TIOL-DDT 2452
09.10.2014
Thursday

IT is Failure In All Tax matters aka FIAT. You must be remembering the famous FIAT case in Supreme Court, where FIAT sold its cars in India at a loss to compete in and penetrate the market. But Central Excise Department was in no mood to lose its pound. In the much talked about case 2012-TIOL-58-SC-CX, the Supreme Court allowed the revenue's appeal on valuation issue, resulting in demand of Rs 311 crores.

The judgement was delivered on 29.08.2012 and the very next day on 30.08.2012, the assessee was presented with a demand to pay a sum of Rs.382,66,99,590/-. (How nice it would be if they were equally prompt in deciding refund matters!) Subsequently, this amount was revised to Rs. 311,16,49,260/- along with interest at the appropriate rate. The assessee initially requested to keep the demand in abeyance as they had filed review petition against the order. After they exhausted all the channels, they requested the Commissioner to allow payment of dues in instalments as per a schedule drawn by them.

Vide letter dated 1st February, 2013 the Commissioner of Central Excise accepted the schedule of payment but insisted on demand of interest at the rate of 18% per annum in accordance with Notification No.5/2011 Central Excise (NT) dated 1st March, 2011 read with CBEC circular No.208/42/96-CX dated 2nd May, 1996 with effect from 29th August, 2012 being the date of the order of the Supreme Court

The company filed Writ Petition against the demand of interest. It is the Petitioners' case that the provision for charging interest and duty on finalisation of the provisional assessment came into effect on 1st July, 2001. The Petitioners contend that under Central Excise Rules, 2001 the proper officer may allow clearance of goods on payment of the duty on provisional basis. Sub-rule (4) of Rule 7 provides for interest on payments by the assessee. It is the Petitioners' contention that prior to 1st July, 2001 there was no specific provision for recovery of interest arising out of finalisation of assessment.

However, the High Court dismissed the Writ Petitions with the following observations:

The interest demanded was not under section 11AA. The department demanded interest in pursuance of the instalments facility granted in accordance with the Notification dated 2nd May, 1996 as stated above the grant of interest free instalments would not have been authorized at all and therefore there is no justification in the Petitioners seeking quashing of the impugned notice.

In the facts of the present case it cannot be disputed that the Petitioner has retained money owing to the Respondents without authority of law and engaged the Respondents in a series of litigations. They then filed Civil Appeals before the Supreme Court which were disposed of on 16th October, 2012 with liberty to file Review Petition. The Review Petition was filed on 19th October, 2012. The review petition came to be dismissed on 27th November, 2012. The Petitioners did not stop there. They then filed a curative petition on or about 2nd January, 2013 which came to be dismissed on 20th February, 2013. Thus, at every opportunity the Petitioners sought to defeat the Revenue's right to amount of duty and there is no reason for the Petitioners to be excused from paying interest.

Accordingly, the High Court dismissed the Writ Petitions and also imposed cost of Rs 50,000/- on the Petitioner.

DDT 2273 - 16.01.2014, had commented, The fault is neither with the Law nor the Board nor the Supreme Court - it is with Fiat - in spite of being the sixth largest car manufacturer in the world, they failed in everything they did in India - including defence of their case in the Supreme Court.

And the failure continues….

For more details on the FIAT case, you may see DDT 1931, DDT 2023, DDT 2239, DDT 2254, DDT 2394, DDT 2273

Please see 2014-TIOL-1761-HC-MUM-CX for the High Court Order

Appointment as ITAT Member - Waiting List to RAC?

THE Supreme Court recently directed the Government to consider the appointment of a petitioner who applied for the post of Member ITAT in 2005.

By an advertisement dated 21st January, 2005, 13 posts of Accountant Members and 9 posts of Judicial Members in the Income Tax Appellate Tribunals of the country were advertised.

A Select List of 18 persons, 13 for the post of Accountant Member and 5 for the post of Judicial Member was finalized. There was a waiting list also prepared by the Selection Committee and the petitioner was placed at Serial No.2 of the said Waiting List for appointment as Accountant Member.

It appears that the Select List was approved by the Appointment Committee of the Cabinet (ACC) and 11 vacancies of Accountant Members were filled up whereas 5 vacancies of Judicial Members were also filled up. Two vacancies of Accountant Members remained vacant as the two candidates who were selected were not cleared by the Vigilance. The petitioner who was placed at Serial No. 2 in the Waiting List, therefore, perceived a right to be appointed against one of the vacant posts of Accountant Member.

As appointment was not forthcoming, the petitioner moved the Central Administrative Tribunal, Hyderabad Bench and through several layers of the Judicial System is in the Supreme Court for the second time.

Perseverance pays and the Supreme Court directed consideration of the case of the petitioner for appointment on the basis of his position in the Waiting List against one of the two vacancies that had arisen on account of two of the candidates in the merit list not having been granted the vigilance clearance. This will be done by the concerned Authority within 30 days from the date of receipt of a copy of the order dated 23rd September 2014.

Please see 2014-TIOL-84-SC-SERVICE

Retired Income Tax Additional Commissioner Charge sheeted - for granting refund - CAT quashes charge-sheet

THE Applicant retired from service on 31.12.2004 as Additional CIT and has been drawing pension w.e.f. 01.01.2005. Ministry of Finance, Department of Revenue, after obtaining approval of the President under sub-clause(i) of clause (b) of sub-rule (2) of Rule 9 of the CCS (Pension) Rules, 1972, vide its Order No.C-14011/20/2008-V&L dated 11.07.2008, instituted an enquiry against him. Along with the said Memorandum, there was also a letter dated 11.07.2008 conveying the sanction of the President for instituting the departmental proceedings against him.

The substance of imputation of misconduct or misbehaviour in respect of which the enquiry was proposed to be held as set out in the Articles of Charges are as under:-

1. While holding the charge of Additional Commissioner of Income-tax, Range-36, New Delhi during the period 2003 to 2004, he granted approval for issuing refund of Rs.44,68,939/- (with interest) in the case of M/s Oriental Apparels, A.Y. 2003-04, in a casual and negligent manner and without safeguarding the interest of revenue, knowing fully well that it was a case, where the refund was claimed by the assessee by retracting the income disclosed during the survey operation conducted on the assessee.

2. While holding the charge of Additional Commissioner of Income-tax, Range-36, New Delhi during the period 2003 to 2004, he failed to properly monitor and supervise the follow-up action such as early selection of the case of scrutiny, conduct of investigation and early finalization of assessment in the case of M/s Oriental Apparels for the A.Y. 2003-04.

In its order dated 01 10 2014, the Central Administrative Tribunal observed,

It is seen that the proposal to initiate disciplinary proceedings under Rule 9 of the CCS (Pension) Rules, 1972 was approved by the President on 09.07.2008. In the note submitted to the President, the Respondent-department has specifically noted that, under the aforesaid rules, the proceedings could be initiated against the Applicant till 14.07.2008 (i.e., within 4 years from the date of referred approval). Thereafter, the Respondents have signed the impugned Memorandum and the sanction on 11.07.2008. But it is seen that the Respondent-Department prepared the covering letter for them only on 16.07.2008 and sent them by Registered Post only on 17.07.2008, i.e., after the expiry of the prescribed period. Both the dates are after the period of limitation which expired on 14.07.2008. The Applicant got those letters again after further delay on 23.07.2008. Rule 9(2)(b) of the CCS (Pension) Rules, 1972 is an order prohibiting the Respondents to initiate departmental enquiry proceedings against a retired Government servant unless the conditions mentioned therein are fulfilled. Sub-rule (ii) (b) of the said Rules says in clear and unequivocal terms that departmental proceedings against a retired Government servant shall not be instituted in respect of any event which took place more than four years before such institution. It is a mandatory provision. It is a provision to protect the retired employees from departmental enquiry after several years of retirement as they are not able to defend their position in their old age. The Respondents themselves have admitted that the disciplinary proceedings could be issued only till 14.07.2008. On the contrary, the Respondents have conveyed their decision to initiate departmental proceedings against the Applicant only by their letter dated 16.07.2008 posted only on 17.07.2008. It is a well settled position of law that if the rules provide that a particular action has to be taken in a particular manner, it is to be done in that manner and in no other manner. Further, as pointed out by the learned counsel for the Applicant, the Apex Court in its judgment in State of Punjab Vs. Amar Singh Harika held that it is not sufficient that the competent authority pass its orders and keep in its file but they have to be actually communicated to take effect.

Another question that arises in this case is whether the charge issued to the Applicant was approved by the President or not.

Yet another important aspect of this case is that the Respondents themselves had admitted that there were no witnesses to prove the charge levelled against the Applicant. In terms of Sub Rule 3 & 4 of Rule-14 of the CCS (CCA) Rules, 1965, it is an essential requirement of the enquiry proceedings that allegations made against the delinquent official has to be sustained with the help of the documents produced by the prosecution proved by its witnesses. According to the Sub Rule-(14) of Rule-14 of the CCS (CCA) Rules, 1965, it is by the Disciplinary Authority or on his behalf the Presenting Officer to produce oral and documentary evidence by which the Articles of Charge are proposed to be proved. Thereafter the witnesses have to be examined by or on behalf of the Presenting Officer and they may be cross-examined by or on behalf of the Government servant. However, in the present case, as pointed out earlier, there was not even a single prosecution witness.

The Tribunal held that the impugned charge Memorandum issued to the Applicant is not in conformity with the rules and the law laid down by the Apex Court on the issue. In the absence of any witnesses to prove the charge, the enquiry proposed to be held is an exercise in futility.

And so the inquiry proceedings are quashed.

The Former Additional Commissioner is now about 70 years old and for the last six years he was on this case. Is it fair for the Government to harass its former officers like this? Why don't you allow them a peaceful retired life? What do you get by such frivolous cases against your own employees, which will any way not stand? Who will pay for the mental torture endured by this retired officer? Or is it a warning to the present officers?

Please see 2014-TIOL-01-CAT

Travel by Air - Babus need not submit Boarding Pass

THE Government does not believe its employees. If an employee claims that he has travelled by air, on official work, he is required to produce the Boarding Pass to claim the reimbursement of the flight charges. Government is apprehensive that the officer will buy a ticket and later cancel it and unless the Boarding Pass is produced, Government is not sure that he actually travelled.

Government has recently decided to dispense with the condition of submission of Boarding Pass along with settlement of T.A. claim.

However, the officer concerned, will have to attach an undertaking that the journey, as mentioned, has actually been performed by him/her.

In case of extreme doubt, the controlling officer may be asked to verify the genuineness of the claim.

Further Frequent Flyer Reward points from Air India should be redeemed only for official travels.

DOPT Circular in F.No.G-14019/2/13-Cash, Dated: October 07 2014.

Jurisprudentiol – Friday's cases

Central Excise

Penalty proceedings have to be initiated within five years: HC

ANY law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. The period of five years has been held to be reasonable period for initiating penalty proceedings.

Income Tax

Income tax - Whether assessee is eligible for deduction u/s 54EC, even if investment made in relavant AY was not within six months from handing over of possession to developer by virtue of JDA - NO: ITAT

THE issue before the Bench is - Whether assessee is eligible for deduction u/s 54EC, even if investment made in the relavant AY was not within six months from handing over of the possession to the developer by virtue of joint development agreement. And the answer is NO.

Service Tax

Penalty - penalty is ordinarily levied for some contumacious conduct or for deliberate violation of provisions of particular statute: HC

PENALTY is ordinarily levied for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. In the case on hand, the assessee has stated that they were under the impression that the service rendered by them will not be exigible to service tax. On an earlier occasion, the assessee registered and paid service tax on a non taxable service and they did not even seek for refund of the amount. The bona fide confusion in the mind of the assessee as to which service is taxable or non-taxable is apparent and that justifies the plea of failure to pay service tax. This reasoning paripassu applies to non registration of said service rendered by them. Therefore, the demand of penalty under Sections 76 and Section 77 of the Finance Act, 1994 is not tenable.

Section 80 - No penalty if reasonable cause is shown: The provision of Section 80 of the Finance Act, 1994 gives the authority the power to consider not to impose penalty in certain cases, where the assessee shows reasonable cause for his failure to comply with the requirement of the Finance Act, 1994. This provision is analogous to Section 273B of the Income Tax Act, which also states that no penalty shall be imposable on the assessee for any failure referred to in the said provision, if the assessee proves that there is reasonable cause for the failure.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice time.

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