TIOL-DDT 2590
05 05 2015
Tuesday

BY Notification No. 8/2015-C.E. (N.T.), dated 1st March 2015, the following proviso is added to Rule 11(2) of the Central Excise Rules, 2002.

"Provided also that if the goods are sent directly to any person on the direction of the Registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and person as the consignee, and that person shall take Cenvat credit on the basis of the registered dealer's invoice".

DDT was informed by a netizen that the field formations are of the view that whoever orders goods on the manufacturer and directs the manufacturer to send the goods to ultimate user directly are required to take "Dealer's" Registration.

We carried the mail sent by the netizen in DDT 2584 under the caption - CBEC - Please Listen; Please spare us of 'registration' - Rule 11 of CER, 2002.

Incidentally, we had also carried an article on the aforesaid issue in our ST se GST tak column.

DDT was under the impression that the field formations have been taking such a view without any official backing.

For once, we were wrong.

We are made to understand that there is a letter F.No. IV/16-Tech-15/CCO/MCX-I/2012 dated 21st April, 2015 addressed to the All India Non-Ferrous Metal Industries Association by the Joint Commissioner, Office of the Principal Chief Commissioner of Central Excise, Mumbai Zone-I in response to their seeking an urgent clarification as to "Whether in case of direct/transit sale by a trader from the Manufacturer to the end-user - Do a trader required to be registered as a dealer".

The letter clarifies as below -

1. The CENVAT credit will be available on Registered Dealers Invoice, hence registration of Dealer with Central Excise is must from 01.03.2015.

2. Requirement of Godown has not been done away, and it is necessary, if the Registered Dealer wants to store the goods.

3. Any amendment in the format of Dealer's invoice can be done only by the Central Board of Excise and Customs.

4. There is no provision for availing CENVAT credit on the strength of Manufacturer's invoice when the goods are sold through a non-registered dealer.

This issues with the approval of the Chief Commissioner, Central Excise, Mumbai Zone-I.

It is high time that the CBEC intervenes and comes out with a clarification lest this issue should snowball into a major controversy which will, in the final run, not fetch any revenue to the government but certainly assist Consultants and Advocates laugh all the way to the bank.

Was the amendment beneficial or was it one more method of harassing the assessees?

If this is called "Ease of doing business", so be it…and we are supposed to migrate to GST by this time next year!

New Judicial Members in CESTAT

IT is learnt that the Government of India has appointed the following Judicial Members to the CESTAT: -

Mr.Shyam Sunder Garg has been posted to CESTAT, Mumbai. Mr.Garg is a Practicing Advocate in Tax Matters at Chandigarh and had earlier been a Member of the Railway Claim Appellate Tribunal.

Ms. Sulekha Bibi has been posted to CESTAT, Delhi. Ms.Bibi is a Practising Advocate in Tax Matters at Cochin.

Mr.P.K.Choudhary has been posted to CESTAT, Chennai. Mr.Choudhary is a Practising Advocate at Dhanbad and is the brother of Mr. Anil Choudhary, a sitting Member of the CESTAT, Mumbai.

Foreign Trade Policy - No import of Raw Sugar under DFIA

GOVERNMENT has amended Para 4.25 of Foreign Trade Policy 2015-20, to stipulate that Duty Free Import Authorisation Scheme shall not be available for import of raw sugar.

DGFT Notification No.05/2015-20, Dated: May 1, 2015

Foreign Trade Policy - CIF value increased for border trade between India and China

DGFT has amended 2.07 (a) (iv) of Handbook of Procedures (2015-2020) which lists categories of importers or exporters exempted from obtaining Importer-Exporter Code(IEC).

For border trade between India and China, the CIF value per consignment is being increased from Rs.1,00,000/- to Rs.2,00,000/- in case of Nathula, while for Gunji and Namgaya Shipkila, the existing CIF value limit of Rs.25,000/- is being enhanced to Rs.1,00,000/-.

DGFT Public Notice No.07/2015-20, Dated: May 1, 2015

Foreign Trade Policy - Raw Sugar - Export Obligation Period under Advance Authorizations

DGFT has amended the Appendix- 4 J of the Handbook of Procedures 2015-20:

Pre-import condition shall be mandatory for import of "raw sugar" under Advance Authorisation scheme. Export obligation period for "raw sugar "imported under Advance Authorisation has been reduced to six months from the date of clearance of each consignment by customs authority.

DGFT Public Notice No.08/2015-20, Dated: May 1, 2015

Foreign Trade Policy - Allocation of quantity for export of sugar to EU

DGFT has allocated a quantity of (i) 10,000 MTs (Ten thousand metric tons) of white sugar for export of CXL Concessions sugar to European Union (EU) for the period October, 2014 to September, 2015 and (ii) 8424 MTs (Eight thousand four hundred and twenty four metric tons) of raw sugar (at 98 degree pol), out of non-levy (Free Sale) quota for export under Tariff Rate Quota (TRQ) to USA for the US fiscal year 2015 (October 1, 2014 to September 30. 2015).

DGFT Public Notice No.09/2015-20, Dated: May 1, 2015

EA 2000 Audit - some facts - Where is risk review?

WE got this mail from a concerned Netizen:

During the year 2011-12, 22534 units were audited and total recovery (including under protest) is 1243 crores. This data is based on the report released by Directorate General of Audit.

100 Commissionerates, each one having audit wing, collecting 1243 Crores per year (including under protest) means 12.43 Crores per Commissionerate per year. This is mere 0.21 percent of the total indirect tax collection of Rs. 6 lakh crores.

This could be assumed that 99.80 % collection is coming in spite of the audits. If the registered assessees are paying 99.80% of the tax due, it is appreciable and must not be subjected to this mechanical audit each year without any risk to revenue.

Recovery per assessee audited, comes to an abysmal Rs. 5 lakh in a year. This suggests that there is no "risk based audit" but actually mechanical audit without any risk/desk review.

Audit staff in a Commissionerate could be 20 persons comprising inspectors and superintendents plus DC, JC, and may be commissioner.

Out of 22534 (if not all), at least half will be issued SCNs.

Ripple effect on litigation machinery including CESTAT, Commissioner Appeals, Range Staff and all the assessees, lawyers.

Tons of paper will be used for audit reports for each assessee, issuing SCN, reply to SCN, filing appeals with Commissioner Appeals, CESTAT and in few thousand cases to the High Courts and Supreme Court.

Audit Report - 22500 reports, at least comprising 6 pages, 5 copies = 6,75,000 pages which equals to 1700 reams of paper.

SCN - 12000 * 10 pages each * 5 copies = 1500 reams of paper

Reply to SCN - 12000 * 20 pages * 5 copies = 3000 reams of paper

Order-in-original - again 3000 reams of paper

Appeal to CA - at least equal to reply to SCN plus OIO plus annexures, conservatively - 12000*20 SCN pages plus 20 OIO pages plus 20 pages of annexures * 5 copies = 9000 reams

Appeal to CESTAT - at least equal to CA - again 9000 reams

If half of these cases landed at HC/SC - again 5000 reams

Total paper consumption could be - 1700+1500+3000+3000+9000+5000 = 23200 reams of paper

This is exclusive of the printed data sheets which will be prepared by the assessee during audit and the documents submitted to audit department before and after the audit. Few correspondences between audit and assessee, audit and range, notices, personal hearings, additional submissions and so on..

Besides the documents asked before the audit includes photocopies of the following documents for last three years (during each audit).

Balance sheet, Trial Balance, Income Tax audit report (3 CB), Cost audit report, sales tax returns, income tax returns, GLs, Registration Certificate/ copies of returns/ intimations/ permissions and many other documents. In some cases this may contain a full load of index file (400 - 500 pages).

Cost of audit and litigation could be more than the amount collected, leave aside the man-days lost for assesses and burden on the courts/tribunals plus the space required to stores these mountain of papers in the offices across the country.

This is high time to review the EA audit process and requirement.

In fact audit must be based on the "actual risk review" and the DG Audit should be accountable for the number of audit conducted vis-à-vis the recovery. If the recovery is few lakhs of rupees from an assessee, means that the "risk review" is farce and audit is without real objective but ………

There is no departmental audit in income tax and the collection is much more than the indirect taxes collectively. There is no departmental audit in VAT and collection is notches higher than the excise, customs and excise duty.

Introduce a process similar to income tax and VAT where annual audit report from an independent chartered accountant is submitted to the department - Ease of doing business.

Depute the audit staff to look into "un-registered" category.

Minimum Government - Maximum Governance - Go Green - Swachh Bharat

LPG Subsidy to be taxed?

IN the official amendment to the Finance Bill 2015 as passed by the Lok Sabha, a new clause is added to Section 2 (24) (which gives an inclusive definition of income) of the Income Tax Act. There are 17 sub-clauses for this clause and 18th one is now added which reads as:

Income includes,

"(xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43;"

This was supposed to have been done to clarify that subsidies are not capital receipts, but it may have a totally unexpected result that the subsidy given to LPG cylinders may now become taxable. LPG users now get a subsidy of over Rs. 400 per cylinder for 12 cylinders a year. Prime Minister Modi has requested those who can afford to, not to take the subsidy - well if you still take the subsidy, pay tax on that - maybe about one third of the subsidy will go back to the Government as tax.

Jurisprudentiol- Recent SC Judgement

Maharashtra Sales Tax - No provision under the Act for settlement of dues of a partner with the State Government - 30 year litigation ends in cost of 5 lakhs to the appellant: The litigation started sometime in 1977. The appellant claims that the State Finance Minister accepted his request for settlement of his sales tax dues in relation to the Firm in which he was a partner. The case travelled right up to the Supreme Court. Last week the Supreme Court held that under the Sales Tax Act, there was no provision for settlement at all and certainly no provision for settling the dues of one partner in a partnership firm. The Supreme Court held, "the convoluted mesh of facts and the extremely protracted proceedings which span over three decades, at the instance of appellant, indicate that the basis of case made out by the appellant does not exist in either the statute law or, in fact, any law applicable to the present proceedings. The settlement, if any, reached between the appellant and the State Government for part payment of tax liability by the partner of an assessee-Firm would not fall under the four corners of the Act or the Rules as has been claimed by the appellant since the beginning of the proceedings under the Act."

The Supreme Court reiterated that there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied.

The appellant was imposed a cost of Rs. 5 lakhs.

We bring you the case today.

Please see Breaking News.

Until Tomorrow with more DDT

Have a nice day.

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