From the Supreme Court
04 08 2015
Tuesday
WE bring some recent Supreme Court judgements today.
Service Tax – Quashing of CBEC Circular upheld.
The Andhra Pradesh High Court in 2004-TIOL-58-HC-AP-ST had quashed the CBEC Circular No. 66/15/2003-S.T., dated 5-11-2003. The circular reads as under :
I am directed to say that some doubts have been raised regarding application of service tax on the activity of Mutual Fund Distribution as to whether
1. the commission received by distributors on mutual fund distribution as liable to Service Tax under the category of Business Auxiliary Services?
2. the services provided is exempt from service tax in terms of Notification No. 13/2003, dated 20-6-2003?
In this connection, it is clarified that the services provided as referred above are primarily in nature of the services of commission agent in relation to clause (ii) and (iv) of the category of services mentioned in the definition of Business Auxiliary Services and hence should be leviable to service tax under this category. This activity does not get covered under exemption Notification No. 13/2003-S.T., dated 20-6-2003, as this is not in relation to sale or purchase of goods. The exemption provided under Notification 13/2003-S.T. is applicable only for commission agents dealing in goods .
The High Court noted that as per Section 37B proviso (a), the CBEC cannot issue a circular, so as to require any Central Excise Officer to make particular assessment or to dispose of a particular case in a particular manner.
The High Court found the Circular illegal, contrary to the proviso to Section 37B(a) of the Act and accordingly quashed it. This was in 2004. The Board did not withdraw the Circular, but appealed to the Supreme Court.
The Supreme Court did not find any error in the judgement of the High Court. The Supreme Court noted,
Government had issued Notification No. 13 of 2003-Service Tax whereby it exempted the 'Business auxiliary services provided by a commission agent' from the service tax leviable thereon under sub-Section (2) of Section 66 of the Finance Act, 1994. Thereafter, circular dated 05.11.2003 was issued in which it is stated that having regard to some doubts that had arisen regarding application of service tax on the activity of mutual fund distribution, it was clarified that the commission received by distributors on mutual fund distribution would be liable to service tax as it would not fall within the expression 'business auxiliary services'. This circular dated 05.11.2003 has been set aside by the High Court in the impugned judgment on the ground that it amounts to foreclosing discretion or judgment that may be exercised by the quasi judicial authority while deciding a particular lis under particular circumstances. The High Court referred to the proviso to Section 37B of the Central Excise Act, 1944, which categorically states that such kind of circulars cannot be issued .
The Revenue Appeal was dismissed.
God knows why the Board issued this Circular – it simply stated the obvious. Still mysterious is why the Government took the matter to the Supreme Court. The High Court had only explained the law. More mysterious is why the assessee challenged the circular. Its liability to pay tax certainly did not depend on the circular.
Please see Union of India Vs Karvy Stock Broking Ltd - 2015-TIOL-170-SC-ST
Customs – Classification - 'business satellite receivers':
The Supreme Court just read the tariff entries and observed, "A reading of heading 85.28, under which the Revenue wants the product to be included, would show that it pertains to only those apparatus which have the function of receiving the signals only and that they are reception apparatus. The moment particular apparatus has transmission function as well that would be excluded from Chapter Heading 85.28. On the other hand Chapter Heading 85.25 deals with transmission apparatus. Here under entry 8525.20 even if the apparatus which are transmitting signals have the additional functions of reception of signals as well, such goods will still be classified 8525.20. Tribunal has rightly classified the goods of the respondent under 8525.20."
But Revenue had to take this case all the way to the Supreme Court to just read and understand two plain entries in the tariff.
Revenue appeal was dismissed
Please see Commissioner of Customs Vs Multi Screen Media Pvt Ltd - 2015-TIOL-169-SC-CUS
Central Excise – Manufacture – whether cutting of the conveyor belting into required sizes amounts to manufacture:
Supreme Court observed, "Mere cutting of the lengthy conveyor belt into smaller sizes would not amount to manufacture, ipso facto, unless it is shown that as a result of the said cutting, it was transferred into a new product which was a marketable product."
Please see Commissioner of Central Excise, Chennai-II Vs Tejo Engineering Services Pvt Ltd - 2015-TIOL-167-SC-CX
Customs – Project Imports - 1MW plant of the appellant cannot be treated as power generation project:
It is the admitted position that the capacity of power plant of the appellant is only 1MW. Further the power generated plant is exclusively used for the sister concern of the appellant and is not for consumption of the general public. Tribunal has rightly held that 1MW plant of the appellant cannot be treated as power generation project.
Please see Venkataraya Power Ltd Vs Commissioner of Customs, Mumbai - 2015-TIOL-168-SC-CUS
Can Tribunal Rectify a Rectified Order?
THE Tribunal rectifies an order for an apparent record. Later the Tribunal finds that the rectification was wrong. Can the rectified order be rectified?
Under Section 254(1) of the Income Tax Act, the Income Tax Appellate Tribunal (ITAT) passes an order. Under Section 254(2), the Tribunal can, on an application for Rectification of Mistake (ROM), to rectify a mistake apparent on record, amend any Order passed under Section 254 (1).
Under Section 129B(1) of the Customs Act, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) passes an order. Under Section 129B(2), the Tribunal can with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1).
There are identical provisions in the Central Excise Act.
Now what happens if the Tribunal realizes that the order passed under Section 254(2) is also wrong. Can this order be further amended?
The Income Tax Appellate Tribunal felt that it had inherent powers to rectify a rectified order and it can rectify even without an application from either of the parties.
If that be so, can the re-rectified order be rectified again and if so how many times. Any way the High Court has saved the trouble of such repeated rectifications by holding that the Tribunal can rectify only an order passed under Section 254 (1) and not under Section 254 (2).
We reported this High Court order in 2007-TIOL-193-HC-ALL-IT. In our analysis of the order on 18.4.2007, we mentioned, "This would equally apply to CESTAT."
The same issue reached the CESTAT recently. The Tribunal observed that there is no provision for filing ROM application against the order of the Tribunal deciding a ROM application. 2015-TIOL-1594-CESTAT-MUM.
CBEC -Procedure for grant of Vigilance Clearance for purpose of NOC for passport and for personal travel abroad
CBEC has examined and approved a proposal of Directorate General of Vigilance for streamlining of the procedure for grant of Vigilance Clearance to Group ‘A' officers for various purposes. These instructions are being issued for the guidance of field officers for grant of Vigilance Clearance for the purpose of issue of NOC for applying for a passport and for personal travel abroad.
A passport can be denied under S.6(2)(C) of the Passports Act, 1967 if:
i) The applicant has been convicted by a court of India for any offence involving moral turpitude and has been sentenced to imprisonment of not less than 2 years.
ii) Criminal proceedings in respect of an offence alleged to have been committed by the applicant are pending before a court in India.
If a person is facing a criminal charge, he requires permission from the competent Court to obtain a passport and his passport has to be surrendered to the Court during trial, if the Court so desires.
It has been decided that Vigilance Clearance for NOC for passport is to be denied only if a charge of prosecution is pending against the officer or if he has been convicted. If a request for sanction for prosecution has been received from a competent agency, NOC for passport will be denied. Departmental penalty proceedings will not be considered a ground to deny Vigilance Clearance for NOC for passport.
It has further been decided that permission for personal travel abroad will be denied if a charge of prosecution is pending against an officer or if a request for sanction for prosecution has been received from a competent agency.
Where penalty proceedings are pending and where there is a possibility that the officer may be dismissed or removed from service, the leave sanctioning authority may decide the grant of permission to travel abroad based on the gravity of the charges, the duration of leave, reasons for foreign visits, source of funding etc.
The facts of the penalty proceedings would be conveyed to the leave sanctioning authority to enable him to take a decision on whether personal travel should be permitted or not.
A punishment like dismissal or removal cannot be imposed in minor penalty proceeding, and hence permission to travel abroad may be granted in such cases.
A request for Vigilance Clearance should be sent to DGoV at least one month in advance and should invariably include the Civil List ID No. of the officer.
DG, Vigilance, Customs & Central Excise F.No.V.500/47/2012/Pt-II., Dated July 15, 2015
Customs Cadet Corps
IT is reported that the Cochin Customs has launched Customs Cadet Corps for school students on the lines of the National Cadet Corps (NCC). These cadets will participate in the Independence Day parade this year in Cochin Customs.
The Customs will give training to the cadets in Customs operations, life skills, parade etc. They will be trained in Customs boats and taken to outer sea. They will also get training in the airport. They will have an introduction into use of arms and anti smuggling activities of the department.
Until Tomorrow with more DDT
Have a nice day.
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