TIOL-DDT 2697
05 10 2015
Monday

We have been highlighting in these columns the harassment meted out to Indian Industry through frivolous Show Cause Notices and non-application of mind in confirmation of demands. We reported one such issue in 2013.

Notification No. 67/95-CE dated 16.03.1995 as amended provides exemption from payment of whole of the Central Excise duty on the specified inputs manufactured in a factory and captively consumed within the factory of production in or in relation to the manufacture of specified final products provided the final products are cleared on payment of duty. This means, duty is payable on the inputs/intermediate goods, which are captively consumed in the manufacture of final products, which are fully exempted from payment of duty or chargeable to 'Nil' rate of duty.

However, in the notification, exception is given to those goods, which are cleared:

(i) to a unit in  Free Trade Zone, or

(ii) to a Hundred Percent Export Oriented Undertaking, or

(iii) to a unit in a Electronic Hardware Technology Park, or

(iv) to a unit in a Software Technology Park, or

(v) under Notification No. 108/95-CE dt. 28.08.1995, or

(vi) by the manufacturer of dutiable and exempted final products after discharging obligation prescribed in Rule 6 of Cenvat Credit Rules, 2004

The DG, Audit of the Department noticed that an assessee cleared certain quantities of Cement at "Nil" rate of duty to  SEZ  units. The clearances to a unit in SEZ is not notified as exception under the Notification No. 67/95-CE dated 16.03.1995 and hence it appears that the assessees are liable to pay central excise duty on the intermediate goods viz., "Clinker" used in the manufacture of cement, cleared to SEZ units without payment of duty.

A simple application of mind by the officers in the field would have saved the time and money of both department and the assessee. It is strange to know that the officers holding highest position in the department are not aware that the clearances to SEZ are neither 'exempted' nor chargeable to 'Nil' rate, but are 'exports' allowed to be cleared without payment of duty. Such clearances to SEZ are even eligible for sanction of rebate on par with exports. The exemption under captive consumption notification is not available only in cases where final products are 'exempted' or 'chargeable to Nil rate' and clearances to SEZ do not fall under these categories.

The word  FTZ  is being continued in the notification No. 67/95-CE as a vestige of the past horrors, as there are no FTZs functioning in the country after enactment of SEZ Act.

But, who can put these simple facts into the minds of adjudication officers, when they have decided not to apply mind at the time of issuance of demands. All these notices are routinely confirmed for fear of review.

We had suggested in 2012 that references to "free trade zone" have to be removed and 'Special Economic Zones" inserted in all statutes, but Board allows such confusion in the statute to continue and then allows the Commissioners to create havoc in the field. Can you imagine several Commissioners actually held that the exception in Notification 67/95 is applicable for the non-existing FTZ and not the existing SEZ? Where has reason fled? Gurudev Tagore did not visualize IRS officers when he wrote about the clear stream of reason.

Recently the Chennai Bench of the CESTAT emphatically held that the assessees are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty.

We bring you this judgement today. Please see Breaking News.

Please also see:

•  DDT 2019 08.01.2013

•  DDT 2204 07.10.2013

Income Tax Disputes badly handled in High Court - RS Summoned

IN an order dated 9.7.2015, the Delhi High Court expressed its concern about the manner in which the Revenue's cases have been handled. The Court had, in fact, called the Additional CIT concerned, Mr. Vivek Kumar and conveyed to him its concern. Mr. Vivek Kumar had assured the Court that there would be a proper coordination and it would be ensured that the Revenue is effectively represented in its cases before the Court.

In an order dated 13.08.2015, the Court observed that it was disappointing to note that the Revenue has been unable to make good the above. So the Court directed the Revenue Secretary to be present in person in the Court on 20th August, 2015 and to submit to the Court in writing the steps that he proposes to take to put in place a mechanism for the seamless and immediate transfer of cases from one Standing Counsel of the Revenue to the other in any contingency, so that no unnecessary adjournments are sought by the Standing Counsel for the Revenue, particularly on the grounds of lack of formal order of entrustment of the case, want of instructions or papers and so on and so forth.

The Court concluded, "We expect that the matter will be attended to with the seriousness and urgency that it deserves."

See what happened on 20th August 2015:

Present in the court are: Mr. SK Ray, Member (Audit and Judicial), Central Board of Direct Taxes (CBDT); Mr A. K. Sinha, Principal Commissioner of Income Tax (Pr CIT), Delhi; Mr NiranjanKohli, CIT (Judicial); Mr. Vivek Kumar Additional CIT (Judicial) and Mr. Ramesh Chandra, Deputy CIT. Mr S. K. Das, Secretary (Revenue) was unable to be present in the Court.

The High Court gave certain directions to the Income Tax Department:

1. There should be a system devised for the Deputy CIT, under supervision of the Additional CIT to monitor on a constant (if not daily) basis the adherence to time lines in various matters entrusted to standing counsel. If there is delay beyond the acceptable limit, for any reason whatsoever, it should be possible for the case to be re-assigned to another standing counsel with specific instructions to complete the further steps within the stipulated time frame. The defects pointed out by the Court are accessible on the net, and the Deputy and Additional CIT will keep themselves apprised of these on a regular basis case-wise to facilitate effective monitoring.

2. The Court would like the ITD to ensure that in none of the matters there is a situation where (a) there is no one appearing for the ITD (b) even if they are, they have neither instructions nor papers. The Deputy CIT in-charge of the Judicial Cell of the ITD in the High Court should coordinate with the Court Masters of the Court and provide a list of the names of standing counsel who will be appearing in the appeals in the final hearing list. It will the responsibility of the Deputy CIT to ensure that the standing counsel who have been assigned the cases have the complete records. The Deputy CIT can obtain from the Court Masters of the Court, well in advance of the likely dates of hearing of the cases, soft copies of the complete case records available in the Court server, upon payment of the usual charges. It should not be an excuse for standing counsel of the ITD to take adjournments on the ground that they have no instructions or that they do not have the case papers.

3.  Issues that may be pending before other High Courts or the Supreme Court which have attained finality one way or the other, i.e., either in favour of the Revenue or the Assessee. There should be a regular channel of communication of such information to the standing counsel (with a copy being provided to the Court Masters by the Deputy CIT). This will greatly facilitate the disposal of such Regular Matters.

On all the above three aspects, Mr Ray and Mr Sinha assured the Court that a supplementary SOP will be prepared and placed before the Court within a month's time. The Court also impressed upon the ITD that its communication with its standing counsel should be through emails and other electronic forms of communication and the movement of hard copies of files and papers should be avoided unless absolutely essential. If the entire case records in the ITAT and the level of the CIT (A) are digitised, as they should be, there should be no difficulty in even the entrustment of the case records to standing counsel happening digitally.

And the case was posted for 28th September, 2015

What happened on 28th September 2015?

Mr. NiranjanKouli, CIT (Judicial) is present in Court. He has handed over a status report prepared by him in which inter alia it is stated that there are altogether 1001 defective appeals of the Revenue beginning from the year 2006 onwards that have so far been identified. In other words, these 1001 appeals are yet to be numbered because counsel for the Revenue have not cured the defects pointed out by the Registry of the Court.

In response to a specific query by the Court as to the tax effect in all these 1001 appeals, the Court is informed by Mr. Kouli as well as by Mr. N.P. Sahni, learned Senior Standing counsel, some more time would be needed for that purpose.

The Court is also informed that the said status report has not yet been placed before the Secretary (Revenue), and that no instructions as such have been issued by him to the Income Tax Department (ITD) pursuant to the Court's order dated 20th August 2015, a copy of which was directed to be delivered to him by a Special Messenger.

The Court expressed its disappointment that the ITD has not acted with the urgency required in terms of the Court's previous order passed more than a month ago on 20th August 2015.

The Court directed:

1. By 9th October 2015, the ITD will file in the Court, and also simultaneously send to the Secretary (Revenue), Government of India, the complete list of 1001 defective appeals (with the cause title and relevant assessment year, the date of filing, the date when defects were pointed out) indicating the tax effect in each of the appeals.

2. The ITD will also file in the Court not later than 9th October 2015 the written instructions that have been issued in strict compliance with the Court's order dated 20th August 2015. 

3. The Court fixes the responsibility for ensuring compliance with the directions issued in paras 4 and 5 of this order on Mr. NiranjanKouli CIT (Judicial), Mr. S.K. Ray, Member (Audit and Judicial), Central Board of Direct Taxes (CBDT) and Mr A. K. Sinha, Principal Commissioner of Income Tax (Pr CIT), Delhi Region.

4. If the ITD provides the email Ids and the mobile numbers of the CIT, ACIT and DCIT concerned to the Registry, then the list of defects thereafter pointed out by the Registry in the Revenue's appeals will be communicated by the Registry to the said officials by email and SMS simultaneous with such intimation being sent to counsel. Once this is done, responsibility should be fixed on the concerned officer of the Department when appeals which are indicated to be defective are not cured and re-filed within the time limit prescribed by the Rules of the High Court. This will also form part of revised instructions that will be issued by the ITD.

5. The ITD should digitise all its records and engage teams of persons with the requisite knowledge who can assist it in collating information on specific areas from the digitised data. The Court would expect effective steps to be set in motion without delay by the ITD and file a status report by the next date on the progress made in this regard.

The case is posted for 12th October 2015.

Supreme Court Imposes Cost of 5 lacs for withdrawing appeal

A PSU filed an appeal in the Supreme Court with more than 800 pages in the appeal book. After the judges have read those 800 pages, the PSU wanted to withdraw the appeal. The Supreme Court on 1 st October 2015 imposed a cost of Rs.5 Lakhs on the appellant in view of the judicial time expended.

LTC – No Ticketing by Private Agencies

AS per DoPT directives, Government employees are required to book the air tickets directly from the airlines (Booking counters, website of airlines) or by utilizing the service of Authorized Travel Agents viz. 'M/s BalmerLawrie& Company', 'M/s Ashok Travels & Tours' and 'IRCTC'.

Ministries/Departments continue to send references to DoPT seeking relaxation regarding the booking of air tickets for the purpose of LTC from the travel agents not authorised. In most of the cases, the common reason stated by the LTC beneficiaries is that they were not aware of the guidelines and inadvertently booked the tickets from other travel agents.

DoPT wants all the Ministries/Departments to ensure a wide circulation of the guidelines.

Please also see DDT 2379 & 2432.

DoPT Office Memorandum No. 31011/5/2014-Estt (A.IV)., Dated: September 23 2015.

Customs - New Exchange Rates

CBEC has notified new exchange rates for Imported Goods and for Export Goods with effect from 2 nd October 2015. The USD is at 66.15 Rupees for imports and 65.10 Rupees for exports.

Notification No. 97/2015-Customs (NT)., Dated: October 01, 2015

Customs goes paperless?

THE Board seeks to ensure that the success achieved over the years in advancing automated clearance processes, EDI messaging and digital signatures translate into a paper-free environment, besides reducing transaction costs. This is proposed to be achieved incrementally by examining different situations where printouts are used.

CBEC proposes to eliminate paper and go digital for

I. GAR 13 forms/TR6Challans:

II. TP Copy

III. LEO

CBEC Instruction in F.No. 450/25/2013 - Cus IV (Pt)., Dated October 01, 2015

FTP – Export Promotion Responsibility

DGFT has shifted the export promotion responsibility for Sesame seed and Niger seed from Shellac and Forest Products Export Promotion Council (SHEFEXIL) to Indian Oilseeds and Produce Export Promotion Council (IOPEPC).

DGFT Public Notice 38/2015-20., Dated: October 01, 2015

FTP - Agencies Authorized to issue Certificate of Origin - (Non-Preferential)

DGFT has authorised M/s International Society for Small and Medium Enterprises (ISSME) to issue Certificate of Origin (Non-Preferential)

DGFT Public Notice 39/2015-20., Dated: October 01, 2015

Principled Commissioners?

CBEC expects its senior officers to be principled but should they be addressed so?

CBEC has addressed a recent letter to All Principle Chief Commissioners. Of course what they mean is Principal Chief Commissioners.

Incidentally the letter is about the failure of the principle officers to send compliance report about compulsory retirement.

CBEC F.No. C 30013/79/2015-Ad.IVA., Dated September 28 2015.

Until Tomorrow with more DDT

Have a nice day.

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