TIOL-DDT 2892
20 07 2016
Wednesday

IF you are registered under the Act, the Department has a feeling that they can just walk into your premises at their sweet will and disturb your equilibrium. They walk into your office as if they own it.In one such case, it seems the DGCEI officers walked in uninvited to the premises of an assessee and took away voluminous records including the Registration Certificate without even a panchnama. Almost always these are unwelcome guests.

In this ancient country, a guest is called 'atithi', meaning one without a date; the consequence is that a guest is a person who calls on you without information, without notice and without regard to time and date. And we are expected to treat him like God - Atithi Devo Bhava. The guests from the Revenue department are no different.

As per Section 82 of the Finance Act, 1994;

(1) Where the Joint Commissioner of Central Excise or Additional Commissioner of Central Excise or such other Central Excise officer as may be notified by the Board has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Chapter, are secreted in any place, he may authorise in writing any Central Excise officer to search for and seize or may himself search and seize such documents or books or things.

(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches, shall, so far as may be, apply to searches under this section as they apply to searches under that Code.

As per Rule 5A of the service tax Rules,

(1) An officer authorised by the Principal Commissioner or Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

(2) Every assessee, shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994,-

(i) the records maintained or prepared by him in terms of sub-rule (2) of rule 5;

(ii) the cost audit reports, if any, under section 148 of the Companies Act, 2013 (18 of 2013); and

(iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961),

for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountant, as the case may be.

Netizens will remember that the Delhi High Court recently struck down Rule 5A(2) to the extent that it authorises the officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG to seek production of the documents mentioned therein on demand as ultra vires the FA and, therefore, struck it down to that extent. Please see DDT 2861 06 06 2016.

Now Rule 5A(1) is under challenge before the Calcutta High Court. (2016-TIOL-1441-HC-KOL-ST)

The High Court on 14th July 2016 directed the Revenue to file affidavit-in-opposition within four weeks and the case is posted for hearing on 1st September 2016.

The High Court observed,

Upon hearing the parties, prima facie the Bench perceives the challenge to Rule 5A(1) to be well founded, as it seeks to override the section. It appears that Rule 5A(2) has been declared ultra vires by an Hon'ble Division Bench of the Delhi High Court. This Bench prima facie finds no reason to disagree with such decision. If the authorities cannot make any demand as envisaged in sub-rule (2), gaining access to any premises under sub-rule (1) may not serve any purpose.

In that view of the matter, the respondents are restrained from taking recourse to Rule 5A(1) against the petitioner, and the petitioner shall also not be under any liability to place books/accounts, etc. if any demand is made. The respondents shall, however, be free to take recourse to Section 82 of the Finance Act in accordance with law.

Maybe, now the officers just cannot walk into the premises of the assessees at their sweet will.

CE - Classification of Tamarind Kernel Powder - CBEC Withdraws a 30 year old Circular

IT seems CBEC had clarified in Circular F. No. 10/18/86-CX-1 dated 14.08.1986 that Tamarind Seed Powder or TKP would be correctly classifiable under Sub Heading No. 1101.90 of CETA.

Now Board says there are two tariff items where classification of tamarind kernel powder may be considered namely 1106 3010 and 1302 32 90. Board doesn't approve 1106 3010 and clarifies that tamarind kernel powder shall be classified under tariff item 1302 32 90 of CETA, 1985 and the 1986 Circular is rescinded. In the meantime, the humble tamarind had travelled all the way up to the Supreme Court at least thrice and very recently on 13th May 2016, the Supreme Court remanded the matter to the Tribunal.

The DGFT seems to have a better (at least an earlier) idea on this classification. In Trade Notice No. 2/2016, dated 19.04.2016, DGFT clarified that the correct ITC(HC) Code of "Tamarind Kernel Powder" is 13023290  and not 11063010. (DDT 2829 21 04 2016).

Hopefully, the tamarind issue will now be settled.

CBEC Circular No. 1037/25/2016-CX, Dated: July 19, 2016

The Confusing Digital Signature on Central Excise Invoices

THE Central Excise Invoice is a very complicated document, the electronic version more so.

Representations have been received from the trade requesting for clarification on whether a manufacturer who opts to authenticate invoices with digital signature can simultaneously also authenticate invoices by manual signature.

The need for the trade to simultaneously use digital and manual signature has apparently arisen because many of the customers of a manufacturer or service provider, who receive goods and services under cover of an invoice authenticated by a digital signature, do not have the requisite Information Technology infrastructure to accept or receive such invoices electronically. In such situations they demand manually authenticated invoices from manufacturers or service providers who otherwise issue digitally signed invoices.

CBEC Clarifies:

- A manufacturer or a service provider who opts to issue invoices authenticated by digital signature may print a copy of such invoice and sign them manually and forward the same to such customers who are unable to accept or receive the digitally signed invoices.

- Such invoices in effect would be authenticated by two signatures, digital signature as well as manual signature and would be considered to be in conformity with rule 11 of Central Excise Rules, 2002 or Rule 4A, 4B and 4C of the Service Tax Rules, 1994.

- Such invoices would also be a valid document to avail CENVAT credit.

Please also see

1. Digital Signature Vs Facsimile Signature  

2. Digital Signatures - myths and misconceptions  

CBEC Circular No. 1038/26/2016-CX, Dated: July 19, 2016

Who will defend Union of India in Tax Cases?

WHO should be the appellant/respondent in a case filed by/against a Government Department?

In  Divisional Railway Manager Vs Commissioner of Central Excise, Jaipur-II - 2013-TIOL-1891 CESTAT-DEL, the CESTAT observed,

it is clear and beyond disputation that suits or proceedings against the State can be pursued only in the name of the Union of India or the concerned State, as the case may be. 

As  per Article 300 of the Constitution of India, the Government of India may sue or be sued by the name of the Union of India.

So, if the Government is the petitioner/appellant in a case, the first appellant should be shown as Union of India - similarly as respondent.

We see many cases like  Commissioner of Central Excise vs ….

Anyway, the question now is, "who will appear for the Union of India". The Law Ministry has appointed Additional/Assistant Solicitor General of India to represent Union of India before the High Courts. The CBEC has also appointed its own panel of Counsels in all the High Courts, with the Commissioners choosing the counsel from the panel on a case to case basis. Now, there seems to be a conflict between the Law Ministry appointed ASGs and the Board appointed Counsels.

It seems recently an Additional SG asked the Chief Commissioner to route all litigation pertaining to his zone through the Office of Addl.SG. and Lawyers of UoI, appointed by Ministry of Law and Justice.

CBEC clarifies the issue:

1. UoI will be defended by a Counsel(s) such as Additional Solicitor General/Assistant Solicitor General/CGSC etc. for the respective High Court, appointed by Ministry of Law & Justice, Govt. of India.

2. CBEC Counsel (who are appointed with the concurrence of Ministry of Law & Justice), on panel and authorized by the concerned Commissioner will extend necessary assistance to the Counsel so appointed by Ministry of Law, defending Uol, in a particular case.

3. The CBEC Counsel would, however, defend the other Respondents other than Uol arrayed in a particular case.

4. Where no Counsel to represent Uol is appearing in a case related to indirect tax, the CBEC Counsel may defend Uol also, besides, defending other Respondent(s), so as to avoid a situation Uol going unrepresented.

5. However, once Ministry of Law appointed Counsel has been assigned the case, he/she (Ministry of law appointed Counsel) will have first charge for defending Uol.

CBEC F .No.278A/35/2016-Legal., Dated July 15, 2016

How to Get Good Lawyers for Tax Departments?

IN a recent judgement, the Bombay High Court observed,

The issues which arise before this Court have at times huge tax implications and as the decision rendered in one case would have a bearing on all similar matters across the State, the importance of proper appointment is paramount. One possible way forward would be to also include the State's law officers such as the Additional Solicitor General and Advocate General in the selection/screening Panel. They would also be aware of the meritorious Advocates who may not be inclined to make an application to be empaneled, but if invited, could be willing to accept the appointments. This would be more particularly so in respect of designated Senior Advocates. It is indeed sad, that the Revenue does not have a single Senior Advocate on its panel to represent its interest.

CBDT also sets out the parameters of performance of the counsel for renewal of his appointment; one of the criteria mentioned therein is the number of cases won by the Counsel for the Income Tax department. This can never be a measure of competence of an Advocate i.e. an officer of the Court. In fact, the quality of the Advocate would be best judged by his performance and not in the result of the litigation. This evaluation can take place only when the Advocate is seen in action. We find that when the Advocates appear before us, very rarely are the Assessing Officer or other Officers involved in the litigation present in Court. In case, they are present, they would be able to give feedback to the Commissioner of Income Tax which could be factored in while briefing him and / or renewing his engagement.

There are a large number of appeals filed by the Revenue from the orders of the Income Tax Appellate Tribunal. However we find that the distribution of work amongst the panel lawyers is not equitable and also without any consideration of the issue of law involved vis a vis the experience of the Advocate. We find that most matters are distributed amongst a few advocates with the result we have occasions where a single Advocate appears in eight/nine matters a day. This indeed is expecting the moon from the panel Advocate. Resultantly, the preparation suffers leading to inadequate performance. It would therefore be appropriate to have more number of Advocates on the panel and distribute work amongst them. This would at least give an opportunity to the Advocate to prepare properly for appropriate representation.

We hope the Revenue would consider our observations and make attempts to ensure that it is properly represented. This can only happen when meritorious Advocates are appointed. This would ensure that the Officers of the Revenue would value his advice as a learned man of experience and not treat him as an employee, merely because he is appointed at the instance of the Commissioner of Income Tax .

Service Tax Not Shareable?

IS the Service Tax collected by the Central Government not shareable with the States? Well, that is what the Finance Minister told the Rajya Sabha yesterday. In reply to a question, the Finance Minister said,

Besides this 42 per cent for the Centrally-sponsored Schemes, out of the Centre's share of 58 per cent, a lot of assistance goes to the States. Some of the States, which don't have adequate resources, get the money. But as far as service tax is concerned, the States don't get a share. The sooner you pass the GST the better it is for the States. Because the States will then start getting the service tax.

Former Finance Minister Chidambaram was quick to point out the FM's slip.

Chidambaram tweeted:

FM told Parliament that Service tax revenues are not shared with the States. FM was wrong. He slipped. All taxes including Service tax are shared.

Government Officer arrested by CBI - Wife and Daughter Commit Suicide

LAST Saturday, CBI arrested BK Bansal, Director General, Corporate Affairs in the Ministry of Corporate Affairs for allegedly receiving Rs. 9 lakhs bribe from a corporate firm. Subsequent raids led to seizure of over Rs. 50 lakh and 4 kgs of gold. The CBI Court sent him to CBI custody for three days. On Tuesday, he was again produced before the CBI court which extended his custody by three days. Shortly after he was produced in court, came the shocking news that his wife and daughter had committed suicide.

Bansal was to retire in October this year and the daughter who died was to get married in two months.

What is the use of all that money?

Advocate Viswanathan wrote to me, "You have been running a crusade against bribe in DDT by publishing the incidents of those CBEC officials caught accepting bribes and the repercussions such as suspension, humiliation, ignominy, etc.

Please highlight the sad incident, involving the arrest of senior most Law Officer Mr.Bansal and subsequent suicide of his 58-year old wife and 28-year old daughter, in your column.

I don't preach honesty, but would certainly appeal to friends in Government - think for a moment about the Bansal family before you take that bribe. What will happen if you are caught? Are you prepared for the risk?

Until Tomorrow with more DDT

Have a nice Day.

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