JANUARY 12, 2017

By R C Pillai, Head-Taxation, Lenovo Group

I.DIRECT TAX

Issue

1. The Assessing Officer has been vested with the power to stay the demand as well

Difficulties/Problems

Practically,they deliberately inflate the demand and forces the Industry to deposit huge portion of the demand amount. This is the yearly ritual by the Officers starting from January to March of every Financial Year, even though the assessee has received the favourable order from the Appellate foram in the previous years.

Suggestion

Like Excise,Service Tax & Customs standard % shall be allowed to be paid at every stage of appeal and the balance should be automatically stayed.Also,if the assessee had Appellate orders in the previous years the AO should take cognizance of the same and pass orders accordingly.

2. MAT

The Rate of MAT u/s 115JB (18.5%) works out to almost 20% including the surcharge and Cess.It is posing a big challenge to the business which are incurring Book losses and blocks the funds for 10 years. It poses very big cash flow issues.

Suggestion

The Rate of MAT should be reduced to flat 10% inclusive.

II. CUSTOMS

Issue

1. Special Valuation Branch(SVB)

SVBs in general are not fully manned. This function is given as additional charge to other Officers. It only leads to increase in the litigation blocking the money and cost of doing the business. Although the process has been eased with many recent circulars, ground reality has not improved.

Suggestion

Abolish SVB because of the following facts. In case of under valuation, the importing company would save the custom duty of Rs.23% approx. (10%+12%+cess) but would result in payment of more income tax. For example if a company undervalues its imported goods by Rs.100/- then it may save Rs.23 but its income would increase by Rs.100 on which it would be required to pay Income Tax up to 35% or so.

2. In ordinate delay in Passing of SAD refunds

Difficulties

Rejection of SAD refunds without appreciating the spirit of SAD refund wherein Sales Tax is paid. Department even misplaces files and expresses their inability to trace.

Suggestion

Rejection on flimsy grounds should be avoided and the orders of superiors (Commr-A), Tribunal & courts on the similar issues should be followed.

3. Interest on Refunds

Difficulties

No interest is paid unless it is insisted. Generally, assessees are reluctant to ask for interest because of fear of vindictive action.

Suggestion

On passing of delayed refunds of any sort, interest should be automatic like payment of duty with interest by the assessee. It should be in line with the Income Tax cases.

III. EXCISE & SERVICE TAX

1. Accumulation of CENVAT Credits

Difficulties

CENVAT credits are getting accumulated where there is more import content, less value addition and finished goods are dispatched to domestic projects where ED is exempted to which CCR 6(3) also is not applicable . This is blocking the working capital.

Suggestions

Mechanism to provide refunds to the extent of CENVAT availed for such Duty exempted projects in line with the formula given under Rule of 5 of CCR, 2004 can be introduced.

2. Interest on Refunds

Difficulties

No interest is paid unless it is insisted. Generally, assessees are reluctant to ask for interest because of fear of vindictive action.

Suggestion

On passing of delayed refunds of any sort, interest should be automatic like payment of duty with interest by the assessee. It should be in line with the Income Tax cases.

3. Parking of SCNs in call Book without adjudication

Difficulties

Periodically SCNs are issued and on filing the reply they are transferred to call Book because of issues raised by CAG although the law is very clear.n It increases paper work for both the Assessees and the Dept Officers.

Suggestion

When the law is very clear, no SCNs should be issued and the Dept should take up with CAG separately.

4. Litigations

Difficulties

Invariably all SCNS are confirmed till Com-A despite clear provisions of Law & case laws. It increases the litigation.

Suggestion

A mechanism to be devised to check the officers who mechanically confirms the initial SCNs and their success rate in the appeals.

5. Time bound release of orders after the PH by the Adjudicating AC/Com/Com-A

Difficulties

At present the Adjudicating officers are not passing the orders in a time bound manner and pending release of order, they are transferred and fresh PH notice is issued which delays/vitiate the whole appeal process.

Suggestion

It should be made mandatory that the same officer who heard the matter should pass the order in a time bound manner may be within a fortnight of the hearing.

CST Act

1. Submission of Statutory Forms- C,F,H,I,E-I & E-II

Difficulties

Sub-Rule (7) of Rule 12 Central Sales Tax (Registration and Turnover) Rules, 1957 provides that the declaration in Form-C or Form-F or the certificate in Form-E-I or Form-E-II shall be furnished to the prescribed Authority within three months after the end of the period to which the declaration or the certificate relates. This change was made w.e.f 2005.

Suggestion

There are practical problems in getting all the statutory forms within the period of 3 months for the Cos which are having operation all over the Country. Many State Assessing Authorities, treat this provision for the creation of huge demand. Assessees have to make the deposit of 20% to 50% of the demand in cash before filing the appeal. Eventually, they collect the Forms in a year time or so and they do not get the refunds in time. The Dept also knows that the forms will be collected by the Cos in due course of time. Also this is being resorted to augment the revenue especially during the year-end. It is suggested to remove the time limit of 3 months. Time limit can be before the completion of assessment of the respective year. Pending introduction of GST, this is urgently required to be implemented and some States or trying to increase the revenue to get more compensation under GST.