TIOL-DDT 2310
10.03.2014
Monday

COME March and the madness in Revenue Departments to recover arrears, by means fair or foul, reach unimaginable levels. Last year, armed with the CBEC's draconian Circular 967/01/2013 dated 01/01/2013, the field officers drove the assessees frantically to the various Benches of the High Courts and CESTAT.

The Mumbai High Court had given a landmark order in Larsen & Toubro Ltd. Vs. Union of India, - 2013-TIOL-99-HC-MUM-CX and the CESTAT had in a suomoto order in 2013-TIOL-553-CESTAT-BANG restrained the Department from initiating recovery proceedings when the stay application is pending in the CESTAT.

It was believed that the draconian Circular is no more valid in view of the Order of the Bombay High Court (and eight other High Courts) and the suomoto order of the Tribunal in 2013-TIOL-553-CESTAT-BANG .In fact the Mysore Chief Commissioner had clarified in a RAC meeting that, the Board has decided to accept the Tribunal suomotu order No.25453/2013 dated 02/04/2013 under rule 41 of CESTAT (Procedure) Rule, 1982, with respect to the CBEC Circular No. 967/01/2013 dated 01/01/2013.

But it seems the Circular is raising its ugly head again in some pockets of the country.

Recently even while the Stay application was pending in the CESTAT and even listed for hearing, the Department went ahead with recovery proceedings and the assessee had to approach the High Court.

The  High Court took note of the Bombay High Court 2013 order in the  Larsen & Toubro  case  (2013-TIOL-99-HC-MUM-CX)  wherein it was held,

"For the reasons, we have come to the conclusion that the provisions contained in the impugned circular dated 1 January 2013 mandating the initiation of recovery proceedings thirty days after the filing of an appeal, if no stay is granted, cannot be applied to an assessee who has filed an application for stay, which has remained pending for reasons beyond the control of the assessee. Where however, an application for stay has remained pending for more than a reasonable period, for reasons having a bearing on the default or the improper conduct of an assessee, recovery proceedings can well be initiated as explained in the earlier part of the judgment."

The Court was also informed that the same view has been taken by as many as eight High Courts.

The High Court requested CESTAT to dispose of the stay application filed by the petitioner, within a period of eight weeks and ordered that in the meantime, no coercive action against the petitioner for recovery of the demand will be taken .

Why should the Department harass the assessees like this and drive them to High Courts and Tribunals enriching the lawyers in the process?

Is the Government meant only for making the peoples' lives miserable including those of the taxpayers? Actually in this election year, who is really bothered about revenue targets? Overanxious revenue officers used to annual arm-twisting are only continuing with a treacherous tradition.

And what happened to direction of the Karnataka High Court (2013-TIOL-264-HC-KAR-CX) directing the Union of India to constitute additional Benches of CESTAT for early disposal of the Stay applications. See also DDT 2078 14.04.2013 & 2146 11.07.2013.

Please see 2014-TIOL-300-HC-ALL-CX

If Advocate is not Present, Appeal will be dismissed - Revenue Departments warned by HC

IN a recent case in the Bombay High Court, the Bench found that matters were adjourned because the Counsel did not have papers or were not ready with the case. The High Court affirmed: Such state of affairs will not be tolerated hereafter . The High Court directed:-

1. In the event, the Counsel engaged by the Department is absent without a justifiable or reasonable cause, we will invariably impose costs and to be paid by the Counsel personally.

2. Equally, we would proceed in his absence. In the event, the Appellant or his Advocate is absent; we will proceed to dismiss the Appeal for non prosecution. Thereafter, no application for restoration of the Appeal will be considered unless the Appellant makes out a sufficient cause for absence. ­­

3. We would also expect the Department and equally the­­ Excise,­ Customs, Income Tax, all of which are stated to have engaged separate Advocates,to inform and caution their Advocates that their absence would ­ result in either this Court proceeding ex-parte or Appeals of the Department being dismissed for non prosecution.

4. This Court will not hereafter countenance that the matters are adjourned and not heard due to absence of the Advocates.

5. The Department is equally responsible to the Court and must ensure the presence of their Advocates.

6. In the event only one Advocate is being briefed, ­ the Department may consider handing over and entrusting the paper to an additional Advocate so as not to cause inconvenience to this Court.

7. The disobedience of this order or inconvenience to Court, would result in the Joint Secretary, Department of Judiciary, Government of India, so also, the Secretary Department of Law & Judiciary, Government of India, remaining present in the Court.

Please see 2014-TIOL-299-HC-MUM-MISC

Adjournments and harsh courts

NOWADAYS we find the tendency where some courts are very harsh with prayer for adjournments. It is not that adjournments are always sought only to delay adjudication or for forum shopping. Many courts list 50 to 200 cases for hearing on a day and hardly 30 of them reach and all the advocates whose cases are listed for that day have to come and sit in the court for the whole day with their cases not reaching for hearing and without even knowing the next date of hearing. And if this advocate asks for an adjournment, some courts simply dismiss his suit. It is not as if the cause lists are published well in advance. In many courts the cause lists are uploaded on the website late in the night and it is impossible for an outstation advocate to reach the court in a few hours. Again it is not as if the Court has nothing to do if an advocate asks for an adjournment - there is always a long list of cases posted for that day. If it is found that any advocate is indulging in delay tactics or forum shopping, it can be made clear that in the next hearing, there would be no adjournment - but to treat every prayer of adjournment as a punishable crime is not fair.

Jurisprudentiol - Tuesday's cases

Customs

Appeal against orders of Tribunal - Show Cause Notice issued by Vizag Customs - Appellate Order passed by Appellate Commissioner at Hyderabad - Next Appeal passed by CEGAT, Chennai - Appeal lies to AP HC and not Madras HC

IT was contended that the appellant was a licensed bonded warehouse in Visakhapatnam and the licences having been granted by the Commissioner of Customs, Visakhapatnam; the fraud committed by the appellant was detected at Visakhapatnam; the show cause notice was issued by the customs authorities at Visakhapatnam and the show cause notice was adjudicated and order in original was passed by the Assistant Commissioner of Customs, Visakhapatnam. Aggrieved by this, the appellant preferred appeal before the Commissioner of Customs and Central Excise (Appeals), Hyderabad, who by order dated 10.11.1998, dismissed the appeal. Thereafter, show cause notice was issued to the appellant by the Commissioner of Customs, Visakhapatnam. This was adjudicated and order in original was passed by the Commissioner, Visakhapatnam. The appellant filed appeal as against the said order before the Tribunal and the Tribunal passed an interim order, dated 11.11.1999. As against the said order, the appellant initially filed a writ petition before this Court in W.P.No.16490 of 2000, withdrawing the writ petition on the ground that they proposed to move the High Court of Andhra Pradesh and the writ petition was dismissed by this Court on 13.10.2000. Thereafter, the appellant moved the High Court of Andhra Pradesh and the writ petition was dismissed and the order passed by the Tribunal was confirmed. Therefore, it is contended that the present appeal which has been filed under Section 130 of the Customs Act is not maintainable before this Court as the cause of action for filing the appeal does not arise within the jurisdiction of this Court as the situs of the Assessing Officer will determine the jurisdiction and not the situs of the Tribunal in this regard. The counsel appearing for the Revenue in support of his submission relied upon the decision of the Supreme Court in the case of Ambica Industries vs. Commissioner of Central Excise, reported in (2007-TIOL-97-SC-CX);

Income Tax

Whether where assessee's intention is to earn long-term income from investment made out of own funds and Revenue has accepted same in preceding years, gains from same investment can be treated as business income - NO: ITAT

ASSESSEE is partner in a firm of Indenting Agent and Director in a pharmaceutical company and is also deriving income from dealing in shares and mutual funds. Assessee offered Long-term capital gains and short term capital gains on shares and securities through Portfolio Management Services and through transactions done himself. Assessee also declared income from speculation on shares as his business income. AO assessed the entire income declared by the assessee under the head "capital gains" as income under the head "profits and gains of business or profession". CIT (A) confirmed the order of AO.

Assessee contended that in preceding assessment year, the ITAT in assessee's own case held that the very nature of PMS is such that investments made by assessee cannot be said to be scheme of trading of shares and stocks and therefore, the profit is to be assessed under the head "capital gains".

The issues before the Bench are - Whether the gain arising to the assessee on sale and purchase of shares through PMS is to be considered as business income - Whether where the intention of the assessee was with long term goal of earning income from the investment and investment was made out of own funds and the revenue has accepted the investment in the preceding years, the gain on the same cannot be considered as business income. And the verdict goes against the Revenue.

Central Excise

Activity of sieving and packing is not notified as manufacturing activity in respect of goods falling under Chapter 25 of CETA, 1985 - hence it cannot be said that appellant manufactured exempted goods - since appellant has taken credit of 4% SAD on the imported inputs LBU 30, LBU 60, they are required to reverse the same treating these inputs as having been cleared as such - appeal allowed with consequential relief: CESTAT

THE assessee is a manufacturer of boric acid which is cleared on payment of Central Excise duty. The appellant procured two inputs namely LBU 30 and LBU60 which are required for manufacturing of boric acid. Prior to March 2006, both the inputs were exempted from payment of all duties. With effect from March 2006 these inputs were required to pay 4% SAD on the import of the said inputs. The appellant paid SAD @ 4% and took the CENVAT credit of the said duty. These inputs namely LBU 30 and LBU 60 were also cleared after sieving and repacking into local market without reversing any credit or on payment of any duty.

Since the assessee was manufacturing dutiable and exempted goods but was not maintaining separate accounts of inputs used for the aforesaid goods, demand notices were issued invoking rule 6(2) of CCR, 2004 asking the assessee to pay 5%/10% of the value of the 'exempted' goods.

During the course of investigation, the assessee paid the "amounts" and the same was appropriated in the adjudication proceedings. Against these orders of the CCE, Thane-I, the assessee is in appeal.

However, in another case, the Commissioner(A) held that the goods which are called as exempted goods are not exempted goods as the inputs LBU 30 and LBU 60 have been cleared as such without any manufacturing activity and, therefore, the assessee is required to reverse only the quantum of 4% SAD availed by them as credit.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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