TIOL-DDT 2315
18.03.2014
Tuesday

IT was a bad day in the CESTAT for the Revenue on the 12th of March 2014. They filed a Rectification of Mistake (ROM) application against a CESTAT order condoning a delay of nine days in filing an appeal by an assesse. The Tribunal was not too pleased with this application and imposed a cost of Rs. 10,000 on the Revenue to be paid to the Prime Minister's Relief Fund within two weeks.

The Tribunal observed,

This application seeking rectification/review of the order dated 19.8.2013, condoning a delay of nine days, for the detailed reasons recorded therein, is clearly a fundamentally misconceived and frivolous application. We are burdened with a huge pendency. It is regrettable that not only are such frivolous applications filed by Revenue but are even argued by DRs at great length and unmerited vehemence. There is also no provision, conferring jurisdiction on the Tribunal to review an order condoning delay in presenting the appeal.

Since a wholly frivolous application is filed by Revenue, seeking review of an order condoning the delay while recording reasons therefore, seeking exercise of a jurisdiction not vested in the Tribunal and what is more, such application is pursued with great vehemence, resulting in wastage of substantial time of a docket overloaded Tribunal, we consider it appropriate to dismiss this application with costs of Rs. 10,000/- payable by the petitioner/Revenue to the Prime Minister's Relief fund, within two weeks from today.

Please see 2014-TIOL-410-CESTAT-DEL

Can payment be ordered to PM's Relief Fund?

PRIME Minister's National Relief Fund is established wholly with public contributions and does not get any budgetary support. The Fund has a PAN and is audited by an independent auditor outside the Government. Thakur Vaidyanath Aiyar & Company, Chartered Accountants are the present auditors.

The Fund accepts only voluntary contributions by individuals and institutions.

Contributions flowing out of budgetary sources or from the balance sheets of the Public Sector Undertakings are not accepted.

At the cost of repetition, it has to be noticed that:

1. Contributions have to be voluntary.

2. Only individuals and institutions can contribute.

3. Government Departments supported by Union Budget cannot contribute.

4. PSUs are not allowed to contribute from funds in their balance sheets.

If the CESTAT orders a Government Department like the Revenue in the Finance Ministry which wholly depends on the Consolidated Fund of India, there is no way the Revenue Department can withdraw the money from the Consolidated Fund of India to make a contribution to the PM's National relief Fund. So, the Tribunal's direction to the Revenue Department to make a payment to the PM's Relief Fund cannot be implemented.

Even if they manage to get hold of the money somehow, the PM's Relief Fund cannot accept this money as only voluntary contributions are accepted. A payment made on the directions of a Tribunal can by no stretch of imagination be called a ‘voluntary contribution'.

A copy of the order was directed to be sent to the Finance Secretary and CBEC, for appropriate consideration . Now the appropriate consideration would be not action against those who filed the frivolous application, but it would be to sort out the knotty problem as to how money can be withdrawn for making a contribution to the PM's Relief Fund and then how to convince the Fund Managers and their tough auditors to accept the non voluntary contribution from the Government department which is neither an individual nor an institution. They have a tough time indeed. Maybe a constitutional question - but how will they solve it in two weeks?

Can President of India make donation to PM's Relief Fund?

IT seems the President of India does have access to certain funds from which he can make donations. On some RTI applications, recently the President's Secretariat refused to divulge information on the donations made by the President of India. The Delhi High Court ruled that donations were by the President from the taxpayers' money and as such taxpayers had a right to know where the money was going. The High Court had observed, "such acts of generosity and magnanimity done by the President should be placed in the public domain as they would enhance the stature of the office of the President of India. In that sense, the disclosure of the information would be in the public interest as well."

The Revenue Department spends its money on behalf of the President of India and it is very doubtful whether the President can make a contribution from the tax payers' money to the Prime Minister's Relief Fund.

Can CESTAT/ITAT impose costs?

LET us restrict the issue to the two tax Tribunals, the ITAT and the CESTAT. One school of thought is that these Tribunals being creatures of the statutes like Income tax Act and Customs Act cannot go beyond the statutes and these statutes do not provide for awarding costs.

Now can Tribunal award costs?

The CESTAT had awarded costs in a few of cases. The Investigation Commission under the chairmanship of Sir Srinivasa Vardhachariar was in favour of the Tribunal having the power to award costs in the appeals before it.

As per Section 260A of the Income Tax Act,

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

There is an identical provision under Section 130(5) of the Customs Act.

The National Tax Tribunal Act, 2005 has a provision in Section 15 (3)(b)(ii) that the NTT may award such cost as it deems fit.

So, can the CESTAT impose costs in the absence of any legal provision for that? Under what law or authority is cost imposed?; Customs Act has no provision; is it under CPC? Is it under inherent powers?

If you look at the orders passed by the present President of the CESTAT, almost invariably, all of them end with the words, “no order as to costs”. So obviously he believes that CESTAT can order costs - he should know; he had been an experienced and distinguished judge of a big High Court. Or was it simply carrying the High Court language into the Tribunal?

Anyway, he has imposed costs in several cases during the last one year. And the cost mentioned in the case discussed above was also in an order passed by the Hon'ble President.

Frivolous litigation needs to be curbed at any cost.

Costs and Courts

RECENTLY, a petitioner before the Delhi High Court raised the following questions:-

a) Whether a Court has the power ("the jurisdiction") to injunct a party from filing any kind of application?

b) Whether a Court, purportedly acting to check vexatious or frivolous litigation, has the power to impose costs under any provision of law other than in the manner laid out in Section 35-A of the CPC?

Put differently: Whether 'inherent powers' can be claimed to usurp jurisdiction to impose costs for what is allegedly vexatious or frivolous litigation beyond the limit of Rs. 3000 (as laid out in Section 35-A of the CPC), especially in contempt proceedings, in which the maximum fine that can be imposed is Rs. 2,000?

c) Can such costs be 'punitive' in nature i.e. other than 'compensatory' in nature?

d) Can the power to do so be usurped by following a procedure other than that laid out in Section 35-A of the CPC?

e) Can such costs be directed to be paid to a beneficiary other than the opposite party?

f) If such so-called costs be 'punitive' in nature, whether they are, in actual reality, 'costs', or in truth, a 'fine'?

The Delhi High Court delivered its judgement on this writ seeking such vital answers on 5.3.2014, but unfortunately, the High Court declined to give a ruling in a writ petition as the petitioner had the alternate remedy of appeal.

Costs - Law Commission' Recommendations

"COSTS” signifies the sum of money, which the court orders one party to pay another party in respect of the expenses of litigation incurred. Except where specifically provided by the statute or by rule of Court, the costs of proceedings are in the Court's discretion." - Halsbury's Laws of England, 4th Edn.,Vol 12, P 414

The provision for costs is intended to achieve the following goals, as pointed out by the Supreme Court in Vinod Seth vs. Devinder Bajaj,

(a) It should act as a deterrent to vexatious, frivolous and speculative litigations or defences. The spectre of being made liable to pay actual costs should be such, as to make every litigant think twice before putting forth a vexatious, frivolous or speculative claim or defence.

(b) Costs should ensure that the provisions of the Code, the Evidence Act and other laws governing procedure are scrupulously and strictly complied with and that parties do not adopt delaying tactics or mislead the court.

(c) Costs should provide adequate indemnity to the successful litigant for the expenditure incurred by him for the litigation. This necessitates the award of actual costs of litigation as contrasted from nominal or fixed or unrealistic costs.

(d) The provision for costs should be an incentive for each litigant to adopt alternative dispute resolution (ADR) processes and arrive at a settlement before the trial commences in most of the cases. In many other jurisdictions, in view of the existence of appropriate and adequate provisions for costs, the litigants are persuaded to settle nearly 90% of the civil suits before they come up to trial.

(e) The provisions relating to costs should not however obstruct access to courts and justice. Under no circumstances, the costs should be a deterrent, to a citizen with a genuine or bona fide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts.

The Law Commission of India in its 240th Report in 2012 recommended inter alia :

(1) Costs in civil suits/proceedings should be such as to curb false and frivolous litigation and to discourage adjournments on feeble grounds or for ulterior purpose. Further, the costs to be awarded to a successful party should be realistic and reasonable and to this effect the rules in vogue should be revisited by the High Courts.

(2) The principle that costs should follow the event which finds statutory recognition in Section 35 of CPC ought to be given effect to by the Courts with all seriousness and the deviations should be rare. The recent decision of Supreme Court in Sanjeev Kumar Jain (2011, JT (12), 435) has laid stress on this aspect.

However, the award of costs should not cause undue hardship to the parties who by virtue of their socio-economic circumstances may not have paying capacity.

(3) a) The rules framed by the High Courts in relation to costs especially the advocate's fee should be thoroughly revised so as to accord with the principle of realistic and adequate costs [The aspects on which the Committee of the High Courts should focus their attention while revising the rules in this regard are discussed at various places, especially paras 4.2, 4.3, 5 and 6

b) The rules must be updated and language to be made simpler so as to impart clarity. Unnecessary and outdated rules ought to be weeded out. The format of bill of costs needs to be revised. The procedure for filing fees certificate also needs a change.

(4) Adjournment costs should be sufficiently high and with a view to ensure this, the High Courts may, by virtue of practice directives or circulars, lay down guiding principles. Uniformity in approach on the part of the trial judges in granting costs for adjournments ought to be developed.

Tariff Value of Gold, Oils increased

THE  Government has increased the Tariff value of Gold from 433 USD to 445 USD per 10 gms and decreased that of Silver from 699 to 694 USD per kilogram with effect from 14.03.2014. Tariff values of other items are also hiked. Tariff value of Areca Nuts remains same.

The Tariff values as on 28.02.2014 and with effect from 14.03.2014 are as under:

Notification No. 23/2014-Cus (NT), Dated: March 14, 2014

CBEC offices to remain open on last three days of this Month

CBEC notes that the last week of March 2014 does not have full working days. 29th March is a Saturday, 30th March is a Sunday and 31st March is a public holiday in some parts of the country (Chaitra Sukladi / Gudi Padava / Ugadi / Cheti Chand). Incidentally, this week also happens to be the last week of the financial year. And the bulk of the revenue is received at the end of the month.

CBEC Chairperson has requested the Secretary Financial Services to issue instructions to have the banks open for full day on 29th, 30th and 31st March 2014 so that the efforts made for collections of revenue are reflected appropriately.

The Board requests the Chief Commissioners to issue Trade Notices and keep their offices open on 29th, 30th & 31st March, 2014. Board also wants the Chief Commissioners to contact the local banks to ensure that the assessees can make their payments electronically and these are uploaded to reflect the actual revenue collections for the financial year.

CBEC F. No. 296/42/2013-CX.9, Dated: March 14, 2014

FTP - Introduction of Online Export Obligation Discharge Certificate (EODC) / Redemption for Advance Authorization (AA) and Duty Free Import Authorization (DFIA)

DGFT is to introduce Online system for EODC / Redemption for AA / DFIA with effect from 14.03.2014, which is expected to reduce processing time and transaction cost.

DGFT Public Notice No. 55 (RE-2013/2009-2014), Dated: March 14, 2014

Jurisprudentiol – Wednesday's cases

Service Tax

Agricultural dam or sluice gates cannot be considered as a plant and machinery or equipment or structures thereof - they are in nature of infrastructural construction catering to needs of agriculture and are excluded from purview of Service Tax - Appeal allowed: CESTAT

THE appellant is the Chief Engineer (Mechanical), Water Resources Department of the Government of Maharashtra. The appellant undertook erection of various types of sluice gates and hoses for the dams constructed in various districts of Maharashtra, such as, Amravati, Akola, Washim, Yavatmal, Buldhana districts for the Vidharbha Irrigation Development Corporation, Tapi Valley Irrigation Development Corporation and Krishna Valley Development Corporation.

The Commissioner of Central Excise, Customs & Service Tax, Nashik/Nagpur was of the view that the appellant was liable to pay service tax on these activities under the category of 'Erection, Commissioning and Installation Service'.

Income Tax

Whether when excise duty liability is that of contract manufacturers, same can be taken over by assessee as matter of commercial expediency and can also be treated as revenue expenditure - NO: ITAT

THE assessee is a wholly owned subsidiary of M/s Tuppeware Asia Pacific Holdings Private Limited, Mauritius which holds 99% equity capital of the assessee. The remaining 1% was held by M/s Tupperware Home Parties Inc., USA. The Group owns the brand name “Tupperware”. The assessee is engaged in trading of plastic kitchenware products It purchases the products from the contract manufacturers (Dart Manufacturing India Private Limited and Innosoft Technologies Limited). During assessment proceedings, AO found that assessee had claimed mould expenses of Rs. 46,632,929/- and the moulds were used by Dart India and ITL against rent payments.

The issues before the Bench are - Whether when the Revenue has allowed the expenditure incurred on import of mould utilised by contract manufacturers against payment of rent, any change in the treatment of such expenditure is required in the subsequent year when there is no change either in law or in facts and Whether when the excise duty and interest payments liabilities are that of the contract manufacturers, the same can be taken over by the assessee as a matter of commercial expediency and can also be treated as revenue expenditure. And the verdict partly goes in favour of the Revenue.

Central Excise

Rebate - One cannot view limitation imposed under statute leniently so as to bring through backdoor concept of sufficient cause flowing from section 5 of Limitation Act - delay largely remains un-explained - Had there been some extraordinary circumstances preventing petitioner from presenting appeal within such time coupled with gross injustice on account of termination of appellate remedy, we would have still considered case of petitioner for invoking extra ordinary writ jurisdiction -: HC

IT is the case of the petitioner that 10 consignments of processed fabrics were removed for export from the factory of one M/s. Gujarat Polyfilms by the petitioner as a merchant exporter. M/s. Gujarat Polyfilms, as manufacturer of the fabric had paid excise duty of Rs.8.07 lakhs on such fabrics and CENVAT credit of duty paid on inputs like yarn was utilized for discharging its duty liability. The petitioner company as a merchant exporter lodged rebate claims upon receiving documents of proof of export.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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