GST Commissionerates – Proposed Organizational Structure

SEARCHES/Seizure: Both the Central and State Governments should be authorized to issue search warrants separately under CGST/IGST or SGST laws, as the case may be. For this purpose, the legal provisions under the CrPC as made applicable to the Central Excise Act, 1944 may be replicated with suitable modifications. For GST/IGST, search warrants may be issued by officers of the rank of Joint/Additional Commissioner or the Commissioner. The authority carrying out searches should inform the other tax authority immediately to enable it to join the operations, if necessary. The goods and documents, however, should be seized by the authority, which issues the search warrant.

A tax payer has to face the searches from multiple agencies like the AE Commissionerates, regular Commissionerates, and specialised agencies of State and Central Governments. So the power to search should be vested only with the Anti-Evasion Commissionerates/ Divisions. Regular Commissionerates should not have the power to search.

Adjudication and Appeal: The Group recommends two alternate models of dispute resolution under GST, analyzing the pros and cons of both, for consideration of the Board:

In Model 1 there will be separate adjudication process by the CGST and SGST authorities and the integration takes place from the stage of Appeals. In Model 2, the integration takes place from the Adjudication stage itself with separate Adjudicators who will not be under the administrative control of the CGST and SGST authorities.

Experience suggest that it is not easy for somebody who is transferred from Customs to Central Excise or vice versa do handle the work of the other department. So, the model of a Common Adjudicator for both CGST and SGST may not give the desired result, at least in the beginning of the implementation of GST, though the disputes / provisions of law may be similar for CGST/SGST. At the same time the suggestion of separate Adjudicators without the administrative control of the GST authorities is a welcome step. Therefore with integration of both these models, Model 3 can be evolved.

Under this third Model, Adjudication process will be separate for CGST and SGST with separate Adjudicators drawn from CGST and SGST authorities. They will function independently without the administrative control of the CGST/SGST authorities. The integration will take place from the Tribunal Stage (on appeal against the order-in-original). However, because of the integration of the CGST/SGST disputes, the Tribunals will be choked with appeals from both the departments. So each State should have more than one Tribunal with the option to the tax payer to file appeal at any of the Tribunals within the State.

Refund of 4% CVD in terms of Notification No.102/2007-Cus – Disposal of claims in r/o cases where assessments are provisional – Board's Instructions

IN TIOL-DDT 1398 09.07.2010, while reporting Board's frantic efforts to clear the backlog of SAD refund claims and Circular No. 18/2010-Cus dated 08.07.2010 issued in this regard to speed up the refunds, we said,

“Board believed that in view of its clarifications issued through earlier Circulars, there would not be any difficulty in timely disposal of refund claims (how naïve it was). However, on review of the status of pending refund claims at major Customs Houses as on 31.03.2010, it was noticed that more than 80% of pending claims relate to 4% CVD cases. In view of this, the Board has launched a special drive for clearing the pending SAD refund claims and came out with the following instructions to further simplify the procedure for claiming 4% CVD refunds.”

By issuing Circular No. 18/2010-Cus, Board launched a special drive to clear the said refund claims pending with various Customs Houses across the country and issued certain instructions to be followed by the field formations to achieve this goal. Within no time i.e. three weeks into this special drive, it appears that the Board has hit a road block thanks to the ingenuity of field formations in raising queries in instalments. This time the field formations wanted the Board to clarify as to what should be regarded as the relevant date for determining the prescribed period of one year in terms of the amending Notification No. 93/2008-Cus when assessments are provisional. While in some Customs Houses, ‘date of payment' of duty is being considered as relevant date for determining the prescribed period of one year, in some other Customs Houses, the date of finalization of provisional assessment is regarded as the relevant date. To resolve this confusion, Board was requested to issue a suitable clarification in order to ensure uniformity in procedure.

After examining the matter Board clarifies that in terms of Circular No. 6/2008-Cus dated 28.04.2008, it was made clear that the time limitation under Section 27 of the Customs Act, 1962 will not be applicable in cases relating to 4% CVD refunds. Board further states that the 4% CVD refund is admissible in terms of Notification No. 102/2007-Cus as amended by Notification No. 93/2008-Cus issued in terms of Section 25(1) of Customs Act, 1962 subject to fulfilment of certain conditions envisaged in the said notifications. As per the said notifications the time limit prescribed for the purpose of the said refund claims is one year from the date of payment of duty. In view of this, in cases where the assessment is provisional, for the purpose of sanction of refund of 4% CVD, the date of payment of duty would be the date of payment of CVD at the time of import of goods and not the date of finalization of provisional assessment. The importer, therefore, would be eligible to get the refund, if the claim is filed within one year from the date of actual payment of 4% CVD i.e. the date of payment of duty at the time of clearance of imported goods.

In view of the above clarification, Board directs that all pending 4% CVD refund claims under Notification No. 102/2007-Cus as amended by Notification No. 93/2008-Cus should be disposed of despite the fact that the assessment continues to be provisional without awaiting for finalization of assessments.

It has been almost three years since this benefit was extended to the importers by virtue of this notification and Board overcame one hurdle after another placed by the field formations and issued clarifications to speed up the refund process. Unfortunately, history told us a different story because, the officers in the field devised smarter ways to thwart the noble ideas of the Board. At least for now, let us hope that Board will not be saddled with anymore queries from the field formations and the special drive to clear these refund claims becomes successful.

Now, what will happen if an importer believed that the refund has to be filed only on finalization of provisional assessments (as held in various case laws) and waiting for finalization of the assessments ? The field formations will merrily reject his claim on the ground that it was filed beyond one year from the date of payment of duty by taking shelter under this latest circular. Because of lack of field experience, while removing one hurdle for refund, the Board is unknowingly creating another hurdle.

All this is good. But having dilly dallied for three years to clear the backlog, the Board should seriously consider shelling out interest for delaying the refund claims? Board may conveniently say that this is not provided for in the Notification and hence interest on delayed refunds is ruled out. But equity demands that the department should pay interest for unnecessarily holding back the claims for three years on one pretext or the other.

In TIOL-DDT 1398 we in the context of an application form being prescribed for the purpose of the said refund claims, we also asked a question as follows:

Will the Board clarify as to Part 5 of which Customs Manual the Board is referring to here?

Will the Board clarify?

CBEC Circular No. 23/2010-Cus., Dated: July 29, 2010

Service Tax Return Preparer Scheme - Age Restriction withdrawn

AS per para 4 of the Service Tax Return Preparer Scheme, 2009, a person aged above 35 is not eligible to apply to act a service tax return preparer. This restriction is not applicable to a person who has retired from the Customs and Central Excise Department. Now both these clauses are removed and the field is open to everyone.

Notification No. No.  44/2010 – Service Tax Dated: July 20, 2010

Supreme Court goes hi-tech - Notice by email

THE Supreme Court has ordered that:

[i] In addition to normal mode of service, service of Notice(s) may be effected by E-Mail for which the advocate(s) on-record will, at the time of filing of petition/appeal, furnish to the filing counter a soft copy of the entire petition/appeal in PDF format;

[ii] The advocate(s) on-record shall also simultaneously submit E-Mail addresses of the respondent(s) Companies/Corporation(s) to the filing counter of the Registry. This will be in addition to the hard copy of the petition/appeal;

[iii] If the Court issues notice, then, in that event alone, the Registry will send such an additional notice at the E-Mail addresses of the respondent(s) Companies/Corporation(s) via E-Mail;

[iv] The Registry will also send Notice at the E-Mail address of the advocate(s) for respondent(s) Companies/Corporation(s), who have filed caveat. Advocate(s) on-record filing caveat shall provide his/her E-Mail address for effecting service; and

[v] Within two weeks from today, Cabinet Secretariat shall also provide centralized E-Mail addresses of various Ministries/Departments/ Regulatory Authorities along with the names of the Nodal Officers, if already appointed, for the purposes of service. Why can't the High Courts and Tribunals follow this system? And why can't we make all adjournment proceedings online so that it will save the precious time of the Court and the Bar?

Click here for the Supreme Court order.

Jurisprudentiol – Monday's cases

Central Excise

Inputs used in dutiable and exempted Goods – Tribunal's Remand order to verify fact of proportionate reversal challenged by Revenue - Appeal Dismissed

REVENUE is in appeal against a remand order by the CESTAT. Demand came to be confirmed against the respondent-assessee in terms of provisions of Rule 6(3)(b) of the Cenvat Credit Rules, 2004 (the Rules) on the ground that the assessee having availed of input credit in respect of common inputs used in the manufacturing of excisable as well as dutiable goods was required to pay 8% of the price of the exempted goods at the time of clearance of the finished goods. Against the order made by the Commissioner, the assessee preferred appeal before the Tribunal, which came to be disposed of by remitting the matter to the Commissioner for verifying the correctness of the reversal and directing that any shortfall of reversal would be made good by the appellant.

Income Tax

Sec 41(1) - waiver of loan amount by bank - assessee not entitled to exclude it from income as it is not cessation of trading liability nor has assessee acquired any capital assets: ITAT

THE issue before the tribunal is - Whether the assessee is entitled to exclude the loan amount waived off by the bank as income in its hand u/s 41(1) as the same has not been in the nature of cessation of any trading liability and also the failure to prove that the loan was utilised for acquiring any capital asset. And the answer is NO.

Service Tax

Towers and pre-fabricated buildings - prima facie not capital goods or inputs – Stay orders are not precedence - pre-deposit ordered - CESTAT

THE principles laid down by the Larger Bench in Vandana Global Ltd . case is that CENVAT Credit on the capital goods is necessarily intended to be provided in respect of movable goods. Prima facie, neither the tower nor the pre-fabricated building have the characteristic of movability to grant CENVAT Credit.

See our columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend

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