TIOL-DDT 1414
02.08.2010
Monday

Implementation of Cadre Review

THE cadre review proposal needs to be pursued vigorously so that the additional manpower is available at the earliest for smooth switch-over to GST.

HR Management is at its worst in the Department. The reward or appreciation for good work is “more work” in Government Departments, which offer the officers are made to accept. The penalty for incompetence is less work. With nearly 50 lakhs assessee base needing professional guidance, it will be a herculean task to retain the cream in the Department. There should be a serious re-thinking on the HR Management before switching over to GST.

Territorial / Functional Divisions:

The Report proposes One tier/ Two Tier and Three Tier Commissionerates, with Functional Divisions in One Tier and Territorial Divisions in Two Tier Model. Within the Territorial Divisions, there will be again Functional Divisions like Registration / Refund etc. The common usage of Division may lead to some confusion among tax payers and there is a need to reframe the Functional “Divisions” proposed. The confusion the word Division creates can be illustrated by the following conversation:

In order to avoid such confusion among the tax payers, may a new word has to be coined for functional divisions, say SECTION could be a better word.

The Group also felt that Commissionerates can also be organized based upon combination of more than one type. For example, if a Commissionerate has 3 Divisions in the city and 2 Divisions away from that city, for the 3 Divisions in the city functional organization (one-tier) can be adopted and for other 2 Divisions, 2- tier organization can be followed.

This type of combinations will surely create confusion as there will not be uniformity within the same Commissionerate. This kind of situation of having 3 Divisions in the City and 2 Divisions away from the City had arisen due the fact of trying to keep the Commissioners in the Cities only. There is no harm in grouping Divisions outside the City into a single Functional / Territorial Commissionerate outside the city. But no Commissioner would be willing to work in such B class stations having no airport facilities. Unless the officers change their mindset, and change the policy of keeping the Commissioners only in cities, the tax payers have to suffer. Even today, there are Commissionerates in a City though the territorial jurisdiction is totally outside the city.

Mysteries of Uniform – CIC wants Board to issue guidelines – Will there be a GST Uniform?

ONE of the relics which the Central Excise and Service Tax Department should perhaps get rid of in the GST regime is the funny uniform that you see Inspectors, Superintendents and Assistant Commissioners in.

In a recent order, the CENTRAL INFORMATION COMMISSION, observed, “It is seen that the CBEC has not formulated clear guidelines about the use of uniform by officers, Equipment Advances and its relationship with the uniform usage, etc. Apparently, these rules did exist a long time ago before Independence and had been followed more in the form of conventions than any set written directions. Now that this point has been raised, CBEC may consider issuing detailed and clear guidelines in this regard.”

This order was given by the Commission in January 2010 and apparently, so far nobody in the Board has considered this issue. This should be an important issue for consideration for GST Implementation – It will be ridiculous if the CGST officers wear uniform and the SGST officers don't. Any way the uniform in Central Excise command more ridicule than respect.

Sometime back Dr. DD Rishi, Commissioner of Customs and Central Excise, writing in the irsonline observed,

“About 27 years ago, while being posted as the Senior Superintendent of Central Excise, I was attending a meeting with the Commissioner. I saw another Senior Superintendent there. To my surprise she was wearing an Ashoka Emblem along with a star on her shoulder while I was wearing only an Ashoka Emblem. “Madam, Senior Superintendent's uniform should have only the Ashoka Emblem while that of Assistant Collector (now Assistant Commissioner) has a star in addition”. “Is it so? But nobody told although I have been wearing it for last one year!” “Are you sure?” “I am not sure but I think so.”.”OK, then, let us be uniform'', she stripped the star off her shoulders mercilessly. A sacrifice for the sake of uniformity of uniform.

Recently I was attending a function organized for Presidential Awards in Delhi. Some of the awardees were wearing uniforms while others were wearing what they considered to be “uniform”. Anyhow, no two uniforms matched in colour, shade or style. But that is what we call ‘Unity in Diversity'. Yesterday, from the latest batch of probationers, some were wearing Ashoka Emblem plus a star, while others were wearing just a star. Those wearing just a star explained that they had been under the impression that they could wear Ashoka Emblem plus a star only on completion of their probation. I don't know who will make the sacrifice for the sake of uniformity of uniform this time.

Impressions determine the rules. And the impressions are as mysterious as the uniform of a uniformed service.”

Tariff Value of Brass Scrap increased

GOVERNMENT has increased the Tariff Value of Brass Scrap from US Dollars 3678 to 3685 per MT and marginally increased the value of Poppy Seeds from 2744 to 2745 dollars. There is no change in the tariff value of other items.

NOTIFICATION NO. 68/2010-CUSTOMS (N.T.) Dated: July 30, 2010

Service Tax - Services provided by State Governments under Centrally Sponsored Schemes - CBEC Clarifies

IN the recent past, instances have come to the notice of the Board, where field formations have demanded service tax from State Governments or their departments/ agencies, for providing certain services under the centrally sponsored schemes (CSS).  To cite an illustration, in the case of the centrally sponsored National Biogas and Manure Management Program operating under Ministry of New and Renewable Energy, State Government agencies were involved in setting up of bio-gas plants in villages. Certain expenses  incurred by the State Governments or their departments/ agencies during the course of setting up of such bio-gas plants were reimbursed by the Central Government by way of a grant under the CSS. Jurisdictional service tax authorities demanded service tax from the State Government department/agency, saying that the reimbursements received by the concerned State Government department/agency (as service provider) are nothing but consideration for installation and commissioning service received from the Central Government (service receiver).

Implicit in this service tax demand is an assumption that the relationship between Central Government and the State Government is an equivalent of a relationship between principal and the agent. This assumption is questionable as under administrative arrangement, State Governments are bound to implement the centrally sponsored schemes on receipt of a grant. The fact that State Governments are implementing agencies for the Central Government within the framework of CSS does not make them service providers. Consequently, Central Government cannot be taken as service receiver. Grant released by the Central Government under a centrally sponsored scheme cannot be presumed as consideration for providing a taxable service.

CBEC clarifies, “Levy and collection of service tax on State Government agencies/departments implementing CSS under a central grant, is not legally tenable and therefore in such cases service tax should not be demanded.”

CBEC Circular No. No. 125/7/2010 - ST – Service Tax Dated: July 30, 2010

Restore Exemption Of Withholding TAX On FCL - ASSOCHAM 

THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has sought restoration of exemption on payment of withholding tax on Foreign Currency Loans (FCL) in a bid to make such loans much more competitive and reasonable.

In a representation made to Finance Minister, Mr. Pranab Mukherjee, the chamber has argued that withholding tax on FCL needs to be withdrawn immediately so as to make cost of such loans more competitive and reasonable.

ASSOCHAM President, Dr. Swati Piramal has, however, pointed out that interest on FCL works out to be over 26 per cent which used to be exempted until fiscal 2000. The Finance Act of 2001, however, has withdrawn the benefits of exemption under section 10(15)(4)(f) of the Income Tax Act. Since then, industry has been demanding restoration of exemption in respect of interest paid on foreign currency loans but is of no use.

The ASSOCHAM President further pointed out that withdrawal of benefit of exemption under aforesaid section has substantially increased cost of borrowing funds from outside India, since interest paid on such loans is subject to withholding tax at the effective tax rate of 26.77 per cent.

The chamber has further stressed that Organization for Economic Co-operation and Development (OECD) also supports economic justification of interest on cross-border loans and, therefore, it is reiterated that the demand of ASSOCHAM has full economic justification for restoring exemption in respect of interest paid on foreign currency loans.

Jurisprudentiol – Tuesday's cases

Customs

Adjudication Order passed by Chief Commissioner is appealable to CESTAT; An officer can exercise powers of only his immediate subordinate – CC can exercise power of a Commissioner, not an AC – High Court

THE mere fact that the Chief Commissioner of Customs has signed the original order of adjudication as Chief Commissioner of Customs cannot make the said order as the one passed by the Chief Commissioner of Customs in its own capacity. But the same has to be construed as the one passed by the Commissioner (Adjudication). In other words, the Chief Commissioner of Customs has stepped into the shoes of the Commissioner of Customs and exercised his power as an adjudicating authority in this case. He has got no independent power of adjudication except to take the power of the Commissioner (Adjudication) under Section 5(2) of the Act.

Income Tax

Revenue vs Capital Expenditure - complete purchase of existing business with plant and machinery - non-compete fee paid - it is capital in nature: ITAT Special Bench

THE issue before the Special Bench of the ITAT is - Whether the assessee by entering into a non-compete agreement, has acquired any benefit of enduring nature which can be treated as capital expenditure. Whether the non-compete amount should be considered separately from what was paid by the assessee to acquire the business activity of transformers and its related facilities from Whirlpool India Ltd .

Central Excise

Imposing penalty on appellant without quoting provisions of law is illegal: CESTAT

ENTHUSIASM knows no bounds and who can vouch more than the Department.

The present case is a critical example of the same. The facts are that the appellants had supplied excisable goods on payment of duty to Railways and during warranty period the defective goods were received back for repairs in which the appellants had used inputs on which CENVAT credit was taken. It was alleged that the appellants had not reversed the CENVAT credit of Rs.72,360/- on the inputs used in repairs of defective goods during the warranty period.

The appellants submitted that in terms of the agreement entered into by them with the Railways, they were bound to replace the components free of cost during the warranty period. Inasmuch as since the original price charged to Railways had already included the cost of repairs with material during warranty period and on which duty had already been paid, they were not in the wrong. However, to buy peace, they paid the CENVAT credit availed before issue of show cause notice.

See our columns tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice DAY

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