TIOL-DDT 1750
12.12.2011
Monday

THERE  is a mistaken belief that CAG's Audit has a constitutional mandate and power to visit factories and other premises to audit for Central Excise and Service Tax. In fact, the AG's Audit gets its power to visit the offices of the Central Excise and Service Tax assessees by virtue of the power given under the Central Excise Rules and Service Tax Rules and these rules are made by the Government means Board. So the Board has simply invited the AG Audit to come and act like a bull in its China shop!

In fact the Kelkar Committee had recommended that  ¶Rule 22(3) of the Central Excise Rules, 2002 may be amended to exclude reference to audit party deputed by the CAG so that they need not visit the tax payer's premises.¶

For the assessees, it is a regular nuisance to attend to the periodic visits of the Auditors from the AG's office. The long history of trouble starts with picking up the auditors for the great audit work. Once this preliminary courtesy is extended, neither the assessee nor the Central Excise officer can rest. After a few days of continuous audit, the Audit party issues half margin memos to the Superintendent of Central Excise in charge of the factory listing out their objections and the Superintendent is required to give his replies. Whatever be his reply, the objection is not closed. The Audit party goes and in due course the Local Audit Report arrives and this time the AC/DC of the Division is expected to answer which means the paras will be sent to the ranges and the Superintendent will be required to answer, which means the paras will be sent to the assessee and he will be asked to answer the Audit paras. Even before the AC/DC sends his reply, in most cases the objection is converted into an SOF (Statement of Facts) and now the Commissioner is involved and before you can say AG, it becomes a DAP (Draft Audit Para) and now the Board is involved, which means, the Commissioner, DC, Superintendent and assessee are involved. By this time the files become bulky in all offices and with frequent transfers of officers within the department, nobody has any idea as to what the original objection was and then it is converted into a PAC matter and a group of Hon'ble Members of Parliament will summon the Commissioner and other officers to discuss the issue and things will revert to stage 1. In the mean time whether the department agrees with the audit objection or not, Show Cause Notices will be issued and they will be in different stages of adjudication, appeal or hibernation. Mountains of papers are created and thousands of man hours engaged in the great audit chase - finally, nothing may happen and usually nothing does.

When CAG does not audit assessees under Income Tax, Customs, VAT, State Excise, Municipal taxes, etc. why only Central Excise and Service Tax assessees should be subject to this torture by CAG Audit?

CBEC should have followed Kelkar's advice and removed the power of AG Audit to visit factories and the entire industry would have been grateful to the Board!

[from DDT 1298 12.02.2010]

But why the issue now? Please see these columns tomorrow.

1991 CAG Paras Still Pending - FM Concerned

IN a meeting with Financial Advisers, held on 20.10.2011, the Finance Minister observed that 1991 CAG paras are pending with various Ministries/Departments. (It is not clear whether 1991 is the number of audit paras or the year from which the paras are pending). Standing Audit Committees have been constituted to oversee the settlement of pending audit paras. In order to ensure speedy liquidation of these paras, the FM has directed that Secretaries to Ministries/Departments should personally chair the meetings of the Standing Audit Committees.

MOF Dept of Expenditure No. 12(2)/E.Coord/2010(Vol.III) Dated: December 07, 2011

Export to Nepal - Liberalisation - What about Service Tax?

LAST week, the Government had amended six Central Excise NT Notifications to delete the special procedure for export of goods to Nepal. Those notifications prescribed the procedure, conditions etc. for exports to countries other than Nepal and Bhutan. By Notifications 24-29/CENT dated 05.12.2011, export to Nepal was made just like export to any other country.

Notification No. 11/2005-Service Tax, dated 19.04.2005 grants rebate of Service Tax on taxable services exported to countries other than Nepal and Bhutan.

SIMILARLY, Notification No. 12/2005-Service Tax, dated 19.04.2005 grants rebate of the duty paid on excisable inputs or service tax and cess paid on taxable input services used in providing taxable service exported to countries other than Nepal and Bhutan.

Why Nepal is retained in these two notifications? Has the Board forgotten these notifications or is it intentional?

Obey the Boss - But Only after obtaining Written Orders

¶I have acted on the advice/directions of my superior officer ¶, is no excuse for the actions of a Government servant. CBDT has observed that during the processing of vigilance complaints, Assessing Officers have claimed that the particular action/decisions were taken after discussion with and as per the directions of their controlling Range Head, though, no such written directions were found on the record.

And predictably, the controlling officers denied having issued any such informal instructions/directions in the matter!

As per Rule 3(2) of the CCS (Conduct) Rules, Government servants are expected to act in their best judgement except under written directions of superior officers; Where the issue of oral direction becomes unavoidable, the official superior shall confirm it in writing immediately thereafter; A Government servant who has received oral direction from his official superior shall seek confirmations of the same in writing as early as possible.

CBDT has reminded the staff that oral/informal directions without being confirmed by the superior authority in writing carry no statutory force. Therefore, neither an Assessing Officer nor Range Head can take shelter behind such oral/informal directions having been received/issued to avoid punitive action.

CBDT Instruction No. 10/2011 Dated: December 07, 2011

Confidential Report on CESTAT Member - Not to be given under RTI - High Court

THE petitioner asked for the file containing certain remarks of the President of CESTAT in relation to corruption charges against a Member. The CESTAT rejected the request and the matter reached the Delhi High Court.

The Delhi High Court observed that except in cases involving overriding public interest, the ACR record of an officer cannot be disclosed to any person other than the officer himself/herself.

The High Court further noted that however the CIC has not examined the issue whether larger public interest justifies the disclosure of the information sought by the petitioner in this case. This issue should have been examined by the CIC. So, the matter is remanded to the CIC for considering this issue.

Click here for the High Court order

Ujal Singh Bhatia Sworn in as Member of WTO Appellate Body

THE Appellate Body is responsible for hearing appeals of WTO panel reports. It is composed of seven members, each appointed for a four-year term, with a possibility to be reappointed once. The expiration dates of terms are staggered, ensuring that not all members begin and complete their terms at the same time. Members of the Appellate Body must be persons of recognized authority with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally and must not be affiliated with any government. The members of the Appellate Body are appointed by the Dispute Settlement Body.

Ujal Singh Bhatia, a 1974 batch IAS officer, retired in 2010, is an independent consultant and academic engaged in developing a policy framework for Indian agricultural investments overseas, while at the same time working with the Commonwealth Secretariat on multilateral trade issues.

From 2004 to 2010, Bhatia was India's Permanent Representative to the WTO. During his tenure as Permanent Representative, he was an active participant in the dispute settlement process, representing India in a number of dispute settlement cases both as a complainant and respondent in disputes relating to anti-dumping, as well as taxation and import duty issues. He also has adjudicatory experience having served as a WTO dispute settlement panelist. He took over as Member of the Appellate body on 8 th December.

14 IRS officers in Custody

IT seems that 14 senior officers of the Income Tax Department are in the custody of CBI. In the last two years sanction for prosecution has been given against 23 Income Tax Officers and 31 Customs and Excise officers. It looks as if Tihar and other custodial places need massive expansion.

Jurisprudentiol – Tuesday's cases

Service Tax

NOTIFICATION No. 21/03-ST issued independently granting exemption from service tax on taxable service for which consideration was received in convertible foreign exchange and had nothing to do with rescission of Notification 6/99-ST: CESTAT

THE issue involved in this appeal before CESTAT was with regard to levy of service tax on advertising agency rendered by appellant to a foreign company wherein the consideration was received in convertible foreign exchange. The demand was raised on the services rendered during the interregnum between Notifications 2/03-ST dated 01.03.2003 and 21/03-ST dated 20.11.2003 and this was based on an audit report which alleged that the appellant collected under certain bills/invoices an amount of Rs. 82.89 lakhs in convertible foreign exchange during the said period.

Income Tax

WHETHER when AO fails to go into the question of whether provisions of deemed dividend are attracted in the case, it can be a valid ground for initiating reassessment - YES, rules High Court

FOR the AY 2001-02, the AO made an addition of Rs.1,56,51,570/- as deemed dividend u/s 2(22)(e) of the Act. This amount reflected the advance given by a group company, to the appellant-assessee. On appeal, the CIT (Appeals), rejected the argument of the appellant that the aforesaid amount of Rs.1,56,51,530/- reflected only a current account entry and no loan or advance was taken.

The   question before the Bench is - Whether when the AO fails to go into the question of whether provisions of Sec 2(22)(e) are applicable to the case, it makes a valid ground for initiating reassessment - Yes is the HC's answer.

Central Excise

STRICTURES against Central Excise Superintendent for certifying payment of duty by a unit under compounded levy scheme - He has no authority to do so: CESTAT

IT is strange how a Superintendent could issue the certificates available on record, which was relied upon by the appellant for the claim of deemed credit. Perusal of the definition of Adjudicating Authority under section 2(a) and definition of Central Excise Officers appearing in section 2(b) of Central Excise Act 1944 does not appear to have recognised a Superintendent as Adjudicating Authority or Central Excise Officer. He was not competent to issue the certificate relied upon by the appellant for no prescription in law.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

Mail your comments to vijaywrite@taxindiaonline.com