TIOL-DDT 2100
08.05.2013
Wednesday

VIDE Finance Act, 2011, Section 78 of the Finance Act, 1994 has been substituted with a totally new set of provisions to deal with quantum of penalty in different situations. In terms of the amended provisions, according to the first proviso to Section 78(1), where true and complete details of the transactions are available in the specified records, penalty shall be reduced to fifty per cent of the service tax not levied or paid or short-levied or short-paid or erroneously refunded.

Now the point of doubt is whether the benefit of 50% penalty can be extended to the offences committed prior to the substitution of Section 78 with effect from 08.04.2011.

The Commissioner (Appeals), Pune III recently had to decide an appeal on this interesting dispute. The Adjudicating authority imposed 50% penalty under the first proviso to Section 78(1) and the department filed an appeal with the Commissioner (Appeals) on the ground that the provisions of amended Section 78 cannot be applied to the case as the period of offence is before 08.04.2011.

The Commissioner (Appeals) passed an interesting order (which may soon be reviewed by the Department for filing appeal) holding that there is no merit in the appeal by the Department and there is no error in applying the new provisions of Section 78 for the offences prior to 08.04.2011. Some of the excerpts from the order:

In respect of effect of amendment of law, in the case of T. Barai Vs Henry Ah Hoe ( 1983-1-SCC-177), it was held:

It is quite clear that insofar as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under s. 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The principle is based both on sound reason and common sense. This finds support in the following passage from Craies on Statute Law, 7th edn. at pp. 387-88 : ¶A retrospective statute is different from an ex post facto statute. ¶Every ex post facto law ..... ¶ said Chase J. in the American case of Calder v. Bull(1) ¶must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive ; it is a good general rule that a law should have no retrospect, but in cases in which the laws may justly and for the benefit of the community and also of individuals relate to a time antecedent to their commencement : as statutes of oblivion or of pardon. They are certainly retrospective, and literally both concerning and after the facts committed. But I do not consider any law ex post facto within the prohibition that mollifies the rigour of the criminal law, but only those that create or aggravate the crime, or increase the punishment or change the rules of evidence for the purpose of conviction ..... There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime.¶

To illustrate, if Parliament were to re-enact s. 302 of the Indian Penal Code, 1860 and provide that the punishment for an offence of murder shall be sentence for imprisonment for life, instead of the present sentence of death or imprisonment for life, then it cannot be that the Courts would still award a sentence of death even in pending cases. In Rattan Lal v. The State of Punjab, the question that fell for consideration was whether an appellate court can extend the benefit of Probation of Offenders Act, 1958 which had come into force after the accused had been convicted of a criminal offence. The court by majority of 2 : 1 answered the question in the affirmative. Subba Rao, J. who delivered a majority opinion, concluded that in considering the question, the rule of beneficial construction required that even ex post facto law of the type involved in that case should be applied to reduce the punishment.

I find myself also in agreement with the contention of the Respondent that since Section 78 of the Act has not been amended, but has been substituted, the provisions of Section 78 as they existed prior to 08.04.2011 cannot be applied while imposing penalty under Section 78 of the Act after 08.04.2011. It is settled law that when a new penal provision substitutes an earlier provision, and the offence remains the same, then the earlier legal provision is obliterated.

It clearly emerges that neither there was any intention to save the tougher provisions of Section 78 of the Act after 08.04.2011, nor Section 38A of the Central Excise Act is legally capable of saving the provisions of erstwhile Section 78 of the Act as Section 78 is not a delegated piece of legislation. Erstwhile Section 78 does not exist after 08.04.2011. The principle of Beneficial Construction also does not allow imposition of higher penalty under the provisions of erstwhile provisions of Section 78.

The CBEC should clarify this position to avoid useless litigation. This issue is sure to exist in every Commissionerate.

Interestingly, the Adjudicating Authority extended the benefit of 25% penalty under the Second proviso to Section 78(1) if the amount is paid within 30 days. However, the Adjudicating Authority wrongly mentioned the penalty as Rs 3,15,050/- instead of Rs 6,30,100/-. (That is 25% of the penalty instead of 25% of the tax). The Commissioner (Appeals) held that the benefit of 25% penalty is not admissible on the ground that though the amount was wrongly mentioned by the Adjudicating Authority, it will not alter the legal position and the assessee should have correctly paid the 25% penalty within 30 days.

Click here for the full text of the order of the Commissioner (Appeals)

Sodium Dithionate no longer a permissible input

SODIUM Dithionate (Hy-drose) stands deleted as a permissible input under SION G-7 and G-46 with immediate effect. The DGFT informs that there would be no change in either the description or the quantity permitted in respect of the rest of the inputs under SION G-7 and G-46.

Public notice 10/(RE-2013)2009-2014, Dated: May 7, 2013.

More Agencies Authorized to issue Certificate of Origin

THE DGFT has authorised Visvesvaraya Trade Promotion Centre (VTPC) Bangalore and its two branches at Dharwad and Mysore for issuing Certificate of Origin (Non Preferential). The name of the above agency is added at Serial No. 7 (Karnataka) of Appendix 4C to Handbook of Procedure Vol. I, 2009-2014. 

Public notice 11/(RE-2013)2009-2014, Dated: May 7, 2013.

VCES, 2013 – what happens if the amount is paid but the declaration is rejected?

WE received this mail -

“As per Section 97(1) of the Finance Bill, 2013, the last date for filing declaration under the VCES, 2013 is 31 st December, 2013 and the minimum 50% amount of tax dues has to be paid on or before 31 st December, 2013. The declarant has the option to pay the entire amount on this date but why would he do so when the law allows him to pay the balance 50% by 30 th June, 2014.

So, a prudent declarant will file the declaration on the 31 st December, 2013 and also pay the 50% amount on that date. Not that he cannot file the declaration after the passage of the Finance Bill, 2013 and the rules are framed thereafter. The declarant can very well file the declaration after the rules and the formats are notified but he would opt to pay the amount of minimum of 50% latest by the 31 st December, 2013.

In this scenario, if the designated authority rejects this “declaration” at a later date what would happen to the amount paid?

Section 99 says that any amount paid in pursuance of a declaration u/s 97(1) shall not be refundable under any circumstances .

This is highly unfair for the reason that the Government cannot withhold what is not theirs. At least, there should be provision for adjusting the same against the dues which are later confirmed against the declarant by the department based on his declaration submitted. And mind you, this is a voluntary disclosure scheme.

One would opine that the declarant should wait for the designated authority to decide in terms of s. 96(2) but here again section 97(2) only refers to “acknowledging the declaration” and nothing more. And above all, the 50% minimum amount has to be paid by 31 st December, 2013 else the declarant will miss the bus – so time is a constraint.

Interestingly, section 96(2) does not prescribe any time limit within which the designated authority has to decide whether the ‘declaration' is allowed or liable for rejection.

In this scheme of things, it would have been advisable to follow the KVSS, 1998 procedure where the scheme required the designated authority, after receipt of an application for settlement of tax arrears, to issue a certificate of intimation determining and directing the applicant to pay the “sum payable for full and final settlement of tax arrears” within a period of 30 days.

It is felt that the FAQ on VCES, 2013, if and when it is published, addresses these issues.”

DDT hopes that the Board is readying itself with answers for the barrage of questions that the prospective declarant has.

NDPS - Whether Sec 32A is violative of Arts 14 & 21 of Constitution– Matter goes to SC Larger Bench

AS per Section 32A of the NDPS Act, No suspension, remission or commutation in any sentence awarded under the Act is permissible. Articles 72 and 161 of the Constitution empowers the President and the Governor of a State to grant pardons, reprieves, respites or remissions of punishments or to suspend, remit or commute the sentence of any person convicted of any offence against any law.

Now, is Section 32A of the NDPS Act violative of the Articles 14 and 21 of the Constitution of India as it creates unreasonable distinction between the prisoners convicted under the NDPS Act and the prisoners convicted for the offences punishable under various other statutes?

A Division Bench of the Supreme Court yesterday referred the matter to the Chief Justice to constitute a Larger Bench of three Judges or Five Judges to decide the issue.

We bring you this judgement today. Please see Breaking News  

Service Tax - Air India gets waiver of pre-deposit of Rs 8 Cr from HC

The Commissioner had confirmed a demand of over Rs. 65 Crores in respect of alleged repair and maintenance service to the extent of Rs. 49.95 crores and in respect of alleged business auxiliary service to the extent of Rs. 15.53 crores. The CESTAT directed a pre-deposit of Rs. 8 Crores, even which was a financial hardship for the airline. In view of the fact that the financial hardship of the appellant has already been recognised by the Tribunal in some other cases, the High Court ordered waiver of pre-deposit and directed the Tribunal to hear the appeal without any pre-deposit and also cautioned the Department not to press for recovery of the tax, penalty and interest amount till the disposal of the appeal by the Tribunal.

Please see 2013-TIOL-362-HC-DEL-ST

CHAs - Old Regulations or New? - Litigation still alive? - SC disposes a large number of appeals

THERE used to be Customs House Agents Licencing Regulations, 1984 which were superseded by the Customs House Agents Licencing Regulations, 2004. Now the question arose as to whether those who qualified in the examination under the old regulations can be given a licence under the new regulations without again clearing the examination.

There was litigation galore right up to the Supreme Court. The Apex Court had in Sunil Kohli's case (2012-TIOL-45-SC-CUS), held that examinations held under the 1984 Regulations did not get nullified with the enactment of the 2004 Regulations and the candidates who had qualified the examinations held under the 1984 Regulations are not required to again qualify the examination which may be held under the 2004 Regulations.

Following this decision, the Supreme Court recently disposed of a large number of appeals in the same terms, observations and directions. (Please see DDT 1710 – 11.10.2011)

See 2013-TIOL-28-SC-CUS

ITAT Bar Association withdraws Boycott of Member

DDT 2089 – 22.04.2013 reported that the ITAT Bar Association, Ahmedabad had resolved to boycott the Bench of a Member on account of his consistent gross, rude, arbitrary and outrageous behaviour with all members of the Bar appearing before him and his doubtful integrity and unethical standards.

Now, the Association has resolved that in view of the good offices of Hon'ble the Vice President of the Income Tax Appellate Tribunal, Ahmedabad Zone, Shri G.C. Gupta and in view of the written request of Shri Garodia for request transfer from Ahmedabad addressed to the Hon'ble President, Income Tax Appellate Tribunal, the resolution dated 19.04.2013 of the Income Tax Appellate Tribunal Bar Association shall be kept on hold till further notice and the members of our Association will start appearing before all Benches of the Hon'ble Income Tax Appellate Tribunal at Ahmedabad from 08.05.2013 (Wednesday).

Jurisprudentiol – Thursday's cases

Central Excise

Appellant receiving duty paid billets from Jamshedpur unit, value of which was determined as 115%/110% of cost of production - AV of wire rods manufactured out of these billets should be 115%/110% of the cost of production of billets and not the cost of raw material consumed for manufacture of billets - Duty demand of Rs.8.61 Crores upheld along with penalty: CESTAT

THE appellants are engaged in the manufacture of wire rods falling under Chapter sub-heading 72142090 of CETA, 1985. The appellants received inputs, i.e. billets, from their Jamshedpur unit on payment of duty on the value determined 115%/110% of cost of production in terms of Rule 8 of the Central Excise Valuation Rules, 2000. The duty paid on the billets was taken as credit by the appellants. The appellants manufactured wire rods and stock transferred the same to their Borivali unit on payment of duty. However, on scrutiny of records by the department, it was observed that the appellants while computing the cost of production of wire rods only took into consideration the cost of production of the billets instead of 115%/110% of the cost of production of the billets, which resulted in short payment of duty.

Income Tax

Whether when assessee has transferred money taken on interest from sister concern in P&L account, and sister concern has dissolved without receiving interest and principal sum, such sum warrants addition u/s 41(1) in assessee's hands - YES: ITAT

THE issues before the Bench are - Whether when assessee has transferred the money taken on interest from its sister concern in P&L account, and the sister concern has dissolved without receiving either the interest or principal sum nor has it demanded from the assessee, such sum warrants addition u/s 41(1) in the hand of the assessee - Whether the nature of receipt, which was capital in the beginning, can undergo a change with influx of time and the same can become revenue receipt. And the verdict goes against the assessee.

Customs

Since the goods are not notified under S.123 and provisions of Chapter IVA, relating to notified goods have been deleted from the Customs Act more than decade back, there cannot be any order of confiscation: CESTAT

THE Commissioner of Customs (Appeals), Airport, Mumbai held that since the goods are not notified under section 123 and Chapter IVA dealing with notified goods have been deleted from the Customs Act, 1962, the goods are not liable to absolute confiscation, let alone confiscation. Accordingly, he allowed the appeal filed by the respondent. Revenue is not happy with this ¶all is lost¶ order and, therefore, is before the CESTAT.

See our Columns Thursday for the judgements

Until tomorrow with more DDT

Have a nice day

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