 TIOL-DDT 2056
01.03.2013
FridayWHEN I took over in August 2012, I made a statement that “clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”. That statement is the underlying theme of my tax proposals, both on the direct taxes side and on the indirect taxes side . This is what the Hon'ble Finance Minister said in para 120 of his budget speech just before pronouncing his tax proposals. After hearing these words, taxpayers would have expected the FM to announce assessee friendly reforms in taxation laws that would aid better tax environment and begin a new era in tax administration, but the shocking reality was far from the rhetoric. In fact, this budget has seen the introduction of many draconian provisions in the indirect tax laws - all in the name of clarity in tax laws and non- adversarial tax administration! Arrest in Service Tax: Section 91 is proposed to be inserted in the Finance Act, 1994 to give powers to Superintendent to arrest a service tax offender where amount involved is rupees fifty lakhs. Fear and threat of arrest are more dangerous than arrest itself. This will breed unbridled corruption and in the long run more officers than assessees will be arrested. Now, a Superintendent can arrest an alleged offender and an Assistant Commissioner can release him on bail. At every stage, before arrest, during arrest, after arrest and during bail proceedings, there is tremendous scope for corruption and generally, such opportunities are not wasted. When you are planning to take Service Tax to the States with GST, such demonic law will certainly scare the States away – after all they are running their VAT administration for more than 70 years without arrest provisions. Why should you arrest an accused assessee – can't you wait till he is convicted? YOU CALL THIS NON- adversarial! Repressive Recovery Provisions introduced in Customs and Excise: Section 142 of Customs Act & Section 11 of Central Excise Act are amended to insert recovery provision a la Section 87 of Finance Act 1994, which provides for recovery from a third person or by making banks or post office where the assessee holding deposits to pay the dues. The Department can recover the dues from your bank deposits, just by addressing a simple letter to bank manager. And such a letter to the Bank will virtually cripple the industry as the Bank would treat the industry as a bad customer and withhold overdrafts and other facilities. NON- ADVERSARIAL INDEED. Customs Broker to replace Customs House Agent. The age-old institution of Custom House Agent (CHA) is to die giving place to the Customs Broker. The Bombay CHA association was started in 1937. Custom House Agent found a place even in the Old Customs Act, 1878. It is not known whether all the existing CHAs would be licenced as Customs Brokers or they have to go all the way to the Supreme Court. Section 146 of the Customs Act is substituted. A STABLE TAX REGIME! Appellate Apathy: Section 35C of Central Excise Act and Section 129B of Customs Act are amended – to curtail the power of Tribunals to grant stay till the case is decided. The stay given by tribunals gets automatically vacated after one year even though the case is not decided. At present, the minimum time for a case to come up for final hearing after granting stay is four years and what would happen to all the cases where stay has been granted by tribunals till disposal of the case? This is the most unjust appeal provision which may not be practised even in the most authoritarian regimes. The Tribunal is a creature of the State. The Government appoints (or do not appoint) the Members of the Tribunal. The assessee appellant is no way concerned with the working of the Tribunal. How can the assessees be punished if the Tribunal is not able to pass orders within one year? Instead of punishing the innocent appellant, why can't you open a hundred benches of the Tribunal and ask them to clear all the arrears? Your Commissioners pass atrocious orders demanding mind boggling sums; you don't fill vacancies in the Tribunal and you punish the assessee for your incompetence. Will any Government anywhere be more unfair? THIS IS FAIR MECHANISM FOR DISPUTE RESOLUTION! Works Contract or Construction? Flats with more than 2000 sft or costing more than Rs one crore get an abatement of 70% and the rest will get an abatement of 75%. Almost all the constructions are undertaken as “Works Contracts” and there is no change in the rate of service tax for works contracts in respect of Flats with more than 2000 sft or costing more than Rs 1 crore. So, should you assess construction service under ‘Works Contract' which makes no distinction between two classes of flats or pay tax by availing abatements? When there is tax on Works Contract service, why to have a Notification prescribing abatement for material used? CLARITY IN TAX LAWS! No Service Tax from 1.7.2012? DDT 1880 - 15.06.2012, reported that Service Tax could not be collected from 1.7.2012 as the new charging Section 66B was not mentioned in Section 68. DDT wrote, ¶So, with effect from 01.07.2012, the assessees are required to pay service tax at the rate specified under Section 66, but there would be no Section 66 in the Statute. AND SO, THEY NEED NOT PAY ANY TAX. Hence, all the exercise of moving to negative list will go down the drain because of not amending Section 68 to substitute the charging section referred therein with the new charging section, i.e., 66B. The Government has to do something urgently - in any case not later than 30.06.2012 - if they want to collect Service Tax from 1.7.2012. But what can they really do, notwithstanding Section 95 1(I)? Can the babus amend an Act passed by Parliament even if it is to remove difficulties?¶ All hell broke loose and the Government in a quick damage control exercise, exercised the power under Section 95 1(I) and issued a Service Tax (Removal of Difficulty) Order No. 01/2012 on the very same day that DDT broke the news – 15.06.2012. The Order Stipulated, “In sub-sections (1) and (2) of section 68 of the Finance Act, for the figures “66”, the figures and letter “66B” shall be substituted.” It was doubtful whether the Government could amend an Act passed by Parliament in the name of removing a difficulty. DDT 1881 - 18.06.2012, commented, If there is a difficulty, the Government can remove it, but can they amend an Act passed by Parliament? If the Parliament wanted the tax to be levied at a rate prescribed in one section of the Act, can a Babu in the North Block amend it to read as another Section in the name of removing a difficulty? If that could be so, they may as well make Parliament to pass a one line Act that there shall be levied a Service Tax at such rates and under such conditions at the whims and fancies of the Under Secretary working for the time being in the TRU Section of the CBEC in the Revenue Department of the Finance Ministry. All Laws can be simplified and the Babus can legitimately usurp the powers and jurisdiction of the Parliament of India, for which they in any case have only scant respect. They may also add a proviso that the Supreme Court cannot poke its nose into the scholarly legislation brought out by the babus. After all, if you want to administer taxes the way you want to, it is absolutely essential to keep the Parliament and the Supreme Court out of the way.
Now, the Government seems to have realised that the “removal of difficulty order” is not enough and so they have included in the Finance Bill 2013 a provision to insert a new Section 66BA, which would read as, ¶66BA. (1) For the purpose of levy and collection of service tax, any reference to section 66 in the Finance Act, 1994 or any other Act for the time being in force, shall be construed as reference to section 66B thereof. (2) The provisions of this section shall be deemed to have come into force on the 1st day of July, 2012.¶
The damage is sought to be rectified retrospectively with effect from 1.7.2012. If the “removal of difficulty order” was enough to diffuse the damage, why should there be a retrospective insertion of Section 66B in the Act? Now, until the Finance Bill 2013 gets enacted as Finance Act 2013, the new Section 66B will not come into force and we are back to square One – No Service Tax from 1.7.2012. In view of the proposed amendment, at least from today, till the Finance Bill is enacted, no Service Tax is payable!! PC as PM? THERE has been some talk in Tamil Nadu recently about a Dhoti clad Tamilian becoming the Prime Minister of India and can you find a better dhoti clad Tamilian than Chidambaram? PC as PM is news even in Pakistan. Today the Daily Times of Pakistan reported, “Chidambaram, a three-time finance minister seen as a candidate for prime minister in 2014, has staked his reputation on cutting swollen fiscal and current account deficits ……” DDT Cartoon 
Until Monday with more DDT Have a Nice Weekend Mail your comments to vijaywrite@taxindiaonline.com |
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