TIOL-DDT 2282
29.01.2014
Wednesday

SUPPOSE by mistake, you debit the duty twice in your CENVAT account or you make an excess payment, which you realise after some time. What do you do? Take credit of the wrongly debited amount. Well, that is simple accounting which your auditor may approve, but your Central Excise Officer will frown and his frown will result in a Show Cause Notice which will take you through the great maze of Indian tax litigation and God alone knows where and when and how it will end.

The Larger Bench of the CESTAT had in BDH Industries case reported in 2008-TIOL-1211-CESTAT-MUM-LB observed, "there is no provision under Central Excise Act and Rules allowing suomoto taking of credit of refund without sanction by the proper officer. The appellant's contention that refund in respect of duty paid twice cannot be considered as refund of duty and is only the accounting error does not appeal to us as the debit entry made in the accounts is towards payment of duty only and therefore refund of these amounts has to be considered as refund of duty only. The PLA account and the credit accounts are required to be submitted to the department and any correction carried therein, need to have department's sanction.".

And since then, the Department is totally against allowing any suomotu credit of any amount and insists that one has to go through the refund procedure and even prove that there was no unjust enrichment.

In such a scenario, comes a refreshingly welcome order from a High Court which has upheld suo motu credit taken by the assessee.

You will have to wait till tomorrow for the judgement.

Service Tax - Transportation of Milk Products exempted - not Milk from 1.3.2013 - Not Really!

TRANSPORT of milk was exempted since the beginning days of Service Tax on GTA. Notification No. 33/2004-ST, dated 03.12.2004 exempted the taxable service provided by a goods transport agency in relation to transport of fruits, vegetables, eggs or milk by road in a goods carriage. This Notification was valid till 30.06.2012.

Even the still-born Notification No. 12/2012 dated 17.03.2012 exempted fruits, vegetables, eggs, milk, food grains or pulses transported in a goods carriage.

This notification was superseded by Notification No, 25/2012-ST dated 20.06.2012 (with effect from 01.07.2012) which also exempted transportation of milk in Sl. No. 21(a) which reads as:

fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage

This was amended by Notification No. 3/2013 - ST dated 01.03.2013, by which the exemption was given to

(d) foodstuff including flours, tea, coffee, jaggery, sugar, milk products , salt and edible oil, excluding alcoholic beverages;

So, now there is an exemption for transport of milk products, but not milk. But why was 'milk' removed from the notification and 'milk products' introduced. This happened because of an alignment of the notification entries for exemption to goods transported by rail or vessel and by road. The rail notification entry was simply transported into the road notification.

But then, was transport of milk by rail not exempted as Sl. No 20 of Notification No. 25/2012 dealing with exemption to transport of goods by rail had no 'milk' but contained 'milk products'.

Fortunately Board had clarified this issue in Circular No.167/2 /2013 - ST, dated 01.01.2013. The Indian Railways sought a clarification from the Board as to whether service by way of transportation of milk by rail is covered by Notification No.25/2012-ST dated 20.06.2012, serial number 20. The Board clarified:-

The expression 'foodstuff' appearing in Notification No.25/2012-ST dated 20.06.2012, serial number 20(i) includes milk. Therefore, it is clarified that the service by way of transportation of milk by rail or a vessel from one place in India to another, is covered by the Notification No.25/2012-ST dated 20.06.2012.

Thus, according to the Board, foodstuff includes milk and so transport of milk is exempted.

The notification was amended two months after the clarification was issued and the Board could have used this as an opportunity to include this clarification in the notification itself and which would have taken care of the service of 'transport of milk by a goods transport agency, by way of transport in a goods carriage or by transportation by rail or a vessel'.

Why DDT had to raise this issue is because we have come to know that some Service Tax officers are planning to issue notices to transporters of milk by GTA. If a notice is issued, it will be confirmed and at some appellate stage, it will be held that Board Circulars are not binding on adjudicating authorities and the clarification was in relation to transport by rail and not transport by road ….And the litigation may go on.

Income Tax - Rewards to Olympic Award Winners Exempted

AS per Section 10 (17A) of the Income Tax Act, the following income is not included in the total income:

any payment made, whether in cash or in kind,-

(i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or

(ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest;

So, a reward given by the Central Government or State Government is exempted only if approved by the Central Government.

CBDT had clarified in Circular No. 447 dated 22.01.1986 that awards received by a sportsman, who is not a professional, will not be liable to tax in his hands as the award will be in the nature of a gift and/or personal testimonial. This Circular was applicable in a tax regime when gift was not taxable in the hands of the recipient and with the fundamental change in the manner of treatment of gift by amending the definition of income under sub-section (24) of section 2 by introduction of sub-clauses (xiii), (xiv) and (xv) therein and insertion of clauses (v), (vi) and (vii) in sub-section (2) of section 56 of the Income-tax Act, 1961 ('Act'), the gifts became taxable in the hands of recipient with effect from 1.4.2005. The said Circular No. 447 had therefore become inapplicable with the change in law and is to be treated as overridden by the aforesaid statutory provisions with effect from 01.04.2005.

Board in a Circular dated 20.01.2014 further clarified that in terms of provisions of clause (17A) of Section 10, Central Government approves awards instituted by Central Government, State Government or other bodies as also the purposes for rewards instituted by Central Government or State Government from time to time. Tax exemption can be sought by eligible persons in respect of awards or rewards covered by such approvals.

Now, the Central Government has approved any payment made, whether in cash or in kind, as a reward by the Central Government or a State Government to the medal winners of the Olympic Games or Common Wealth Games or Asian games.

CBDT Circular No. 2/2014 in F.NO. 199/01/2014-ITA.I; Dated: January 20, 2014

CBDT Order in F. No. 199/03/2013-ITA.1 Dated: January 28, 2014

Jurisprudentiol - Thursday's cases

Central Excise

CENVAT Credit - Suo motu credit of wrongly debited amount - No refund Claim required - Credit by assessee upheld: High Court

THE objection of the Revenue herein is that even for a reversal of an entry, the assessee should have followed Section 11B of the Central Excise Act, 1944 lest there would be unjust enrichment. Consequently, there could be no such thing as suomotu reversal, except through a petition made under Section 11B of the Central Excise Act, 1944. The contention of the Revenue that even in reversal of the entry there is bound to be an unjust enrichment has no substance or based on any legal principle, since, what is availed off by the assessee is only a credit on the duty paid on the services rendered. No good ground to hold that it was a case of refund of duty falling under Section 11B of the Central Excise Act, 1944 and that the assessee was to comply with the provisions of Section 11B of the Act.

Income Tax

Whether, for the purpose of assessment of undisclosed income, loose papers seized during the Search have any evidentiary value - YES, rules High Court

THE Assessee filed his returns wherein he had declared undisclosed total income of Rs. 8,85,000/- representing undisclosed investment made in acquiring relief bonds with the aforesaid sum. It had further submitted his explanation whereupon notices u/s 158BFA(2) were issued asking him to show reasonable cause as to why he failed to furnish return of the undisclosed income. AO found the undisclosed salary income of Rs. 3,39,900/-; unexplained payment on account of purchase of property totalling Rs. 3,00,000/-; unexplained investment in shares and bonds to the tune of Rs. 8,85,000/-. Consequently, on the basis of appreciation of seized documents, assessment have been made on total income of Rs. 15,24,000/- out of which, undisclosed income of Rs. 8,85,000/- have been given deduction, thereby assessment have been made on the total income of Rs. 6,39,900/-.

The issue before the Bench is - Whether, for the purpose of assessment of undisclosed income, loose papers seized during the Search have any evidentiary value. And the answer goes against the assessee.

Service Tax

Chemical analysis and furnishing test results for pesticides - whether covered within the ambit of Service Tax - Tribunal order without application of mind and without considering the facts - Matter Remanded: High Court

TRIBUNAL has allowed the appeal of the respondent relying upon the judgment in Central Power Research Institute without discussing the facts of the present case and no finding has been given whether the respondent is a service provider or not in order to give benefit of the judgment in Central Power Research Institute. Therefore, when the Tribunal without application of mind and without considering the facts involved thereunder, has rendered judgment, the same has to be set aside and requires to be reconsidered by the Tribunal afresh.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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