TIOL-DDT 2299
21.02.2014
Friday

PLEASE recall our Story, "Service Tax - Appeal - Pre-deposit - Pay or Perish?" in TIOL- DDT 2285  - 03.02.2014.

In a service tax appeal, the adjudicating authority had confirmed a demand of about Rs. 33 Crores. The service was in relation to irrigation projects of the Government of Andhra Pradesh. The assessee would have been under the genuine impression that no Service Tax was payable as identically placed assessees were not paying any tax; the department targeted some contractors and issued notices. There was confusion with some parties getting relief at appellate stages and some not getting such benefit. In this case, the CESTAT ordered pre-deposit of about Rs. 30 Crores (of the 33 Crores demand) of tax and also ordered payment of interest in addition. Penalty was mercifully waived.

On appeal, the High Court passed a very quotable order observing that the indiscriminate denial of the power of waiver is like telling the party to pay or perish. However the High Court still ordered pre-deposit of 50 per cent of the tax demanded. The harried assessee had to approach the Supreme Court.

The Supreme Court on 19.02.2014 ordered:

Issue notice, returnable on 28th March 2014.

Dasti, in addition, is permitted.

No coercive steps shall be taken in the meantime for recovery of the amount in question.

So, the assessee is safe for another month or so.

Telangana is born - Special Category Status for AP - Visionary Central Excise

THE first among the linguistic States of India, Andhra Pradesh is bifurcated into Telangana and Andhra. Prosperous and reasonably well-administrated state of Andhra Pradesh is advanced in education, health, IT, Pharma and food sectors and has the highest budget for any State in India. Now, this rich State is to be bifurcated into rich Telangana and poor Andhra.

First of all, we must appreciate the visionary outlook of the Central Excise administrators in Andhra Pradesh. In 2002, the Central Excise (and Customs and Service Tax) jurisdiction in Andhra Pradesh was divided between two zones - Hyderabad and Visakhapatnam and today 12 years later, the State of Andhra Pradesh is bifurcated into two States - Telangana and Andhra and the territorial areas of these two states are coterminous with the jurisdiction of Hyderabad and Vizag Central Excise Zones respectively.

Now, the poor State of Andhra will have to depend on Central alms for its survival. Even to start with, they need assistance from the Centre. Yesterday, the Prime Minister assured in the Rajya Sabha, "the resource gap that may arise in the successor state of Andhra Pradesh in the very first year, especially during the period between the appointed day and the acceptance of the 14th Finance Commission recommendations by the Government of India, will be compensated in the Regular Union Budget for 2014-15."

The Prime Minister also assured tax incentives to the new State. This will be given on the lines of the Excise Exemption to certain States like Uttarakhand, J&K etc.

The Prime Minister has announced these fiscal concessions to the 'successor' State of Andhra Pradesh, but that can be implemented only by his 'successor'. He has promised allocation in the Regular Union Budget for 2014-15, but that budget will be presented by a Government which, perhaps, he will not head. Can he make promises on behalf of his 'successor' Government? Can he bind the next Finance Minister who will take office in another three months?

A new CESTAT Bench for the present State of Andhra Pradesh is proposed to be established at Hyderabad. Now, in view of the bifurcation of the State, should the new CESTAT Bench be located in Hyderabad?

Advocate Sarveswara Rao from Visakhapatnam tells me that whatever happens, he has to always appear before a CESTAT Bench located outside his State. He used to attend CEGAT/CESTAT at Chennai in Tamil Nadu, when that bench had jurisdiction over Andhra Pradesh. Later he attended CESTAT Bench at Bangalore in Karnataka, which at present has jurisdiction over Andhra Pradesh. Now, he will have to attend CESTAT at Hyderabad in Telangana!

India initiates Safeguards Investigations on Saturated Fatty Alcohols

INDIA has initiated Safeguards Investigations on Saturated Fatty Alcohols as per a communication circulated by the WTO on 20.02.2014.

The Product under Consideration (PUC) is "Saturated Fatty Alcohols with carbon chain length of C8, C10, C12, C14, C16 and C18 including single blends and unblended (Not including branched isomers) which includes blends a combination of carbon chain lengths C12-C14, C12-C16, C12- C18 and C14-C16 (commonly categorized as C12-C14)" and is classified under Customs sub- heading No.38237010, 38237020, 38237040, 38237090 and 29051700 of the Customs Tariff Act 1975.

REASONS FOR INITIATION OF INVESTIGATION:

The investigation was initiated following the examination of the safeguard petition of the domestic industry (DI) alleging serious injury and threat thereof caused by increased import of the PUC into India. Relevant factors having significant bearing on the present deteriorating domestic industry as claimed by DI, inter-alia, are:

1. The import of subject product has shown an increasing trend in absolute terms as well as the relative terms;

2. Share of domestic industry in domestic consumption and domestic demand has fallen significantly;

3. Though sale of the domestic industry increased in 2013-14 (annualised) as compared to the preceding year 2012-13, it has declined significantly in comparison to 2010-11;

4. Profitability of the domestic industry has steeply deteriorated, leading to financial losses.

5. The DI's petition has been examined and it has been found that prima facie increased imports of PUC have caused or threatening to cause serious injury to the domestic producers of PUC. Accordingly, it has been decided to initiate an investigation.

Service Tax - Renting of Immovable Property - No Penalty

IN a recent case, the CESTAT observed,

The issue involved in the present appeal is payment of Service Tax on renting of property. In terms of the Hon'ble Delhi High Court decision in the case of M/s. Home Solution Retail India order dated 18.04.2009 - 2009-TIOL-196-HC-DEL-ST, it was held that the service of renting of immovable property by itself cannot be regarded as service. Subsequently, there was retrospective amendment introduced with effect from 01.06.2007 by Finance Act, 2010 and the renting of immovable property was made taxable service to undo the effect of judgment of the Hon'ble Delhi High Court.

In view of the above development, the appellant cannot be held guilty of any mala fide so as to impose penalty upon him.

Please see 2014-TIOL-276-CESTAT-DEL

Customs - New Exchange Rates from Today

CBEC has notified new exchange rates for Imported Goods and for Export Goods with effect from 21 February 2014. The US Dollar stays put at 62.95 rupees for imports and 61.95 rupees for exports.

The Exchange rates were last notified on 06 February 2014.

Notification No. 13/2014-Cus (N.T.), Dated: February 20, 2014

DDT Cartoon

Jurisprudentiol – Monday's cases

Service Tax

ST - Merely because service recipient did not pay service tax liability initially, that would not take away/obliterate liability on service provider to discharge the tax - If this plea is accepted, it would make taxable event as receipt of service tax from recipient of service which is not the law - Appeal dismissed: CESTAT

EFFECTIVE from September, 2006 the service recipient had been reimbursing the service tax on the very same activity and the appellant was discharging service tax on the said activity under the category of "Site formation and clearance, excavation and earthmoving and demolition service".

The dispute in the present proceedings is for the period prior to September, 2006.

The CCE, Nagpur confirmed a Service Tax liability of Rs.1.64 crores along with interest and imposed penalties. An amount of Rs.1.36 crores paid by the appellant under protest was also appropriated by the adjudicating authority.

Income Tax

Income tax - Whether if no materials are found during the Search, AO is duty bound to go by original assessment and cannot made any additions u/s 153A - YES: ITAT

THE issues before the Bench are - Whether if no materials are found during the Search, the AO is duty bound to reiterate the original assessment and cannot made any additions u/s 153A and Whether the statement recorded at the time of search which was retracted by the assessee and documents which are already the part of books of account can be considered as incriminating documents for making assessment under section 153A. And the verdict goes against the Revenue.

Customs

Cus - Export of basmati rice - DRI alleging that what is sought to be exported is non-basmati rice - goods confiscated with option for redemption and penalties imposed - as per DGFT Circular No.33/2008 dated 30.9.2008, samples for testing to ascertain variety for identification are to be sent to Agmark Testing Centre - in present case samples sent to other agencies for testing, so cannot be relied upon - based on retracted statement charges cannot be established - Appeal allowed: CESTAT

SUSPECTING the rice to be non-basmati, the officers of Customs, Mumbai withdrew the samples from the goods lying for export. Within a few days, the DRI, Mumbai also on some information that the appellant exporter is illegally exporting non-basmati rice by misdeclaring the same as Basmati rice inspected the consignment lying in Dock and also withdrew samples.

See our Columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend.

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