TIOL-DDT 2618
12 06 2015
Friday

IN a Communication to the TARC, President of the CESTAT Justice Raghuram observed that show cause notices often record conclusions, instead of allegations.

Show Cause Notices are usually issued with ultimate apathy, usually at the last moment when time has run out. Usually the department gets a favourable remand order from higher appellate authorities to rectify their lapses. But for once they faced a different situation in the Madras High Court.

More than 50 Show Cause Notices were issued to several contractors who were engaged in providing certain services to Neyveli Lignite Corporation (NLC). It was alleged by the noticees that in none of the Show Cause Notices, the Department, brought out any allegation against any one of the Assessee with reference to his/her specific/individual activity undertaken for NLC, as per the contract or the scope of work, to hold that such activity was a taxable service under Finance Act, 1994. None of the show cause notices specified the activity with reference to a particular classification of taxable Service. In certain cases, consideration received for certain activities which are clearly outside the purview of Service Tax levy, were also included in the demand of Service Tax, again without any proposal for classification of the service.

And the demands were confirmed.

The Commissioner (Appeals) allowed the appeals of the assessees observing,

I find that in the impugned SCNs issued by the department there were no allegation as regards to the category under which the appellants are liable to service tax and the SCNs simply state that the appellants are providing taxable service and have received payments for such services and therefore entire amount received is liable to service tax as could be seen from the impugned SCNs.

SCN is foundation on which the Department has to build up its case. In the absence of specific allegations, the appellants would not be in a position to defend their case effectively. Hence I hold that the impugned orders emanated from such insufficientSCNs are not sustainable.

He also held the Show Cause Notices to be time barred:-

I also find that all the SCNs are time barred inasmuch as the department had been aware that the appellants had been rendering services to M/s.NLC from the year 2002 onwards. This being so the appellants cannot be fastened with duty liability invoking proviso to Sec.73 as there was no intention on the part of the appellant to evade payment of service tax. There were also series of correspondences withNLCon the rendering of various services by the appellants.

This is the kind of temerity up with which the department will not put.

So they appealed to the Tribunal and got a remand order from the tribunal. The Tribunal observed, there is no dispute that the Assessees rendered various taxable services at the premises of NLC. It is a fact that the Assessees had obtained service tax registration for the services rendered by them to NLC. The demand of tax is for the period prior to registration. Hence, it is the duty of the Assessees to explain the activities in respect of the amounts in question received by them from NLC as they had entered into contract with the NLC for rendering services of various nature.[2015-TIOL-05-CESTAT-MAD]

The assessees now appealed to the High Court. The High Court observed,

A careful perusal of the orders of the adjudicating authority, the Commissioner (Appeals) as also the Tribunal would reveal that the Commissioner (Appeals) has decided the issues on two aspects, viz., one on the vagueness of the show cause notices stating that it is bereft of details and being without clarity and the other on the plea of limitation. The Tribunal, however, in its order, while extracting the portion of the order of the Commissioner (Appeals) was of the view that the Revenue had discharged its burden by producing the statements given byNLCand that the assessees did not dispute it at any point of time and that the entire demand was raised on the basis of the statements provided byNLC. However, this finding of the Tribunal runs counter to the plea raised by the appellants/assessees before the Commissioner (Appeals) as the show cause notices were challenged on the very foundation that they are vague and without particulars as to classification of works that attracts service tax.

The High Court held that the issues raised by the appellants/assessees and answered by the Commissioner (Appeals) in their favour has to be considered by the Tribunal on its own merits and there being no finding on the issues in the manner in which the plea has been taken by the present appellants, who were successful before the Commissioner (Appeals), the order of the Tribunal cannot be sustained on an issue of open remand.

The arguments of the standing counsel for the Department that all the issues can be thrashed out before the adjudicating authority did not find favour with the Court as the Department cannot be allowed to fill up the lacunae in the show cause notices on the basis of an open remand as alleged by appellants.

So, the High Court remanded the matter to the Tribunal to decide the appeal in relation to the findings of the Commissioner (Appeals) which was under challenge before the Tribunal in the appeals.

The Department cannot always get away with its pitiably low quality Show Cause Notices.

Please see Breaking News and 2015-TIOL-1432-HC-MAD-ST

Can CESTAT remand case to Assistant Commissioner?

AS per Section 35C of the Central Excise Act, the Tribunal may pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order. Section 129B of the Customs Act is identically worded.

It is often found the Tribunal remands cases to Assistant Commissioner/Deputy Commissioner who is not the authority, which passed the order before the Tribunal.

See this real situation:

Commissioner (Appeals) remanded a case to the Assistant Commissioner. Department took the matter in appeal to Tribunal arguing that Commissioner (Appeals) has no power to remand. Tribunal agreed -and remanded the case back to the Assistant Commissioner! Where was the litigation and who won? If the revenue was to take the matter to the Tribunal to get the case remanded to Assistant Commissioner to whom the case was already remanded, what is our litigation all about?

A case reaches the CESTAT from an order passed by a jurisdictional Commissioner or a Commissioner (Appeals). The Commissioner (Appeals) passes his order on an appeal from an order of Assistant Commissioner/Deputy Commissioner/Joint Commissioner/Additional Commissioner. Once the Commissioner (Appeals) passes an order, the order of the lower authority does not exist and gets merged with the order of the Commissioner (Appeals). So the Tribunal can remand the case back to the Commissioner (Appeals) and not Assistant Commissioner/Deputy Commissioner. The law also provides for only sending the case back to the authority which passed the order under appeal.

However the Income Tax Appellate Tribunal appears to have this power to remand to the Original Adjudicating Authority. Section 254(1) of the Income Tax Act reads, "The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit.” This perhaps gives the ITAT the power to remand to an authority lower than Commissioner (Appeals) but the CESTAT does not seem to have such powers.

IT - Rollback Provisions of Advance Pricing Agreement Scheme - CBDT Clarifies

THE Finance Act, 2012, introduced the Advance Pricing Agreement provisions in 2012 through insertion of sections 92CC and 92CD in the Income-tax Act, 1961. Subsequently, the Advance Pricing Agreement Scheme was notified inserting Rules 10F to 10T and Rule 44GA in the Income-tax Rules, 1962.

Rollback provisions in the APA Scheme were introduced through sub-section (9A) inserted in section 92CC by the Finance (No. 2) Act, 2014 and the relevant rules, namely, Rules 10MA and 10RA, have been notified recently. Subsequent to the notification of the rules, requests for clarification regarding certain issues have been received in the Central Board of Direct Taxes.

In order to clarify such issues, the Board has adopted a Question and Answer format and the clarifications are issued for 14 questions.

CBDT Circular No.10/2015., Dated: June 10, 2015

Wealth Tax Refund - Time Limit can be extended and interest will be paid

PRIOR to amendment by Finance Act 2013, sub clause (b) of Explanation 1 to clause (ea) of section 2 of the Wealth-tax Act 1957 provided that an urban land shall be chargeable to wealth-tax. This included land situated in any area which is comprised within the jurisdiction of a municipality or a cantonment Board and which has population of not less than ten thousand according to the last preceding census;or land situated in any area within such distance not being more than eight kilometres from the local limits of any municipality or cantonment Board as the Central government may specify in this behalf by notification in the official gazette. Subsequently, by Finance Act 2013 the said sub clause (b) of Explanation 1 to clause (ea) was amended to provide that the term "urban land" would not include land classified as agricultural land in the records of the Government and used for agricultural purposes. Accordingly, such land stands exempt from wealth-tax. This amendment was done with retrospective effect from 1.4.1993.

Various representations have been received in the Central Board of Direct Taxes (CBDT) that assessees had paid wealth-tax on such agricultural land as per the provisions of the Act as they existed prior to Finance Act 2013. In view of the amendment brought by the Finance Act 2013 w.r.e.f. 1.4.1993, the wealth-tax paid in respect of such land is required to be refunded. However, the time-limit for filing revised return or application for rectification for the purpose of claiming refund has expired in several cases.

With a view to avoid genuine hardship, the CBDT has authorised Principal Commissioners/Commissioners of Wealth-tax to admit application for revision under section 25 of the Act from assessees seeking refund arising due to the aforesaid amendment, after the expiry of the period specified under the said section and to deal with it on merits as per law.

In case refund is granted, the assessee shall be entitled to interest on such refund.

The assessee shall make the application for such claim within one year from the date of issue of the order (11.06.2015). After expiry of the said period, no such claim shall be admitted.

CBDT Circular No.11/2015., Dated: June 11, 2015

Extension of due date of filing return of income for Assessment Year 2015-16

THE Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income-tax Act, 1961 has extended the 'due-date' for filing Returns of Income, in terms of clause (c) of Explanation 2 to sub-section (1) of section 139 of the Income-tax Act, 1961, for Assessment Year 2015-16 from 31st July, 2015 to 31st August, 2015 in respect of income tax assessees concerned.

Those who are required to file the return by 31st July 2015 can file it by 31st August 2015. The CBDT is yet to notify the revised forms.

CBDT Order under section 119., Dated: June 10, 2015

Subscription to chit funds by Non-Resident Indians - RBI Circular

AS per the existing provisions, no person resident outside India shall make investment in India, in any form, in a company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage "in the business of chit fund”.

The guidelines for subscription to the chit funds have been reviewed in consultation with the Government of India and RBI has decided to permit Non-Resident Indians (NRIs) to subscribe to the chit funds, without limit, on non-repatriation basis subject to the following conditions:

i. The Registrar of Chits or an officer authorised by the State Government in accordance with the provisions of the Chit Fund Act in consultation with the State Government concerned, may permit any chit fund to accept subscription from Non-Resident Indians on non-repatriation basis;

ii. The subscription to the chit funds shall be brought in through normal banking channel, including through an account maintained with a bank in India.

AP (DIR Series) Circular No.107/RBI., Dated: June 11, 2015

Government Holidays for 2016

2016 is more than six months away, but the Government has notified the list of holidays for Central Government offices in 2016. The list of holidays contains:

1. Three National Days;

2. Two Christian holidays - Christmas and Good Friday;

3. Four Muslim holidays - Idul Fitr, Bakrid, Muharram and Prophet Mohammed's Birthday

4. One day each for Buddha Purnima, Guru Nanank's Birthday and Mahavir Jayanti.

5. Four Hindu holidays - Vijaya Dashami, Deepavali, and two from a list of 12.

Dr. Ambedkar's Birthday is not in the list - this will be announced separately. Instead of closing down all the offices on all these days, why can't the employee be allowed to choose his holidays?

F.No.12/7/2015-JCA-2., Dated June 11 2015

Until Monday with more DDT

Have a nice weekend.

Mail your comments to vijaywrite@tiol.in