TIOL-DDT 2752
28 12 2015
Monday

CBEC had circulated the decisions taken in the recent Tariff Conference of Chief Commissioners. (Please see DDTs 2741, 2742, 2743, 2744, 2745, 2746). There were some other issues which the Conference discussed but were not circulated to the trade and public. DDT brings you some of those issues.

Counter-productive Year-end Revenue Drives - No more coercion? As the new year arrives, assessees who are used to routine and regular harassment by the Department in the name of meeting their revenue targets, can hopefully heave a sigh of relief.

In the Conference, the Chandigarh Central Excise Zone proposed,

Towards the end of almost every financial year, pressure builds up on all field formations to meet revenue targets assigned to them by the Board. Various methods suggested and employed to boost net revenue yields include:

(a) Holding back sanction of refunds/rebate/drawback claims till 31st march

(b) Persuading the assesses not to use Cenvat credit and instead pay duty in cash/PLA

The whole exercise benefits none, in fact, it offends the taxpayers, compounds the ease of doing business, and provokes resentment from the trade, without securing any real gain to the Government. Luckily, the current times are most opportune, when the revenue growth is good and there may not be any need for such revenue drive.

After discussion the conference concluded that such coercive collection of revenue in the last quarter does not serve the interest of any stake holder and vitiates the working atmosphere. It was decided by the conference that such coercive practices would be avoided.

There seems to be no sound reason why the Board wants to keep such a trade friendly decision a secret. Or is the Board not vey confident that it can avoid the useless, offensive and resentment provoking coercive action to collect a few extra rupees?

Limitation for Demand - Five Years in all cases: Here is a lurking danger. The Vizag Zone proposed this in the Conference.

The legal provisions for demand of duty under Section 11A of Central Excise Act and Section73 of the Finance Act require that the department establish ‘suppression, willful miss-statement and fraud' to invoke the extended period of 5 years. Such cases entail mandatory equivalent penalty also with certain reductions in the quantum of penalty where the assesse suo-moto pays duty, interest and penalty within specified time frame. The conference may deliberate on the issue of increasing the time frame to raise a demand from the current period of one year in central excise and 18 months in service tax to a period of 5 years without invoking extended period for demand of duty and corresponding penal provisions. The proposal was made as some of the Courts have taken a stand that once audit covers a particular period, no issue can be raised for the said period during the subsequent audit.

The conference discussed the issue in light of the fact that audit of each of the assessee, is not conducted every year and observed,

(a) Often during audit short-payment of duties are noticed where it is difficult to invoke extended period of time.

(b) At the stage of audit, often evidence for invoking extended period is not available. This may lead to loss of revenue as detected short levies may be time-barred and beyond normal period of limitation.

The Conference recommended that Board should consider proposing amendment in law to the effect that in case of audit the normal period of limitation would be much longer say three years or five years.

Cases Pending Prosecution for more than 15 Year Where Amount Involved is Less than 5 Lakhs:: The issue of long running prosecution in petty cases was discussed as in many such cases the accused persons and witnesses go missing, evidence and documents are not available and considerable expenditure is incurred without the possibility of very fruitful results.

The conference discussed the issue and was of the view that it would be desirable that a policy decision was taken on the subject by the Board. Consequently, it was decided that Board would collect information regarding petty cases which are long pending for say more than 15 years and where duty involved is less than Rs. 5 lakh. Policy decision would be taken after due analysis of the data collected.

Applicability of Minimum Alternate Tax (MAT) on foreign companies for period prior to 1.04.2015 - CBDT Issues Instructions

ON the issue of applicability of Minimum Alternate Tax (MAT) under section 115JB of the Income Tax Act, 1961 on Foreign Institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs), the Board had issued instruction No.9 dated 02/09/2015 informing the field authorities that the Government has accepted the recommendation of the Committee on Direct Tax Matters that Section 115JB be amended to clarify the inapplicability of MAT to FIIs/FPIs having no permanent establishment/ place of business in India and decided to carry out appropriate amendment to this effect. In view of this, the field authorities were advised to keep in abeyance, for the time being, the pending assessment proceedings in cases of FIIs/FPIs involving the said issue.

Board now informs that an appropriate amendment to the Income-tax Act in this regard shall be undertaken through Finance Bill, 2016.

CBDT has now advised the field authorities that pending assessments involving applicability of MAT on foreign companies (including FIIs/FPIs) should be completed in accordance with the decision of the Government.

Please see more on this in The MAT Controversy -Under the mat - DDT 2676 02 -09 2015.

CBDT Instruction in No.18/2015., Dated: December 23, 2015

Taxpayers' electronic interface with the Department - CBDT & CBEC Officers to mention email id and phone numbers in communications

THE Revenue Secretary has directed that henceforth any notice/letter/communication issued by any officer under Department of Revenue including CBDT, its directorates and field formations; to the taxpayers, members of public should invariably contain mention of e-mail address and office phone numbers, of the officers signing such, communications/notice/letters for facilitating taxpayers' electronic interface with the Department.

CBDT has instructed all senior officers that these directions are strictly followed.

Please also see Name and Contact Number of Signing Officer in DDT 2746.

CBDT F.No.Dir(Hqrs)/CH(DT)/29/2015/2030., Dated: December 15, 2015

FTP - Onions - No Minimum Export Price

GOVERNMENT had reduced the Minimum Export Price (MEP) for export of all varieties of onions from USD 700 F.O.B. per MT to USD 400 F.O.B. per MT by Notification No. 26/2015-20, dated 11.12.2015. This was increased from 425 to 700 dollars in August 2015.

Now the Government has done away with the MEP - Minimum Export Price. This is expected to boost exports. Onion prices have come down to less than ten rupees a kilogram in the domestic market.

DGFT Notification No.29/2015-2020, Dated: December 24, 2015

What happened to Education Cess?

THE Government had been collecting Education Cess on Customs, Excise, Service Tax and Income Tax since 2004. What did the Government do with all the money collected?

The CAG, in a recent report, observed,

A non-lapsable fund for elementary education known as Prarambhik Shiksha Kosh (PSK) was created in 2005-06 under non-interest bearing section of the reserve funds in the Public Account. This fund is meant to meet the expenditure requirement for elementary education under the schemes of Sarva Shiksha Abhiyaan and Mid-Day Meal Scheme. Through the Finance Act (No. 2) of 2004 a primary education cess of 2 per cent was levied on all central taxes. The cess collection is initially credited to the CFI and subsequently transferred after obtaining the Parliamentary authorisation to the PSK to finance the expenditure on elementary education.

Chief Controller of Accounts (CCA), Ministry of Human Resource Development is responsible for maintaining the accounts of the PSK in coordination with the CCA, Central Board of Direct Taxes and Central Board of Excise and Customs in the Department of Revenue.

Scrutiny of Union Finance Accounts for the period 2004-05 to 2014-15 showed that against the total collection of Rs. 1,54,818 crore of primary education cess in the CFI, only Rs. 1,41,520 crore was transferred to the PSK, resulting in short transfer of Rs. 13,298 crore. During the period 2004-15, in some years the transfer was more than the cess collected, while in some years it was less than the cess collected. Thus, there is no reconciliation between the CCA of the Ministry of Human Resource Development and the CCA, Central Board of Direct Taxes/Central Board of Excise and Customs in the Department of Revenue.

Secondary and Higher Education Cess: The Secondary and Higher Education Cess (SHEC) was introduced in the Finance Act, 2007 to fulfil the commitment of secondary and higher education.

Scrutiny of the Union Finance Accounts for the period 2006-15 showed that a total collection of SHEC of Rs. 64,228 crore had been made. However, unlike the creation of PSK in the case of primary/elementary education cess, neither a fund was designated to deposit the proceeds of SHEC thereto nor schemes identified on which the cess proceeds were to be spent. Consequently, the commitment of furthering secondary and higher education as envisaged in the Finance Act was not transparently ascertainable from the Union Accounts. Thus, the possibility of the diversion of funds for purposes not mandated under the Finance Act cannot be ruled out.

The Income Tax Welfare Fund - 100 Crore lying unutilised

MINISTRY of Finance, Department of Revenue created the Income Tax Welfare Fund (ITWF) by transfer of Rs. 100 crore over a period of three years from 2006-07 to 2008-09 in interest bearing section of Public Account. The Fund was created with the purpose of (i) promotion of welfare, recreation and other outdoor activities of officials of the Income Tax Department, (ii) providing financial help to officials during contingencies such as injuries or accidents, (iii) providing ex-gratia payment to families of deceased officials, (iv) providing medical maintenance not fully reimbursable under CGHS, etc.

The Comptroller and Auditor General had not agreed to the creation of the Fund on the ground that the activities proposed to be covered by the Fund should be included in the annual budget of the Department and be financed through the normal budgetary process. The objective to cover officials/family members of officials who faced injury/death during search/seizure operations and provision of high risk insurance cover could be provided under a designated scheme of the Government of India or included in the existing provisions under the funds in existence for such purposes. The other purpose cited could be covered under the standard object heads "Rewards", "Medical treatment", "Office expenses", "Grants-in-aid" in the demand for grants of the Ministry. The creation of the Fund under interest-bearing section of the Public Account entailed recurring liability of interest, which would not be subject to usual parliamentary financial control. The utilisation of the Fund would not be reported through the standard object heads as is the case with the demand for grants presented in the Parliament leading to non-transparency. General Financial Rules (GFR) also do not permit expenditure from public moneys for the benefit of a section of people or individuals unless said expenditure was in pursuance of recognised policy.

The Department told Audit that no expenditure had been incurred out of the accumulated corpus of Rs. 100 crore and no interest had been credited into this Fund since its inception.

Please also see Story of Income Tax Welfare Fund - DDT 2603 22 05 2015

National Calamity - Contingency Continues

NATIONAL Disaster Response Fund (NDRF) was constituted as per Ministry of Home's Notification No 1995 dated 28 September 2010. According to para 4.1 of its guidelines, National Calamity Contingency Fund (NCCF) was to be merged with National Disaster Response Fund (NDRF).

On scrutiny of Union Government Finance Accounts for 2014-15, CAG noticed that the head 8235.119-National Calamity Contingency Fund is still being depicted with closing balance of Rs. 1,484.78 crore in Statement No-13.

Further, an amount of Rs. 3,732.55 crore has been shown as receipt under head 0038.03.108- National Calamity Contingent Duty and against this amount, Rs. 3,460.88 crore was transferred to the head 8235.125-National Disaster Response Fund in Statement No-13 resulting in short transfer of duty of Rs. 271.67 crore into the said fund during the year 2014-15.

The CGA (Controller General of Accounts) replied in September 2015 that a reference had been made to the Ministry seeking reasons for short transfer. Further, it added that the merger of NCCF and NDRF was under process.

This is how they play with our money.

Until Tomorrow with more DDT

Have a nice day.

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