TIOL-DDT 1243
24.11.2009
Tuesday

IT's bad times for the CESTAT. The latest to go from the Bench is Mr. PK Das, Member (J). We had flashed this news on Friday but had not commented about it as we got a copy of the order only yesterday. The cryptic order states,

In pursuance of rule 8(3) of the Customs, Excise and Service Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1987, the President hereby discharges forthwith Shri P K Das, Member (Judicial) in Customs, Excise & Service Tax Appellate Tribunal from service.

This is of course not the first time that a CESTAT Member had been discharged. Way back in 2001, Dr. SN Busi, then a Member of the Tribunal's Kolkata Bench had been similarly discharged. Dr. Busi had joined the Tribunal in strange circumstances without even getting properly relieved from his job as Commissioner of Central Excise. And within a year he found himself out of the job in the Tribunal and facing inquiry by the CBI.

In recent times, we had seen two Honourable Members of the Tribunal resigning (voluntary retirement, of course)

The CESTAT is a small Tribunal with hardly twenty Members but in the last twenty seven years, it has established a towering reputation as a temple of justice by the sheer hard work and dedication of the few Great members who occupied the exalted seats in the Bench in the last quarter of a Century.

As Lord Roskil said in a different context, “When these ghosts of the past stand in the path of justice clanking their medieval chains, the proper course for the judge is to pass through them undeterred”.

But we are passing through bad times. It seems Mr PK Das had resigned, but before his resignation could be considered, he was unceremoniously sacked, sending shock waves down the line. It seems after he was discharged, his room was sealed!

What is happening to this great institution?

There was another little drama before Mr. Das was discharged. By a Notification dated November 19, 2009, the Central Government extended the period of probation of Mr.PK Das and Debendranath Panda, Members (Judicial) in Customs, Excise and Service Tax Appellate Tribunal up to 21.11.2008 and further up to 21.11.2009. Then by a Notification dated November 20, 2009, Mr Das was discharged.

How can a CESTAT Member be removed?

Let us look at the Law. See Rules 8 and 9 of the CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL MEMBERS (RECRUITMENT AND CONDITIONS OF SERVICE) RULES, 1987.

RULE 8. Probation. - (1) Every person appointed as a member shall be on probation for a period of one year.

(2) The Central Government may extend the period of probation for a further period of one year at a time so that the period of probation in aggregate may not exceed three years.

(3) A member may be discharged from service at any time during the period of probation without assigning him any reason.

RULE 9. Reversion or termination of the service of members. - (1) In case of a person appointed as a technical or a judicial member from any post under the Union or a State, unless such a person is confirmed, the Central Government may at any time revert him to his parent post without assigning any reason, after giving him one month's notice of such reversion and in case a technical or a judicial member wishes to revert to his parent post, he shall be required to give one month's notice to the Central Government:

Provided that in case such technical or judicial member has already superannuated according to the relevant rules of his parent post, the appointment may be terminated by the Central Government at any time without assigning any reason after giving him one month's notice of such termination and in case such technical or judicial member wishes to resign, he shall be required to give one month's notice to the Central Government.

(2) In case of a person appointed as a judicial member directly from the Bar, unless he is confirmed, the appointment may be terminated by the Central Government at any time without assigning any reason after giving him one month's notice of such termination and in case such judicial member wishes to resign, he shall be required to give one month's notice to the Central Government.

Now there are three categories of Members:-

1. Members who are on probation – Probation can be extended up to three years and during probation they can be discharged from service at any time without assigning any reason.

2. Members who have completed probation, but are not confirmed: They can be sent home without assigning reasons after giving one month's notice.

3. Members who are confirmed: Difficult to be removed as it involves a lot of procedural rigmarole.

Well, that is how the premier Tribunal functions.

You may see:

1. NOTIFICATION. No. 4/2009. - (No. F. No. 27/10/2005-Ad.IC) Dated : November 19, 2009

2. NOTIFICATION No. 5/2009 - (No. F. No. 26/8/2005-Ad.IC) Dated : November 20, 2009

3. ORDER NO 5 OF 2009 - F. No. 26/8/2005-Ad.IC Dated : November 20, 2009

Income Tax - Dispute Resolution Panel - Rules Notified

Finance Act 2009 had inserted a new Section 144 C in the Income Tax Act to provide for a Dispute Resolution Panel.

Sub section 14 provided that

14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.

Now the Board has notified the Income Tax (Dispute Resolution Panel) Rules, 2009.

8 panels are to be created at Delhi, Mumbai, Ahmedabad, Kolkata, Chennai, Hyderabad, Bangalore and Pune. Three Commissioners, nominated by name shall constitute the Panel. There shall be a Secretariat for the panel created by the Chief Commissioner. The AO shall pass Assessment Order on the directions of the panel. An appeal against the order passed on directions of the Panel shall lie to the ITAT.

Let us hope this Panel does not turn out to be the farce that the Committees of Commissioners and Chief Commissioners to review orders in Central Excise and Customs.

Please see our Editorial for a more detailed analysis.

Income Tax Notification. Dated November 20 2009

Jurisprudentiol – Wednesday's cases

Central Excise

Manufacture - activity of cutting specified varieties of electric cables into desired lengths, testing and packaging thereof does not amount to manufacture - AAR

It is well settled through a series of judgements of the Hon'ble Supreme Court and High Courts in the context of the aforesaid clause (f) that manufacture can said to have taken place only if the processing to which an item is subjected to results in the emergence of a different commodity having its distinct character, use and name and it should be commercially known as such.

Income Tax

Indo-USA DTAA - Article 12 - Non-resident assessees render strategic management services to Indian branch - decline to furnish details of services and transactions relating to relevant AY - If assessees fail to cooperate, onus to prove non-taxability of income shifts to assessees, and AO can draw adverse inference: ITAT

PROTECTING business details, clients' details and the nature of transactions entered into from public eyes is one of the basic traits of any business-doing entity. But, can this trait or behaviour be given a leeway to such an extent that an assessee need not disclose them even to the income tax authorities? The issue becomes more sensitive when the details of services rendered and transactions entered into are in exclusive possession of the assessee. Under such circumstances, does the onus to prove the taxability of income continue to be on the Revenue? Or, the burden of proof shifts to the assessee who fails to cooperate with the AO and insists on relying on some information filed before the Revenue in some distant assessment year? Should the AO rely on some email correspondence details disclosed in the past, the same having no nexus with the relevant assessment year, and concur with what was decided in the past? Can the A.O legally draw an adverse inference for lack of details furnished by the assessee? It may sound enigmatic to TIOL Netizens or call it 'Vodafone Syndrome' as Vodafone B V had also declined to provide text of original agreement to the Bombay HC in its Rs 10000 Cr case which was later dismissed. Anyway, here are the details of this case involving a global service provider specialising in strategic management consultancy services which highlight the dilemmas many of the assessing officers face while making assessment orders involving the high and mighty, particularly MNCs having global interrelated business from whom it is extremely difficult to get any worthwhile information leading, at times, to framing of assessment orders which are often dubbed as high handed. It is only because of the feisty defence put up by the departmental representative that the fact that the assessee declined to give any shred of evidence for the relevant financial year came to light.

Customs

COFEPOSA – Detention - In matters of personal liberty, standard of proof needs to be high to justify an order of preventive detention.- Supreme Court

Preventive detention is not punitive but a precautionary measure. The object is not to punish a person, but to intercept or prevent him from doing any illegal activity. Its purpose is to prevent a person from indulging in activities, such as smuggling and such other anti social activities as provided under the preventive detention law. The mere fact that on one occasion person smuggled goods into the country may constitute a legitimate basis for detaining a person under COFEPOSA. For this purpose, the antecedents of the person, facts and circumstances of the case need to be taken into consideration.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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