TIOL-DDT 1747
07.12.2011
Wednesday

IT is the responsibility of the tax administrator to understand and implement the tax laws properly. In case of any disputes, where the tax payer thinks the tax administrator is not correct, the issues are agitated in higher courts. Often, the taxpayer is assisted by their counsels who are supposed to possess better expertise in the field than an ordinary citizen. So, it is the responsibility of the counsel to appraise the courts and help the court in arriving at proper interpretation of the statutory provisions. The courts, after hearing both sides, should shoulder the responsibility of explaining the disputed provisions in proper perspective and there is no room for any carelessness. That is why often the findings part in any order starts with "I/We have examined the issue carefully". The importance of a decision in a particular case cannot be undermined as it sets a precedent.

Unfortunately, when all the three fail in doing justice to their respective roles, it results in a catastrophe. Here is an example.

The issue relates to attachment of property under Section 87(c) of the Finance Act, 1994 for recovery of service tax. The appeal of revenue against waiver of pre-deposit by the Tribunal was allowed by the AP High Court with a direction of pre-deposit of Rs. 80 crores. Since the assessee did not pre-deposit the amount, the jurisdictional officers attached the property of the assessee under Section 87(c) of the Finance Act, 1994. The Writ Petition filed by the assessee against the said attachment order was dismissed by the High Court.

Everything is fine except the fact that as of now no Notification has been issued under Section 87(c) of the Finance Act, 1994 which means that the provisions of recovery under Section 87(c) have not been given effect to so far.

Section 87(c) of the Finance Act, 1994 reads:

(c) the Central Excise Officer may, on an authorisation by the Commissioner of Central Excise, in accordance with the rules made in this behalf , distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person;

No rules have been made to give effect the provisions of Section 87(c) of the Finance Act, 1994. However, the Ld. departmental officers have attached the property (God knows in accordance with what rules), the Ld Counsel for the petitioner appears to have not urged the non-issue of Notification under Section 87(c) and the Hon'ble Judges have ignored the above provisions and dismissed the petition. While examining the scope of Section 87(c), the High Court held:

Section 87 of the Act in plain terms empowers the Central Excise Officer to proceed to recover the amount of demand by one or more modes mentioned therein. Section 87 (c) empowers the Central Excise Officer to distrain any movable and immovable property until the amount payable is paid.

Apparently, the words "in accordance with the rules made in this behalf" have been lost sight of in PLAIN TERMS!

The second issue is the High Court in earlier order directing the pre-deposit of Rs. 80 crores, did not specify any time limit. The assessee urged before the High Court that if no time limit is mentioned in the order, and as per Rule 21 of the Writ Proceedings Rules, 1977, if no time is prescribed by the Court, it is presumed that the petitioner has two months time from the date of receipt of the order, and the notice of attachment even before the expiry of the period granted by this Court is highly arbitrary and illegal.

The High Court observed:

The fact that the petitioner has got some more time to comply with the order passed by this Court or that he has other remedies to avail against the order passed by this Court cannot be a mitigating factor in favour of the petitioner.

So, now the properties of all the manufacturers and the service providers who have obtained stay of the orders passed by the lower authorities against the payment of pre-deposit within a stipulated time period can be attached as the time limit to comply with the pre-deposit cannot be a mitigating factor!

Now, if a court/tribunal orders pre-deposit, the assessee has to run straight from the Court to the bank and the Central Excise officer can run equally fast to the assessee's premises to detain property!

Doing business in India is really a Herculean task!

We bring you the High Court order today. Please see Breaking News

Export to Bhutan - Ban on Certain items selectively lifted

GOVERNMENT has exempted the following items from any export ban, with the annual limits indicated against each, when exported to Bhutan:

DGFT Notification No. 87/(RE - 2010)/2009-2014, Dated: December 05, 2011

Initiation of safeguard investigation concerning imports of Carbon Black into India from China PR

THE domestic industry has requested in their application for immediate imposition of Safeguard duty on imports of Carbon Black originating from People's Republic of China for a period of four years. They have also requested for imposition of provisional safeguard duty in view of the steep deterioration in performance of the domestic industry due to market disruption and the threat of market disruption as a result of increased imports of the product under consideration from China P. R.

The application has been examined and it has been found that prima facie increased imports of Carbon Black have caused and are threatening to cause market disruption to the domestic producers of Carbon Black and as such, DG, Safeguards has decided to initiate an investigation in the matter.

All interested parties may make their views known within a period of 30 days from 02.12.2011.

DG, Safeguards F.No. D-22011/12/2011, Dated: December 02, 2011

The Best Airport in the World

WALL Street Journal recently proclaimed Singapore's Changi airport as the best airport in the world. There is a rooftop hot tub, a movie theatre and a tropical butterfly garden in the airport. If you want a photograph in front of Taj Mahal or the Statue of Liberty, there are models of these and other great wonders of the world.

Security, Customs and immigration in Changi are unmatched in courtesy and service.

The officer smiles and takes your passport and offers you a candy while he checks the passport; The Security official would politely request you to take out your coat and apologise for the inconvenience and delicately place the coat in the tray to avoid creases.

And there are officials going round asking passengers if officials smiled and whether they were satisfied with their behaviour.

The airport is the first and last taste of a country for a visitor and it has to be made pleasant.

Katju is again angry with the Press - Coverage for Dev Anand

PRESS Council of India Chairman and former Supreme Court Judge, Justice Markendeya Katju did not like the coverage given by the Indian Press to the news of Dev Anand's death. "Putting the news of an actor's death on the front page when farmers were committing suicide and there were more pressing social and economic issues to be addressed only showed a "lack of sense of priority", according to the Hon'ble former judge. Every media worth its name carried news of Dev Anand's death.

Perhaps, once a judge; always a judge. Newspapers and editors however incompetent they are, certainly have a reasonable judgement on what constitutes news and do they need a judgement from a former judge? Even while sitting in the highest court, the learned Katju used to lecture to senior lawyers on how to argue!

  Jurisprudentiol - Thursday's cases

Service Tax

Service Tax - Tax with interest paid before SCN - non payment of tax when liability is known - Penalty @ 25 percent payable - No penalty under both Section 76 and 78: High Court

IT is now well settled that the liability cannot be imposed both under Section 76 and 78. Therefore, in this case the liability to pay penalty is only under Section 78. In fact the proviso to Section 78 makes it very clear that if penalty is payable under this Section, the proviso to Section 76 shall not apply. Thereby no penalty could be imposed both under Sections 76 as well as 78. Therefore, in this case the penalty is to be construed under Section 78. To that extent, the appeal succeeds. Once Section 78 is attracted, proviso to Section 78 makes it clear, a person who is liable to pay penalty in addition to payment of tax and interest, if he pays the said tax and interest within 30 days from the date of determination of the liability by way of an order the penalty payable is only 25%.

Income Tax

Whether while computing indexed cost of acquisition of asset sold, which was acquired under a Gift, assessee is entitled to benefit of indexation from date of purchase of asset by previous owner - rules in favour of assessee: High Court

ASSESSEE  declared long term capital gains arising from the sale of a residential flat which was received to the assessee from his daughter by a gift deed. The flat was purchased by the daughter of the assessee i.e. the previous owner on 29/1/1993 and gifted to the assessee vide gift deed dated 1/2/2003. The assessee sold the flat on 30/6/2003. During assessment proceedings, the assessee contended that the gains arising therefrom were liable to be computed as long term capital gain, by deducting from the total consideration received, inter alia, the amount of indexed cost of acquisition and contended that the indexed cost of acquisition had to be determined with reference to the cost inflation index for the year in which the cost of acquisition was incurred i.e. on 29/1/1993.

Central Excise

Cenvatted capital goods destroyed due to natural causes in year 2005 - no provision in law to seek reversal of Cenvat credit initially availed: CESTAT

THE  flash floods of 26th July 2005 had one more casualty. Cenvatted Inputs and capital goods lying in the factory of the assessee got destroyed. Insurance claim settlement saw the assessee getting a sum of Rs.1,39,69,851/- and which excluded VAT and CENVAT. Incidentally, the said claim included an amount of Rs.27,77,437/- on account of loss of capital goods on which CENVAT was availed. The Department certainly wanted to have its pound of flesh on the clearance of "Cenvatted capital goods".

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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