TIOL-DDT 2192
18.09.2013
Wednesday

CERTAIN amendments were made in the Central Excise Act, 1944 with regard to arrest and bail, in the Finance Act, 2013.

Now, Board has come out with a circular clarifying various issues on arrest and bail.

Since arrest takes away the liberty of an individual, the power must be exercised with utmost care and caution and only when the exigencies of the situation demand arrest. A person is liable to be arrested for non-bailable offence only when the offence committed by him is covered under clause (b) or clause (bbbb) of sub-section 9(1) and the duty involvement exceeds Rs. fifty lakh. Thus, it is essential to examine offences in each and every case with reference to each of the clauses of sub-section 9(1) and also the quantum of duty involved prior to invoking the arrest provisions. Only where clause (b) or clause (bbbb) are the most appropriate clauses to describe the offence and duty involved exceeds rupees fifty lakhs, these provisions should be invoked. Any person arrested for offences under these clauses should be informed of the grounds of arrest and produced before a magistrate without unnecessary delay and within 24 hours of arrest.

A list of non-bailable offences where decision to arrest may be taken by the Commissioner:

(a) clandestine removal of manufactured goods;

(b) removal of goods without declaring the correct assessable value and receiving a portion of sale price in cash which is in excess of invoice price and not accounted for in the books of account;

(c) taking Cenvat Credit without the receiving the goods specified in the invoice;

(d) taking Cenvat Credit on fake invoices;

(e) issuing Cenvatable invoices without delivering the goods specified in the said invoice.

Bail: Bail should be subject to the condition(s), as deemed fit, depending upon the facts and circumstances of each individual case. It has to be ensured that the amount of bail bond/ surety should not be excessive and should be commensurate with the financial status of the arrested person. Further the bail conditions should be informed by the arresting officer in writing to the person arrested and also informed on telephone to the nominated person of the person(s) arrested. Arrested person should be allowed to talk to the nominated person. If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail. The arresting officer may, and shall if such a person is indigent and unable to furnish surety, instead of taking bail, discharge him on executing a bond without sureties to his appearance as provided under section 436 of Cr.PC. However, in cases where the conditions for granting bail are not fulfilled, the arrested person shall be produced before the appropriate magistrate within 24 hours of arrest.

Precautions to be taken by the departmental officers:Powers to arrest a person needs to be exercised with utmost caution. Chief Commissioners/ Commissioners of Central Excise are required to ensure that approval for arrest for non-bailable offence is granted only where the intent to evade duty is evident and element of mensrea / guilty mind is palpable. The guidelines given by the Supreme Court in D. K. BasuVs State of West Bengal - 2002-TIOL-230-SC-MISC are to be followed.

Arrest Memo: Though there is no prescribed format for the arrest memo, Board has prescribed the essential particulars that the arrest memo should contain.

Certain modalities:

1. Arrest of a female should be carried out by or in the presence of a lady officer;

2. Arrest memo should be attested by nominated person (such as member of family) of the person arrested or a respectable member of the locality from where the arrest is made;

3. Medical examination of the arrested person should be conducted by a medical officer in the service of Central or State Governments and in case such medical officer in not available, by a registered medical practitioner soon after the arrest is made. If an arrested person is a female then such an examination shall be made only by, or under supervision of a female medical officer, and in case such female medical officer is not available, by a female registered medical practitioner;

4. It shall be the duty of the officer having the custody of the arrested person to take reasonable care of the health and safety of the person arrested.

Chief Commissioners are to send a report to the Zonal Member on every arrest and a monthly report to the DGCEI.

Let us hope the field officers follow all the instructions of the Board.

The Board Circular wants the field to follow the guidelines of the Supreme Court in the case of D. K. BasuVs State of West Bengal , but Board has not mentioned where the case is available or what the instructions are. You can access the case and the instructions in 2002-TIOL-230-SC-MISC .

Similar instructions are to be given for Customs and Service Tax and maybe they are in the pipeline.

CBEC Circular No.974/08/2013-CX, Dated: September 17, 2013

What are the Supreme Court Guidelines?

THEY are not exactly guidelines but requirements. The Supreme Court had in the famous DK Basu case - 2002-TIOL-230-SC-MISC in Para 29 said,

We therefore, consider it appropriate to issue the following requirements to be followed in all cases of arrest or detention till legal provisions are made in that behalf as preventive measures:

1. The police personnel carrying out the arrest and handling the interrogation of the arrestee should bear accurate, visible and clear identification and name tags with their designations. The particulars of all such police personnel who handle interrogation of the arrestee must be recorded in a register.

2. That the police officer carrying out the arrest of the arrestee shall prepare a memo of arrest at the time of arrest and such memo shall be attested by at least one witness who may be either a member of the family of the arrestee or a respectable person of the locality from where the arrest is made. It shall also be counter signed by the arrestee and shall contain the time and date of arrest.

3. A person who has been arrested or detained and is being held in custody in a police station or interrogation centre or other lock-up, shall be entitled to have one friend or relative or other person known to him or having interest in his welfare being informed, as soon as practicable, that he has been arrested and is being detained at the particular place, unless the attesting witness of the memo of arrest is himself such a friend or a relative of the arrestee.

4. The time, place of arrest and venue of custody of an arrestee must be notified by the police where the next friend or relative of the arrestee lives outside the district or town through the legal Aid Organisation in the District and the police station of the area concerned telegraphically within a period of 8 to 12 hours after the arrest.

5. The person arrested must be made aware of his right to have someone informed of his arrest or detention as soon he is put under arrest or is detained.

6. An entry must be made in the diary at the place of detention regarding the arrest of the person which shall also disclose the name of the next friend of the person who has been informed of the arrest and the names and particulars of the police officials in whose custody the arrestee is.

7. The arrestee should, where he so requests, be also examined at the time of his arrest and major and minor injuries, if any present on his/her body, must be recorded at that time. The "Inspection Memo" must be signed both by the arrestee and the police officer affecting the arrest and its copy provided to the arrestee.

8. The arrestee should be subjected to medical examination by trained doctor every 48 hours during his detention in custody by a doctor on the panel of approved doctors appointed by Director, Health Services of the concerned Stare or Union Territory. Director, Health Services should prepare such a panel for allTehsils and Districts as well.

9. Copies of all the documents including the memo of arrest, referred to above, should be sent to the Magistrate for his record.

10. The arrestee may be permitted to meet his lawyer during interrogation, though not throughout the interrogation.

11. A police control room should be provided at all district and state headquarters, where information regarding the arrest and the place of custody of the arrestee shall be communicated by the officer causing the arrest, within 12 hours of effecting the arrest and at the police control room it should be displayed on a conspicuous notice board.

This judgement was delivered in 1996 and now theCr.P.C has incorporated all these guidelines - so they are requirements mandated by Statute.

Customs - Government Increases Tariff Rate of Customs Duty for Jewellery to 15%

GOVERNMENT has increased the Tariff rate of duty for import of jewellery and parts thereof, of precious metal or of metal clad with precious metal and articles of goldsmiths' or silversmiths' wares and parts thereof, of precious metal or of metal clad with precious metal, falling under headings 7113 and 7114 respectively of the First Schedule to the Customs Tariff Act , from 10 percent to 15 percent, by a notification issued yesterday. This Notification amends the Customs Tariff.

Can the Government increase the rate of duty by a Notification? Tariff is an Act passed by Parliament and only Parliament has the power to amend it. But the Government has emergency powers as provided for under Section 8A of the Customs Tariff Act.

Emergency power of Central Government to increase import duties:

8A (1) Where in respect of any article included in the First Schedule, the Central Government is satisfied that the import duty leviable thereon under Section 12 of the Customs Act, 1962 should be increased and that circumstances exist which render it necessary to take immediate action , it may, by notification in the Official Gazette, direct an amendment of that Schedule to be made so as to provide for an increase in the import duty leviable on such article to such extent as it thinks necessary:

It is under this provision that Government has amended the Tariff to increase the import duty and the notification declares that circumstances exist which render it necessary to take immediate action.

Notification No. 44/2013-Cus, Dated: September 17, 2013

Compliance of International Standards - wood packaging material for exports - CBEC Instructions routinely flouted

BOARD had in Circular No. 14/2009 - Cus dated 06.05.2009 directed that all the Customs field formations should verify whether the export goods packed with raw or solid wood packaging material comply with the ISPM No. 15 or are accompanied by a phytosanitary certificate with the treatment endorsed issued by the agencies which are accredited / certified by DAC. In case of non-compliance, the matter may be referred to the Plant Quarantine authorities for proper treatment of export goods before their release.

This was reiterated by Board Circular No. 13/2011 - Cus dated 28-02-2011.

Despite explicit provisions, it has been reported that in a number of export consignments have been found non compliant by other Customs administrations especially European Union on the ground of non-adherence/infringement of phytosanitary standards prescribed therein. Ministry of Agriculture has repeatedly expressed concerns over increasing number of such cases and desired remedial action be taken to check export of consignments not meeting required phytosanitary specifications i.e. ISPM - 15.

Now, Board has taken a serious note and reiterates that no export consignments packed with raw or solid wood packaging material shall be allowed clearance which is found deficient on meeting phytosanitary requirements ISPM - 15.

Non compliance on the part of officers shall be viewed seriously.

So, now only a serious note is taken and one more lapse, a serious view will be taken and after that? They will all forget it and life will go on.

Instead of saying a serious view will be taken why can't the Board take serious action when its directions are flouted with callous impunity?

CBEC Instruction in F. No.450/19/2005-Cus.IV Dated: September 16, 2013

Addition of 8434 Crores - Vodafone loses Writ in Bombay High Court

IT was a high radiation battle - the petitioner was the mobile monarch Vodafone - in action were the top lawyers of the Country and issue involved addition of 8434 Crores of rupees to the income of the assessee.

The only issues involved were whether the TPO had jurisdiction and whether the High Court could entertain a writ when ample alternate remedy was available. In a massive judgement running into 239 pages, the High Court held that that the writ was not maintainable and dismissed it.

The petitioner seeks a writ of certiorari to quash and set aside a Transfer Pricing Order dated 31st October, 2011, passed by Additional Commissioner of Income-tax, Transfer Pricing (“the TPO”) to the extent that it relates to the addition of Rs. 84,34,39,52,555/- on account of two unreported international transactions and a Draft Assessment Order dated 29th December, 2011, passed by respondent Assistant Commissioner of Income-tax (“Assessing Officer”). The petitioner has also sought a writ of mandamus directing the AO to revise the Draft Assessment Order, after excluding the said transfer price adjustment. Lastly, the petitioner seeks a writ of prohibition, prohibiting the respondents from taking any steps pursuant to the impugned orders.

The two unreported transactions are the sale of the call centre business by the petitioner to Hutchison Whampoa Properties (India) Pvt. Ltd. and an alleged assignment of call options by the petitioner to Vodafone International Holdings B.V. The TPO determined the arm's length price of these two unreported transactions suomoto in exercise of powers under sections 92CA(2A) and/or (2B) of the Income Tax Act, 1961. The petitioner has challenged the jurisdiction of the TPO to determine the arm's length price of these transactions on various grounds. The respondents, apart from denying this case, have contended that the Writ Petition is not maintainable on the ground that the petitioner has an alternate remedy under the provisions of the Income Tax Act, 1961, and on certain other grounds

Far from questioning the TPO's jurisdiction to consider an unreported international transaction, the petitioner, in fact, submitted to his jurisdiction in this regard. The petitioner filed submissions before the AO in which, for the first time, it objected to the exercise of the jurisdiction by the TPO over the unreported international transactions.

The High Court held,

We must keep in mind that it is not for us in this writ petition to consider the merits of the rival contentions in detail with a view to deciding the same. It is necessary for us only to examine whether the petitioner has clearly established that there is a patent or inherent lack of jurisdiction in the TPO on account of the transaction being clearly a domestic transaction and not an international transaction; that there is nothing to be considered in the matter on behalf of the respondents and that the respondents have clutched at jurisdiction although they had none.

In the result, we are unable to agree with the contention that the TPO's lack of jurisdiction to consider the transaction relating to the sale of the call centre business / BTA is so obvious and clear as to entitle the petitioner to invoke the extraordinary writ jurisdiction of this Court instead of being compelled to file an appeal before the ITAT. It cannot be said that he "clutched at jurisdiction" or that his decision with respect to the jurisdictional facts was "so patently and loudly obtrusive" that it has left on it "an indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision" and, therefore, warrants interpretation in a writ petition. There are several issues of fact and of law on every material aspect which must be considered by the authorities under the Act. This is not a fit case for invoking the extra-ordinary jurisdiction under Article 226.

In the circumstances, the Writ Petition is dismissed.

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Jurisprudentiol – Thursday's cases

Customs

Valuation - for period from 02.03.01 to 26.09.06, ship demurrage charges cannot be included for discharge of customs duty on the imported goods even if assessments are made provisionally: CESTAT Larger Bench.

THE issue referred to the Larger Bench in this case is:

"When the circular issued by the Board vide 14/2001-Cus. dated 02.03.2001 communicated the decision that demurrage charges are includible in the assessable value, whether demurrage charges can be excluded from assessable value for imports subsequent to 02.03.2001 even where assessments were made provisional on the ground that final decision was taken by the Board only on 26.09.06 when Tribunal has taken a view that legally such demurrage charges are includible"

Income Tax

Whether assessee has case even if he pays higher stamp duty as per valuation of stamp authority and claims lower capital gains as per report of approved valuer - YES: High Court

THE issues before the Bench are - Whether assessee has a case even if he pays higher stamp duty as per valuation of stamp authority and claims lower capital gains as per report of approved valuer; Whether valuation by stamp authority is not expected to have any nexus with the market value; Whether valuation under I-T Act is required to take into account attributes like occupancy by tenants, legal encumbrances and other charges; Whether if the value assessed by the stamp valuation authority exceeds u.s50C, the AO can refer the case to the DVO and Whether if the AO relies on the report of the approved valuer u/s 55A, it is required to apply his mind and record reasons for the same. And the law point goes in favour of the assessee.

Service Tax

Appellant receiving Edit & Data fee in convertible foreign exchange - Data furnished by appellant is used by foreign entity Reuters Ltd., UK for inclusion in their products for dissemination to customers situated worldwide - ST is not attracted -Pre-deposit of 43 Crores waived & Stay granted: CESTAT

THE appellants are a part of the Reuters Group worldwide and are registered with the department under the category of ‘On-Line Information and Database Access and/or Retrieval Services'. During the course of audit of the records of the company, it was noticed that the appellant had received ‘data and edit fees' in convertible foreign exchange from M/s. Reuters Ltd., U.K., a sister-concern. It was also noticed that the appellant had purchased equipment from Reuters Ltd., U.K. and maintained communication lines for providing Reuter's services in India. The department was of the view that the service rendered in the form of maintenance of communication lines was classifiable as ‘Maintenance or Repair Services'.

See our Columns Tomorrow for the judgements

UntilTomorrow with more DDT

Have a nice day.

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