News Update

Factory output in Euro area picks up - Germany, France & Italy perform better than forecastVaccination - India administers 4.27 lakh doses on March 1 - only 19K beneficiaries of less than 60 years but above 45COVID-19 - As global tally inches close to 11.5 Cr mark, death count also almost reaches 25.5 lakhFormer French President Sarkozy found guilty of corruption; sentenced to one year jailGST Revenue collection for February - IGST saves the dayCentre releases 18th instalment of Rs 4,000Cr to States to meet GST shortfallGolden Globe Awards go to ‘Nomadland’ & ‘Borat’Tax department finds Rs 400Cr black income after raid on Hyderabad-based pharma groupSpeed, skill, scale, standard should be new national mantra: Piyush Goyal at BISMoHUA launches Swachh Survekshan 2021 survey ranking cities' cleanlinessUP Govt & Noida International Airport ink State Support PactGovt committed to empowering small farmers, says PMST - Pre-deposit made through CGST credit - Matter listed for maintainability - As appellants opted for SVLDRS, they are allowed to withdraw appeal: CESTATUpsurge continues in Maharashtra as India's COVID-19 cases surpass 1.11CrOver 3.13 lakh domestic passengers fly on February 28CT - Levying penalty without personal hearing would go to root of very levy itself - exercise of jurisdiction under Article 226 warranted: HCMonitoring prices of 22 essential goods through App paying dividendsI-T - Power u/s 263 cannot be invoked when AO has made all due enquiries while making original assessment: ITAT
Superintendent (AR) in CESTAT Sabrina Cano among Presidential Awardees

DDT in Limca Book of RecordsTIOL-DDT 2276

SABRINA Cano, Superintendent of Central Excise working as Authorised Representative of the Department in CESTAT, Bangalore has bagged the Presidential award.

Sabrina is a very hard working, dedicated and knowledgeable AR in the CESTAT. It is a sheer pleasure to see her battling it out with indomitable lawyers and consultants from the other side, keenly attentive, never missing a point as she comes to court well prepared. She is better than many seasoned lawyers - precise and concise in her arguments and devastatingly effective when she has a strong point.

In a case dealing with interest on irregular credit taken but not utilised, where there was a Karnataka High Court judgement distinguishing the Ind Swift judgement of the Supreme Court, she successfully convinced the Bench that it was open to the Tribunal to consider the High Court decision per incuriam , for which she relied on a AP High Court judgement.The Bench found great force in her argument and did not follow the High Court judgement. (Please see 2013-TIOL-934-CESTAT-BANG )

Sabrina is elated beyond words on getting the award and says it is a dream come true for her. She says that working in CESTAT was a great learning expedition. Appearing before great judges and against eminent lawyers in the company of senior officers of the Department was a very humbling and gratifying experience. Working in CESTAT was itself its reward ( Those ARs working in CESTAT hardly get any facilities or rewards - DDT ). She is grateful to Commissioner Nagendra Kumar who identified her for the work in CESTAT and gave her an opportunity to prove her worth as a good AR and ultimately win the Presidential Award.

Hearty Congratulations Sabrina and wish you all the best.

Presidential Award for CESTAT AR - DDT's Campaign

FOR nearly a decade, DDT has been vigorously campaigning for the Presidential awards to ARs in the CESTAT and it is gratifying to see that it has become a reality now. A frustrated Jt.CDR once told me, "why do you write for us?; I don't want that stupid award - I don't want my image to be tarnished - they care a damn about cases in CESTAT and they are not bothered about ARs in CESTAT."

DDT 2029 - 22.01.2013 commented,

It is surprising that not even a single Authorised Representative in the CESTAT figures in the list of 37 awardees. The ARs in the CESTAT do so much of thankless work for the Department - always unheard (except in the court) and unsung. It is unfortunate that their work goes unrecognized. While officers routinely posted to NACEN get a 30 percent allowance, even if they cannot take a single class, the ARs in CESTAT who have to face brilliant lawyers and more brilliant judges with the badly drafted notices and pathetically written orders, are not given any incentive. Hard work, sincerity, passion, loyalty and erudition - all are discerningly visible when you see an AR arguing a case - often a bad one. Officers from the investigating agencies like DRI and CEI often corner many of the awards - but their cases are cases only when effectively defended by the DRs in the Tribunal Benches. Almost all the AR srichly deserve the Presidential award, but hardly anyone ever gets it.

An AR once told me that she prays before appearing for a major case and one day she asked her daughter also to pray for her. "Mummy, what will you get if you win the case?, asked the daughter. "Nothing, but satisfaction", was the answer.

The Chief Commissioner (AR) should prevail upon the Board to grant a few awards to the ARs every year. Even the DRI and CEI chiefs should recommend some ARs for the award. This is the least you can do to your most dedicated officers slogging it out in the Tribunal.

The AR who told me about praying before going to court is R. Bhagya Devi, now Commissioner of Central Excise in Chennai. She also figures in this year's Presidential awards - maybe the great work she did as AR in CESTAT is being belatedly recognised. She was humility personified when DDT called her up to congratulate her.

One great advantage in working in CESTAT is you develop great manners and extreme courtesy. After all you are always submitting before their lordships and everybody on the other side is your learned friend!An AR told me once, "With all these submissions and excellent manners, we are sure to go to heaven."

JM Kennedy, Director TRU in the CBEC is another prominent awardee this year.

TIOL congratulates all the awardees.

Notification No.4/2014-Cus.,(N.T.), Dated: January 20, 2014

How Rice Became a Non-Agricultural Produce

GOD said, "let there be light", and there was light. Babu said, "rice is not agricultural produce", and rice became non-agricultural produce. It's Alice in Blunder-land all over again.

The whole idea was to grant exemption from Service Tax to storage, handling and transport of agricultural produce - a lofty ideal in a predominantly agricultural country where the cost of agricultural produce has to be kept at the lowest possible position.

By Order No. 1/2002-Service Tax dated 1.8.2002, the Government defined agricultural produce as:

"agricultural produce" means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but make it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice , coffee and tea but does not include manufactured products such as sugar, edible oils, processed food, processed tobacco.

By Notification No. 8/2004 dated 9.7.2004, Notification No. 13/2003-Service Tax dated 20.06.2003 was amended to add an explanation which was identical to the above definition.:

"agricultural produce" means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but not include manufactured products such as sugar, edible oils, processes food and processed tobacco."

So, rice was very much an agricultural produce by definition. This definition continued for nearly a decade and then came the scholarly negative regime with effect from 1.7.2012 and the definition underwent a major surgery.

By Finance Act 2012, Section 65B(5), this definition became:

(5) "agricultural produce" means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;

Lo and behold! Rice went out of the purview of the definition of agricultural produce. It did not go out as a conscious decision of the Parliament of the country, but because some babu in North Block was too lazy to copy the whole definition - he left out the inclusive part and that is how rice could be pushed out of the purview of 'agricultural produce'. No babu would have realised that he was granting exemption to storage of apples while he was denying it for rice.

You go to a court or Tribunal, they will tell you the intention of Parliament is very clear and there is no ambiguity. If you ask them how rice which was an agricultural produce till 30.06.2012, became a non-agricultural produce on 1.7.2012, they will tell you Parliament has decided so and Parliament has the power to decide so. Parliament? The babu in the North Block who could not copy the definition properly is the Parliament! And if the babu makes a mistake - we, the people have to pay for it and he will get a promotion. That is what our Republic is all about.

Even a brilliant financial wizard like P. Chidambaram told his cabinet colleague that rice is not covered under the definition of agricultural produce and it is not feasible to change the law. But did he ask his babus why rice is not in the definition of agricultural produce and why they want to tax storage of rice and exempt storage of apples and Italian kiwi fruits? There must be some strong reason.

Taxing storage and transport of rice in India is sacrilege - the FM should immediately rectify this lapse.

If rice does not figure in the definition of agricultural produce, what needs change is the definition…….

Customs - Exemption for goods imported under Advance Authorisation

GOVERNMENT has exempted materials imported into India against an Advance Authorisation issued in terms of paragraph 4.1.3 of the Foreign Trade Policy meant for export of a prohibited item in terms of paragraph 4.4.1 (b) of the Handbook of Procedures Volume 1 from the whole of the duty of customs and from the whole of the additional duty, safeguard duty and anti-dumping duty leviable thereon, subject to certain conditions

Notification No.01/2014-Customs, Dated: January 17, 2014

Service Tax - Discharge Certificate under VCES and availment of CENVAT credit - CBEC Clarifies

CLARIFICATION has been sought from the Board as to whether the first instalment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as CENVAT Credit immediately after payment or CENVAT credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.

Board clarifies:

As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.

It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004 .

Board has advised the Chief Commissioners that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.

Please note that even now the Board is not confirming that the amount paid under VCES can be taken as CENVAT credit by the service recipient. When I asked a Chief Commissioner whether it would be allowed, he laughed it off and said the VCES volunteers should forget it.

Do we need a great Board to tell us that it is governed by CENVAT Credit Rules? Who does not know it? Why can't they say Yes or No ?

Circular No.176/2/2014-Service Tax., Dated: January 20, 2014

Central Excise - CENVAT Credit - Special Dispensation under Rule 12

ASPER Rule 12 of the CENVAT Credit Rules, credit is allowed on inputs/capital goods cleared from exempted units in certain regions. Now Notification No. 1/2010-CE pertaining to Jammu & Kashmir is included in the list.

In the days to come, we will know whether this 'insertion' is to be construed as being retrospective in nature or for that matter whether this special dispensation applies to goods which are cleared under the notification 1/2010-CE on or after 20/01/2014 or to goods cleared under this notification before this date but received on or after 20/01/2014.

Notification No. 02/2014-CX (N.T.), Dated: January 20, 2014

Jurisprudentiol - Wednesday's cases

Legal Corner IconCustoms

Fraudulent drawback claimed by exporter - Overvaluation has been done by exporter and appellant-bank has no role to play in such overvaluation - No doubt there has been some negligence on part of HDFC Bank in not properly verifying export documents but omissions do not fall within scope of Section 113(i) and consequently no penalty is imposable on appellant-bank under Section 114 - CESTAT

A case of overvaluation of readymade garments and fraudulent availment of drawback on such garments alleged to have been exported to Russia was investigated by the DRI.

The allegation against the appellant HDFC Bank Ltd. is that they, as bankers were supposed to be custodian of money on behalf of persons banking with them and they were expected to scrutinize the documents submitted by the exporter minutely and systematically. In the present case, the exporter, filed documents with the Bank showing different dates of shipment for the same voyage and the same vessel and Port of discharge and place of delivery were shown as Moscow and Russia respectively and these declarations were accepted and based on the claim of the exporter, the documents were processed and money credited to their accounts. Consequently, the appellant bank failed to protect government money amounting to Rs.3,02,09,760/- inasmuch as they did not properly scrutinize the documents presented to them for availment of remittance from RBI under Rupee-Rouble Trade and they also failed to notice that the exporter had no letter of credit in their favour on the date of export which was a condition for export to Russia under the Rupee-Rouble Trade Agreement.

Income Tax

Whether in case total amount of hire that hirer pays to assessee company exceeds price at which vehicle was purchased from dealer, excess can be termed as interest - YES: HC

THE assessee company is engaged in the business of "financing and leasing." On hire purchase transaction the assessee charged "finance charges" as well as interest on repayment of principal amount, which was shown in the balance sheet as capital receipt. During assessment, AO held that finance charges received by the assessee were nothing but interest charges on the money financed to the hirer and, therefore, it was chargeable interest as defined under Section 2 (5) read with Section 2(7) and consequently the charging provision of Section 4 got attracted. The AO held the assessee to be a finance company. On appeal, CIT(A) upheld the AO's assessment order. On further appeal, Tribunal set aside the order of the authorities below and observed that the transactions involved were in the nature of contract of hire purchase having an element of bailment as well as that of sale. Therefore, the hire purchase transactions in the present case cannot be considered as transactions of money lending or advancing of loans.

THE issues before the Bench are - Whether in case the total amount of hire that hirer pays to assessee exceeds the price at which the vehicle was purchased from the dealer, excess can be termed as interest, Whether in case promissory note is executed by the hirer in favour of assessee for total hire payable for the motor vehicle as collateral security and the assessee company is given right to negotiate the said Demand Promissory Note in favour of their bankers or any other party for valuable consideration and also sue upon the same, the said assessee is a financing concern and Whether in case notice issued u/s 10 is invalid, it would render the entire assessment proceeding invalid. And the verdict favours the Revenue.

Central Excise

Raw materials procured under exemption notification 1/95-CE diverted to DTA - documents prepared by appellants were found to be fake and ultimately in year 2006 evidence collected was put to proprietors and they admitted the clandestine clearance of goods without payment of duty - appellants not disputing demand on merits - demands not time barred as they have been issued within five years from the date of knowledge - Appeals dismissed: CESTAT

THE appellants are 100% EOU and are engaged in the manufacture of polyester twisted yarn and polyester woven fabrics. The appellants were working under Notification 1/95-CE dated 1.4.1995 and procuring the raw materials without payment of duty on the condition that the same will be used in the manufacture of goods exported.

During investigation, it was found that the appellants had procured raw material without payment of duty and cleared the same to DTA without payment of duty. As the appellants had not complied with the conditions of the Notification under which the appellants were procuring the raw material without payment of duty, the demands were made and confirmed by the adjudicating authority, along with interest and penalties.

Before the CESTAT, the only submission is that the demands are hit by limitation; that as per the terms of the B-17 bond, the demands are to be made as per the provisions of Section 11A of the CEA, 1944 and since the SCNs were issued after five years from the period in dispute they are time barred.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to


Sub: Congratulations for Madam Sabrina Cano

It is pleasing news to Bangalore indirect tax practitioners, the Madam Sabrina Cano got the Hon'ble President of India award.

But She could successfully convinced the CESTAT Bench as there was no one appeared on behalf of the Appellant. The Procedure of CENVAT credit was not clearly putforth before the CESTAT. The Hon'ble High Court in the case Bilforge handled the issue with full clarity. They dealt the case of IndSwift in detail and with full knowledge of the issue only the case is decided. 'Per Incurium' means without the knowledge of. But it is not the case in Bilforge. There is not cenvat credit document prescribed and the real credit will be only on the date of utilization. This has been clearly spelled out in the Bilforge case. It is unfortunate the the Hon'ble CESTAT decided in the Dr.Reddy's case over ruling the jurisdictional High Court decision which amounts to violation of constitutional instruction. The High court is having all the right to pass an order to distinguish the Hon'ble Supreme Court order as per Jurisprudence. The Decision of Dr.Reddy's case put hardship to lots of assesses. The Government of India also after realizing the hardship amended the law suitably.

R. Vaidyanathan
Consultant - Indirect Taxation

Posted by Ramadoss Vaidyanathan
Sub: Presidential awards

Congratulations to Ms. Bhagya Devi and Ms. Sabrina Cano. Both of them put in their best efforts in CESTAT. Hope number of such officers increases in the days to come in CESTAT.

Posted by Ramadoss Vaidyanathan
Sub: Presidential Awards

It is nice to see that the Board could see beyond DRI & DGCEI officers, who otherwise also get cash rewards in addition of awards

Posted by Yogendra Badhwar
Sub: Rice is indeed agriculture produce

In the common understanding, If rice, wheat and vegetables are not agriculture produce, then what else it is. It is clear that Rice is not fabricated in the fabricating unit; it is also not emerged out of complex chemical chain reactions, and, moreover, it is also not obtained by mining process. Obviously it is being produced by soil cultivation and thus it is agriculture produce. As far as definition of 'agriculture produce' under the service tax after the advent of negative list regime is concerned, it is explicitly emerged out of that if shelling (de-husking) of paddy (i.e. rice) is done even in the mill, as is usually done by cultivator or producer ( it means it is de-husked even in mill by adopting similar/identical process as usually done by the cultivator), it would come under the definition of agriculture produce as enshrined under section 65B(5) of the Finance Act, 1994. For ease of reference it as under:
"agricultural produce" means any produce of agriculture on which either no further processing is done or such processing is done 'as is usually done by a cultivator or producer' which does not alter its essential characteristics but makes it marketable for primary market. ( emphasis supplied)

Posted by uma shanker singh