TIOL-DDT 2345
02.05.2014
Friday

EVERYBODY knows about the Rs. 2400 Crore demand by Tamil Nadu VAT Department on Nokia India, on clearances from their SEZ, most of which were exports and so were outside the purview of VAT.

The issue before the Madras High Court was the TN VAT Department's demand without granting a hearing to the assessee, Nokia India.

As per the High Court, the short point for consideration was as to whether the Department passed the order under Section 22 (2) or 27 (2) of TNVAT Act and whether the requirement to afford an opportunity of personal hearing is different from issuing a show cause notice as contemplated under Section 27 (2) of the said Act. It is also required to be decided as to whether issuing a show cause notice would amount to sufficient opportunity of hearing.

The High Court observed, "The quasi judicial powers conferred on the assessing officer has to be exercised in a judicious, fair and objective manner without arbitrariness and subject to the rules of natural justice, including grant of personal hearing and recording of reasons for conclusions ultimately arrived at before rejection of an application for exemption or waiver or stay and the non-adherence to the aforesaid principle will offend Article 14 of the Constitution of India and also renders the very remedy available to the assessee a nugatory."

So, the High Court remanded the case to the Adjudicating Authority for fresh consideration.

Though case remanded, pre-deposit ordered: Though the case was remanded, which means the assessment orders are set aside, the High Court wanted to protect the Revenue at least to some extent.

The High Court observed, "Even though the impugned orders are quashed, this Court, taking into consideration the demand notices issued by the first respondent are still valid, the effect of quashing the assessment orders will not totally take away the right of the first respondent to proceed further in the matter. Further, taking note of the fact that the transaction reported by the petitioner is huge, pertaining to foreign sale, which according to the petitioner is totally exempted, the question of deposit of any amount will not arise. At the same time, in the impugned orders of assessment, it has been clearly stated that certain documents have been produced in form C and F in which there are lot of differences. In fact, an argument was advanced by the Advocate General in this regard. A feeble attempt was made by the Senior counsel for the petitioners that the payment of tax relating to Rs.14crore alone may be due in respect of the above variation. Such an argument advanced on behalf of the petitioner will not by itself stop this Court to direct the petitioner to deposit some amount. If an appeal is filed against the impugned order, it will be a different aspect to be considered. Now, by virtue of this order, the first respondent is directed to re-consider the entire matter afresh. At the same time, the revenue also has to be safeguarded to some extent. In that view of the matter, out of the demand of Rs.2,400/- crores made by the revenue in the impugned orders of assessment, the petitioner is directed to deposit 10% of the tax amount thereof as a pre-condition for reviving the orders of assessment."

Even if the Rs. 2400 Crores was a fictional imaginary figure, the fact is that the assessee has to pay 10% of that illogical figure.

Please see 2014-TIOL-624-HC-MAD-VAT

Comrade Judges, Differ with Dignity - rarely and in exceptional cases

High Court Tells CESTAT Members

OF late, it is observed that many cases in CESTAT, especially in a particular Bench predominantly in respect of orders passed by a particular Member, are routinely referred to a Third Member as there is difference of opinion between the two Members in a Division Bench. This shakes the confidence of the litigant on the great institution and all kinds of rumours spread on the real reason for difference of opinion. If two members of the Tribunal do not agree on an issue, it clearly means the assessee was not wrong in assuming a particular stance as correct and legal as at least one Member of the Tribunal is on his side. In such situations, it is unfair and unjust to ask him for pre-deposit.

In certain genuine cases, it is possible that the Members may have a difference of opinion, but if difference of opinion is based on who gives the opinion rather than what the opinion was, there is a danger to the credibility of the so-called temple of justice.

In a mild rebuke with deep humility, the High Court found that the frequent reference to Third Member hampers the administration of justice and affects the working and functioning of the Tribunal, which caused the High Court more anguish than anger. The High Court noted that this was one of the best Tribunals and its example was cited even during the course of imparting training to the Judicial Officers at Academies.

The High Court obviously did not want to hurt or embarrass the Members of the Tribunal and observed, "We are not at all critical of the manner in which the Tribunal is functioning and working. We are aware of the fact that at times large number of cases take a toll on the Judicial Officers or the Members. However, Cordiality, Co-operation, Courtesy and respect for each other's view would assist in avoiding divergence of opinion on factual issues. We have also not made any comments much less adverse and which may be taken as a reflection on the working of any of the members in this case. It is only the increasing tendency to record a dissent that has prevailed us to take note of the grievance raised before us."

The word "Comrade" as defined in the concise Oxford Dictionary means a "workmate, friend or companion". The word and spirit need not be forgotten even by Judges and Adjudicating Bodies. We should continue the debate, dialogue, discussion and deliberation but differ rarely and in exceptional cases, with dignity.

A junior colleague who did a quick statistical survey and came out with the finding that more than 50 cases have been referred to Third Member in the last one year and he came up with a startling conclusion that not even a single order of the President is differed with and referred to Third Member. He wanted me to explain to him this phenomenon. I told him that other than the President, there were several Members whose orders are not differed with. He said he is referring to the Benches where the Third Member cases are maximum. I asked him to find out the reasons for himself. He came out with some startling findings:

1. The President's orders are Perfect to the P - nobody can find any different view.

2. Everybody else is so afraid of the president, that they dare not differ from him.

I was too afraid to make any comment against this irreverent boy.

For more details on the High Court order please see Breaking News.

Tariff Value of Gold, Silver decreased

THE Government has decreased the Tariff value of Gold from 431 USD to 422 USD per 10gms and that of Silver from 646 to 632 USD per kilogram with effect from 30.04.2014. The Tariff value of Crude Soyabean oil sees a marginal increase. Tariff values of other items are reduced except areca nuts. The Tariff values as on 15.04.2014 and with effect from 30.04.2014 are as under:

Notification No. 36/2014-Cus (NT), Dated: April 30, 2014

Who Blocked GST - FM answers - Bad Economics - Good politics?

OUR present Guest Column has an article by a former Chairman of CBEC, entitled "who blocked GST?"

Finance Minister Chidambaram yesterday answered this question. He said, "I note that Shri Sinha has pleaded in favour of GST and DTC. I am not amused. Who has stalled GST and DTC? When a consensus on GST was nearly reached, it was the Governments of Madhya Pradesh and Gujarat that stalled further progress."

Chidambaram took credit for a lot of things that happened in the last ten years like:

- economic growth during in the 10 years of the United Progressive Alliance's rule was far higher than the economic growth in the 57 years prior to it.

- The UPA's achievements, especially in disbursement of Rs 57,700 crore education loans and Rs 36,900 crore credit to women's self-help groups deserved to be highlighted.

- UPA's legacy was such that if the new government were to follow sound economic policies the country could "achieve 6 per cent growth in 2014-15, even though the international situation remains very, very tepid.

The soon-to-be-ex-FM said, "I would be very unhappy if somebody goes out with a message that good economics is not good politics because the opposite is the frightening thought that bad economics is good politics."

This figure was released by the Congress Party, but somehow it found its way into the Fin Min website - http://www.finmin.nic.in/7CPC/decade_growth.pdf

A very thin line demarcating the party and Government!

Customs seizes Wedding Dress from Bride

"THE customs department's efforts to clamp down on duty dodgers went a bit far when officers seized a wedding dress. The department has been accused of ruining a couple's big day as a result of confiscating a bride's gown in an incident which could do serious damage to the department of tourism's push to make the Cayman Islands the destination of choice for weddings. The customs boss denied that her officers did anything wrong however and stated that the couple should have declared the dress when they arrived and paid a deposit. As a result of the failure to disclose the various outfits carried by the wedding party and because the bride didn't have a receipt for her dress officers seized it.", reported the Cayman News Service. "My wife was crying, my mother was crying - it was just a massive ordeal. It was not the homecoming I wanted, it was devastating.", said the bridegroom. Collector of Customs at H.M. Customs Department, Samantha Bennett, said passengers are required to make a full declaration of all goods being imported onto the island, and failure to do so would result in the seizure of goods and fines imposed. This couple was finally let off with a deposit of 60 dollars.

DDT Cartoon

Jurisprudentiol - Monday's cases

Central Excise

Whether MRP on footwear was marked with indelible ink - Superintendent 'scratching' print made and concluding that marking was not 'indelible' - appellant producing certificates from National Test House & Indian Institute of Packaging to certify that printing of MRP was indelible & therefore they are entitled for exemption in terms of notification 5/2006-CE - Matter remanded: CESTAT

THE two certificates indicated that the printing done by the appellant on the footwear was indelible and, therefore, the appellant was entitled to the benefit of the said exemption. However, since these certificates were not produced before the adjudicating authority and the appellate authority, the CESTAT found it prudent to remand the matter to the adjudicating authority for reconsidering the matter afresh and accordingly directed the appellant to submit the test results to the said authority. And since the matter was being remanded no pre-deposit was ordered.

Income Tax

Whether if person sells his investment on an enhanced price, excess over his purchase price is to be considered as profit assessable to tax as income in every case - YES: HC

THE assessee is an individual. In the return of income filed, it had claimed that Rs. 65,45,321/- had to be treated as short term capital gain, on account of sale of shares. During assessment, AO had noted that the assessee provided the funds to M/s Vimgi Investments Pvt. Ltd to trade in shares on his behalf, which was supported by the brokers notes and confirmed copy of the account of the broker filed by the assessee. Since the broker had traded on behalf of the assessee, practically on day-to-day basis, AO observed that the assessee was engaged in the activity of sale/purchase of share. Therefore, the AO show caused the assessee why the profit of Rs. 65,45,321/- should not be assessed as business income against the income shown as short term capital gain.

The issues before the Bench are - Whether if a person sells his investment on an enhanced price, the excess over his purchase price is to be considered as profit assessable to tax as income in every case and Whether when the main line of business or commercial activity of the assessee is not share trading and the assessee did not have a separate infrastructure or expenditure to support such trade, it can be presumed that the intention behind these transactions is to derive business income or profit, and not to invest the amounts. And the verdict goes against the assessee.

Central Excise

Shortage of inputs - Pre-deposit - Matter referred to Third Member by CESTAT

THE issue involved is demand of CENVAT Credit on inputs found short during the verification by the officers of the department. It is the contention of the assessee that the officers did not take into account the stock of inputs lying adjacent to the factory during the stock taking which is sufficient to hold that the appellant has a prima facie case in their favour.

See our Columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend.

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