News Update

RBI revises directions on Voluntary Retention Route for FPIsCBIC enables Customs to launch prosecution in certain cases immediately after issuing SCNOver 13 children killed in major fire in SuratPresident receives Union Cabinet's recommendation to dissolve 16th Lok SabhaFANI fall-out - CBDT extends due date for TDS for Odisha from June 15 to July 15, 2019British Prime Minister Theresa May to resign on June 7 post failed efforts for Brexit compromiseRoundtables on e-commerce can act as inclusive force: WTO chiefAmerican trade body congratulates ModiFire breaks out at Bhilai Steel Plant's Tar Distillation Unit; no casualties or injuries reportedAAR erred in classifying PP Non-woven bags made from non-woven polypropylene fabric as being plastic goods under SH 3923 29, correctly classifiable under HSN 6305 3300: AAARGST - Remittances from IWAI are being credited to Consolidated Fund of India so they are part of government revenue and not part of business proceeds - appellant satisfies Sr. 3(vi)(a), 11/2017-CTR; GST @12%: AAARRespondent had not availed any additional benefit of ITC post GST as compared to pre-GST, therefore, no contravention of s.171 of Act - Profiteering unproved: NAAFor computing GST tax liability, respondent had taken 2/3rd value and charged GST @12% which shows effective GST rate was 8% - no profiteering observed, applicant agrees, withdraws complaint: NAANotice served u/s 143(2) at different address than what was consistently disclosed by assessee, is time barred service: ITATCus - Refund of SAD - Tribunal was not justified in holding that discrepancy in description of goods on sales invoices was not in nature of curable effect: HCNo penalty u/s 271AAA is leviable, if additional income is voluntarily surrendered during course of search and offered to tax along with its mode of earning: ITATCus - When Tribunal remanded matter for fresh consideration, obviously, adjudicating authority cannot start from inception as if it is a fresh proceeding: HCIndustry captains welcome Massive mandate for Modi; says it is vote for economic growthCarbon credits - Whether taxable under GST?
Service Tax - Payment through CENVAT credit account - Not a valid payment?

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2352

CAN you pay service tax on your output service from CENVAT credit account? If your client is a Government of India undertaking or a Government Company, perhaps the answer is ‘NO'. Pay it at your own risk. There is every possibility that your client may not reimburse your tax for want of evidence, i.e., a bank challan.

It is very common among many Government organizations to reimburse service tax to the service provider only on submission of documentary proof in the form of a Bank challan. If you pay from CENVAT Credit account, there will not be any challan and there will not be any reimbursement of service tax.

When we came across an assessee paying service tax under multiple challans, we asked him, instead of paying tax under different challans, why can't he pay total service tax under a single challan, he replied, “Sir, we need to submit challans to our clients who are mostly Government companies. Unless we match the service tax amount on the invoice with a challan, they don't pay us the service tax.”

Coming back to CENVAT issue, there is a big Coal mining company called Bharat Coking Coal Limited. It is learnt that the Company is refusing to reimburse service tax paid from the CENVAT credit account. The Board Secretariat of the Company has also issued strict instructions not to reimburse payment of service tax from CENVAT Credit account made by the contractors.

The tender document as amended by the Functional Directors has the following conditions.

1. The quoted offer should be exclusive of Service Tax. Service Tax if it is legally payable by the Contractor under this Contract, will be reimbursed by BCCL on production of original challan of having made cash remittance of such Service Tax to the Service Tax authority.

2. Original Challan will be defaced by management by putting a stamp across the challan

Defacement to be done with the following stamp:

Reimbursed the Service Tax

For Rs.................................

For W.O. No..........................

Dated..................of BCCL.

GM(F)I/c                        AFM Area.........

3. Copies of original challan duly attested by General Manager (F) I/c will be retained for subsequent use as per requirement.

4. Service Tax reimbursement will be made to the contractor for net Service Tax payment (Calculated service tax on the value of work less paid through CENVAT).

5. Copy of Returns of the firms showing all details of Service Tax should be furnished.

6. A self—certification declaring that the Service Tax amount claimed through the submitted voucher will not be further claimed for any other work.

(The above information is extracted from a judgement of the Jharkhand High Court.)

WHEN a Government company does not recognize payment from CENVAT Credit as a valid payment, who else will? How can they unilaterally decide not to reimburse tax paid through CENVAT credit to the contractors? In case of any doubt or need for clarification, they could have contacted the jurisdictional Central Excise officers or the Board.

It is time the Board/Ministry gives a clarification and maybe a direction at least to the PSUs that they are required to reimburse the Service Tax paid either in cash or by CENVAT Credit. It should be made clear that payment by CENVAT Credit is as good as payment by cash. And that there is no requirement of cash payment of Service Tax separately for each service recipient. In fact in certain situations, even the Service Tax Department refunds the unutilised balance in the CENVAT Credit Accounts.

The Government should inculcate respect for law at least in its own companies. A Government company refusing to recognise payment by CENVAT credit as good payment is blatantly violating a law framed by the Government. The Government should speak with one voice.

Maybe we should wait for a Mody-fied VAT system to take over in a few days.

Cadre Review Implementation in CBEC - Chairperson greets

Legal Corner IconTHE CBEC Chairperson Shanti Sundharam is happy to inform that the implementation of the cadre restructuring of the department has been approved by the FM. The cadre review had been approved by the cabinet long ago and it is not known as to what the FM again approved.

Any way the Department is going to get more than 18,000 posts. It will be a miracle if the Department can really fill those 18000 vacancies by promotion, recruitment or whatever means. It takes them a couple of years to fill up a few hundreds vacancies. When will they fill up 18000?

Maybe they will start with making the top unbearably heavy. They are going to have 14 new Principal Chief Commissioners, 38 new Chief Commissioners and 53 new Principal Commissioners that is they have a vacancy for 105 posts of Principal Commissioners and above. All the present Chief Commissioners will immediately move to the top slots and about 100 Commissioners can move into their chairs and some of them can get a further promotion in a day or two - if they can clear Delhi's red tape.

But the biggest challenge is to promote about 2200 Superintendents as Assistant Commissioners. As such nobody has a proper updated list of all these officers. Maybe for the next one or two years, the only activity in the Board and the field offices would be promotions, postings, transfers, infrastructure, reorganisation and utter confusion - not necessarily in that order.

The only reason for the cadre restructuring seems to be to address the problem of stagnation due to lack of promotion especially among the junior staff. But this actually will not solve the problem as only the senior officers will get promotion and the rest have to live with stagnation.

The Chairperson says that it is in the interest of the department to have a committed and largely satisfied work force. Stagnation is one of the de-motivating factors in this regard. While CR resolves some of the issues leading to stagnation, it does not address some of the root causes of stagnation.

If some of these posts could be diverted to the Tribunal, maybe we could have had more Benches, which could have reduced the mounting arrears of cases in the Tribunal. And all these new officers are sure to add work for the Tribunal.

Member(T) Joins in Chennai CESTAT

THE Chennai Bench of the CESTAT was without a Technical Member for sometime since the retirement of Mathew John. Yesterday R. Periasami has assumed charge as Member (Technical). He will have a two year term. He was earlier Service Tax Commissioner in Chennai. And that creates a problem - appeals against his orders, as Service Tax Commissioner will have to be heard by a different Bench. Of course Chennai is to get one more Bench soon.

Post of Competent Authority vacant in Chennai

IT is proposed to fill a vacancy of the post of Competent Authority and Administrator, Smugglers and Foreign Manipulators (Forfeiture of Property) Act and Narcotic Drugs and Psychotropic Substances Act, at Chennai.

Commissioner level officers of Income Tax, Customs and Central Excise are eligible.

CBEC officers can send their applications to the Board latest by 16.05.2014.

CBEC F. No.A.35017/29/2014-Ad.II, Dated: May 12, 2014

Legal Corner Icon

Jurisprudentiol – Thursday's cases

Legal Corner IconService Tax

Commissioner (Appeals) has fallen into error in taking certain figures (year wise or consolidated for total period) given by respondents instead of examining invoice wise/transaction wise details - Matter remanded: CESTAT

ON the basis of information that the two respondents are not depositing the appropriate amount of service tax in relation to security services provided by them, respondents were visited by the Central Excise officials on 22.10.2002 and certain incriminating documents were recovered under panchanama. Statements were recorded and thereafter demand notices were issued for the period 16.10.1998 to 30.9.2002. Investigation showed that the respondents were issuing invoices covering security services and some invoices covering labour services. In respect of invoices relating to security services, most of such invoices showed that service tax amount was charged and collected. However, in respect of some of the invoices, though the services were mentioned as security services but no service tax was charged.

Income Tax

Whether when AO allows an expenditure as revenue in nature during original assessment, any attempt to treat same as capital expenditure in reassessment would amount to change of opinion - YES: HC

THE Assessee is a company. Present writ petition has been filed by the assessee to seek quashing of the Notice dated 28th March, 2012 issued by the ACIT u/s 148 in relation to the AY 2005-06 as well as the Order dated 25th February, 2013 rejecting the Petitioner's objections thereto. It was contended by the assessee's counsel that, as more than four years had elapsed from the end of the relevant AY 2005-06, ACIT could not have issued the notice without coming to the conclusion that he had reason to believe that income had escaped assessment by virtue of the fact that the assessee had failed to disclose fully and truly all material facts necessary for its assessment.

The issue before the Bench is - Whether when AO allows an expenditure as revenue in nature during original assessment, any attempt to treat the same as capital expenditure in reassessment would amount to change of opinion. And the verdict goes in favour of the assessee.


Refund - Unjust enrichment - Deposit made before adjudication and appropriated in order in original - If there is contest to demand, amount remains as deposit and doctrine of unjust enrichment is not applicable - CESTAT

THE issue involved is rejection of refund of deposit of duty made during the provisional assessment. The Appellant had imported ICs, Transistors etc. at Air Cargo Complex Ahmedabad and the said goods were cleared vide Bill of Entry No.6757/98 dated 27.10.1998. The said consignment was detained by the Customs officers on the ground that the prices shown in the said bill of entry and invoice were very low. The detained goods were released provisionally on execution of the requisite bonds and on payment of differential duty of Rs.10,00,000/- and Rs.7,50,000/-

The Tribunal finally decided the matter in favour of the appellant. The claim of refund for the duty of Rs 17,50,000/- paid by the appellant was credited to consumer welfare fund by the Adjudicating Authority on the ground of unjust enrichment. The same has been upheld by the Appellate Authority. Aggrieved by the same, the appellants are before the CESTAT.

Tomorrow is a Holiday - Budha Purnima

See our Columns Thursday for the judgements

Until Thursday with more DDT

Have a nice day.

Mail your comments to


TIOL Tube Latest

Legal Wrangle | International Taxation | Episode 104