TIOL-DDT 2487
02.12.2014
Tuesday

THE CAG in its latest report to Parliament finds that under CBEC,

1. Eleven cases from 5 Commissionerates involving meagre amount of Rs. 1.82 lakh are under prosecution in various Courts for periods exceeding 30 years.

2. Audit could not identify the pendency period in 43 prosecution cases having a revenue implication of Rs. 31.50 crore as department was not able to provide details of date of filing of complaint.

3. In 138 prosecution cases in 27 Commissionerates, the sending of investigation reports suffered delays ranging from a month to over 10 years to obtain the mandatory sanction of the Chief Commissioner to launch prosecution.

4. In 61 cases under 12 Commissionerates and in four cases under DGCEI Mumbai Audit could not verify whether the investigation reports were submitted within the stipulated time or not due to non-availability of records in the concerned files.

5. In 175 cases relating to 37 Commissionerates and DGCEI, Delhi there was delay of a month to 15 years in filing complaints with the Courts of Law.

6. Out of 46 selected Commissionerates, 30 Commissionerates reported that they are not doing any review on pending prosecution cases.

7. Instances of delay in Court proceeding due to lack of proper attention by the departmental officers were noticed

8. In 19 cases where prosecution was initiated, none of the accused persons had been informed separately in writing about the offer of compounding.

9. In 24 Commissionerates no remarks were found in the Director General (Inspection) reports pertaining to prosecution cases.

10. The department is not reviewing the prosecution cases for withdrawal as per Board's Circular dated 4 April 1994.

CAG Recommends:

1. Ministry may ensure that all long-pending prosecution cases are reviewed at periodic intervals by Chief Commissioners at field level to ensure adequacy of action taken to satisfy the Court about existence of sufficient grounds for permitting withdrawal of complaint where warranted.

2. Board may strengthen its monitoring mechanism at the Chief Commissionerate level through the MIS/Monthly Technical Reports it receives from its various field formations.

3. The Ministry may consider discussing the pendency of prosecutions during monthly Monitoring Committee meetings to be convened by Commissioners. As on date, such meetings are being convened regularly at all Commissionerates to discuss internal audit findings.

4. The Board may consider having a specially trained group of personnel to handle issues relating to prosecution cases and courts to have an efficient monitoring over its cases and its revenue.

5. The Board needs to examine critically the reasons as to why the adjudicating authorities are not explicitly concluding whether a case is fit for prosecution or not and take corrective action accordingly.

6. The Board may consider issuing comprehensive instructions on the approvals issued for prosecution and its follow up by the subordinate field formations in the case of both DGCEI and the Chief Commissioners of Central Excise.

Source: CAG Report No.29 of 2014

What is Prosecution?

THE CAG explains:

Prosecution is the commencement of a criminal proceeding, where the Government exhibits before a Court of Law the formal charges against a person accused of an offense and seeks to impose on such person a suitable punishment and penalty. Thus, in Central Excise, prosecution sets in motion a legal process by which Government seeks to ensure punishment of companies and persons concerned with evasion of Central Excise duty.

Overanxious Prosecution - Addl Sessions Judge slams ST Department - trivial and frivolous Litigation

IN this bizarre case, one Surender Pal Singh Chadha stood a surety for Rs. 10 lakhs to an accused in a Service Tax prosecution case. The accused absconded and the surety is now responsible. His liability was Rs. 10 lakhs. However due to his old age and non-earning, he requested for some leniency and the Court asked him to deposit a penalty of Rs. 8 lakhs instead of the surety amount of Rs. 10 lakhs. He deposited Rs. 5 lakhs immediately and requested for some time to deposit the balance. In the next hearing he pleaded for some more leniency and the CMM reduced the penalty to Rs. 7 lakhs instead of Rs. 8 lakhs.

The Service Tax Department was greatly aggrieved and filed a revision petition with the Additional Sessions Judge on the ground that the CMM had no jurisdiction or power to review and/or recall his own order. (wisdom acquired from appeals in the Tribunal).

The Additional Sessions Judge noted that the Magistrate has powers to remit portion of penalty under the bond even after passing the final order and before recovery of total amount and he dismissed the revision petition.

However before parting with the case, he observed his anguish and serious concern over the ST Department's over anxious behaviour in moving frequently to higher courts on trivial and frivolous issues.

He observed that by filing such frivolous and vexatious petitions, the precious time of the court and money of the common people of the nation had been wasted. Though on this action of the petitioner, refrained from imposing costs upon the petitioner, he warned the petitioner to refrain itself from involving in such litigations with the individuals in future failing which heavy costs/penalties shall be imposed upon it.

In this case, the accused was charged with collecting and not paying to the Department Service Tax to the tune of Rs. 9 crores.

The Department is after the surety and that too for a paltry sum of one lakh rupees. How much money and time did they waste on this trivial trial? And this happened right under the nose of the Board in Delhi.

FTP - Deferment in the date of effect of the procedure for export of certified organic products

THE procedure for export of certified organic products notified vide Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 became effective from the date of issue of public notice i.e. 18.11.2014. (Please see DDT 2478-19.11.2014)

Now it has been decided to grant some transition time to make the Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 effective. Accordingly, the procedure notified vide Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 would come into effect from 18/12/2014

DGFT Public Notice No. 77 (RE-2013)/2009-2014, Dated: December 01, 2014

Income Tax Advance Ruling - Fee

CBDT has amended the Income Tax Rules inter alia to fix the following fees for advance ruling

Income Tax Notification 74 of 2014, dated November 28, 2014

Income Tax - Jayalalithaa - compounding- 18 year old case likely to end

THERE is a long pending prosecution case against former Tamil Nadu Chief Minister Jayalalithaa and her friend Sasikala.

It is reported that the Income Tax authorities have agreed to compound the offence and these ladies have already paid up two crores of rupees. The 18 year old case is likely to be withdrawn now.

DDT is Grateful - touching the Everest

DDT is grateful to the large number of Departmental officers, lawyers, professionals, leaders of trade and friends who took time off to send wonderful mails on the occasion of DDT completing 10 years. Most of the mails contained embarrassingly high accolades.

One Netizen said it was the Everest. Incidentally yesterday I was flying in a mountain aircraft and I had a close view of the magnificent Mount Everest from the Pilot's cockpit. Really the height of heights. They say, "I couldn't climb Mt Everest, but I could touch it with my heart."

DDT is made by fools like me - only God can make an Everest (with apologies to Joyce Kilmer who wrote, "Poems are made by fools like me but only God can make a tree.")

DDT is Grateful.

Jurisprudentiol-Wednesday's cases

Service Tax

ST - Levy of Development fee has been struck down by apex court as not being service - no service tax payable - from May, 2012 what has been collected as ST has been paid - prima facie case - stay granted: CESTAT

THE applicants are responsible for managing the entire operations of CSI Airport at Mumbai. Apart from other charges the applicant charges development fee @ Rs.100/- from the departing domestic passenger and Rs.600/- from the passenger travelling abroad. The fee charged by the applicants is for the development of the airport in future. As the development fee charged by the applicants is in nature of service to be provided, therefore, the Revenue was of the view that on these development fees, the applicant is required to pay service tax under the category of “Airport services”.

Various SCNs were issued for the period April 2009 to February 2013 to the applicant demanding service tax and they were all confirmed along with interest and penalties by the CST, Mumbai.

Income Tax

Whether compensation received from insurance company on account of destruction of a capital asset can be taxed u/s 50 - NO, says High Court

THE assessee company is engaged in the business of manufacturing of petrochemicals and job work. The assessee had filed its return disclosing total income at Rs. 1,95,54,060/-. Subsequently, it had filed revised return and disclosed revised income at Rs. 2,23,68,340/-. The AO however, assessed the total income of the assessee at Rs. 5,69,39,830/-. On appeal, the CIT(A) partly allowed the appeal of assessee but sustained the addition made by the AO though on different ground. On further appeal, the Tribunal confirmed the addition made by the CIT(A). On appeal before the High Court, the counsel for assessee submitted that the Tribunal had erred in law in holding that the compensation received by the assessee on account of depreciation of Wind Mill from the Insurance Company was fully taxable u/s 50.

The issue before the Bench is - Whether compensation received from an insurance company on account of destruction of a capital asset can be taxed u/s 50. NO is the answer.

Central Excise

There was no need to pay any duty when the goods were being returned to the original supplier - By the above process, accumulated CENVAT credit got shifted from the applicant to the supplier's unit - Pre-deposit ordered of 7.5% of duty in cash: CESTAT

THE applicant is a 100% EOU. For manufacturing their final products, they are procuring certain inputs from the domestic manufacturers free of excise duty. After receiving the said inputs, they are testing and at times such consignments are rejected and returned to the supplier. However, while returning the goods to the supplier, they were paying excise duty by debiting the duty amount in the accumulated CENVAT credit available with them.

Revenue smelt a rat in this uncanny procedure adopted by the applicant. An objection was raised that under Rule 3(4) of the CCR, 2004, CENVAT credit can be utilized for payment of duty in the specified circumstances.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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