SCN cannot be read as legislative enactment, which is to the point, precise and required to show exceptional lucidity
17 03 2015
Tuesday
THE great litigation industry in the Revenue Department starts with the Show Cause Notice and somehow this is given the least importance. Often the euphoria at the time of detection of the case does not remain till the issue of Show Cause Notice. Show Cause Notices are hurriedly drafted callously and carelessly without clearly explaining the charges levelled and often ignoring statutory provisions.
Usually the Judiciary is kind to Revenue for such badly and defectively drafted notices. But in ITC Ltd vs Commissioner of Service Tax - 2013-TIOL-1394-CESTAT-DEL , Revenue had a shock when the Show Cause Notice and the consequential adjudication order were quashed as the notice was vague and not specific as to under what head the revenue proposed to demand the service tax.
The CESTAT observed,
The show cause notices in the present case before us, were issued on the basis of a prima facie assumption by Revenue that the assessee was assessable to levy of service tax for providing BAS. The reasons for such prima facie assumption of Revenue were however not specified in the show cause notices. Mere extraction of the entire provisions of Section 65(19) of the Act does not fulfill the requirement.
Onthe aforesaid analysis, the show cause notices dated 21.4.2010 and 20.4.2011 are invalid. This infirmity is incurable; these show cause notices are therefore quashed. Since the adjudication order is the consequence of the invalid show cause notices, it is also quashed.
While reporting the case, we observed, "It is very easy to issue Show Cause Notice in service tax cases. All you have to do is reproduce the provisions of the definition of a particular service and raise a demand on the income asking the assessee to show cause as to why the service tax should not be demanded with interest and penalties, preferably under extended period, when the normal period is over. But in this case, the Tribunal was not kind enough to take such notice into cognizance and quashed the same."
The Revenue took the matter in appeal to the Delhi High Court.
The High Court in a landmark judgement reported in 2014-TIOL-2511-HC-DEL-ST allowed the Revenue Appeal.
The High Court made some remarkable observations.
We do not think, that the Tribunal was right in quashing the show cause notices itself, observing that there was violation of principles of natural justice. It is not a case wherein, the respondent-assessee was taken by a surprise, as relevant facts on which, the Commissioner relied and provisions of Section 65(19) invoked, were set out and mentioned in the show cause notices itself. Further, personal hearing was given in which the question whether the services were covered and could be treated as 'Business Auxiliary Service' was discussed. In case, the assessee wanted to file further reply or wanted further time to explain and put forth their point of view, they could have asked for an adjournment or further time before the Commissioner of Service Tax .
The object and purpose of issue of show cause notice is to inform the assessee so that reply or submissions can be made and relevant facts which are in the knowledge of the assessee can be brought on record. After examining and consideration of the show cause notices, we feel that the assessee was informed and made aware of the contention of the revenue and their stand and stance.
When we examine the Show Cause Notice, we have to take into consideration that the object and purpose is to inform the recipient of the allegations against him so that he can meet them effectively and is not prejudiced by manifestly vague notice which leaves him confused and unable to answer/reply. The assessee must be given a reasonable and real opportunity and made aware as to what he has to meet. But, the notice cannot be read as a legislative enactment which is to the point, precise and required to show exceptional lucidity. What is required to be seen is whether the allegations made have been conveyed and set forth, to enable the recipient/assessee to get an opportunity to defend himself against the charges. Notice should not suffer from obscurity and unintelligibility as to deny a fair and adequate chance to the recipient/assessee to get himself fully exonerated and avoid incidence of tax. What transpired after the notice was served, conduct of the parties thereafter, hearing given, are all factors that have to be examined to ascertain as to any prejudice was caused resulting in an arbitrary and unjust decision. Principle of prejudice resulting from vagueness and uncertainty has to be examined in pragmatic and a reasonable manner.
So the High Court had allowed the revenue appeal and remanded the case to the Tribunal to decide the issue afresh.
This time it was the turn of the assessee to appeal - to the Supreme Court. The assessee did not succeed in the Apex Court. The Supreme Court in a one line order simply dismissed the SLP of the assessee.
Now, it is back to the Tribunal - where the vague SCN is not an issue at all.
CBDT Notifies Rollback Provision in APA
IN para 204 of his 2014 Budget Speech, the Finance Minister Mr. Jaitley said,
An Advance Pricing Agreement (APA) scheme was introduced in the year 2012. It has received good response. I propose to strengthen the administrative set up of APA to expedite disposal of applications. Further, I propose to introduce a “Roll Back” provision in the APA scheme so that an APA entered into for future transactions may also be applied to international transactions undertaken in previous four years in specified circumstances.
"Rollback year" is defined as any previous year, falling within the period not exceeding four previous years, preceding the first of the previous years.
The rollback provision stipulates that the agreement may provide for determining the arm's length price or specify the manner in which arm's length price shall be determined in relation to the international transaction entered into by the person during the rollback year.
Maybe an exercise in 'ease of doing business in India' - at least some certainty in taxation.
CBDT Notification No. 23/2015,Dated: March 14 2015
Cadre Review - Car Review - 701 more cars for babus
THE cost of cadre review in the revenue Departments, is slowly sinking in. CBDT has sanctioned hiring of 701 additional vehicles for the new offices created consequent to cadre restructuring. Now, NADT (National Academy of direct Taxes) is allotted 46 vehicles. The hiring of each vehicle costs Rs. 40,000/- per month. The additional vehicles will cost the Nation about Rs. 300 crores in a year!
Now, CBEC has to follow.
The Direct Taxes Department is going to cost us Rs.5408.56 crores, while indirect taxes department will spend Rs. 5664.60 crores in the next financial year. Of course they are credited with collecting lakhs of crores.
CBDT DIT letter., Dated: March 13, 2015
In this cloudy global horizon, India is a bright spot - IMF MD
SPEAKING in New Delhi yesterday, Ms. Christine Lagarde, Managing Director, International Monetary Fund, said,
In this cloudy global horizon, India is a bright spot. Recent policy reforms and improved business confidence have provided a booster shot to economic activity. Using India's new GDP series, the IMF expects growth to pick up to 7.2 percent this fiscal year and accelerate further to 7.5 percent next year-making India the fastest growing large economy in the world.
Indeed, a brighter future is being forged right before your eyes. By 2019, the economy will more than double in size compared to 2009. When adjusting for differences in purchase prices between economies, India's GDP will exceed that of Japan and Germany combined . Indian output will also exceed the combined output of the three next largest emerging market economies-Russia, Brazil, and Indonesia. So clearly India's weight among the group of emerging markets will increase.
By 2030, India is expected to have the largest labor force in the world . At more than one billion people of working age, India's labor force will be larger than the combined labor force in the United States, the Euro Area, and Indonesia. The potential benefits to be reaped from your collective work efforts could be enormous.
So we know India can run -judging by your cricket record! Can it fly? I believe it can. As India grows and takes its rightful place in the global economy, the focus should remain on sound policies and inclusive institutions.
There is already a lot that the world can learn from India. The Economist's Global Microscope ranks India very highly for creating an enabling financial environment.
This is not surprising. Under the Prime Minister's Jan Dhan Yojana , financial services have been extended to more than 125 million previously unbanked individuals - an impressive achievement in such a short span of time! And India also expanded basic insurance coverage so people's lives become more secure.
What makes these achievements even more remarkable is that this financial inclusion approach is embedded in a broader strategy to use these accounts to provide cash transfers to those who need them. Programs in other countries such as Mexico's Prospera also capitalize on the link between financial inclusion and targeted transfers.
Many of the projects were delayed due to regulatory uncertainty and bureaucratic holdups. Much needs to be done in easing land acquisition, expediting clearances, and establishing a stable regulatory regime so that the private sector can invest. These issues are on the radar of policymakers, which is promising, they must be on the action list.
At the current juncture, the world needs a vibrant India and India needs the world! As one of the largest commodity importers in the world, an open and transparent multilateral system for trade and financial flows will be essential to support India's vibrant economy. With growing economic size and power come greater leadership expectations. We look forward to seeing India becoming even more active on the global stage - in fora such as the G-20 and the IMF.
The IMF is a global multilateral institution where countries like India deserve a bigger say. We are working precisely on that-on implementing reforms that would lift India to the top 10 shareholders at the IMF.
I would also like to acknowledge the many talented Indian staff at the Fund and the contribution they have made over the years. Your very own central bank governor, Raghuram Rajan, was one of our most distinguished economic counselors!
There is an old Indian proverb that says: "Yesterday is but a dream, tomorrow but a vision. But today well lived makes every yesterday a dream of happiness, and every tomorrow a vision of hope. Look well, therefore, to this day."
Today, the elements are all aligned to make India a global powerhouse. This is India's moment. Seize it. Chak De India!
Until Tomorrow with more DDT
Have a nice day.
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