TIOL-DDT 2715
30 10 2015
Friday

A recap on the facts:

Education Cess exempted on excise duty: Consequent to the increase in excise duty to 12.5% from 12% with effect from 1.3.2015, the Government by Notification Nos. 14/2015-CE and 15/2015-CE dated 1.3.2015 exempted ‘education cess' and ‘Secondary and Higher Education Cess' on all excisable goods. So, from 1.3.2015, no education cess was payable on excise duty.

The Law - Credit of Education Cess can be used only for payment of education cess: As per Rule (3)(7)(b) of the CENVAT Credit Rules, the CENVAT Credit of education cess can be used only for payment of education cess - that is this credit cannot be used for payment of excise duty or Service Tax.

But from 1.3.2015, there was no education cess on excise duty. Then what to do with the credit of education cess? The Government rectified this anomaly by Notification No. 12/2015-CENT dated 30.4.2015, after keeping the assessees under utter confusion for two months. By this notification, the CENVAT Credit Rules were amended to allow utilisation of CENVAT credit of education cess:

1. Paid on inputs or capital goods received in the factory of manufacture of final product on or after the 1st day of March, 2015.

2. of balance fifty per cent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the factory of manufacture of final product in the financial year 2014-15, and

3. paid on input services received by the manufacturer of final product on or after the 1st day of March, 2015,

for payment of excise duty.

Education Cess exempted on Service Tax: Consequent to the increase in Service Tax to 14% from 12% with effect from 1.6.2015, ‘education cess' and ‘Secondary and Higher Education Cess' was done away with effect from 1.6.2015.

The same problem as relating to excise duty arose now for Service Tax, but the Government allowed the assessees to wallow in confusion for five months without granting the same benefits as in the case of excise.

Now they have woken up and amended the CENVAT Credit Rules again to allow utilisation of CENVAT credit of education cess:

1. on inputs or capital goods received in the premises of the provider of output service on or after the 1st day of June, 2015

2. balance fifty per cent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the premises of the provider of output service in the financial year 2014-15, and

3. on input service in respect of which the invoice, bill, challan or Service Tax Certificate for Transportation of Goods by Rail (referred to in rule 9), as the case may be, is received by the provider of output service on or after the 1st day of June, 2015

for payment of service tax on any output service.

See how confusing the whole situation is. It will take these babus a few centuries to improve the ease of doing business, notwithstanding whatever the Finance Minister or Prime Minister or anybody wants.

Notification No. 22/2015-Central Excise (N.T.), Dated: October 29, 2015

But what about balance of credit? CBEC Refuses to see reason

THE confusion continues: With this latest notification, CBEC has allowed the CENVAT credit on inputs and input services on goods or services received after 1.3.2015/1.6.2015, but CBEC refuses to understand that almost all the assessees must have had credit balance of education cess paid on inputs or input services as on 1.3.2015/1.6.2015. How can this credit be used? DDT extensively covered this issue on several days:

DDT 2589 01 05 2015: What about the balance of CENVAT credit of education cess lying in CENVAT account as on 28.02.2015? The amendment to CENVAT Credit Rules allows credit on inputs/input services received on or after 01.03.2015, but it does not provide solution to the balance of credit as on 28.02.2015.

What if someone had already received the inputs/input services before 28.02.2015, but did not take credit of education cess? Should he lose that?

In case of capital goods, it is not mandatory that the balance 50% should be taken only in the immediate next financial year. Then, why they allowed the credit only to the capital goods received in 2014-15, but not before that?

Why can't they make a simple amendment without creating any fresh problems?

DDT 2591 06 05 2015: We are still waiting for the clarification/amendment from the Board (read TRU).

DDT 2609 01 06 2015: While  there will be no education cess on Service Tax from today, somehow CBEC is shying away from giving a clarification on how the balance of CENVAT credit on education cess lying in the accounts as on 1.6.2015 can be used by the service providers and as on 1.3.2015 by the manufacturers.

CBEC should understand that they have put every manufacturer and every service provider in the country under deep distress, because there is no clarity on the issue. A leading manufacturer asked us, "What is the status of balance amount lying in both the cess in CENVAT account as on 01.03.2015 and Service tax Edu cess lying as on 31.05.2015. Shall we wait till the board clarifies or can we merge all the cess with basic excise duty?." With the hope that Board will soon clarify, we advised them to wait. But how long? Does the Board believe in the concept of 'ease of doing business'? Or are our tax laws intentionally made complicated to torture the assessees?

Unfortunately, there is a school of thought in the Department, which believes that this credit will lapse. Before such dangerous thoughts spread and the litigation system is further clogged with unwanted notices and appeals, CBEC/TRU should wake up to the reality and urgently issue the clarifications/amendments.

Will TRU listen?

DDT 2614 08 06 2015: There are important issues crying for Board's attention, like the issue of balance of CENVAT Credit of Education Cess. Instead of clarifying such issues Board embarks upon this kind of misadventures and tells the world that they are a little weak in elementary arithmetic.

DDT 2616 10 06 2015: Without wasting its time in useless clarifications, why can't the Board clarify on what to do with the credit balance of education cess?

DDT 2624 22 06 2015: The PHD Chamber of Commerce and Industry in a Press release said,

Commissioner Service Tax Mr.Gautam Bhattacharya on Friday asked India Inc. to be excessively pro-active in sharing its inputs with the government officials when they are in the middle of preparing the direct and indirect tax proposals rather than commenting on them after such a policy documentation is finalized, for it becomes difficult for them to insert and incorporate valuable industry's inputs later on in such a paper.

Mr. Bhattacharya indicated that clarification sought by industry on application of service taxes including education and secondary education cess, especially after the service tax has been increased to 14% would be addressed suitably by the finance ministry without giving a particular roadmap for it.

Who will pay for the un-utilisable credit?

DDT 2631 01 07 2015: Mr. Najib Shah will take over as the new Chairman of CBEC today. Sir, while there are a lot of issues crying for your attention, it will be a good idea to start your innings with a clarification on what happens to the accumulated credit of education Cesses lying in the CENVAT accounts of the assessees. The assessees are really concerned about this blocked up amount and the unconcerned silence of the Board. Will you ask your concerned officers to clarify the position as soon as possible?

DDT 2644 20 07 2015: We have been requesting them to clarify on the education cess credit lying in balance and there is deafening silence from them, but they rush in with such notifications.

DDT 2647 23 07 2015: While on it, Board may be pleased to consider issuing a clarification on that accumulated Education Cess Credit.

DDT 2714 29 10 2015 (yesterday): Najib Shah - New Chairman of CBEC - Please clarify Education Cess

Mr. Najib Shah will take over as the new Chairman of CBEC today. Sir, while there are a lot of issues crying for your attention, it will be a good idea to start your innings with a clarification on what happens to the accumulated credit of education Cesses lying in the CENVAT accounts of the assessees. The assessees are really concerned about this blocked up amount and the unconcerned silence of the Board. Will you ask your concerned officers to clarify the position as soon as possible?

Yesterday, Mr. Najib Shah took over as the regular Chairman of the Board and when I heard that they have issued a notification clarifying the issue of CENVAT credit of education cess, I was thrilled, but the thrill vanished in a couple of minutes as I realised they have not clarified the issue of credit balance. Disappointing Mr. Shah!

Is the Board ready to clarify or do they want the issue to be settled only in the Supreme Court after 15 years - after all, lawyers need to live too.

Why can't they make a simple rule that credit of any duty/tax can be used for payment of any duty/tax? Or simply be silent? The restrictions in Rule 3(7)(b) can be removed altogether. There will be no national calamity if they do this. The CENVAT Credit Rules with its varied sub-rules, sub-clauses and provisos looks like a maze created by several thoroughly confused minds - and have contributed to endless litigation.

I am scared of GST, because these very officers who make life miserable for the taxpayers will be administering GST and they are sure to export all the confusion - they are already on the job. The credit flow under the GST will be based on the present CENVAT Credit Rules - only made more complicated.

FTP -Merchandise Exports from India Scheme (MEIS) - Additions

DGFT has made additions/amendments in Table 2 [containing ITC(HS) code wise list and description of goods with reward rates under MEIS] of Appendix 3B.

DGFT Public Notice No. 44(RE-2015)/2015-2020., Dated: October 29, 2015

Income Tax -Due Date of filing Return - Extended date applicable for e-filing Audit Reports too

CENTRAL Board of Direct Taxes had extended the 'due-date' for E- filing Return of Income from 30th September, 2015 to 31st October, 2015 in case of income-tax assessees covered under clause (a) of Explanation 2 to sub-section (1) of section 139 of the Act.

In this regard, clarification has been sought whether the said extension is also applicable to the requirement to obtain and furnish 'reports of audit' under various provisions of the Act.

CBDT clarifies that the "due-date" for obtaining and E-filing reports of audit under various provisions of the Act pertaining to such Returns of income also stands extended till 31.10.2015.

CBDT F. No. F.No.225/207/2015/ITA.II., Dated: October 29, 2015

No fresh permission/ renewal of permission to LOs of foreign law firms - RBI

THE Supreme Court vide its interim orders dated July 4, 2012 and September 14, 2015, passed in the case of the Bar Council of India vs A.K. Balaji & Ors., has directed RBI not to grant any permission to any foreign law firm, on or after the date of the said interim order, for opening of Liaison Office (LO) in India. Hence, no foreign law firm shall be permitted to open any LO in India till further orders/notification in this regard. However, foreign law firms which have been granted permission prior to the date of interim order for opening LOs in India may be allowed to continue provided such permission is still in force. No fresh permission/ renewal of permission shall be granted by RBI/AD banks respectively till the policy is reviewed based on, final disposal of the matter by the Supreme Court.

A P (DIR Series) - CIRCULAR NO. 23/RBI., Dated: October 29, 2015

Come Prepared or get appeal dismissed - Delhi HC tells Senior Advocate

RECENTLY the Delhi High Court dismissed a batch of appeals as the Senior Counsel was not prepared to argue.

The High Court observed,

Learned senior counsel ought not to have appeared today if he had no time to study the brief. Declining to adjourn the matter we have requested learned counsel to proceed with the arguments. Learned senior counsel states that since it is his duty to assist the Court, he cannot argue the matters without reading the brief.

If this be so, learned senior counsel ought not to have appeared.

The junior members of the bar always have a grievance of senior counsel being accommodated and they being called upon to argue their matters. In our opinion a senior counsel ought not to appear in a matter in which he has been briefed but the learned senior counsel has no time to study the brief.

We have once again called upon learned senior counsel to advance arguments but learned senior counsel declines.

The appeals are accordingly dismissed for non prosecution.

This was on September 07 2015. But on 18.09.2015, the High Court restored the appeals observing,

Notwithstanding the reasons recorded in the order dated September 07, 2015 dismissing the appeals for non-prosecution, we are inclined to accept the apology tendered in the applications and restore the appeals for hearing because the question of law is important and is a subject matter of other appeals which are admitted .

Until Monday with more DDT

Have a nice weekend.

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