TIOL-DDT 1115
21.05.2009
Thursday

RAJIV GANDHI was worried that out of a rupee spent by the Government, only eleven paise reach the beneficiary. Obviously about 90% is eaten away by middlemen. If you think the government is spending your money in an irresponsible way, the CAG has found that they are not even capable of spending all the money that Parliament has authorised them to spend.

The Central Government's expenditure for 2007-08 was to the tune of 8.63 Lakhs Crores of which the Revenue Expenditure was about 7.35 Lakhs Crores and Capital Expenditure about 1.17 Lakh Crores.

The total liability of the Union Government in 2007-08 was around 25 Lakh Crores.

Even if money is granted and Parliament had voted expenditure, several Departments of the Government could not spend the money granted to them.

CBEC could not spend Rs. 113 Crores; School Education is considered so important and is covered in the Constitution but our HRD Ministry could not spend 2668 Crores and the Department of Higher Education could not spend 2952 Crores. The Education Department is consistent in their inability to spend the money granted to them, for the last three years.

Education has bureaucrats who don't like to spend money. The UGC surrendered 491 Crores; IITs 372 Crores, IISc 156 Crores, IIMs Rs. 61 Crores; the AICTE Rs. 595 Crores.

Is there some hidden agenda? An educated electorate is a threat to politicians?

SUMMONS UNDER CENTRAL EXCISE – PRESENCE OF A LAWYER

Usually, these summons create quite a controversy on one question “Can a person summoned have the right to have an advocate to assist him? Usually, consultants (mostly ex-employees of the department) insist that their clients have a right to have the presence of an advocate and mostly departmental officers are very adamant in not allowing advocates to be present. Let's see the relevant provisions of the law.

Section 14 of the Central Excise Act, 1944 states:

(1) Any Central Excise Officer duly empowered by the Central Government in this behalf, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the persons summoned.

(2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required:

Provided that the exemptions under sections 132 and 133 of the Code of Civil Procedure, 1908(5 of 1908) shall be applicable to requisitions for attendance under this section.

(3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of 1860).

From the Section it is clear that persons can be summoned to give evidence or to produce a document or any other thing in any enquiry which such officer is making.

All persons summoned shall be bound to attend either in person or by an authorized agent as such officer may direct.

So it is the officer who decides whether the summoned person has to attend himself or by an authorized agent. Some Advocates have argued that, “as such officer may direct” relates to “bound to attend” and not to the person or authorized agent. Some Advocates claim that it is a constitutional right to have the presence of a lawyer. In the famous Nandini Satpathy case, the Supreme Court held that if an accused person expresses his wish to have his lawyer during examination, this facility should not be denied. It is this case that many lawyers rely on, while insisting on their right to be present when their clients are summoned to give evidence before a Central Excise Officer. But it is often (conveniently) forgotten that the Nandini Satpathy case is not relevant to Central Excise & Customs matters.

In Romesh Chandra Mehta V. State of West Bengal, the Supreme Court held that a person who was asked to give evidence under the Sea Customs act is not an accused. In Ilias V. Collector of Customs, madras, the Supreme Court held that a statement made to a Customs Officer is not hit by Section 25 of the Evidence Act since Customs Officers are not Police Officers (Section 25 of the Evidence Act states “No confession made to a Police Officer shall be proved as against a person accused of any offence.”) Thus the ratio of Nandini Satpathy case is applicable to an accused before a Police Officer, and not to a person summoned under the Central Excise Act or Customs Act, because the person summoned is not an accused and the officer summoning is not a Police Officer.

The view was emphatically reiterated by the Supreme Court in Poolpandi V. Superintendent of Central Excise – (2002-TIOL-625-SC-CX) where it was pointed out that the first case was one in which an accused was entitled to protection under Article 20(3) and the Officers were Policemen, whereas in a case under the Customs Act, the person does not become an accused during the enquiry stage, nor are Customs Officials police Officers.

Thus the position is very clear that a person summoned before a Central Excise/Customs/Service Tax Officer does NOT have the right to be accompanied by an Advocate.

Jurisprudentiol–Friday's cases

Central Excise

Central Excise - Duty and interest paid before Show Cause Notice – Penalty is 25% not because of any discretion of Tribunal or Court, but as per proviso to Section 11AC : Tribunal is required to take into account the correct rationale of law as per statutory provisions rather than following the judicially condemned approach – High Court

THE conclusion reached by the Tribunal is correct. However, it seems that the reasoning followed by the Tribunal is not in accordance with the law. The amount of 25% imposed as penalty is not because any discretion is vested in the Court or the Tribunal but because of 1st and 2nd provisos incorporated by the Parliament w.e.f. 12.5.2000. Therefore, the Tribunal should not have committed the same error that merely because the amount of duty has been deposited before the issuance of show cause notice that imposition of penalty becomes illegal or lenient view was required to be taken.

Income Tax

Income tax - CoD approval - if Indian PSU is held as an agent of non-resident company and there is revenue implication for Indian entity, CoD permission is required: ITAT

FOR a dispute involving two Govt departments or PSUs or even State PSUs, the Apex Court decision in the case of ONGC Vs CCE (2002-TIOL-196-SC-CX) is an authoritative guideline. All Courts have been directed not to entertain any case unless Committee on Disputes (CoD) approval is granted to the parties to pursue the litigation. But what about a case where a Govt Department or a PSU is held as an agent of a foreign company which provides certain services to the Indian entity and their income becomes a subject of dispute for its taxability in India? Does the Govt Department or the PSU need to take CoD approval for the same as well?

Service Tax

CENVAT Credit - Outdoor Catering Services employed in factory canteen is an Input Service - adjudicating and appellate authorities in the department have got to scrupulously follow the binding judicial precedents for the sake of administering justice in their proceedings: Tribunal

What can one say about a Commissioner (Appeals) who refuses to follow a Larger Bench decision of the Tribunal and endlessly argues that had the points being taken by him agitated before the Tribunal by the Revenue representative, the outcome would have been different. Obstinacy coupled with scant disregard to judicial discipline, one may say. And more importantly, a sure recipe for inviting strictures.

See our columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice Day.

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