FEBRUARY 22, 2011

Budget Suggestions – Vox Populi

By A Netizen

WE have received a large number of suggestions from stake holders across the country. Today we carry some of them. Some more will be carried in the next few days.

Reduce a few Heads or rather combine a few : Presently invoices, bills, bills of entry etc must indicate duty / tax, education cess and secondary & higher education cess separately. Instead the tax & duty may be allowed to be shown in the invoices, etc. inclusive of education cess and secondary & higher education cess. For example, the rate of service tax may be indicated as10.3% instead of 10% plus education cess 2% and sec & higher education cess 1% and the amount also calculated and shown accordingly. The returns can be filed indicating the tax / duty, education cess and sec & higher education cess separately by working back for proper accounting in Government account. Similarly CENVAT credit can also be availed and utilized separately by working back to compute tax / duty, education cess and sec & higher education cess. This will result in all round savings in paper, ribbon/ ink, computer time, electric power, storage space and human effort.

T George Abraham, Visakhapatnam

Refund of Education cess to exporters : Notification 41/2007-ST dated 6.10.07, provides exemption exclusively to taxable services which are specified and which have been received by an exporter and have been used for export of goods from the whole of service tax. The department has litigated the said notification saying that the same does not provide exemption from education cess and higher education cess. This has been approved by two Tribunal decisions. Based on this thousands of SCN and appeals are being filed by the department to recover this cess already refunded or to reject refund of this cess.Once the exporter has been exempted from service tax and it being the policy of the Government not to export taxes, education cess should be allowed as a refund. An appropriate clarification/amended to notification is necessary to avoid this huge litigation.

Parimal

Reverse Service Tax: The liability of payment of Service Tax may be shifted from service provider to the service recipient where the service recipient is a PSU or a State/Central Govt. body.This would make the collection of revenue easy and lessens the burden on the department. This act will not burden the PSUs or State/Central Govt. bodies as they are used to deducting TDS of Income Tax. Same way they will be deducting Service Tax also. The success of GTA cannot be forgotten in this regard.

All the assessees should be asked to upload the details of invoices raised duly giving the particulars of the buyer and their C.Ex details in case they avail Cenvat credit through ACES alongwith their periodical returns.

The ACES software should be upgraded to highlight if any of the buyer's CER number submitted through online by the assessee does not tally with the available data on the site so that misuse of Cenvat credit can be prevented.

BSVSOMANATH

Legalised Smuggling? As the duty rate has been considerably reduced since the last 20 years, there should be no duty benefit for goods imported under Export Promotion Schemes such as DEEC, DEPB, EOU, EPCG etc. In fact, these schemes are legalized smuggling and vicious source of corruption. Most of the duty evasion cases pertain to the said schemes;

Rescind Notification No.21/2002-Cus dated 01.03.2002 as amended and replace it with Notification wherein only concessional duty with condition is to be provided. Effective duty without condition may be provided in the Customs Tariff. Similarly, Notifications under Central Excise may be issued and duty on merit may be provided in the Central Excise Tariff;

If any notification provides exemption from Basic Customs Duty and CVD, it must also provide exemption from any other duty levied under the Finance Act or any other Act;

There should be no bar of unjust enrichment in the case of refund. It is totally unjustified that refund is sanctioned and ordered to be credited to the Consumer Welfare Fund but in fact, the amount is never credited to the Consumer Welfare Fund;

Duty structure on Motor Spirit (Petrol) and High Speed Diesel must be simplified. Due to its most complex duty structure, duty is wrongly calculated by the computer system resulting in re-calculation of duty;

Drawback must be sanctioned after submission of Bank Realization Certificate;

Where there is provision of conditional refund of duty or tax after its payment (for example refund of SAD or Service Tax), such notifications may be amended in order to exempt the goods/services from duty or tax directly;

Samir Kumar Sinha

Fraud, Suppression, .. – a new look: Presently, reasons for invoking proviso to Section 11A of the Central Excise Act, 1944 to demand duty in the extended period of five years and for imposition of penalty under Section 11AC, ibid, are same. The assessees, mostly in the cases of bonafide omissions, accept to pay the duty alongwith interest even after one year, but contest the penalty under Section 11AC of the Act. But, there is no way for the department to collect the duty & interest without penalty under Section 11AC of the Act without establishing reason of Fraud, Collusion or any willful mis-statement or Suppression of fact, or contravention of any provisions of the Act or of the rules made thereunder with intent to evade payment of duty, if the demand pertains to period beyond one year. Hence, cases, where the demand is in a period beyond one year and with in five years and there is a contest between the department and the assessees about reason of Fraud, Collusion or any willful mis-statement or Suppression of fact, or contravention of any provisions of the Act or of the rules made thereunder with intent to evade payment of duty, are ending up in litigation.

To circumvent the above problem, it is suggested to detach the reasons for invoking proviso to Section 11A of the Central Excise Act, 1944 to demand duty in the extended period of five years and for imposition of penalty under Section 11AC, ibid. Penalty under Section 11AC of the Act is taking care of penal action for Fraud, Collusion or any willful mis-statement or Suppression of fact, or contravention of any provisions of the Act or of the rules made thereunder with intent to evade payment of duty. Hence, there should not be any differentiation amongst reasons for demanding duty within one year or within five years.

Hence, following changes may be made in the Central Excise Act, 1944.

(i) In sub-section (1) of Section 11A of the Act, the words 'one year' may be substituted with 'five years'.

(ii) Proviso to the sub- section (1) of Section 11A of the Act may be deleted.

(iii) There shall not be any change in Section 11AC of the Act, as it is taking care of penal action for Fraud, Collusion or any willful mis- statement or Suppression of fact, or contravention of any provisions of the Act or of the rules made thereunder with intent to evade payment of duty.

Corresponding changes may please be made in Section 75 of the Finance Act, 1994 in respect of Service Tax matters and in Section 28 of Customs Act, 1962.

B.Ramachander Rao

Synchronize FTP with Budget: The Annual Budget is essentially a Financial Statement of expenses and revenue of the government and gives an estimate for the next fiscal. But the most important constituent of Trade is the Foreign Exchange earnings. In other words exports can be moderating the domestic trade only when the policies of Foreign Trade and Budget go hand in hand. While FTP is valid for 5 years we are adopting annual Budget to cater to the government expenditure, etc. This age old practice has not helped much as far as exports impacts are concerned. Many a time, FTP and other DGFT Circulars do not comprehend each other and thereby causing hurdles to domestic as well as International Trade. Shortly we are moving towards GST and if implemented many of the indirect taxes will get subsumed. So we must have broad based Budget as well as FTP. Keeping in mind the fast fluctuating market, we should have a time bound policy for a reasonably free trade and for a period of minimum Five years. All un reasonable restrictions on account of taxation proposals can be removed over a period before embarking on merger of FTP and Budget. Let us rework the economic structure for static period of Five years and do away with annual ritual.

M. Ram Kumar