Friday, September 25, 2015

Tax Updates: GST may not apply on Small Firms (> 25 Lakh), Recent Court Cases of SERVICE TAX, CENTRAL EXCISE, CUSTOMS, INCOME TAX


GST may not apply on Firms having annual turnover upto Rs 25 Lakh

Companies having annual turnover up to Rs. 25 lakh might be exempted from GST as the Centre and states are likely to settle for this threshold by finalizing the GST laws.

As draft of the GST laws is likely to get ready by September end. The Centre and states are attempting to build on a mechanism to avoid dual scrutiny of assesses by them. The said exemption to all legal entities shall apply to 1 TIN (Taxpayer Identification Number).

With the drafting procedure going on, the union government is intending to recovnene Parliament's monsoon session to clear the constitutional bill, after which, clearance of bills on Centre's GST (CGST), states' GST and Integrated GST would follow.

On states demand for threshold of Rs 10 lakh, the centre has assured full compensation for 5 years. Besides, firms with annual turnover between Rs 25 lakh and Rs 75 lakh, will have an option pay a flat rate of 1 per cent or GST rate, which, if opted for, firms will not get input credits& for which, it is expected that dealers may choose the GST rate.

The proposed slabs for Tax rate & scrutiny are as follows:

While the exemption limit for VAT & Service Tax among states (except North-East) is Approximately Rs. 10 Lacs, considering the manufacturing view point, the exemption limit should have been higher to enable the manufacturers avail such benefits. The final decision regarding this is yet to be taken by the GST council, to be constituted within 2 months of constitutional amendment.

The union Government has also made a renewed appeal to the opposition parties to pass the Constitutional amendment through an extended monsoon session for it is significant that this be cleared at the earliest to comply to the timeline of 1st April, 2016.

Government eyeing a mid -2016 GST roll out

With the constitutional amendment yet to be cleared, the Union Government has indicated they are reworking the GST rollout deadline to October 1, 2016, and might advance the winter session of Parliament to achieve such goal, the reason being the launch in April, 16 is appearing far-fetched.

The Government has dropped the plans to pass the GST Constitutional amendment though an extended monsoon session & is targeting the implementation by October 1, 2016, if not in April, 2016.

The government is also thinking that the winter session of Parliament could be advanced to immediately after the Bihar polls to pass the key tax reform. After the said polls are over, the government is eyeing on the winter session, where it is expected that the deadline can still be reached through advancement.

Since, ratification of constitution amendment by at least half the states still needs to be done after being passed at parliament, the October 1, 2016 deadline has been on the Government's radar, for it will ensure passage other GST related bills both by Parliament as well as state assemblies.

Though big corporate groups are likely to pressurize the congress party to ensure passage GST in the winter, a string of Holidays may hamper the Government's plas. For this, it is unlikely that the government would be able to call a session before that.




BRIEF: The revenue cannot hold refund of service tax, even if there remains a dispute in entitlement of refund, because revenue is not entitled to do such.

OUR COMMENTS: In the above case, the Ho le Supreme Court held that the eligible person was to get the refund. It was clear that refund of service tax was due either to the petitioner or the merchant exporter, as verified from the Additional Solicitor General. Although, there was a dispute regarding entitlement of refund of service tax, the respondents i.e. revenue could not hold the service tax as they were not entitled to do such. Pursuant to discussions & the above facts, it was held that service tax should be refunded to the petitioner within six weeks .The petitions were accordingly disposed.[Decided in favour of assessee]


BRIEF:If assessee pays service tax under force during investigation & demand gets dropped after adjudication process, the deposited amount has to be considered as pre-deposit or deposit & limitation is to be considered from date of adjudication order instead of the date of deposit.

OUR COMMENTS: In the above case, the Ho le CE“TAT Bangalore held that the contention of revenue that though the appellant had paid service tax correctly in 2005-06, the refund claim in 2010 was rejected correctly for it being beyond the period specified for filing the refund claim, is not correct. The commissioner (appeals) referred to decision in 2549 of 2010 that if payment by assessee is not voluntary, but forced, such would be payment under protest & cannot be thrown out on limitation grounds. Further, pursuant to decision of Ho le CE“TATin the case of Foods, Fats and Fertilisers Ltd. [2010 (20) STR 482 (Tri. Bang.)], the commissioner (appeals) held that payment of service tax by appellant during investigation (based on offi er s advice) might be forced& if demand gets dropped after adjudication process, the deposited amount has to be considered as pre-deposit or deposit. Thus, the limitation has to be accounted from the date of adjudication order instead of the date of deposit of amount. Hence, the impugned order of commissioner (appeals) is correct in this regard & the appeal is rejected accordingly. (Decided against Revenue)

BRIEF: If an activity itself is not taxable & assessee pays service tax after pointing out by the department, it alone cannot be the ground to make allegation of suppression of facts & fraud & refund claim for payment of service tax cannot be denied on the basis of such improper allegation.

OUR COMMENTS: In the above case, the Ho leCESTAT Mumbai held that job work activity was exempted from service tax payment as service provider carried out the job on the material supplied by the appellant & returned the job-worked goods to the appellant and also used the said goods to manufacture other final product cleared on payment of duty. Thus when activity itself was not taxable & appellant discharged the service tax after pointing out by officers, no suppression can be alleged. Further, the concerned jurisdictional office did not issue any show cause notice to service provider for recovery of service tax & the service provider made categorical request for waiver of show cause notice u/s 73(3) of Finance Act, 1994 on the ground of payment of service tax along with interest. Further, payment of service tax by the service provider and issuance of supplementary invoices there against does not amount to suppression of facts by the service provider. It was also found that the only ground to deny refund claim was the payment of service tax on detection by department, which alone is not sufficient to make allegation of suppression of facts by the appellant. Thus, there being no suppression of facts, mis-declaration, fraud etc. on the part of the service provider in making payment of service tax and issuance of supplementary invoices, appellant has correctly availed the Cenvat Credit. Hence, the impugned order is modified & appeal is allowed with consequential relief.[Decided in favour of assessee]



BRIEF: If free samples are clearly comparable with manufactured goods of assessee, Rule 7 may apply for valuation of such samples, but it is on the proper officer to determine the value as per best of judgment considering previous rules. However, decision by the recent adjudicating authority for the relevant period, if any, shall prevail.

OUR COMMENTS:In the above case, the Ho le Supreme Court held that the contention of appellant that though ph si ia s samples are exigible to excise duty, they had to be valued at Zero cost as their cost was already included in the cost of medicines sold in open market, is incorrect &is meritless as identical case was rejected by this Court in Bharat Heavy Electricals Ltd. vs. CCE., Indore (2003 (154) ELT 10 (SC).The question being whether the valuation would be done in pro-rata or cost basis, the apex court referred to the case of  Medley Pharmaceuticals Ltd. Vs. Commnr. Of Central Excise and Customs, Daman (2011 (2) SCC 601), where, pursuant to the decision in CCE v. Bal Pharma Ltd, it was held that above samples were to be valued on pro-rata basis. However, in this case Rule 7 would have applied, where the proper officer determines the value as per best of judgment considering one or more of previous rules i.e. Rule 3-6. But, the appellant had made rectification application on ground of limitation for date of show cause notice being 11.02.2000
covered F.Y. 1998-2000, but submission date covered period of April '98-November '99 & was time barred, which was allowed by the commissioner. So,as per the notice, duty was payable from December '99-March'00. Further,in other appeal CESTAT had partly allowed by stating demand was for period after 1.7.2000 & had accepted that valuation method would be cost of production or manufacture of the goods'. So, appellant's grievance to this extent stands redressed & due to substantial relief already granted by CESTATA, it is not necessary to deal with remaining period as coverd by tribunal's decision in instant case. The appeal is disposed. [Decided against the Assessee]

BRIEF: If the department does not respond to intimation by assessee of destruction of contaminated goods, the department cannot deny remission of duty on such goods to assessee on the ground of destruction of goods in absence of concerned officer.

OUR COMMENTS: In the above case, the Ho le Bombay High Court held that undoubtedly after contamination of goods due to flood & several reminders to the department, on which department was silent, the assessee had to destroy the said goods for there being a risk of contamination of entire production area & hazard to the human-life. Though the goods were destroyed after intimating the department, the department upon waking up after such act, issued notice to the assessee to remain present at the hearing of application for remission of duty on such goods & thereafter, such application was rejected on grounds of destruction of goods in absence of departmental officer. The Chapter 18 of Excise manual provides for a time-bound programme, where the departmental officer is expected to act in such issues, which the department had not done. So, the department cannot be allowed to take advantage of its own fault. As the department did not respond to the intimations of assessee before destruction of contaminated goods, it cannot say that assessee is not eligible for remission. Thus, pursuant to view by Madhya Pradesh High Court that procedure of department was not just & fair, the appeal is meritless for no substantial question of law arising from this appeal. The appeal is disposed. [Decided against revenue]

BRIEF: Merely because of non-application to the AO by assessee for provisional clearance of goods, interest & penalty does not become leviable, if the amount of such levy is of meagre amount & assessee pays differential duty in a timely manner.

OUR COMMENTS: In the above case, the Ho le Rajasthan High Court held that the contention of revenue that, as the assessee did not request the Assessing Officer for allowing the clearances of goods on provisional basis as per Rule 7 of the Central Excise Rules, 2002, interest under Rule 7(4) & penalty was leviable, is not correct. Under Rule 7(4), interest arises only from 1st day of month succeeding the month for which such amount is determined till the date of payment thereof. And it was clear that interest liability arises only after determination of value or duty by the adjudicating authority. Now, merely because the application was not made to the Assessing Officer by the assessee on such fact, no interest or penalty would be leviable. Though, the requirement of the aforesaid rule needs to be fulfilled, but for the particular case, it would be too technical to conclude that application was not moved by assessee to AO & it becomes fatal. Since, no substantial question of law arose & amount involved in the appeal being less than Rs 12,000/- which is a meagre amount, the appeal is meritless & is hereby dismissed.[Decided in favour of Assessee]




OUR COMMENTS: The CBEC (Dept. of Revenue), Ministry of Finance, Government of India, in supersession of the Notification No. 81/2015-Customs (N.T.) dated 20th August, 2015, vide Notification No. 84/2015-Customs (N.T.) dated 3rd September, 2015 has determined the exchange rate of conversion of each of the foreign currencies specified in column (2) of each of Schedule I and Schedule II annexed hereto, into Indian currency or vice versa w.e.f. 4th September, 2015 as follows:-


OUR COMMENTS: The CBEC (Dept. of Revenue), Ministry of Finance, Government of India vide Notification No. 85/2015-Customs (N.T.) dated 4th September, 2015has amended the Notification No. 12/97-Customs (N.T) dated 2nd April, 1997 as follows:

In the said notification, in the Table, against Sl no 10 relating to the State of Rajasthan, after item (viii) and the entries relating thereto, in columns (3) and (4), the following item and the entries shall respectively be inserted, namely-


BRIEF: If the department fails to substantiate allegations with authentic evidences & further fails to object during import involving mis-declaration of country of origin by the assessee, re-opening of assessment of the relevant year is not possible.

OUR COMMENTS: In the above case, the Ho le Supreme Court held that revenue imposed the demand of duty by relying upon the statements of Mr. K.M.Puri & unauthenticated trade declaration copies produced by him, which were unreliable. Further, no material was produced by the department indicating payment by importer assessee based on alleged invoice showing higher amounts. Further, the revenue imposed redemption fine on the grounds of mis-declaration of country of origin as USA instead of Australia by the assessee, but such fine was set aside by tribunal by giving findings that declaration of country of origin were to be made by supplier/exporter. If goods bore Australia marking, Appraising Officers of Department should have objected at time of import. Since, no objection was raised at time of import; assessments cannot be reopened for valuation under guise of mis-declaration of country of origin. In spite of serious allegation, no cogent material was available to substantiate such allegations, which was result of shoddy and slip shod investigation. Since, the matter pertains to year 1997, remitting the matter back would be futile. Thus, appeal is dismissed as no question of law involved.[Decided against Revenue]



The  CBDT,  Dept  of  Revenue  (Ministry  of  Finance)  vide Notification No. 72/2015 dated 24th August, 2015 has notified Press Trust of India Limited, New Delhi as a news agency set up in India solely for collection and distribution of news, for the purpose of Sec 10(22B) of the Act for 3 assessment years 2016-17to 2018-19, subject to the condition that such news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members.

The Directorate of Income Tax (Systems), CBDT, Ministry Of Finance vide Notification No 3/2015 dated 25th August, 2015 has laid down the procedures, data structure and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies as under:

a)  Registration of the reporting financial institution: 
The  reporting  financial  institution  is  required  to  get registered with the department by logging in to the e-filing website with the login id used to file the institutions Income Tax Return. Under MY Account , a link to register reporting financial institution has been provided. The reporting financial institution is to submit registration details on the screen & it may submit different registration information under respective categories.

b)  Submission of Form-61B: 
After successful registration, the reporting financial institution shall submit Form-6 B or NIL statement under e-file menu. The prescribed schema for the report under Form 61B can be downloaded from the e-filing website. The calendar year for which report is to be submitted & the relevant reporting entity category are to be submitted. Then, the reporting financial institution will be provided with the option to upload Form 61B & it is to be submitted using Digital Signature Certificate (DSC).

c)  Submission of Nil statement:
To submit NIL statement, the option to submit NIL statement is to be selected & then, the reporting financial institution has to submit a declaration of pre-existing accounts (as per Rule 114H(2)(h) of Income Tax Rules, 1962) & new accounts (As perRule 114H(2)(d) of Income Tax Rules, 1962) using a DSC.

d)  Digital Signature Certificate(DSC):

In case the designated dealer (as reported in registration details submitted by the reporting financial institution as per para 2(a) above) is same as the person authorized to verify the return of income of the reporting financial institution as per Sec 140 of the Act, Form-61B or NIL statement is to be submitted with DSC of the person authorized to sign such return of income. In other cases, the procedure shall be notified separately.



Brief: If Assessing Officer exercises powers u/s 144, & submits that it was as per sec 143(3) & wrongly recorded u/s 144, such submission is not acceptable. Further, if such officer wishes to make assessment u/s 144, for he being a creature of the statute, can only exercise power either according to the statute or not at all.

OUR COMMENTS: In the above case, the Ho le Cal utta High Court held that it appeared from the order of the Assessing Officer (AO) that the AO had first exercised his power u/s 145 & thereafter, had exercised power u/s 144. Thus, the submission by revenue that the assessment was made u/s 143(3) & mistakenly recorded to have passed the same u/s 144 is not acceptable. Best judgment Assessment i.e. assessment u/s 144 is to be made by the AO after considering all relevant materials obtained after giving opportunity to the assessee, but the AO did not make the assessment based on materials. Instead, he assessed on item wise expenditure where some were allowed & some were disallowed. The submission by revenue that in assessment u/s 144, AO can make disallowances, would have been correct in the backdrop that assessee may raise contentions disputing materials collected by AO. The AO exercised power u/s 145 as books of accounts were not believable for they were neither correct nor complete. If, in such a case the AO wishes to make assessment u/s 144, he has to do that only as per provisions u/s 144. The AO being a creature of the statute can only exercise power either according to the statute or not at all (ref-Bhavnagar University v. Palitana Sugar Mill (P) Ltd. reported in 2003(2)SCC  111).  Hence,  for  the  above  reasons    the impugned order & CIT s order are all set aside &   matter was remanded back to the AO to make assessment only as per Sec 144. The appeal is disposed.[Decided in favour of Assessee]


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