Article by: - CA Pradeep Jain -CA Preeti Parihar
Introduction:- When we talk of penalty under Section 11AC and a number of interpretations and pelothra of litigation comes to mind. Penalty u/s 11AC of the Central Excise Act, 1944 is the harshest penal provision prescribed in the Act and is mandatory provided the conditions prescribed in the section are satisfied. It has always been a matter of litigation since inserted in the Act. This article deals with the various issues arising in this section because of Court decisions and Board Circulars. Section 11AC – An analysis:- Section 11AC of the Central Excise Act, 1944 prescribes that in the cases of non/short levy/payment or erroneous refund due to fraud, collusion, misstatement or suppression of facts with intent to evade payment of duty; the penalty equal to amount of duty determined under section 11A(2) will be imposed on the assessee. However, if the duty alongwith interest is paid within 30 days of the communication of order of Central excise officer, the penalty will be 25% of duty. But for availing this relief it is necessary that the penalty should also be deposited within the stipulated time of 30 days referred hereabove. Further, if the Commissioner (Appeal) or hon'ble Tribunal reduces or increases the duty so determined u/s 11A(2), the reduced/increased amount will be considered for the purpose calculating the penalty. Finally, the fourth proviso to this section provides that where the duty payable u/s 11A(2) is increased by Commissioner (Appeals) or Tribunal, then also the benefit of reduced penalty under first proviso will be allowed if the incremental duty and penalty alongwith interest is paid within 30 days of the order of the Commissioner (Appeals) or Tribunal. Duty paid before issue of show cause notice – whether attracts penalty? Section 11A of the Central Excise Act, 1944 provides that the show cause notice is to be issued for non levy or short levy or non payment or short payment or erroneous refund of duty. In other words, if the duty and interest are paid before issue of show cause notice, there is no short levy/payment; therefore the conditions prescribed u/s 11A for issue of show cause notice are not satisfied and as such, the show cause notice cannot be issued. When show cause notice cannot be issued, the question of imposition of penalty also does not arise as it is dependent upon issue of show cause notice. There was conflict between department and assessees regarding this opinion and the litigation had undergone divergent decisions given by various appellate authorities. It was held by tribunal and even the various High Courts have also decided that the Section 11AC is not attracted when the duty is paid before the issue of show cause notice. The some of the decisions are quoted below:- · CCE, Mangalore v. Shree Krishna Pipe Industries [ 2004 (113) ECR 718] · Rashtriya Ispat Nigam Ltd. v. CCE, Vishakapatnam [ 2003 (54) RLT 317] as affirmed by hon'ble Apex Court & reported at 2004(163) ELT A53 (SC) · Union of India vs T.P.L. Industries Ltd. [2007 (214) E.L.T. 506 (Raj.)] These decisions for some time settled the matter in favour of the assessees who have deposited the duty and interest prior to issuance of show cause notice. Penalty u/s 11AC – Mandatory or Discretionary? The decisions given by relying on the judgments referred above were as usual not acceptable to the department and inspite of High Court decisions in favour of the assessees, the litigation continued. Then, hon'ble Supreme Court of India gave the landmark judgment in the case of Union of India v. Dharmendra Textile Processors 2008-TIOL-192-SC-CX-LB. In this case, it was held that the penalty imposed u/s 11AC of the Central Excise Act, 1944 is mandatory and the authorities, tribunal or Court do not have any discretion to reduce the penalty. This decision seemed to blow away the expectations of the assessees who were relying upon the above referred decisions. Demand should be issued by invoking "intent to evade payment of duty" After the decision of Dharmendra Textiles, the department started invoking the penal provision of Section 11AC in every demand. It was contended that the penalty under Section 11AC is mandatory and it will be equal to duty. But the assesses are maintaining that the penalty under Section 11AC can be invoked only when there is wilful suppression, fraud, collusion etc. Unless and until, the demand is issued by invoking intent to evade payment of duty, the penalty under Section 11AC can not levied. Thus, the demand should be issued under proviso to Section 11A then the penalty under Section 11AC can be imposed. This is provided in the language of the Section 11AC itself. But the department is issuing show cause notice in each and every case by proposing penal action under 11AC. Penalty u/s 11AC – whether dependent on demand u/s 11A(2):- Section 11A of the Central Excise Act, 1944 empowers the Central Excise Officer to issue a show cause notice in the cases where any duty is short levied/paid or not levied/paid or erroneously refunded. Sub section (2) to section 11A states that after considering the representation made by the notice as referred in sub section (1) of section 11A, the Central excise officer will determine the excise duty payable by that person, the amount of duty should not exceed the amount proposed in the show cause notice. The person shall be liable to pay the excise duty so determined. As such, the penalty imposable u/s 11AC is dependent upon the fact that the show cause notice should have been issued to the person and the duty so determined in consequence of that notice will be the base for calculating the amount of penalty u/s 11AC of the Central Excise Act, 1944. Some of the decisions given on this line are listed as follows:- · Union of India vs Perfect Thread Mills Ltd. [2009 (234) ELT 49 (Raj.)] · UOI vs. Rajasthan Spinning & Weaving Mills [2009-TIOL-63- SC-CX] In both of the above cases, it was held that in case the duty is paid by the assessee prior to issuance of the show cause notice, there was no reason to issue any show cause notice to the assessee. When the show cause notice is not issued, there is no determination of duty u/s 11A(2) by the adjudicating officer as determination u/s 11A(2). Since the penalty u/s 11AC is dependent on the fact that the demand is issued u/s 11A(2), inapplicability of section 11A(2) will also lead to inapplicability of section 11AC.
All these decisions without any further ambiguity cleared the situation that there is positive correlation between demand issued u/s 11A(2) and penalty u/s 11AC of the Central Excise Act, 1944. It is the nature of law that as soon as one issue seems to be settled by judicial rulings, another issue arises out of the same provision. Same thing happens with section 11AC of the Central Excise Act, 1944. Conflicts of section 11A(2) viz a viz 11AC seemed to be settled by above discussed decisions, very soon, the litigation arose in the proviso to section 11A(2) pertaining to benefit of reduced penalty. Benefit of 25% Penalty – whether available at Adjudication stage or also at Appellate stage:- The new issue arising in the chain of litigation of section 11AC pertain to benefit of 25% penalty as provided in first proviso to section 11A(2) of the Act. This issue was regarding the question whether benefit of reduced rate of 25% penalty is available at adjudication stage only or this benefit may be availed at appellate stage also. The fire burst up with the decision of hon'ble Punjab and Haryana High Court in the case of Commissioner of Central excise Commissionerate, Rohtak vs JR Fabrics (P) Ltd. [2009-TIOL-259-HC-P&H-CX]. A detailed decision elaborating the various provisions related to section 11AC and section 11A(2) was given. The gist of this decision is produced as follows for the sake of convenience:- In this case, the duty and interest were paid before issuance of show cause notice and the same was intimated to the department. But the show cause notice was issued and the case was adjudicated as follows: Duty and interest already paid were appropriated by the adjudicating authority. Penalty equal to amount of duty was imposed u/s 11AC and 38A and rule 25 of erstwhile Central Excise (No. 2) Rules, 2001. Penalty of Rs. 1 lacs was imposed on managing director of the company. On appeal being filed, Commissioner (Appeal) modified Order in original and removed the penalty on Managing director. The assessee reached Tribunal wherein it was held that the assessee was liable liable to pay only 25 percent of duty amount as penalty by placing reliance on a judgement of the Delhi High Court in the case of CCE v. Malbro Appliances Private Ltd. 2007(208) ELT 503. Whereas, the revenue counsel relied on the decision of Union of India v. Dharmendra Textile Processors 2008(231 )ELT 3(SC) = 2008-TIOL-192-SC-CX-LB and argued that a plain reading of 2nd proviso to Section 11 AC of the Act would make it clear that equal amount of duty found to be paid to the revenue is to be realised as penalty and therefore the amount of 25% imposed by the Tribunal as penalty is liable to be set aside. It was contended by the counsel of the assessee that the first two provisos postulate a concessional rate of 25% penalty in case the amount of duty as determined under sub section 11 A (2) of the Act and the interest payable thereon stand paid within thirty dates from the date of communication of the order of the officer determining such duty. The second proviso further imposes an obligation that the benefits contemplated by first proviso are to be available if the amount of penalty so determined has also been paid within a period of thirty days. In other words, if the duty as determined under Section 11 A(2) of the Act by the Central Excise Officer is paid within thirty days then penalty equal to the amount of duty is not required to be paid and the amount contemplated in lieu of the penalty is 25 % of the total amount of excise duty determined the officer concerned. But since this benefit was not extended to the assessee – neither by the adjudicating authority or first appellate authority; Tribunal extended the same to the assessee. The decision given as above was backed by good analysis of the provisions of section 11A(2) and section 11AC. It seemed to affirm the decisions given by the various appellate authorities on the previous issues arising in the section 11AC. The main outcome of the decision was that the benefit of reduced rate of penalty is also available at appellate stage if the same is not allowed at the adjudication stage to the assessees. Once again a favourable decision was given in favour of the assessees, but it seems that such decisions are not appreciated by the Revenue. The reason being issuance of Circular No. 898/18/09-CX dated 15.9.2009 which says benefit of reduced penalty is available only at adjudication stage. Circular No. 898/18/09-CX dated 15.9.2009:- This latest circular is issued in consequence of a decision given by Commissioner (Appeals) wherein the benefit of reduced rate of penalty u/s 11AC is allowed within 30 days of the communication of the Order in Appeal. In this circular it is clarified that benefit of reduced penalty is available only at the adjudication stage and the period of 30 days as prescribed in proviso to section 11AC is to be calculated from the date of passing order in original. The circular says Commissioner (Appeal) cannot allow this benefit at appellate stage.
Analysis of Circular:-
The analysis of Circular viz a viz first and second proviso to section 11AC makes it clear that mere plain reading of these provisos can derive the interpretation drawn by the Circular. The first and second provisos ibid are reproduced as follows:- "Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. Of the duty so determined:" "Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:" The analysis of above makes it clear that the first proviso talks of reduced amount of penalty if the duty so determined u/s 11A(2) alongwith interest is deposited within 30 days of communication of that order. In other words, it affirms the fact that the benefit of reduced penalty will be available if duty and interest are deposited within prescribed limit of 30 days. The second proviso says that the benefit of reduced penalty will be available if the penalty is also deposited within the period of thirty days referred to in the first proviso. However, this interpretation taken in the Circular would fail in case where the duty and interest are paid before the issue of show cause notice and the order appropriates the duty and interest but imposes penalty equal to amount of duty. In such cases, the first condition is duly satisfied as the duty and interest so paid before issue of show cause notice, come within the time limit prescribed under first proviso. However, it is clear that benefit of reduced rate of penalty is allowable to such assessees as per first proviso. But since the order in original has imposed the 100% penalty, the assessee would have no option but to go to Commissioner (Appeal) for availing this benefit. As such, the interpretation taken by the Circular is not considering all the aspects pertaining to the scheme of section 11AC of the Central Excise Act, 1944. Circular vs P & H High Court decision:-
The circular no. 898/18/09-CX dated 15.9.2009 says that the Commissioner (Appeal) cannot allow the benefit of reduced rate of penalty under proviso to section 11AC. Is this Circular contrary to the decision of hon'ble Punjab & Haryana High Court in the case of Commissioner of Central excise Commissionerate, Rohtak vs JR Fabrics (P) Ltd. [2009-TIOL-259-HC-P&H-CX] as discussed above? Let's recall – in this case, the benefit of reduced rate of penalty was allowed at Tribunal stage. Hon'ble High Court has affirmed this act of Tribunal by saying that if the duty and interest are paid within 30 days of communication of order, then the benefit of reduced penalty to the extent of 25% of duty should be extended to the assessee. It was decided that where the duty and interest are paid within 30 days of communication of order, then the benefit of reduced rate of penalty is available to the assessee. Given in the facts and circumstances of the case, the duty and interest were deposited prior to issue of show cause notice. It was held that it is an obligation on the adjudicating authority that he allows this benefit to the assessee by passing order in original imposing reduced rate of penalty. Since the adjudicating officer as well as Commissioner (Appeal) failed to do so, hon'ble Tribunal allowed the same which was affirmed by hon'ble Tribunal. It was further held that the benefit of reduced rate of penalty is not at the discretion of any adjudicating or appellate authority, it is by virtue of provisos inserted in the section 11AC. In the Circular, the clarification so given is contradicting this decision. The clarification says that the Commissioner (Appeal) cannot extend the benefit of reduced rate of penalty to the assessee whereas the detailed decision so given by hon'ble P&H High court has held that once the mandatory conditions of paying duty and interest within 30 days of passing of order are satisfied, the benefit of reduced rate of penalty is to be allowed to the assessee. The prime authority to allow this benefit is the Adjudicating officer, if he fails to do so, Commissioner (Appeal) has right to do so.
Beginning of a new litigation:- Once again, the Board has brought up a Circular that is contradictory to the decisions given by the Appellate authorities. The Circular no. 898/18/09-CX dated 15.9.2009 and the decision of hon'ble Punjab & Haryana High Court in the case of Commissioner of Central excise Commissionerate, Rohtak vs JR Fabrics (P) Ltd. [2009-TIOL-259-HC-P&H-CX] are contradictory to each other. There is no doubt that department will take shelter of Circular and the assessees would go in shed of this decision, as a result, a new battle would commence. There are a lot of decisions which state that the decisions of High Court or any other appellate authority are binding on the Revenue. But, looking to the increase in contradictory Board Circulars and judicial pronouncements, further clarification is required as to which one will prevail over the other in case of contradiction. Still awaited...
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31 October 2009
PENALTY U/S 11AC: CONTROVERSY CONTINUED....
New Features Added in TIN
| Important features added to TIN by NSDL |
October 30, 2009
Dear Members,
We have been informed by National Securities Depository Ltd. (NSDL) that they have introduced two new features in TIN this week.
1. Online registration of TAN
A facility to register TAN online is available on the TIN website (www.tin-nsdl.com). The Income Tax Department requires all deductors to register their TANs online. Authenticated access (through user ID and password) will be provided to registered deductors. Registration is free.
An acknowledgment number will be displayed on successful registration. This acknowledgment number is to be kept securely. In future user id / password will be provided to the deductors who have successfully registered.
On login, the following will be available to the deductors-
i. view of the status of all statements filed;
ii. download of consolidated quarterly e-TDS / TCS statement for preparation of correction statement; and
iii. other functionalities related to quarterly TDS /TCS statement.
| Guidelines for TAN Registration |
General
- TAN registration should be done online at the website of the Tax Information Network www.tin-nsdl.com.
- Fields marked with (*) are mandatory.
- Select the values from the drop down wherever provided.
- Register all active TANs.
Details of Deductor
- Mention details of deductor (TAN).
- Select appropriate deductor category from the dropdown.
- Mention PAN of deductor. Mention "PANNOTREQD", in case PAN is not available i.e. deductor is not required to have PAN as per the statute.
- PAO Code and DDO Code are mandatory for deductor category "Central Government".
- If PAO Code is not available then mention value "PAOCDNOTAVBL".
- If DDO Code is not available then mention value "DDOCDNOTAVBL".
- For PAO Registration number, mention registration number allotted, if any, by Central Record Keeping Agency (CRA) under New Pension Scheme (NPS).
- For DDO Registration number, mention registration number allotted, if any, by Central Record Keeping Agency (CRA) under New Pension Scheme (NPS).
Contact Details of Deductor
- Mention demographic details of deductor (TAN) i.e. complete address and contact details.
- Provide valid email id and telephone no. / mobile no.
- Provide details of responsible person and designation.
Statement Details
- Mention details of any regular e-TDS / TCS quarterly statement accepted in TIN on or after April 01, 2008.
- Check the status of e-TDS / TCS statement at the Quarterly Statement Status available at the TIN website by entering the TAN and Provisional Receipt Number of the statement before providing statement details.
- For entering statement details you may refer the Provisional Receipt issued at the time of acceptance of the e-TDS / TCS statement.
Generation of Acknowledgement
- After filling up the information, click "submit". On submission of details if system shows any errors, rectify and re-submit the form.
- A confirmation screen with all the data filled by the user will be displayed. The same can be either confirmed or edited.
- On confirmation, an acknowledgement number will be displayed.
- Print the acknowledgment and preserve the same for future use.
- For future correspondence mention the TAN registration number provided by TIN along with the TAN.
- You can re-generate the "Acknowledgement for TAN Registration" by registering again
2. Taxpayers can now view details of paid refund in their Annual Tax Statement (Form 26AS)
Taxpayers who have registered to view Form 26AS online can view details of paid refund in their Form 26AS from F.Y. 2009-10 (A.Y. 2010-11) onwards. Refunds received during the selected A.Y. will be displayed in Form 26AS. For instance, refunds pertaining to A.Y. 2005-06 which are received in F.Y. 2009-10 (A.Y. 2010-11) will be displayed in Form 26AS for F.Y. 2009-10 (A.Y. 2010-11).
The following details related to refund will be displayed:
- A.Y. for which refund is paid
- Mode of payment i.e. ECS, paper (refund cheque), etc.
- Amount of refund
- Date of payment
Taxpayers can register online at the TIN website to view Form 26AS.
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
28 October 2009
Cash Borrowings- No Penalty u/s 271D
Income Tax - Assessee is real estate developer - borrows funds in cash to buy a plot of land - violation of Sec 269SS - Penalty u/s 271D - Since ready cash-backing helps in negotiating land deals, a reasonable cause existed u/s 273B - Penalty not sustainable: ITAT Third Member
Inl Income tax related disputes, Revenue is mandatorily one of the parties. Does it mean that by the virtue of its status in all disputes, it is an adversary of the assessees. Not necessarily. It has a unique status as it is expected to grant the relief to an assessee even if one has not claimed it out of ignorance. In other words, Revenue is expected to collect revenue only as per the law, and not to disprove a particular business practice and deny the concessions granted by the legislature. This is what happened in this case when the assessee, a real estate developer, could not resist the temptations to buy a piece of land at an attractive price, and decided to have the backing of hard cash to negotiate a better deal. For the deal the assessee borrowed cash from a trusted source and went ahead with the negotiations. But the deal fell through and the assessee had to deposit the cash in its bank account and issue a cheque for the same amount to the source which lent him the cash from his cash book register.
This transaction was noticed by the AO who questioned the assessee. An explanation was furnished. The loan was obtained in cash with a view to enable the company to finalize the negotiations without any loss of time. According to the assessee, this cash loan was obtained in the best interest of business so that the deal could be expedited. It was considered necessary to have the funds in cash form on the ground of business expediency. The assessee also tried to explain the reasonable cause for obtaining this loan in cash so that the violation of the provisions of section 269SS would not attract any penalty by virtue of the provisions of section 273B of the Act.
However, the AO did not buy the theory of compelling reasons to borrow the cash and declined to believe the theory of reasonable cause as per the provisions of Sec 273B. The AO treats it as a glaring violation of Sec 269SS and initiates penaly proceedings u/s 271D.
The issue went to the CIT(A) where the assessee filed some additional evidence by way of an affidavit stating therein that the assessee had borrowed money for the purchase of land which was not ultimately materialize. The AO objected the filing of the affidavit. The CIT(A) ultimately sustained the order of the AO levying the penalty.
Finally the issue went to the Tribunal where a difference of opinion cropped up between the Members. The Member, AM, declines to buy the theory of reasonable cause pleaded by the assessee whereas the Member, JM, manages to see adequate reason to invoke Sec 273B. Thus the issue goes to the Third Member who finally goes with the Member, JM. The Third Member observes that,
++ The assessee-company is a builder and developer of lands. It is natural for it to look for purchase of lands which it can develop and make profits. When an opportunity presents itself, it was natural for the assessee to seize the same.
++ The assessee no doubt had a cash balance of above Rs. 12,00,000 in its books on 1-3-2002, but apparently the market price of the lands was around Rs.15 to Rs.20 lakhs and therefore the assessee, instead of using up the cash balance in its books and restricting the borrowing to a much lesser amount, resorted to borrowing the sum of Rs.15 lakhs from N.K. Chemist in cash.
++ The advantage of negotiating for the purchase of agricultural lands for development with ready cash-backing cannot be disputed. It was this advantage that obviously propelled the assessee to keep the cash ready and negotiate with Mukeshbhai Desai for the purchase of land. All this is supported by the averments in the affidavit filed by Mukeshbhai Desai. These averments have not been impeached or discredited or found false.
++ When the deal did not materialize, the assessee deposited the cash in the bank and issued a cheque in favour of N.K. Chemist and closed the borrowing. The learned JM has viewed the above circumstances as constituting reasonable cause and I have no strong reasons to disagree with him in his conclusion. The learned AM has observed that land deals can be closed by paying a token sum as advance and therefore there was no need to borrow monies equivalent to the entire price payable.
++ There may be many ways in which a business deal can be put through and it is well-settled that essentially it is for the businessman to put a transaction through in the manner best suited to his interests. Possibly the transaction could have been put through in the manner suggested by the learned AM, but the Tribunal has to test the reasonableness of the explanation that is offered by the assessee in the touchstone of normal course of human conduct and probabilities.
++ Unless the explanation trotted out is so perverse or strange or unusual that it cannot conform to the normal course of human conduct or probabilities, the fact that the transaction can be put through in several other or different ways should not be an impediment in accepting the explanation as constituting reasonable cause. There is nothing to suggest that the assessee's explanation is in any manner improbable or impossible. It is supported on material facts by the affidavit of Mukeshbhai Desai.
Finally the Third Member agrees with the Judicial Member and holds that the explanation furnished by the assessee does constitute a reasonable cause u/s 273B and it does not call for levy of penalty u/s 271D.
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
SLR Increased
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
27 October 2009
BL Award to CA. TN Manoharan
Finance Minister Pranab Mukherjee was the chief guest at the event, which was attended by several top-notch industrialists.
Awards were given away in 22 categories, besides four special awards, a Life Time Achievement Award and the Business Achievement of the Year Award.
The Business Achievement of the Year Award was given to Directors of Satyam Consultancy Services.
NDTV Profit, Business Leadership Awards 2009 was presented by Hirco.
ONBEHALF OF MYSELF AND NELLORE BRANCH OF SIRC OF ICAI CONGRTULATE SHRI T.N. MANOHARAN FOR RECEIVING BUSINESS LEADERSHIP AWARD 2009 FROM THE FINANCE MINISHER ON 26TH OCTOBER,2009
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
Announcement on ROC Scrutiny Assignment
| Announcement for panel for outsourcing of work of Technical Scrutiny of Balance Sheets - (26-10-2009) |
| Announcement for panel for outsourcing of work of Technical Scrutiny of Balance Sheets - (23-09-2009)
The Institute has received an Office Memorandum (OM) from the Ministry of Corporate Affairs. As per the OM, the Registrar of Companies will prepare a panel of professionals for Technical Scrutiny of Balance Sheets filled by the Companies for the State concerned.
The Scheme of outsourcing the work will be for the financial year 2009-10. The details of the Scheme specifying the eligibility criteria, mode of application, Procedure to be followed by the ROC for outsourcing of work, is provided in the Office Memorandum issued by the Ministry
The Institute of Chartered Accountants of India while appreciating the initiative taken by the Ministry for ensuring good corporate governance and transparency for safeguarding the interest of the shareholders, creditors and the economy as a whole wishes to provide professional expertise of its members to the Registrar of Companies. For the purpose, it has been decided to send a panel of the members of the Institute to the Ministry.
Procedure for Registration for the empanelment: The chartered accountants/firms which have already applied for the Multi-purpose panel for the year 2009-10 will be automatically empanelled for the subject empanelment. In case, they have not applied for the same, the following details may please be mailed at pdc@icai.in with the subject "Empanelment with the office of RoC"
i. Name of the Member ii. Membership No. iii. Professional Address iv. Year of COP v. Mobile No. vi. E-mail id
For any further clarifications, the members may please contact Professional Development Directorate at pdc@icai.in or 30110440, 30110444, 30110480, 30110508 and 30110451. |
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
26 October 2009
FM on DTC -2011-12
Direct Taxes Code to be implemented from fiscal 2011-12: Pranab
The government plans to implement the Direct Taxes Code (DTC) from 2011-12 after addressing all concerns relating to controversial proposals like taxation of retirement benefits, weeding out incentives for housing sector and changes in the Minimum Alternate Tax (MAT). The proposals in the Code are only "illustrative" and are open for discussion and there is no need to think that these "have been decided," Finance Minister Pranab Mukherjee told news agency. Giving the roadmap for the Code that will replace the Income Tax Act of 1961, he said, "It will be implemented from 2011. So, the finance bill of 2011-12 would be appropriate." The government, Mukherjee said, has identified seven critical areas of concern in the Code and would take suggestions on board before finalising it. The critical areas of concern include
- Shifting the base for computation of Minimum Alternate Tax (MAT) from book profits to assets;
- Capital gains taxation in case of non-residents;
- Double tax avoidance agreements;
- General Anti-Avoidance Rules (GAAR);
- Taxation of foreign companies;
- Taxation of charitable institutions; and
- Shift to EET system for taxation of savings.
On the issues relating to taxation of savings at the time of withdrawal, the Minister said, "Whether it will be EET (exempt, exempt, tax) or ETE (exempt, tax, exempt) ... is to be finally arrived at a decision. So one need not rush to the conclusion that it has been decided. That is the short point that I would like to make it clear." DTC has proposed that all savings schemes should be taxed at the time of withdrawal. Under the current dispensation, the savings schemes like Public Provident Fund (PPF) and General Provident Fund (GPF) are not taxed at all, while in some schemes like National Savings Certificate (NSC) only interest accruals are taxed. The Code is also silent on tax incentives for housing sector as against the current practice of provide rebate on repayment of interest and principal on home loans. As regards the MAT, the Code proposes to levy minimum tax on assets instead of book profits. The proposal evoked sharp reaction from the industry which described the move as introducing wealth tax on enterprises. Referring to his interaction with the representatives of the industry on the Code at Delhi and Bangalore, Mukherjee said, "I told them to express (their) views candidly ... final decision will be taken after obtaining inputs from various stake holders and in depth discussions." The direct tax reforms are basically aimed at doing away with the "plethora of exemptions", Mukherjee said, adding "if somebody analysis the Act of 1961, as amended from time to time now (will) realise that the original character of the Act is lost through a series of amendments. "All 22 alphabets are lost, than 1,2,3,4 are also put while amending the Act. It
is substantially because of plethora of exemptions. So attempts have been made to make, to simplify it and in that process some critical areas and vital areas may (have been) left out," h
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
24 October 2009
Concept Paper on GST- ICAI
ICAI Concept Paper on GST Model for India-Suggestions - see attachment
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
23 October 2009
MCA Coommitment on IFRS
| Friday, October 23, 2009 | |||||
| Ministry of Corporate Affairs | |||||
THE CORE GROUP ON CONVERGENCE OF INDIAN ACCOUNTING STANDARDS REITERATES COMMITMENT TO CONVERGE WITH IFRSS BY 2011 FAVOURS IMPLEMENTATION OF CONVERGED ACCOUNTING STANDARDS IN PHASED MANNER | |||||
| 18:9 IST | |||||
| A meeting of the Core Group constituted by the Ministry of Corporate Affairs for convergence of Indian Accounting Standards with International Financial Reporting Standards ( IFRSs ) from the year 2011 was held on 15th October 2009 under the Chairmanship of Shri R. Bandyopadhyay, Secretary, Ministry of Corporate Affairs. The Group noted that the Ministry of Corporate Affairs had prescribed Companies ( Accounting Standards ) Rules, 2006 in December, 2006 which have already harmonized Indian Accounting Standards with IFRSs substantially in so far as the companies are concerned. For entities other than companies, Accounting Standards issued by ICAI are applicable which are also harmonized with IFRSs substantially. The Group also discussed certain critical areas involved in convergence like 'fair value versus historical cost'; application of prudential norms, fixation of minimum depreciation rates etc. and expressed the need for addressing them effectively and timely through a consultative and participatory process. The Core Group is supported by two Sub-Groups set up in July, 2009. Sub-group-I, which is chaired by Shri Y.H. Malegam, Chairman, NACAS and includes concerned Regulators like Reserve Bank of India ( RBI ), Securities and Exchange Board of India ( SEBI ), Insurance Regulatory and Development Authority ( IRDA ), has been set up to identify changes required in various laws, regulations and accounting standards for convergence with IFRS and to prepare a clear roadmap for achieving the same. Sub-Group-II, which is chaired by Shri T.V. Mohandas Pai, Director, Infosys, and includes Chief Financial Officers ( CFOs ) of various companies, has been set up to interact with various stakeholders in order to understand their concerns on the issue of convergence with IFRSs, identify problem areas and ascertain the preparedness of the stakeholders for such convergence. The Group reviewed the progress made by both the Sub-Groups. Sub-Group-II had completed its deliberations and forwarded its recommendations to Sub-Group I. Sub-Group I would submit its report by the end of this month. The Group decided that on receipt of this report, which would also cover the road map and phasing plan for convergence, the concerned regulators like M/o Finance, RBI, SEBI, IRDA etc would take necessary timely action to address changes in legislative and regulatory frameworks within their jurisdictions. Simultaneously, the Ministry of Corporate Affairs would take up the exercise for amending the Companies Act and Rules made thereunder, after taking inputs from ICAI and NACAS. The Group was also of the opinion that in view of practical difficulties involved in implementing/ applying the converged Accounting Standards to all companies at one go, it might be appropriate to apply the converged Accounting Standards in a phased manner. The Group expressed satisfaction at the progress made by the two Sub Groups as well as the initiatives taken by ICAI in respect of training, awareness and other capacity building measures. The Group desired that such initiatives like extensive training & awareness programmes and other capacity building measures for companies, professionals as well as regulators should be continued with increased momentum so that the convergence of Indian Accounting Standards with IFRSs is achieved smoothly and timely. The Group expressed confidence in the approach and process being followed on the matter and reiterated the commitment to converge with IFRSs by 2011. | |||||
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
22 October 2009
Case Law on Delay in taking Cenvat Credit
| Cenvat Credit cannot be denied just making delay in taking the credit |
| Tribunal in a recent case held that though Rule has it that credit should be taken immediately no outside limit was prescribed and therefore credit cannot be denied even if the credit is taken after a long period . Facts of the case was that CENVAT credit of Rs.1,65,089/- has been disallowed to the assessees, who are manufacturers of handmade branded biris, on the ground that credit was taken on invoices which did not contain details of payment of duty and that the credit in respect of inputs was not taken immediately on receipt of inputs in their factory and penalty of Rs.10,000/- was also imposed by the adjudicating authority (Assistant Commissioner). The above order was appealed against before the Commissioner (Appeals) who disallowed the credit only on the ground of delay in taking credit, and no finding was recorded on the second ground for denial namely that the documents on which credit was taken did not contain the details of payment of duty. Court had relied on the decisions of the Tribunal in Coromandel Fertilizers Ltd. Vs. CCE 2009 (239) ELT 99 and Shyam Forgings Vs. CCE 2008 (221) ELT 309 holding that although the rule as it stood prescribed that credit should be taken immediately no outside limit was prescribe and therefore credit cannot be denied even if the credit is taken after a long period M/s. A. Habeebur Rahman Sons Appellants .Vs. CCE, Chennai Respondent Date of Decision: 07.10.2009 |
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
Revised procedure for acceptance of proof Address.
| AS per the circular no 321 the additional procedure for acceptance of proof of address alongwith PAN applications received from Individuals and HUF are as under: 1. While accepting "Application for allotment of PAN (Form 49A)" if both the addresses (residence and office) are mentioned in the application form and office address has been selected as communication address, then POA has to be collected for residence as well as office address. 2. While accepting "Request for New PAN card or/and changes or correction in PAN data" applications, proof of all addresses provided in the application have to be collected. 3. Documents as per Rule 114(4) of Income Tax Rules will only be accepted as valid proof for both the abovesaid addresses. 4. Both proof of addresses will have to be in the name of applicant and should contain the name in the expanded form as given in the application. The exception provided for ration card communicated vide our circular TFCID/TIN/08/255 dated February 18, 2008 will continue to be applicable. We hereby informed that the above will be effective for all PAN applications received on or after November 1, 2009. |
20 October 2009
Circular on Payment of Excise Duty on Job Work
CIRCULAR NO
902/22/2009-CX., Dated: October 20, 2009
Subject: CBEC clarifies if goods are manufactured on jobwork basis, value for payment of excise duty to be determined as per Rule 10A
It has been brought to the notice of the Board that some manufacturers of Motor Vehicles are getting complete Motor Vehicles manufactured by sending the Chassis of the Motor Vehicles to independent body builders for building the body as per the design/specification of the manufacturer. The practice followed is that the Chassis is transferred to the Body builder on payment of appropriate Central Excise duty on stock transfer basis and is not sold to them . The body builder avails the Cenvat Credit of the duty paid on the chassis and clears the same on payment of duty to the Depot/Sales Office/Distributer of the Motor Vehicle manufacturer. The duty is discharged by the body builder on the assessable value comprising the value of Chassis and the job charges. The Depot/Sales office of the MV manufacturer sells the vehicles at a higher price than the price on which duty has been paid. Similar practice may be prevailing in respect of other commodities also.
2. The matter has been examined. Rule 10A (ii) of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 stipulates that where the excisable goods are produced or manufactured by a job-worker, on behalf of a principal manufacturer, then in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker, and where the principal manufacturer and buyer of the goods are not related, and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time.
3. A plain reading of the aforesaid provision of law makes it clear that the assessable value for the purpose of charging Central Excise duty, in the cases where the Job-worker transfer the excisable goods to the Depot/Sale office/Distributer and/or any other sale point of the principal manufacturer, shall be the transaction value on which goods are sold by the principal manufacturer from such a place. Accordingly, after the insertion of Rule 10 A, the practice of discharging the duty on cost construction method by the body builder is not legally correct. It is, therefore, clarified that wherever goods are manufactured by a person on job work basis on behalf of a principal, then value for the purpose of payment of excise duty may be determined in terms of the provisions of Rule 10 A of the Central Excise Valuation (Determination of price of Excisable goods) Rules, 2000 subject to fulfilment of the requirements of the said rule. It is requested that the practice followed in your zone may be verified for body builders of motor vehicles and/or other commodities, which are manufactured on job work basis to ensure that duty is paid correctly as per Rule 10A wherever required.
4. Trade and Industry may be informed.
5. Receipt of this circular may be acknowledged.
6. Hindi version would follow.
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
18 October 2009
XBRL enabled Reporting by Banks
| ||
| Date : 14 Oct 2009 | ||
| RBI provides XBRL enabled filing of Online Returns | ||
|
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CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
16 October 2009
Johnny and Service Tax Refund Part - I
| We are a Practising Chartered Accountants firm practising in the field of Indirect Taxes. Recently we came across a comment on us that Indirect Tax practitioners are not Humorous and correspondence with them is boring. Taking this comment as inspiration and a stepping stone we have drafted an article titled "Johnny and Service Tax Refund Part - I". The content of the articles is as under: - Johnny and Service Tax Refund Part - I By: - CA. Pradeep Jain Siddharth Rutiya With the help of this article an effort has been made to picturise the present situation existing in the refund structure mechanism under Service tax. This state of affair is elaborated with the means of poems and conversation between Johnny (an assessee) and his father. Johnny and Jill went up the hill, to get the refund order Johnny came back with a lack And Jill came hopeless after. Today, in the present scenario the assessee is facing enormous difficulty in getting refund orders as stated in the lines above. The refund claims are the Right of the assessee but the department is rejecting these claims on various grounds which are of trivial importance. This result in frustration and skepticism among assesses as regards the Refund mechanism. The various reasons on which the department is rejecting the refund claim as against the "Transport of Goods by Road Service" u/s 65(105)(zzp) are highlighted here by means of poetic conversation: - Johnny-Johnny! Yes papa! Got the refund? No Papa, Telling lies? No Papa, What's the reason? This papa: - Johnny says: I went to department to get the refund for GTA service but department said: - Johnny-Johnny go away, Come again another day. Your refund order has following Flay: - 1. The documentary proof of discharging service tax liability under transportation of goods by road service classifiable under section (105) (zzp) has not been submitted. The liability to pay service tax is on the manufacturer and as such you should have paid the service tax and produced the challan for the same. If the transporter has paid the service tax then you will not get the refund claim as liability to pay service tax is on you only. Rather than getting refund, you will receive a demand from the department. It is like "CHOBE JI GAYE CHHABE JI BANANE AUR DUBEY JI RAH GAYE." 2. The Exported goods have not been transported directly from the place of removal to inland container depot or port or airport, from where they are to be exported. The transport of goods from factory to ICD is added from 19/02/2008 and from ICD to port from 17/09/2007. As such, you will get refund from such date (i.e. 19/02/2008) only and not prior to that date. Your contention that it has retrospective effect does not hold good as the notification does not contain any such clause. 3. Invoice issued doesn't contain the name of the inland container depot or port or airport from where the goods are exported and hence the documents are not proper. Moreover, the consignment note (popularly known as "Bility" in trade) does not contain all the details required under Rule 4B of Service Tax Rules. It does not contain the truck number and as such refund can not be granted to you. Johnny says: I went to the department next day again with the corrections but department said: - Johnny-Johnny go away, Come again another day. Your refund order has following more flay: - 1. The transportation charges are received without service tax and the relevant documents confirming payment of service tax to Govt. have not been properly submitted. The liability to pay service tax is on you in case of transport of goods by road and as such you should have paid the service tax. If the transporter has paid the same then also you will not get refund. As told earlier, we will issue a demand to you. 2. Lorry Receipt and corresponding shipping bill doesn't contain details of exporter's invoice relating to export goods, 3. The drawback on the said service has already been claimed. Your contention that the notification says that drawback rates should not have included the specified services. The rates are fixed by Government and he knows that whether these are included or not. As you are not aware whether these are included or not, we also do not know whether these have been included or not. The burden is on you to prove the same that these are not included if you intend to claim drawback. Moreover, your contention that Drawback Rules says that only input services are included. The "input services" have same meaning as given under Cenvat credit Rules. As the department has disallowed credit on outward freight and as such the drawback is not included. Hence the drawback rates have not included the service tax paid on outward freight. This is not correct. The Cenvat credit is allowed on outward freight by Punjab and Haryana High Court in case of M/s Ambuja Cement Ltd. v/s Union of India & Ors. [2009 (236) ELT 0431 (P & H)]. Although we are not agreeing the same in case of demand but we follow the same while granting the refund. Further, the condition of drawback is waived from 7.12.2008 and as such the refund will be granted from that date but it does not have retrospective effect. When the law is clear there is no place for intentions. If the intention of the Government was to give you relief they should have straight forward granted exemption rather then exemption by way of refund with so many conditions. Johnny says: I went to the department next day again with the further corrections but department rejected saying: - Johnny-Johnny go away, You won't get refund anyway. It has following more flay: - 1. The declaration, as to whether such GTA service has been received from the service provider for purposes other than for export, is not enclosed along with the refund claim. 2. That the services are not covered in the specified services and and evidence regarding non availment of Cenvat Credit is not enclosed in the refund claim. 3. that the bills of Goods transport agency are not issued by GTA but are issued by CHA and as such the documentary evidence is not suffice; Fruitless again & again; Johnny now in grief and pain! Refund order now a dream; His efforts have downstream! By this humorous and poetic article above we conclude that the physical condition and mental state of assesses claiming refunds against export of goods is similar to that of Johnny in the poem. Every time the assessee is approaching the department his refund claims are being rejected on some or the other flaws. He has to return fruitless, hopeless with his futile efforts thinking whether he will be getting the refund or not. There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article…….. *-*-*-*-*-* |
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