Source: http://aiftponline.org/category/journal/2015/march/
Timestamp: 2019-04-23 14:59:50+00:00

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Clerk of petitioner, paid CST in the head of State Sales Tax. Central tax authorities (of course of State) levied interest and penalty for short payment of CST. Hon’ble Calcutta HC held that adjustment was to be made only when taxes paid in excess or short paid were credited into a known account or fund and could be easily adjusted. Of course, this ratio would not apply in case of inter-departmental adjustment or completely different types of taxes. The revenue on the other hand contended that this kind of adjustment was not possible. According to it, it may be true that the CST and ST were directly credited into the Consolidate Fund of the State. Nevertheless, CST was an item under List-1 Entry 92-A of the Seventh Schedule to the Constitution over which Parliament had exclusive power to legislate and sales tax falls under List-II Entry-54 over which the State Legislature had exclusive power. This proposition was based on the Mysore HC judgment reported in 20 STC 20 which was not applied in the present facts of the case.
Accordingly, the revenues pedantic and very technical approach was rejected and writ petition was allowed.
These items are liable to tax at 5.5% from 1-8-2012 as per Sl. No. 8 of Third Schedule to the KVAT Act, 2003.
Davanam Oil, Ginger Oil etc. These oils together with Palmrosa oil and Patchouli oil are liable to tax at 14.5 % from 1-8-2012 as unscheduled goods u/s 4(1)(b)(iii) of the KVAT Act, 2003.
Paint brushes and other hardware accessories such as hand paint brushes made in Dupont Tynex Filamnet putty mixers, putty knife, hand gloves and face mask etc. liable to tax at 14.5% from 1-8-2012 as unscheduled goods.
Scrapped Buses The same are liable to tax at 5.5% w.e.f. 1-8-2012 as “all kinds of scraps and waste materials” vide Sl. No. 3 in the Table to the Notification No. FD-82 / CSL / 10(III) dt. 31-3-2010 r/w No. FD-143 / CSL / 12(I) dt. 31-7-2012.
Orthopedic appliances “Back Braces, Fracture Bracing, Braces for Knee, Elbow and Ankle” are liable to tax at 5.5% w.e.f. 1-8-2012 under Entry 60 of the Third Schedule of the KVAT Act, 2003.
Tamarind Juice Concentrate Tamarind in all forms have to be treated as one and the same, and, hence, the benefit of reduced rate of tax on “Tamarind” has to be extended to Tamarind juice concentrate, which is nothing but tamarind in usable form. Under Notification No. IV No. FD-63 / CSL-2009 dt. 30-3-2009 liable to tax at 2% w.e.f. 1-4-2009 and onwards.
Money Counting Machine It is liable to tax at 14.5% from 1-8-2012 as unscheduled goods u/s 4(1)(b)(iii) of the KVAT Act, 2003.
The same are liable to tax at 5.5% from 1-8-2012 as industrial inputs and packing materials under Sl. No. 5(1) of the Third Schedule to the KVAT Act, 2003.
In the present case, fact of ‘sale’ by a dealer not recorded as purchase by the appellant. Books of accounts not found at the time of survey. Assessing authority issued show-cause notice and rejected clarification given by the appellant and imposed tax. Tribunal on appeal after consideration of the case law cited by the appellant held that the burden of proof as contained in Section 16 of the Act 2008 has been proved by the appellant-dealer. The bonafide dealer is not responsible to prove negative facts. Accordingly, the Tribunal held that the First Appeal Order does not deserve to be supported and therefore it is set-aside and the appeal is allowed.
In the present case, constitutional validity of Entry 25 of Schedule-VI to the Karnataka Sales Tax Act, 1957, pertaining to “Processing and supplying of Photographs, photo prints and photo negatives” was the subject-matter of the appeal. It was the third endeavour to resurrect the said entry, when on the first two occasions, the steps taken by the State were declared as impermissible. Even this time the HC has dumped the amendment as unconstitutional. However, the reasons advanced by the HC in all three rounds were different. While travelling through the historical facts which led to the issue at hand, we shall clear the whole controversy involved inasmuch as in respect of works contract levy of tax power of State Legislature is derived under Article 366 clause 29-A r/w Entry No. 54 list II of the Constitution and by virtue of Clause 29A of Article 366, the State legislature is now empowered to segregate the goods part of the works contract and imposed sales tax thereon. It may be noted that Entry 54, List II of the Constitution of India, empowers the State Legislature to enact a law taxing sale of goods. Sales tax, being a subject-matter into the State list, the State Legislature has the competency to legislate over the subject. In view of this legal position, the Apex Court comprising of three Judges undertook the journey of its own 15 cases and set-aside the HC judgment by observing that the HC has not dealt with the matter in its correct perspective and even not dealt with various facets of the issue and allowed the appeal of the State holding that Entry 25 of Schedule-VI of the Act is constitutionally valid. For detailed legal analysis, readers are advised to go through the entire text of the long judgment.
The revision application filed by the Commissioner was delayed by 175 days and prayer was made to condone it. No reasons were cited in the affidavit for the period in between 90 days of serving the order except for stating that there was a shortage of employees in the office and there was no permanent State Representative. The HC following the judgment of the Apex Court in the case of Postmaster General v. Living Media India Ltd. 2012 (3) SCC 563 held that the work of no Dept. can be left unattended only for the reason that there was a shortage of employees or that the officer was not posted in a particular post. Therefore, the delay in filing the revision went totally unexplained. Accordingly, the revision application praying of condonation of delay was rejected and revision too was dismissed as barred by time.
Accrual of right of appeal is the date of initiation of proceedings and not the decision itself. Right of appeal is a vested right and accrues to the litigant as and from the date lis commences. Such right is actually exercised when the adverse judgment is pronounced. Lis can be said to have arisen as soon as proceedings start and when the authority called the assessee for evidence. The lis cannot be said to have started merely on the filing of the return. The lis cannot be said to have arisen on issuance of mere notice because (i) the assessee could not accept the notice and there could be no objection from his side; (ii) the assessee would not have appeared to contest the assessment; (iii) the critical relevant date of the initiation of the proceedings and the decision itself. Therefore, following the Apex Court judgments the Tribunal held the intention of the Apex Court to make such observations was that lis is to be determined from the date when objection has been made by the party to the litigation.
2.	In the present case decided by the Punjab Value Added Tax Tribunal in the context of Section 62(5) of the PVT Act, 2005 which referred to the payment of 25% of the tax, penalty and interest. Earlier, it was taken that the appeal could be entertained on the payment of 25% of tax, penalty and interest. But it never referred, if the appellant was also to make the payment of 25% of the “additional demand.” Consequently, the present amendment to the section was brought on the statute book as a clarificatory provision so as to include 25% additional demand of tax, penalty and interest. It is in the context of the section, the above legal position was explained by the Tribunal and the case was decided in favour of the revenue.
Allahabad HC held that it was a settled position in law that the taxing statute was generally prospective in nature and if it has to be made retrospectively, it has to be specifically provided. The facts of the case related to the A.Y. 1997-98 (Central). Assessee dealt in manufacture and sale of electronic goods and was granted Eligibility Certificate (EC) under the provision of Section 4A of the U.P. Trade Tax Act, 1948. The first sale was made on 5-5-1997 under Notification No. 781 dt. 31-3-1995 issued u/s 8 of the CST Act, which entitled the assessee to exemption / rebate on the tax for the first 10 years of the production / sale. However, exemption or rebate in the rate of tax on any transaction of sale shall not exceed 5% of the sale price and it shall be as percentage of the rate of tax normally applicable under the U.P. Act. The Notification dt. 31-3-1995 was amended by another notification dt. 5-5-1997 thereby substituting the words “under the U.P. Act” by the words “under the Act”. Tribunal by its order impugned refused the benefit of exemption / reduction in tax to the assessee for the relevant year 1997-98 on the ground that the use of the word “U.P. Act” in Column 4 of Annexure-I to the Notification dt. 31-3-1995 appeared to be a clerical mistake and that in view of the subsequent amendment made by the Notification dt. 5-5-1997 the said mistake stood rectified which would be operative from 1-4-1995 itself. The HC held that the amendment to the Notification dt. 31-3-1995 brought about by means of the Notification dt. 5-5-1997 shall be effective from 5-5-1997 and would not apply retrospectively w.e.f. 1-4-1995 as held by the Tribunal. Accordingly, the revision was allowed.
In the present case, two points were for the consideration of the Punjab Value Added Tax Tribunal, viz. (i) Opportunity of hearing and (ii) Notice for imposition of penalty. As per section 61 of the PVT Act, 2005, opportunity of hearing is to be given before imposition of penalty. The penalty was imposed on 8-8-2012 and notice was issued on 29-8-2012. Thus, it was no notice in the eye of law after levying the penalty first. As regards reversal of input credit on transfer of stocks to branches, the assessee had not reversed ITC completely as per the provisions of section 19(3) of the Act. The Assessing Officer without giving proper notice, reversed the same and levied penalty on the assessee. The Tribunal held: as regards ITC on the capital goods, the AO did not give his opinion as to at what rate ITC was admissible upon the capital goods. Order passed thus completely lacks application of mind. Consequently, penalty was also set-aside and the AO was directed to decide the case afresh on both the above issues. Accordingly, the appeal was decided.
Hawkins Cookers Ltd. v. State of Punjab (2015) 50 PHT 189 (Pvt).
In writ petition filed before the Allahabad HC, the main grievance of the petitioner was that refund of the excess amount of tax of pre deposit amounted to ` 16.6 crore paid under protest in compliance of interim order of the Supreme Court and be application for rectification of mistake apparent on record has been rejected. The HC on examination of the case allowed the writ petition by holding that not passing an order of refund when the amount is found due to be refundable would amount to be judicial misconduct. The rectification application filed was rejected mechanically without application of mind, the same order too was set-aside. All in all, the refund was required to be granted by allowing writ petition within a period of 6 weeks from the date of production of a certified copy of the Order.
In order to constitute ‘sale’ three ingredients must be present i.e. (i) mutual consent between the parties competent to contract, (ii) transfer of property in goods and (iii) transfer of ownership along with valuable consideration. In the present case, goods were supplied as free of cost returned back after fitment. Questioned goods “Child parts” supplied as free cost to the appellant. Appellant contended that excise duty was leviable on the assessable value i.e. the value of ‘manufactured goods’ whereas sales tax was charged on the taxable value of goods against consideration. The appellant sent back such ‘Child parts’ by fixing it in automobile plastic component supplied back. No tax charged on the value of child parts. The Assessing Authority (AO) imposed tax on supply of such child parts by treating it as sale. First Appellate Authority remanded the matter back to the AO. Aggrieved with the remand order, the dealer filed the present appeal. The Tribunal in appeal placed reliance on the judgment in the case of Devidas Gopal Krishna And Ors; Commissioner of sales tax, U.P. v. Satya Industrial Corporation (1994) UPTC 1149 and observation of the Supreme Court in the case of M/s Moriroku UT India Pvt. Ltd. v. State of U.P. (2008) 15 VST 559 (SC) and held that no valuable consideration was received on supply of questioned goods “Child parts” received as “free of cost” from the buyer for fitments in the manufactured goods supplied by the appellant again to the buyer. No transfer in property in questioned goods passed from buyer to the appellant. Ownership remained with the buyer company which provided “free of cost” supply of question goods to the appellant. Insurance of such question goods was made at the end of the buyer company supplying it as free of cost to the appellant. Hence, on facts, tax deleted as imposed by the AO on supply of “child parts” by treating it as “sale”. Accordingly, appeal allowed.
In this case, Respondent intentionally withheld legitimate purchase tax due to be deposited as per the admitted turnover in the returns. There was delay in framing the assessment on the part of the Dept. Amount withheld whether can be recovered by enacting new law / provision after the expiry of period of limitation as prescribed in the law itself. The HC followed State of Punjab And Ors. v. Patiala Co-Op. Sugar Mills Ltd. and held in the negative.
12.	Whether “Surgical Cotton” commercially different and distinct product ?
In the present case, the fact was production of surgical cotton from raw cotton by process of transformation whether amounts to manufacture, was held in the affirmative and whether “Surgical Cotton” was commercially different and distinct product was held in the affirmative, in the context of Schedule Entry “Cotton including absorbent cotton wool 1.P” and whether liable to exemption of tax under Notification u/s 2(27) of the Rajasthan Sales Tax Act, 1994, also held in the affirmative.
Section 23(5) of the Delhi Sales Tax Act deals with the situation where a dealer fails to furnish returns in respect of any period by the prescribed date. In such eventuality, the Commissioner is mandated to, after giving the dealer a reasonable opportunity of being heard, make a best judgment assessment. Consequently after due notice and opportunity to the dealer a best judgment assessment was made on 26-3-1985 by the Assessing Authority whereby the petitioner was directed to pay a sum of ` 52,39,763 under the said act and by a separate order of the same date, the petitioner was required to pay a sum of Rs. 5,92,469 under the CST Act, 1956. However, in neither case was any interest levied by the assessing authority u/s. 27(1) of the said Act. The writ petition was directed against the order dt. 13-2-1994 passed by the Sales Tax Appellate Tribunal. The point in issue related to the chargeability of interest u/s. 27(1) where the petitioner did not file any return in respect of the year 1980-81. The petitioner had also not deposited any tax during the currency of that year. Provisions of section 23(5) were invoked and best judgment assessment framed where under petitioner was directed to pay a sum of ` 52,39,763 under the Delhi Sales Tax Act, and a sum of ` 5,92,469 under the CST Act, 1956.
2.	The expression “tax due” as appearing in section 27(1) of the Delhi Sales Tax Act to be read in relation to the provisions of section 21(3) thereof. Section 21(3) of the said act has clear reference to the furnishing of a return. Moreover, it has reference to the full amount of tax due from a dealer under the act “according to such return”. In other words, the tax which is set to be due u/s. 27(1) of the said act must be the tax which is due “according to the return”. If no return is filed then there could be no “tax due” within the meaning of section 27(1) of the act r/w section 21(3) thereof. The tax which is ultimately assessed is the tax which becomes due on assessment and if this tax so assessed is not paid even after the demand is raised then the dealer would be deemed to be in default and would be liable to pay interest u/s 27(2) of the said act. But till such tax is assessed no interest can be levied on such a dealer, who has not filed a return u/s 27(1) of the said act.
3.	In view of the above legal position, it is evident that the impugned order dt. 13-2-1994 is not in accordance with the Constitution Bench judgments of the Supreme Court i.e. J.K. Synthetics Ltd. v. CTO (1994) 4 PHT 450 (SC), Maruti Wire Industries Pvt. Ltd. v. STO (2001) 17 PHT 414 (SC) (FB) and State of Rajasthan v. Ghasilal AIR 1965 SC 1454.
In this article, an attempt has been made to analyse the some of the key proposals related to Customs Laws.
•	Proper Officer under Customs Department may serve SCN for recovery of duties not levied/ short levied for reasons other than that of collusion, wilful mis-statement or suppression of facts, within one year from relevant date1. In case the assessee pays duty with interest, SCN shall not be served.
Now, one proviso is proposed to be inserted to Section 28 (2) of the Customs Act, 1962 for non-imposition of penalty provided full duty along with interest is paid within 30 days from the date of receipt of SCN. Further, it is proposed that in such a case, the proceedings would be deemed to be concluded.
•	Further, in cases of short payment/non-payment due to collusion, wilful mis-statement or suppression of facts by the importer or exporter or agents or employees thereof and SCN is already issued, the noticee may pay accepted duty in full or part with interest and penalty @ 25% of the duty amount within 30 days from the date of receipt of SCN2. In such a case, the proceedings are deemed to be concluded for the accepted duty amount.
Now, in the above cases, it is proposed to reduce penalty of 25% of duty amount to 15% of duty amount.
•	In view of proposed amendment to penalty provisions, transitional provisions are proposed to be introduced. Accordingly, in cases where SCN is issued but Adjudication Order is not passed before enactment of Finance Bill, 2015, the proceedings would be deemed to be concluded if duty, interest and penalty @ 25% or 15% of duty amount respectively is paid in full within 30 days from the date of enactment of Finance Bill, 2015.
•	If any person deals with goods in a manner that the goods become liable for confiscation or any person acquires possession of or is in any way involved in dealing with goods such as handling, depositing, harbouring, keeping, concealing, selling or purchasing which that person knows or has reason to believe, are liable to confiscation, then such a person is liable for specified penalties3.
Rs. 5,000/-, whichever is higher.
•	Further, it is proposed that if duty alongwith interest on such improper import has been deposited within 30 days from the date of the communication of adjudication order, penalty shall be reduced to 25% of the penalty (i.e. effectively 2.50% of duty sought to be evaded).
•	Yet again, it is proposed that if duty alongwith interest on such improper export has been deposited within 30 days from the date of the communication of adjudication order, penalty shall be reduced to 25%. Of the penalty (i.e. effectively 2.50% of duty sought to be evaded).
•	Hitherto, Settlement Commission is given power to reopen completed proceedings if the same are connected with the case pending with Settlement Commission with the concurrence of the applicant and pass orders accordingly. The Settlement Commission is not allowed to reopen the case after expiry of 5 years from the date of application made to Settlement Commission.
•	Now, the power given to reopen the cases to Settlement Commission is proposed to be withdrawn.
All the above amendments would be effective from the date of enactment of Finance Bill, 2015.
•	A resident private limited company.
•	Now, with effect from 1st March, 2015, even a resident firm has the facility to apply for advance rulings4. The term “firm” means Partnership Firm and includes Specified Limited Liability Partnership (LLP), Sole Proprietorship and One Person Company.
•	With the aforesaid amendment, almost all business entities will be eligible to apply for the Advance Rulings.
Standard ad valorem rate of duty of excise is being increased from 12% to 12.5% for most of the items. Similarly, duty of excise is increased from 12% to 12.5% for goods covered by the Medicinal and Toilet Preparations Act, 1955. However, the Education cesses of 3% applicable on the duty amount are being exempted. Therefore, the effective rate of duty for most of the items would be 12.5% in stead of 12.36%.
There is no increase in the concessional rates of duties of 2% or 6%.
a.	Presently, if duty has not been paid due to reasons like fraud/collusion/wilful misstatement/suppression of facts or contravention of any provisions with an intention to avoid duty, then penalty equal to the amount of duty involved is leviable. However, if details regarding such transactions are available then penalty would reduce by fifty per cent vide Section Also, if duty liability along with applicable interest has been paid, before issuance of show cause notice (SCN), the penalty shall get reduced to maximum up to 25% of the duty.
b.	However, as per the proposed amendment, the availability of transaction in records will have no bearing on reduction of penalty. Moreover, in cases, where there is no involvement of factors like fraud, etc.; the penalty not exceeding 10% will be leviable. In such bona fide cases, if the duty along with interest, before issuance of SCN or within 30 days of SCN, no penalty would be leviable. In such cases, if the duty along with interest has been paid within 30 days of commnunication of the order, the penalty will get reduced to 2.5% of the duty amount.
50% reduction in penalty where details relating to transactions are available in specified records only for the period from 8th April, 2011 to the date of enactment of Finance Bill.
If Commissioner (Appeals), Appellate Tribunal or Court modifies Excise duty liability, penalty to be modified accordingly. Benefit of reduced penalties is proposed to be made available provided Excise duty, interest and reduced penalty is paid within 30 days from the date of receipt of the Order modifying Excise Duty liability.
Rs. 2,000 to Rs. 5,000.
The above changes shall be effective from the date of enactment of the Finance Bill, 2015 (The Bill).
a.	Presently, relevant date for the purposes of calculating time limit for recovery of duties is the date of filing return. However, the cases where return is filed belatedly are not covered. Now, it has been proposed that date of filing of return would be the relevant date irrespective whether the return was filed on time or belatedly. Moreover, in respect of interest not paid on duties, the relevant date is proposed to be the date of payment of duty.
b.	Self-assessed duty liability as per return which has not been discharged by the assessee can be recovered without issuance of show cause notice as per the proposed introduction of a new sub-section (16).
The above amendments to come into effect from the date of enactment of the Bill.
i.	Applicants other than Government Departments intending for registering themselves under Central Excise shall compulsorily have their Permanent Account Number (PAN) failing which No Registration Certificate shall be issued.
ii.	Existing temporary registrants other than Government Department shall apply for PAN based registration within 3 months failing which their temporary registration shall stand cancelled. Extension for time limit of 3 months can be provided by the jurisdictional authority for one month on the basis of reasons specified by the applicant. If the assessee makes application beyond 1 month then an opportunity of being heard shall be provided thereafter the jurisdictional authority shall pass an appropriate order.
d.	Registration Certificate within 2 days: It has been provided that post verification of documents and premise the Registration Certificate shall be issued by the DC/AC within 2 days instead of 7 days of receipt of duly completed online application form.
e.	Online Registration Certificate: Registration Certificate which is issued online shall be an adequate proof of registration. Applicants are now not required to take signature of issuing authority on the said Registration Certificate.
vii.	Authorisation by the Board of Directors or Partners or Proprietor for filing the application by a third party.
The authorised officer has been made responsible to verify the premises physically within 7 days from the date of receipt of application through online. If any error is found by the concerned authority or certain clarifications are required, the applicant shall rectify the same within 15 days from the date of intimation failing which registration shall stand cancelled. Also, the assessee would be given an opportunity to present his case against the cancellation and if the reasons provided are reasonable, the officer shall not cancel the registration.
If during physical verification it is found that the premise is non-existent, the registration shall stand cancelled. The applicant would also be provided an opportunity of being heard.
Earlier, if a registered person ceases to carry on the business he/she may de-register himself by physically submitting a declaration along with the Registration Certificate. However, now only filing of such application will suffice. If there are no dues pending against the person, the application for deregistration shall be approved within 30 days from the date of filing online declaration which shall be accordingly communicated to the assessee.
iv.	Where the factory has closed and there are no dues pending against the assessee.
The assessee shall also be provided a reasonable opportunity of being heard against the proposed cancellation by the AC/DC.
The above amendments shall come into effect from 1st March, 2015.
Rule 10 of the Central Excise Rules, 2002 provides for maintenance of daily stock account by every assessee having description of goods manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. Also, first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent. Now, assessees can maintain records in the electronic form provided that every page of the record shall be authenticated by a means of digital signature.
CBEC shall also specify conditions, safeguards and procedures to be followed by the assessee who wishes to preserve digitally signed records through notification.
With effect from 1-3-2015, Sub-rule (8) has been inserted under Rule 11 which lays down that invoice issued by a manufacturer under Rule 11 can be authenticated by means of a digital signature. However, if the duplicate invoice meant for transporter is digitally signed, then the hard copy of the duplicate invoice should be self-attested by the manufacturer. Also, the Board may, by notification, specify the conditions, safeguards and procedure to be followed by an assessee using digitally signed invoice.
Rs. 100 per day subject to a maximum of Rs. 20,000 for the period of delay in submission of each such return or statement shall be levied.
Similar late fees has also been prescribed for the delay in filing returns required to be filed by 100% EOUs under Rule 17(3).
The above changes are in effect from 1-3-2015.
Rule 12CCC of Central Excise Rules, 2002 empowers the Central Government to specify the restrictions if there is evasion of duty or to prevent evasion of duty. However, the rule provided that such measures could be imposed for manufacturer, first stage and second stage dealer or an exporter. Now, such restrictions can also be provided by the Central Government for registered importer, with effect from 1-3-2015.
a.	Rule 22 specifying the details to be furnished and audit of assessee are now been made applicable to importer who issues an invoice on which CENVAT credit can be taken also.
b.	Rule 25 of Cenvat Credit Rules, 2002 which prescribes the reasons whereby goods can be confiscated and penalty can be levied. It has been amended to include importers in its gamut.
c.	Importers who are issuing invoices need to prepare invoices as per Rule 11 of Central Excise Rules, 2002.
Central Excise (Removal of Goods at Concessional Rates of Duty for Manufacture of Excisable Goods) Rules, 2001 allows Manufacturer to receive goods for specified use at concessional rate of duty. Earlier, to avail the exemption a general bond with surety or security was to be submitted. Now, submission of letter of undertaking is also allowed in case of specified Manufacturers.
The case which is remanded back to the adjudicating authority for fresh adjudication, by a Court/Appellate authority/any authority, the same shall not be eligible for Settlement.
The above amendment will be effective post enactment of the Bill.
Section 23A of Central Excise Act, 1944 provides for the meaning of an applicant for the purpose of filing advance ruling application. The term “applicant” means a non-resident or resident, Indian or foreign company setting up joint venture in India.
Now resident firms shall also be eligible to apply for the advance ruling, as the term ‘applicant’ has been amended to include ‘resident firms’. Firms would include LLPs and sole proprietorship firms also.
Whether a firm is ‘resident’ or otherwise shall get determined in accordance with Income tax provisions.
a.	Time limit for availment CENVAT Credit on inputs and input services has been increased from 6 months to 1 year1 from the date of issuance of Cenvatable document.
b.	Now, CENVAT Credit on inputs and capital goods is available to a job worker if goods are directly sent to job worker on the direction of manufacturer or service provider2.
c.	The benefit of availment of CENVAT Credit on inputs as such or after being partially processed by a job worker is extended to include all subsequent job workers in a chain.
d.	The benefit of availment of CENVAT Credit on capital goods is available provided capital goods are sent “as such” to the job worker. The time lag allowed for to and fro of capital goods is increased to 2 years as against 180 days for non-reversal of CENVAT Credit.
e.	Henceforth, inputs and capital goods may be received at any place by manufacturer.
g.	Till now, definition of exempted goods4 and final products5 included only “excisable goods”. Therefore, CENVAT Credit was not allowed on inputs or input services used in or in relation to manufacture of exempted excisable goods6. However, now for the limited purpose of Rule 6 of CENVAT Credit Rules, exempted goods would include even non-excisable goods i.e. to say CENVAT Credit shall not be taken on input or input services used for manufacture of non-excisable goods7.
h.	Rule 12AAA of CENVAT Credit Rules, 2004 relating to restrictions to prevent misuse of provisions of Cenvat Credit is made applicable to importers as well.
i.	Till now, CENVAT Credit was recovered provided CENVAT Credit is availed as well as utilised wrongly8. However, now SCN may be issued for recovery of CENVAT Credit availed wrongly though not utilised.
In case of Partial RCM, CENVAT Credit is available on input services only when value of input services as well as Service tax is paid. Now, CENVAT Credit, in respect of Service tax payable by service recipient, is available on payment of Service tax and the same is delinked with payment for services made to service provider9.
The Finance Minister has reaffirmed and shown his commitment to introduce India’s most awaited tax reform, the GST, effective 1st April, 2016. The Constitutional Amendment Bill has already been introduced in the Parliament to this effect.
In fact, on the indirect taxes front, proposals are largely directed towards GST implementation like simplification of Excise duty and Service tax rates by removing Education Cess and Secondary & Higher Secondary Education Cess as well as increase in rate of Service tax to 14% and also visible thrust on e-compliances in line with GST expectations etc.
With the overall objective of preparing the economy for a smooth transition to GST, it is proposed to tax services at the increased rate of 14%. The enhanced rate shall not be subject to Education Cess. In indirect taxes, the FM has done away with the levy of education cess, which has been subsumed into the enhanced rate of 14%.
Thus, the Effective service tax rate is increased from the existing rate of 12.36% to 14%.
The change in rate of Service Tax would be effective from a date to be notified after the enactment of the Finance Bill, 2015. Till such time the levy of existing rate of Service Tax of 12.36% including ‘Education cess’ and ‘Secondary & Higher Education cess’ shall be continued to be levied.
With the objective of financing and promoting Swachh Bharat initiatives, Swachh Bharat Cess is likely to be imposed on all or any of the taxable services as may be notified at the rate of 2% of the value of taxable services.
This Cess shall be levied from a date to be notified by the Central Government in this regard, most probably this cess shall be levied on some high-end services which can support the Swachh Bharat Abhiyan of the Prime Minister.
•	Service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places.
•	All services provided by the Government or local authorities to business entities.
These proposed changes shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.
o	A civil structure meant for use other than for commerce, industry, etc.
o	A structure meant predominantly for use as an educational, clinical, or an art or cultural establishment.
o	A residential complex predominantly meant for self-use or the use of their employees.
•	Services by way of making telephone calls from a public telephone (i.e. departmentally run, guaranteed public telephone and free telephone at airports and hospitals).
o	Exemption on GTA services provided to exporter for transportation of goods from Goods transport services for transport of organic manure by vessel, rail or road container freight station/inland container depot/from place of removal to land customs station.
All the above new exemptions shall come into effect from the 1st April, 2015.
(i) Any reimbursable expenditure/cost incurred and charged by the service provider in the course of providing taxable services, except in prescribed conditions.
(ii) Any amount retained (viz. in addition to fee/commission) or discount received by lottery distributor or selling agent (i.e. difference between face value of lottery and procurement price of ticket).
The above amendments would be effective from enactment of the Finance Bill, 2015.
b.	Inclusion of reimbursable expenses in the value of taxable services?
To overcome the decision of the Hon’ble Delhi High Court in Intercontinental Consultants, the definition of ‘consideration’ in Explanation to Section 67 has been suitably amended.
Delhi High Court in the case of Intercontinental Consultants & Technocrats (P) Ltd vs Union of India  28 Taxmann.com 213 (Delhi) has considered whether out of pocket expenses or reimbursable expenses incurred by the service provider in the course of providing the taxable services has to be included in the value of taxable services. The petitioner filed a writ petition before the High Court for quashing the show cause notice issued by the Service Tax Department for recovery of Service Tax on amount received as reimbursement of expenses such as hotel accommodation, travelling etc. under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.
Delhi High Court decided in favour of the Assessee, but the Department is in appeal before the Supreme Court against the decision of the High Court which is pending for disposal.
Thus, after the amendment in the definition of ‘consideration’ in Explanation to Section 67 there is no doubt that any expenditure incurred by the service provider for providing any taxable services has to be included in the value of taxable services unless specifically excluded and Service Tax would be chargeable on the total value including the reimbursable expenses incurred by the service providers.
However, the inclusion of reimbursable expenses for the period prior to this amendment is yet to be decided by the Hon’ble Supreme Court.
Hitherto, the term “Government” has not been defined in the Act or the Notification. This has given rise to interpretational issues. To address such issues, definition of the term “Government” is now being incorporated in the Act to mean Central Government, State Government, Union Territory and its departments. But it would not include entities whose accounts are not required to be kept under Article 150 of the Constitution.
Definition of the term ‘service’ amended to include services provided by chit fund foreman for conducting a chit and distributor/selling agent of lottery for organising/conducting a lottery.
Effective 1st April 2015, uniform abatement of 70% is prescribed for transport by rail, road and vessel with a condition of non-availment of CENVAT credit on inputs, capital goods and input services. As a result, these services would be taxable at 30% of the service value.
In works contract valuation provisions, effective from 1st October 2014, there will be two slabs for computing taxable value of 40% and 70% instead of the existing three slabs of 40%, 60% and 70%.
Effective 1st April 2015, service tax is payable on 60% (instead of 40 per cent) of service value in case of air transport services of passenger in other than economy class.
Effective from 1st April 2015, Abatement is being withdrawn from chit fund service. Consequently, Service Tax shall be paid by the chit fund foremen at full consideration received by way of fee, commission or any such amount. They would be entitled to take CENVAT Credit.
o	If the service tax amount gets reduced in any appellate proceeding, then penalty amount shall also stand modified accordingly, and benefit of reduced penalty (25% of penalty imposed) shall be admissible if service tax, interest and reduced penalty is paid within 30 days of such appellate order.
o	50% of the Service tax amount where true/complete details of transactions are available.
o	25% of the Service tax amount where value of taxable service does not exceed ` 60 lakhs and payment is made within 90 days from the date of communication of the order.
The existing provision for waiver of penalty in cases where assessee proves the reasonable cause for failure to pay service tax stands withdrawn (effective from enactment of the Finance Bill, 2015).
o	In respect of cases covered by sub-section (4A) of section 73, if no notice is served, or notice is served under sub-section (1) of section 73 or proviso thereto but no order has been issued under sub-section (2) of section 73, before the date of enactment of the Finance Bill, 2015, penalty shall not exceed 50% of the service tax amount.
Appeal against the order of Commissioner (Appeals) in matters relating to rebate of Service tax shall be filed with Central Government and not Tribunal, this shall be effective from enactment of the Finance Bill, 2015.
o	In case of aggregator model, foreign aggregator of service can appoint a person representing the aggregator or any other person in India for the purposes of payment of service tax (effective 1st March 2015).
o	Provisions for issuing digitally signed invoices have been added along with the option for maintaining the records in electronic form and their authentication by means of digital signatures.
o	Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Currently, these are taxed under partial reverse charge mechanism.
o	Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services.
Accordingly, Service Tax in respect of mutual fund agents and mutual fund distributors services shall be paid by assets management company or, as the case may be, by the mutual fund receiving such services. In respect of sub-agents of lottery, Service Tax shall be paid by the distributor or selling agent of lottery.
These amendments would be effective 1st April, 2015.
o	With respect to service tax to be paid by the service recipient, credit can be claimed on depositing the same with the Government Treasury.
o	With respect to service tax charged by the service provider, credit can be claimed immediately on receipt of invoice. However, credit to be reversed if payment not made within a period of three months which can be re-availed on making payment.
These amendments would be effective 1st April 2015.
Further, the time limit for availment of CENVAT credit on input services is increased from six months to one year from the date of issuance of any of the specified documents.
o	Effective 1st March 2015 the scope of advance ruling is extended to cover all resident firms such as one person company, sole proprietor, partnership firm, etc.
o	Effective from the date of enactment of Finance Bill, 2015 the recourse to settlement shall not be available in cases where proceedings are referred back in any manner to the adjudicating authority for fresh adjudication.
As per section 263 of the Income-tax Act, 1961 (the “Act”), the Commissioner (and the Principal Commissioner on or after 1st June, 2013) have revisionary powers in respect of orders passed by the Assessing Officer (AO) if the former considers the impugned order “erroneous in so far as it is prejudicial to the interests of the revenue”. The revisionary powers include passing of order enhancing or modifying or cancelling the assessment and directing a fresh assessment. For invoking the provisions of this section, two conditions need to be satisfied as held in the case of Malabar Industrial Co. Limited v. CIT  243 ITR 83 (SC). These two conditions are as follows: (i) order must be erroneous; and (ii) order must be prejudicial to interests of revenue.
Section 263 has been subject matter of much controversy as regards when an order can be said to be erroneous and whether such error has resulted in the order being prejudicial to the interests of the revenue.
The reason for this amendment, as stated in the Memorandum explaining provisions of Finance Bill, 2015 (the “Memorandum”) is to provide clarity on the issue –  371 ITR (St.) 292, 342.
Clause (a) of Explanation 2: This clause provides that section 263 can be invoked and an order can be revised if it is passed “without making inquiries or verification which should have been made”. Judicial opinion on whether lack of enquiry by AO alone constitutes sufficient cause for invoking revisionary powers under section 263 is divided. In CIT v. Vikas Polymers  194 Taxman 57 (Del.) (HC), the Delhi High Court held that mere lack of inquiry by the AO is not sufficient for revision under section 263. Similarly, in Institute of Chartered Accountants of India v. DIT  136 TTJ 548 (Del.) (Trib.), it was held that non-examination of an issue by AO does not, per se, make the assessment order prejudicial to interest of revenue for revision.
However, with the insertion of this clause (a), this position is now sought to be reversed and the Legislature seeks to affirm the ratio in Anil Kumar v. ACIT  147 Taxman 5 (Mag.) (Del.) (Trib.) that AO was not justified in accepting gifts without making further enquiry about creditworthiness of donors as well as source of funds making revision under section 263 justified.
The proposed amendment gives power to the Commissioner or the Principal Commissioner to sit in judgement over the adequacy of the enquiries or verification which the AO has made. In Salora International Ltd. v. Addtl. CIT  2 SOT 705 (Delhi) (Trib.), it was held that merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by AO while making assessment/assessment order cannot be declared to be erroneous and prejudicial to interest of revenue. In my view, with effect from 1st June 2015, the ratio this decision may not be good.
An order allowing a particular deduction/claim of an assessee after verification of the AO may still be open to revision under section 263 if the Commissioner or the Principal Commissioner opines that verification which ought to have been made by the AO has not been so made. While the provisions of section 263 did not originally visualize substitution of judgement of the AO with that of the Commissioner as held in Antala Sanjaykumar Ravjibhai v. CIT  135 ITD 506 (Rajkot) (Trib.) and Manish Kumar v. CIT  134 ITD 27 (Indore) (Trib.), the new amendment, if enacted, would, in my view, have this effect.
For instance, an order under section 143(3) is to be passed by the AO “after hearing such evidence as the assessee may produce and such other evidence as the AO may require on specified points, and after taking into account all relevant material which he has gathered”. But, even after doing so and after proper application of mind by the AO, the order cannot be said to be immune from revision as the scope of further enquiry/ verification may not, in many cases, be ruled out which may be a subjective matter. To my mind this clause would bestow on an administrative authority in exercise of revisionary oversight jurisdiction, powers usually vested in an appellate authority under appellate jurisdiction in a fiscal law.
Clause (b) of Explanation 2: As per this clause, an order shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, it is passed allowing any relief without inquiring into the claim.
In Bharat Overseas Bank Ltd. v. CIT  152 TTJ 546 (Chennai) (Trib.), it was held when the impugned order was silent on the claim made by assessee, and allowed such claim, without any discussion, such an order was erroneous and prejudicial to the interest of revenue. This decision is sought to be affirmed with clause (b).
It is important to note that the term “relief” has been used many times in the Act but not defined. Every deduction or exemption availed by an assessee would in a general sense be relief but whether the Legislature has sought to include the same under this clause (b) may be a debatable issue. This is because the term “relief” is used in contradistinction with the terms “exemption”, “deduction” etc. at various places in the Act. In my opinion, even if a view is taken that the term “relief” does not cover exemptions and deductions, non-verification of such relief may satisfy the requirements of clause (a), and hence, the impugned order may even otherwise be open to revision under section 263.
It is often seen that during scrutiny assessments, the AO calls for details regarding major items and passes an order based on his verification of these items while omitting the insignificant ones. After the amendment, in my view, even such orders may be revised by the Commissioner or the Principal Commissioner in so far as these unverified items.
This clause can be a major cause of litigation for assessees in whose cases assessment orders are revised under section 263 because no details were called for by the AO.
But, what is the position if the AO after calling for relevant details accepts the contention of the assessee but does not deal with the issue in the assessment order? This issue was considered by the Bombay High Court in Idea Cellular Ltd. v. DCIT & Ors.  301 ITR 407 (Bom.) (HC) and in CIT v. Fine Jewellery (India) Ltd, ITA No. 296 of 2013 dated 3rd February, 2015 wherein it was held that the fact that assessment order is silent on a point does not mean that there is no application of mind by AO if he has raised a query during the assessment proceedings and assessee has replied, and revision under section 263 was not permissible under these circumstances. In my view, this position continues to hold good even post the amendment.
Clause (c) of Explanation 2: As per this clause, any order which has not been made in accordance with any order, direction or instruction issued by the Board under section 119 can be subject matter of revision under section 263. It is settled law that the orders, directions and instructions issued by the Board are binding on the AO. Therefore, it is now proposed to be provided that orders of AO which are in violation of such orders, directions and instructions would be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue.
Under section 119, the Board may also issue directions etc. which are in favour of the assessee. One consequence of this amendment could be that failure to follow such directions which are favourable to the assessee could also satisfy the requirements of this section after the amendment takes effect. This is because vide the proposed Explanation 2, the Legislature seeks to widen the meaning of expression “erroneous in so far as it is prejudicial to the interests of the revenue” and does not make a distinction between direction etc. which are favourable to the assessee and the ones which are not.
The question that arises is whether the proposed amendment can be read in this manner and revision of orders under section 263 justified even in cases where the AO has passed an order ignoring a direction favourable to the assessee. In my view, the answer to this question would be no as such an interpretation would not satisfy condition (ii) mentioned in the Supreme Court decision of Malabar Industrial Co. Limited (supra).
Also, a situation may arise as to whether an order can be revised under this section if it is contrary to a Board direction but in line with a High Court or Supreme Court judgement. It is now settled that instructions or circulars which are contrary to the law declared by Supreme Court or High Court cannot override judicial declaration of law as was held in the case of Hindustan Aeronautics Limited v. CIT  243 ITR 808 (SC). Therefore, in my view, if the order of the AO is in accordance with the decision of High Court or the Supreme Court, then revision under section 263 should not be permissible notwithstanding that that order is contrary to a Board direction, instruction or order. This view has also been taken by the Calcutta High Court in the case of Bhartia Industries Ltd. v. CIT  353 ITR 486 (Cal.), and in my view, continues to be good law.
Clause (d) of Explanation 2: This clause proposes to give to the Commissioner or the Principal Commissioner the power to exercise revisionary power if an order has not been passed in accordance with any decision of the jurisdictional High Court or Supreme Court which is prejudicial to the assessee whether such decision is rendered in the case of the assessee or any other person.
This clause is applicable only when an order has been passed in ignorance of a Supreme Court decision or a jurisdictional High Court decision. The amendment does not seek to cover situations wherein the AO passes an order in ignorance of a non-jurisdictional High Court decision.
A question arises as to whether an order can be revised under section 263 if subsequent to the passing of such order, there is a contrary decision of the jurisdictional High Court or the Supreme Court on a particular issue. The assessee may contend that if a particular decision is not available for consideration of the AO, it is impossible for him to pass his order “in accordance with” such decision. However, in this regard, it is also important to note the decision in CIT v. Dr. K. Ramachandran  139 Taxman 320 (Mad.) (HC) wherein it was held that “record” would mean record which was available to the AO at the time of passing of assessment order, and would include records available with the Commissioner at time of passing of order under section 263. A similar view was taken in Star India Limited v. Addtl. CIT  14 ITR (T) 106 (Mum.). On the basis of these decisions, in my view, revision under section 263 may be permissible even if subsequent to the AO’s order, a Supreme Court decision or a jurisdictional High Court decision is rendered deviating from the position taken by the AO.
The amendment is proposed to take effect from 1st June, 2015 i.e. on or after this date, the Commissioner or the Principal Commissioner, as the case may be, would have the enhanced powers under this section subject to sub-section (2) and sub-section (3). In my view, this Explanation 2 should also apply to orders of AO which are passed before 1st June, 2015.
Though the intended reason for the new Explanation is to “provide clarity”, it has substantially enhanced the power vested in the Commissioner and Principal Commissioner under this section, and such enhanced powers, in my view, would lead to heightened litigation against the revision orders.
A corresponding amendment could also have been made in section 264 to expressly provide assessees the benefit of revision due to subsequent decisions of higher courts. However, the assessees should still be entitled to the same in light of the Gujarat High Court decision in Parshuram Pottery Works Co. Ltd. v. WTO  100 ITR 651 (Guj.) (HC).
Under the existing provisions of section 151, the AO is required to obtain sanction before issuance of notice under section 148. The authority from which sanction is to be obtained depends on (i) whether scrutiny under section 143(3) or under section 147 has been made earlier or not, (ii) whether notice is proposed to be issued within or after four years from the end of relevant assessment year, and (iii) the rank of the AO proposing to issue notice.
The existing section 151 has been sought to be replaced by a new section 151 which provides that for issuance of notice under section 148 within a period of up to four years from the end of relevant assessment year, the approval of Joint Commissioner shall be required and that of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner if the issuance of notice under section 148 is beyond four years from the end of relevant assessment year.
The new provisions introduced vide Clause 35 of the Finance Bill, 2015 seek to do away with two of the existing abovementioned three criteria. After the enactment of this section, the only criteria that would need to be considered, is the time within which the assessment is sought to be reopened under section 147. If the reassessment is proposed within four years, the approval of Joint Commissioner would be required and in other cases i.e. after four years, the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner shall be required.
The amended provision reverts to the position prevailing prior to 1st April 1989 where the competent authority for according approval for reopening of assessment depended only on the number of years elapsed from the assessment year sought to be reopened. That position was altered by the Direct Tax Laws (Amendment) Bill, 1987 –  168 ITR (St.) 301, 330 – and is now proposed to be done away with.
The reason for this amendment as stated in the Memorandum is to bring simplicity in the provision –  371 ITR (St.) 292, 340. However, one effect of this amendment is that, now sanction would be required even if the assessment is proposed to be reopened within a period of four years even when no assessment under section 143(3) or under section 147 had been made earlier. This is a marked change from the existing provision wherein no prior sanction is required if the assessment is sought to be reopened within four years and no assessment either under section 143(3) or under section 147 had been made for that year.
This amendment is proposed to take effect from 1st June, 2015.
Thus, if the sanction under section 151 is obtained and notice under section 148 is issued before this date, the existing provisions would govern the case. Similarly, for sanction obtained and notice under section 148 issued on or after this date, the substituted provisions would govern the case.
However, a question may arise as to the position wherein the sanction is obtained before 1st June, 2015 and notice under section 148 issued after this date. Take for instance the case of ABC Limited where no assessment either under section 143(3) or under section 147 is earlier made for Assessment Year 2009-10 and the AO proposes to reopen the assessment on 29th May, 2015 (last working day of that month). As per the existing provisions of section 151(2), the AO (lets assume the Assistant Commissioner) is required to obtain sanction of the Joint Commissioner before issuance of notice under section 148. Therefore, if the notice is issued on 29th May, 2015 itself, the notice would be valid (subject to satisfaction of other conditions such as “reason to believe” etc.) as sanction is duly obtained from the appropriate authority as on the relevant date.
Now one needs to analyse as to whether the reopening would be valid if after recording his reasons on 29th May, 2015 and sending the same to the Joint Commissioner for approval on the same day, the sanction is obtained on 1st June, 2015 and the AO issues the notice thereafter. In such a case, at the time of recording reasons and at the time of sending the case of approval, the proper authority for obtaining sanction was the Joint Commissioner. However, at the time of issuance of notice, due to amended provisions, the appropriate authority for obtaining sanction is changed to Principal Chief Commissioner/ Chief Commissioner/ Principal Commissioner/ Commissioner. Whether in such a case, the impugned notice can be said to be invalid for want of sanction from appropriate authority?
Thus, with effect from 1st June, 2015, there is a provision in the statute which prohibits issuance of notice under section 148 without the sanction of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner after expiry of four years from the end of the relevant assessment year. The requirement of sanction is with respect of date of issuance of notice under section 148, and hence, in my view, the law as on such date should be considered for examining whether appropriate sanction has been obtained or not. Therefore, the impugned notice in the instant case should not be said to be valid.
Though this amendment is being brought in to bring in simplicity in matters of obtaining sanction for reopening cases and is for the benefit of the revenue, it also has the effect of protecting the assessee from needless harassment even in cases where detailed assessment has not been earlier made and reopening is proposed within four years by mandating the AO to obtain prior sanction even in such cases.

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