Income arising to NR from activities not related to its PE in India isn't taxable
IT/ILT : Where revenue did not challenge Tribunal's finding that Indian subsidiary of assessee-company only constituted its service PE in India in first round of litigation, it could not challenge consequential assessment order passed by Assessing Officer raising a new plea that Indian subsidiary constituted not only service PE but also fixed place PE of assessee in India
IT/ILT: Where a foreign enterprise carries on business in India, it is only that much of profits can be included in taxable income of foreign enterprise which are attributable to business carried on by it in India through its permanent establishment
HC orders partial payment of tax in installments considering the financial condition of assessee
IT : Considering assessee's request that its business was not good and it was not in a position to pay 50 per cent of total demanded tax as directed by Assessing Officer, assessee was directed to pay 25 per cent of total demanded tax in two instalments
HE CBEC invites the attention of all Chief Commissioners to the decision of the Supreme Court in Super Synotex India Ltd. - 2014-TIOL-19-SC-CX on the issue of abatement of sales tax under an Abatement Scheme where the assessee was allowed to retain 75% of the sales tax collected from the buyer and was required to deposit only the remaining 25% with the State Government. Under the circumstances, the Supreme Court held that after 01.07.2000 i.e. under the transaction value regime, 75% of the sales tax retained by the assessee would form part of the assessable value.
The Board states that this is an important judgment on the issue and may be brought to the notice of the trade and the assessing officers for finalisation of similar cases.
MUMBAI, SEPT 18, 2014: THE appellant imported eight consignments of plant and machinery relating to acrylic fibre/polymerization/extrusion during October, 1994 to September, 1995. The said goods covered by six Bills of Entry were cleared and kept in a Bonded Warehouse while the goods covered by two other Bills of Entry were in docks area. Later on, intelligence was received that the appellants are required to pay, to the supplier, in addition to the invoice value of the said plant and machinery, certain amounts relating to the technical knowledge fee.
A SCN came to be issued but the same was dropped by the Commissioner on the ground that the goods are meant for 100% EOU and the warehousing period for 100% EOU is yet to be over. It was also noted that though the amount for technical knowhow fee is required to be paid, no such remittance was made so far.
In Revenue appeal, the matter was remanded by the Tribunal.
During the adjudication process in 2006, the appellant submitted a letter to the Commissioner of Customs relinquishing the title of the goods. The adjudicating authority accepted the relinquishment in respect of the two Bills of Entry wherein the goods were not cleared from the warehouse and were lying in the docks area. However, in respect of the remaining six Bills of Entry the request for relinquishing the title was rejected. A duty amount of Rs.7,15,28,985/- was confirmed u/s 68 of the Customs Act, 1962 r/w s.72 of the said Act. In addition, the appellants are held liable to pay interest on the warehoused goods under Section 61 of the Customs Act, 1962 after expiry of 90 days from the initial warehousing period till the date of payment. The plant and machinery was confiscated under Section 111(m) as the declared value was enhanced keeping in view the proportionate technical knowhow fee in respect of plant and machinery imported. A penalty of Rs.25 lakhs was also imposed on the appellant.
Before the CESTAT, the appellant submitted that since they had relinquished the title as per letter dated 14.3.2006 and it is not under dispute that the goods have not been cleared for home consumption, the relinquishment of the goods is in order and as per the said proviso they are not liable to pay any duty.
The appellant inter-alia placed reliance on the Board Circular 3/2003-Cus dated 14.01.2003 and decision in RPG Cables Ltd vs CC (Imports), Bombay - 2007-TIOL-431-CESTAT-MUM dated 1.3.2007 to support their contention.
The AR submitted that once the warehousing period is over as per Section 72 of the Customs Act, 1962 the goods are deemed to be improperly removed from warehouse and, therefore, the goods cannot be considered as warehoused goods; that since the goods are not warehoused goods, proviso to Section 68 of the Customs Act, 1962 is not applicable at all; that the said proviso is applicable only for the warehoused goods; that in the case of goods improperly removed from the warehouse there is no question of permitting clearance for home consumption and hence the argument that the appellant can relinquish the title before clearance of goods for home consumption is irrelevant in the present situation. The following case laws were relied upon to buttress the Revenue stand the appellants are required to pay the duty, interest and penalty as imposed under the impugned order -Kesoram Rayon 1996 (86) ELT 464 (SC), Videocon International vs Union of India 2003 (155) ELT 25 (Bom); Commissioner of Central Excise vs Decorative Laminates (I) Pvt Ltd 2010 (257) ELT 61 (Kar) & PSI Data Systems Ltd vs Assistant Commissioner of Customs, Bangalore - 2004 (163) ELT 302 (Kar).
The Bench noted that the goods were warehoused during the period October 1994 to September 1995 and after extracting the provisions of sections 61, 68 & 72 as they were amended over a period of time, the Bench observed that the facts of the present case were covered under clause (b) of section 72 of the Customs Act, 1962; that in terms of s. 72(1)(b) any warehoused goods not removed from a warehouse at the expiration of the period permitted under Section 71 are considered as goods improperly removed and the owner of such goods is required to pay, the full amount of duty chargeable together with all penalties, rent, interest and other charges payable in respect of such goods; that 1st proviso to Section 68 introduced w.e.f. 14.5.2003, provides for relinquishment of title of warehoused goods at any time before clearance of goods for home consumption; that Section 72 (1)(b) does not stipulate filing of Bill of Entry for payment of duty and that since the goods are considered as improperly removed from the warehouse, the same cannot be considered as warehoused goods.
Thereafter the Bench visited the ratio of the various decisions cited by both sides and concluded thus -
++ A combined reading of the judgments of the Hon'ble Supreme Court, Bombay High Court and two cases of the Hon'ble Karnataka High Court it is clear that once the warehousing period has expired, the goods are deemed to be improperly removed from the warehousing and cannot be considered as warehoused goods and the appellants are required to pay duty under Section 72(1)(b) of the Customs Act, 1962 irrespective of the fact that they want to abandon or relinquish title of the goods. Accordingly we do not find any merit in the appeal.++ In this case the appellant has sent a letter for relinquishing title of the goods after more than ten years of the expiry of the warehousing period. Even when the letter for relinquishing the title was sent, the appellants have not made payment of rent, interest and other charges and penalties. The second proviso to Section 68 of the Customs Act, 1962 which was introduced with effect from 18.4.2006 also provides that relinquishment shall not be allowed where offence appears to have been committed. In this case, in the impugned order, goods have been held to be liable for confiscation under Section 111 (m) of the Customs Act, 1962 and are confiscated.
The appeal was dismissed.
AS per Rule 6(6) of the CENVAT Credit Rules, 2004, the provisions of sub-rule (1), (2), (3) and (4) were not applicable in case the excisable goods removed without payment of duty cleared to a unit in SEZ. [Exempted and dutiable goods - obligations]
This was amended by Notification No. 50/2008 - CENT dated 31.12.2008 to stipulate that these provisions will not apply to goods cleared to a unit in SEZ or to a developer of SEZ for their authorized operations. [Developer was added]
So, the confusion about clearances to SEZ developers was sought to be put to an end. But things don't end like that in Revenue. Board by a private letter in F.No.267/52/2008-CX dated 7/1/2009, clarified that the amendment was prospective and would be applicable only from the date of the notification. So, the period prior to 31st December 2008, was a happy issue for dispute.
In a stay application reported by us in 2009-TIOL-1096-CESTAT-BANG., the Bangalore CESTAT held that the amendment was retrospective. But the Delhi Bench headed by the President did not agree in 2009-TIOL-1567-CESTAT-DEL and referred the matter to a Larger Bench. The Larger Bench headed by the same President held that a reference cannot be made to the Larger Bench based on a stay order and so the Larger Bench returned the matter to the Division Bench. -2010-TIOL-1841-CESTAT-DEL-LB.
Any way much murky water has flowed under the tricky bridge and this matter has almost reached finality with the Tribunal and a couple of High Courts holding that the notification was clarification and so had retrospective effect.
These are some of the judgements:
1. UOI vs SAIL - 2013-TIOL-384-HC-CHATTISGARH-CX2. Sujana Metal Products - 2011-TIOL-1173-CESTAT-BANG3. Ultratech Cement - 2014-TIOL-1506-CESTAT-MUM
But the Revenue is not prepared to accept these verdicts or reason and have appealed to the Supreme Court.
In a recent judgement, the Karnataka High Court also held that the amendment has retrospective effect. Obviously, they will appeal against this decision also
Whether HC has discretion not to exercise its judicial review powers in writ petition filed by assessee, when conduct of assessee himself is tainted and doubtful - YES: HC
THE issue before the Bench is - Whether High Court has the discretion not to exercise its judicial review in the writ petition filed by the assessee , when the conduct of the assessee himself is tainted and doubtful. And the verdict goes against the assessee.
Facts of the case
The assessee, a famous Bollywood film producer, filed his Return of Income for the AY 1990-91, declaring a loss on account of film – ' Shehzaade ' produced by him. In his Return of Income, the assessee had disclosed his address in Mumbai. The AO served notices u/s 143(2) on several dates
which were returned unserved by the postal authorities. After investigation, it was known that the assessee had settled in Dubai and accordingly, the AO passed a best judgment assessment on 19th March, 1993. The assessee claimed that he came to know of this assessment order in 2003 from the Tax Recovery Officer and obtained a copy of the order on 5th January 2004. In July 2004, the assessee filed a revision application u/s 264 challenging the assessment order with the argument that since the assessment order was received by the assessee in 2004, this application was within the limitation period. The Commissioner vide its order dated 30th March, 2006 had refused the application stating that it was time barred as the assessment order was communicated to the assessee on April 1st 1993 and a xerox copy of the acknowledgment received from the postal authorities was also shown to the assessee . Aggrieved, the assessee filed this writ petition challenging the Commissioner's order in 2006. The counsel of the assessee submitted that at the stage of admission of the Petition, Revenue was not able to satisfy the Court that the original assessment order dated 19th March, 1993 was served upon the assessee by failing to produce the original copy of the postal acknowledgment. The counsel argued that since the assessee was in Dubai, the notice was never served and the assessee obtained a copy of the assessment order only in 2004.
The the counsel for the Revenue argued that this Court should not exercise its extra ordinary jurisdiction under Article 226 of the Constitution of India to interfere with the order dated 30th March, 2006 in view of the assessee's conduct
Having heard the parties, the High Court held that,
Suppression of facts
++ this submission is not acceptable for the reason that it was an order passed at the stage of admission on a prima facie view. Therefore, at the stage of final hearing, the matter cannot be closed on the basis of observations made at the time of admission. It is incumbent upon the assessee to approach the Court with utmost good faith and make complete disclosure in the Petition while seeking relief from this Court. It is not open to an assessee seeking to invoke writ jurisdiction to indulge in suppresso veri suggesto falsi . The obligation of the assessee in approaching the Court for relief under Article 226 of the Constitution of India is to make candid disclosure about all the material facts leading to the Petition;
++ in the Petition, no mention has been made of when the attachment of the film was done by the Revenue. This attachment would have been fatal to the marketability of the film 'Shehzaade'. Therefore, knowledge of the above attachment could be attributed to the assessee as the film laboratory would be storing the film as agent of the assessee. Besides the aforesaid facts not being stated in the Petition, the assessee also does not mention the fact that the impugned order dated 30th March, 2006 does record that the xerox copy of the postal acknowledgment was attached to the same. In case, the assessee was served with copy of the impugned order without the xerox copy of the acknowledgment card issued by the postal authorities, then in the normal course, a demand for the same would have been made with the Revenue before filing of this Petition. These facts find no mention in the Petition which proceeds impliedly on the basis that the copy of the order dated 19th March, 1993 was received by the assessee only on 5th January, 2006. On the above ground alone, the assessee is not entitled to any relief;
Delays amounts to constructive acceptance
++ a copy of the postal acknowledgment has been annexed to the reply. Assessee has not filed any affidavit in rejoinder, disputing the acknowledgment which has been annexed to the affidavit in reply. However, the Counsel appearing for the assessee did contend before us that the same does not bear assessee's signature though no affidavit in rejoinder disputing the signature has been filed by the assessee. It is only the assessee who can dispute this signature on the postal acknowledgment. Therefore, it is clear that the assessee has chosen not to take any proceeding against the Assessment Order dated 19th March, 1993, after it was served upon him on 1st April, 1993. This delay of close to 11 years in filing the Revision Application itself indicates the fact that the assessee had accepted the Assessment Order dated 19th March, 1993. Therefore, no fault can be found with the impugned order dated 30th March, 2006 passed by the Commissioner of Income Tax;
Conclusion
++ we find that the issue before the Commissioner of Income Tax was whether or not the Revision Application filed against the order dated 19th March, 1993 was within time. The averments of the Petition before the Commissioner of Income Tax and also before us that he received the order dated 19th March, 1993 only on 5th January, 2004, is in the face of the xerox copy of the postal acknowledgment given by the postal authorities, evidencing the receipt of the order by the Petitioner as fast as back 1st April, 1993. Thus, on the face of it, the Revision Application as filed, is hopelessly time barred. Although the Petitioner's submission that the issue of jurisdiction can be raised at any time cannot be disputed, the issue of examining the correctness of the order dated 19th March, 1993 does not arise as the Revision Application fails in the threshold requirement of the time within which it may be filed. The Petitioner before us made much song and dance about the Assessment Order dated 19th March 1993 being passed without any notice being served upon him. The Petitioner after filing his Return of Income for the Assessment Year 1990-91 and giving a particular address therein, makes himself unavailable at that address. Nor does the Petitioner inform the Respondent Revenue of the address where communication relating to his Return of Income for the Assessment Year 1990-91 could be sent. On the aforesaid facts, it comes from the Petitioner that the absence of notice being served upon him, the entire proceedings are bad in law. In exercise of our power of judicial review, we are concerned with the decision making process and if no fault can be found with it, we will not interfere, unless of course the order is perverse. In the present facts, we do not find that the impugned order dated 30th March 2006 of the Commissioner of Income Tax perverse or suffering from any flaw in the decision making process. Besides, we find that the conduct of the Petitioner as pointed at above itself would persuade us from interfering in our writ jurisdiction.
Income Tax
Whether High Court has discretion not to exercise its judicial review powers in writ petition filed by assessee, when conduct of assessee himself is tainted and doubtful - YES: HC
THE assessee, a famous Bollywood film producer, filed his Return of Income for the AY 1990-91, declaring a loss on account of film - 'Shehzaade' produced by him. In his Return of Income, the assessee had disclosed his address in Mumbai. The AO served notices u/s 143(2) on several dates which were returned unserved by the postal authorities. After investigation, it was known that the assessee had settled in Dubai and accordingly, the AO passed a best judgment assessment on 19th March, 1993. The assessee claimed that he came to know of this assessment order in 2003 from the Tax Recovery Officer and obtained a copy of the order on 5th January 2004. In July 2004, the assessee filed a revision application u/s 264 challenging the assessment order with the argument that since the assessment order was received by the assessee in 2004, this application was within the limitation period. The Commissioner vide its order dated 30th March, 2006 had refused the application stating that it was time barred as the assessment order was communicated to the assessee on April 1st 1993 and a xerox copy of the acknowledgment received from the postal authorities was also shown to the assessee. Aggrieved, the assessee filed this writ petition challenging the Commissioner's order in 2006.
The issue before the Bench is - Whether High Court has the discretion not to exercise its judicial review in the writ petition filed by the assessee, when the conduct of the assessee himself is tainted and doubtful. And the verdict goes against the assessee.
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