CA and CS HUB: October 2015

If you live in India's most populous state Uttar Pradesh and order a new smartphone from Flipkart, Snapdeal or Amazon, it most likely won't be delivered to your home.
The three online marketplaces have virtually stopped delivering products exceeding Rs 5,000 in value to customers in UP and Uttarakhand, citing harassment by tax authorities over a form that buyers are required to furnish when purchasing goods from other states. Buyers have to file a VAT declaration, along with the registration number of the vehicle bringing the products, which has to be furnished by the deliverer. The tax authorities have upped the ante to ensure it is strictly followed and have even seized goods.

"Owing to these statutory restrictions imposed by the UP government, we do customer deliveries for shipments only up to Rs 5,000, which is for interstate shipments," a Flipkart spokesperson said in an e-mail.

This is another instance of ecommerce companies facing the heat from states over tax issues. Karnataka proposes to impose a 1% value added tax deducted at source on all payments to dealers in the state by ecommerce firms, a move vehemently opposed by the industry.

A spokesperson for Snapdeal said online marketplaces provide technological platforms to connect independent sellers and consumers and should be treated as facilitators, as done by the states of Kerala, Delhi, Rajasthan, West Bengal and Tamil Nadu.

"The tax-related obligations of marketplaces are assessed as services," the Snapdeal spokesperson said. "As facilitators, such marketplaces are tasked with providing information returns to tax authorities to augment enforcement and compliance."

UP WOES

Last year, ecommerce companies stopped shipping high-value products to UP localities including Noida and Ghaziabad after delivery boys got mugged and consumers refused to pay for products ordered through cash on delivery. After the situation improved, they resumed deliveries earlier this year.
The UP law states that any person who intends to bring or receive goods from outside, other than those specifically exempted, is required to furnish a declaration that must accompany the goods during their movement in the state. This is mandatory for foods of any value being transported by truck, specified goods used in construction such as sand worth more than Rs 1,000 and other goods with a value exceeding Rs 5,000.

Although the rule is applicable to all, ecommerce companies that do not have fulfillment centres or use vendors from outside the states have begun to face the heat.

"The requirement of the UP government to ask for way bill forms (Form 39) from end-users, even though the consignments that are brought in are for self-consumption, is leading to recurrent incidences of seizure for both prepaid and postpaid cash-on-delivery consignments," said a senior executive of an ecommerce company, asking not to be identified.

"Since the tax liability on these is already being discharged by the seller in the state from where the shipment has originated, such tax demands are unfounded and restricting marketplace deliveries in this market."

The Flipkart spokesperson said Uttarakhand also has similar VAT regulations in place and such restrictions were earlier in place in Bihar as well. "However, the same (in Bihar) is now subject to payment of entry tax," the Flipkart spokesperson said. Amazon did not respond to an e-mail seeking comment on the issue.

GST SOLUTION

Tax experts said states don't get any tax on goods supplied from outside and are using this system as a deterrent. "This effectively means that without having a local warehouse in these states (and paying local VAT), catering to the customers has become virtually impossible," said Pratik Jain, partner for consulting firm KPMG in India.

He said this problem may finally get resolved under the proposed goods and service tax regime as the benefit of the levy would accrue to the consumption state. Jain said careful drafting of rules under the GST regime is needed to avoid such disputes.

ET View: GST Will End Inspector Raj

Any Inspector Raj is unacceptable. And these levies also mess up the tax system. The problem is also due to the fact that state laws preceded online retail.

So, e-commerce transactions do not find a mention in these laws. The only way to change this is for both states and the Centre to quickly adopt GST which offers credit on the taxes paid on inputs across the production chain. A tax on e-commerce sales then will ensure that the GST chain is not broken.

Online retailers will benefit as GST will mitigate the cascading of taxes, and also help e-commerce grow.

Source : ET wealth

9:30 am
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How to cut costs for long-term mutual fund investors

Investment Tips

How to cut costs for long-term mutual fund investors

Over the last few years, mutual fund (MF) expenses have increased by 0.50 per cent-0.75 per cent. Earlier, an average equity fund used to charge 2 per cent-2.25 per cent which has now increased to 2.50 per cent-2.75 per cent. This is a 25 per cent-30 per cent cost escalation for investors.

As a mutual fund investor should you be worried about this cost increase? One view is that the significant outperformance of Indian equity mutual funds over their benchmarks makes the discussion of expenses irrelevant. Equity mutual funds have delivered a significant alpha over two decades and higher expenses don't really matter.

The cost brigade on the other hand argues that higher expenses are a wealth-drain for a long-term investor and with assets under management ( AUM) increasing costs should logically be reduced as economies of scale kick in.

Let's try to quantify this cost increase for a long-term investor with a time horizon of 10-20 years. For a goal-based SIP, you need to immediately increase your SIP amount by 5 per cent-10 per cent to nullify this cost increase or else you will fall short of your defined goal. So, if you are contributing monthly Rs 10,000 towards your SIP, then increase it to Rs 11,000 so that your final corpus target remains the same. Similarly, for a long term lump-sum investor, increase your investment by 6 per cent-12.5 per cent to counter this cost increase. One can argue that for a long-term investor this cost increase by Sebi, is in effect, equivalent to 5 per cent-12.5 per cent entry load.

If Sebi is really serious to reduce costs, then it should do the following three things. First, plug the loopholes. Take the example of additional 20 basis points (bps) in lieu of the exit load. The actual credit back of the exit load to schemes is a small fraction of 20 bps collected. This should be limited to the actual exit load collected. Also, schemes like ELSS/close-ended funds, which don't have an exit load, still charge the additional 20 bps. This should be stopped. Second, the additional 30 bps for B15 cities should be phased out in a defined timeframe.

There cannot be an indefinite additional cost for long-term investors. And, last, any scheme over Rs 700 crore of assets has the same expense limits. Sebi should increase these slabs with lower limits of expenses as the paradigm of fund sizes has changed.

Source : ET wealth

9:28 am
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Comparable Selected in TP study should be functionally same & not necessarily to be identical

high court judgments

Comparable Selected in TP study should be functionally same & not necessarily to be identical

Case Law Citation: –CIT vs. M/s DSM Anti Infectives India Ltd (Punjab & Haryana High Court), Income tax (Appeal) no. 116 of 2014, Date of Judgment: 27/05/2015
Brief of the Case

Punjab & Haryana High Court held In the case of CIT vs. M/s DSM Anti Infectives India Ltd. that the filter used by the TPO while selecting comparable is to select companies who are using Penicillin-G as raw material irrespective of the extent of usage of the same. The Tribunal’s conclusion that the companies would be appropriate comparables irrespective of the percentage of use of PEN-G by them since companies selected should be functionally comparable and not identical is a possible view.

Facts of the Case

During the assessment year 2005-06, the assessee entered into various international transactions with its associated enterprises. The assessee adopted transactional net margin method contending that it is the most appropriate method for determining the ALP. As comparables, the respondent selected six companies, namely, Amol Drug Pharma Limited, Avinash Drugs Limited, Ind-Swift Laboratories Limited, JK Pharmachem Limited, Kopran Limited and Torrent Gujarat Biotech Limited. These companies rejected by TPO on various grounds in his transfer pricing study. After going through a detailed selection process, the TPO selected as comparables three companies namely, Aurobindo Pharma Ltd., Nectar Life Sciences Ltd. and Standard Pharmaceuticals Ltd. The filters used by TPO includes selection of only those companies as comparables who are using Penicillin-G as raw material and rejection of companies who having negative net worth.

Contention of the Assessee

The learned counsel for the assessee contended that the CIT (A) had wrongly rejected Torrent Gujarat Biotech Limited as a comparable. It was submitted that Torrent Gujarat Biotech Limited ought not to be rejected on the ground that its use of PEN-G was only 7.60% of its total sale.

Contention of the Revenue

The ld counsel of the revenue contended that the Tribunal has erred in including Standard Pharmaceuticals Limited as this company was not an appropriate comparable in view of its relatively negligible use of PEN-G as compared to its total use of raw material or sales.

He further contended that Torrent Gujarat Biotech Limited did not fulfill the last of the said filters/criteria of not being a company having a negative net worth. She contended that Torrent Gujarat Biotech Limited had made a reference under the Sick Industrial Companies (Special Provisions) Act, 1985 which itself indicated that it had a negative net worth.

Held by CIT (A)

The CIT (Appeals) held only Nectar Life Sciences Limited to be the appropriate comparable and rejected Aurobindo Pharma Limited and Standard Pharmaceuticals Limited as comparables. Also it did not accept the contention of the assessee that Torrent Gujarat Biotech Limited also to be considered a comparable.

Held by ITAT

ITAT directed the TPO to include two companies naming M/s Torrent Gujarat Biotech Limited and M/s Standard Pharmaceuticals Limited as comparables for the purpose of determining the arms length price (ALP) in respect of the international transaction.

Held by High Court

It was held by tribunal that Torrent Gujarat Biotech Limited not to be rejected on the ground that it’s use of PEN-G was only 7.60% of its total sale. ITAT pointed out two main factors. One factor is that the filter applied by the TPO of selecting only companies using PEN-G as raw material did not specify the extent of use of PEN-G as compared to the total sales of the company. The TPO himself had obviously not considered the extent of use of PEN-G which is evident from the fact that the TPO considered Standard Pharmaceuticals Limited to be one of the comparables, although this company’s usage of PEN-G was only 5.23% of its total sales.

ITAT also included Standard Pharmaceuticals Limited as a comparable on the ground that company to be considered as an appropriate comparable irrespective of its percentage of use of PEN-G to the total raw material. We noted that the TPO had himself considered Standard Pharmaceuticals Limited to be a comparable.

The contention of the revenue that Torrent Gujarat Biotech Limited has negative net worth , accordingly it cannot be comparable is first time raised before high court, it was not raised below authorities. Prima facie at least there is nothing to indicate that at the relevant time, namely, financial year 2004-05 Torrent Gujarat Biotech Limited had a negative net worth. If the issue is raised before the authorities, while giving the matter appeal effect or in any other proceedings, it would be decided in accordance with law.

TPO himself took by selecting Standard Pharmaceuticals Limited where use of PEN-G was only 5.23% as against the 7.60% use of PEN-G by Torrent Gujarat Biotech Limited. The Tribunal’s view was more than just a probable one.

Accordingly, appeal of the revenue dismissed.

Link to download the full text of the above judgment –

http://phhc.gov.in/pdf/fo/ITA_116_2014_27_05_2015_FINAL_ORDER.pdf

Article Credit - CA Deepak Aggarwal

9:26 am
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YOGA is now Tax Free Service – Baba Ramdev must be delighted!!

Service Tax

9:25 am
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AO not permitted to make additions in respect of already concluded assessments, where no adverse materials found during search

ITAT judgments

AO not permitted to make additions in respect of already concluded assessments, where no adverse materials found during search

Case Law Citation: –Shri Uday C Tamhankar vs. DCIT (ITAT Mumbai), Income tax (Appeal) no. 711 to 715 of 2011, 857 to 862 of 2011, 3579 to 3583 of 2013 Date of Judgment: 11/09/2015
Brief of the Case

Mumbai ITAT held In the case of Shri Uday C Tamhankar that the submission of assessee that the assessment years up to 2006-07 falls in the category of concluded assessments, i.e., assessments of those years were not pending on the date of initiation of search is a valid submission. Hence, in our view, the assessing officer could not have made these additions for AY 2004-05 to 2006-07 in the absence of any incriminating materials. Additions made by the AO, after accepting the additional disclosure of Rs.20.00 lakhs, would result in double assessment, since it is stated that the assessee has not capitalised the above said amount in his books of accounts.

The assessee has duly disclosed the income voluntarily offered by him in the returns of income filed in response to the notices issued u/s 153A of the Act. During the course of penalty proceedings also, the assessee has offered the explanation to that effect and the said explanation was not found to be false. The revenue has noticed/seized all the materials available with the assessee and no incriminating material supporting the additional disclosure was found. Under these set of facts, we are of the view the tax authorities are not justified in presuming that the additional disclosure voluntarily made by the assessee shall constitute concealed income warranting penalty u/s 271(1)(c) of the Act.

Facts of the Case

The assessee is a dentist and carries on his profession from different places and also through different hospital names. He was subjected to search and seizure operations on 17-01-2008. On the very same day, some of his concerns were also surveyed u/s 133A of the Act. During the course of search operations, cash balance of Rs.1,13,57,110/- was found as against the book balance of Rs.9,10,548/-. In the statement recorded from him u/s 132(4) of the Act, he admitted the excess cash balance of Rs.1,04,68,512/- as his unaccounted income. The assessee agreed to offer a sum of Rs.1,25,00,000/- (including excess cash balance) as his income. The AO completed the assessment after making some additions on account of disallowance of expenses on account of car & telephone expenses, addition u/s 69C and relating to estimated professional income. The AO also initiated penalty proceedings u/s 271(1) (c) for concealment of income and u/s 271AAA for additional offer of income by the assessee.

Contention of the Assessee

The ld counsel of the assessee submitted that the car expenses disallowed by the assessing officer include proportionate amount of depreciation and interest on car loan. He submitted that both the items are statutory deductions prescribed under the Act and hence the disallowance of the same was not justified. In this regard, he placed reliance on the decision rendered by the co-ordinate bench of Mumbai Tribunal in the case of Mukesh K Shah (2005)(92 ITD 349). He also submitted that the assessee has offered additional income of about Rs.20.00 lakhs in order to cover up any other deficiencies. He submitted that the assessee has not capitalized the above said disclosure in his books of account. Accordingly he submitted that all the disallowances are to be telescoped against the additional disclosures.

Further submitted that the assessments of the assessment years up to AY 2006-07 were not pending as on the date of initiation of search and hence the AO was not justified in making the additions in those years without there being any incriminating materials. In this regard, he placed reliance on the decision rendered by the special bench of Tribunal in the case of All Cargo Global logistics Ltd (137 ITD 287).

With regard to the penalty u/s 271(1) (c) levied on the additional income surrendered by the assessee, the Ld A.R submitted that the assessee has offered excess amount of about Rs.20.00 lakhs voluntarily and the revenue did not seize any material to support the said disclosure. He submitted that the revenue has seized excess cash balance of Rs.1.04 crores and the said amount was offered as assessee’s income in AY 2008-09. The Ld A.R submitted that the voluntary surrender should not be construed as concealment of income, in the absence of any incriminating material. The Ld A.R also submitted that the assessee has offered the same in the returns of income filed u/s 153A of the Act and they were also accepted by the AO. Accordingly he submitted that there is no difference between the returned income and assessed income in sec. 153A proceedings and hence there is no presumption of concealment of income. He placed reliance on the decision rendered by the Delhi bench of Tribunal in the case of Prem Arora Vs. DCIT (2012)(78 DTR(Del)(Trib) 91).

With regard to penalty levied u/s 271AAA, the assessee contended that he has complied with the conditions prescribed in sec. 271AAA (2) of the Act. He placed reliance on the decision rendered by the Cuttack bench of Tribunal in the case of Ashok Kumar Sharma Vs. DCIT (2012)(149 TTJ (Ctk)(UO) 33).

Contention of the Revenue

The ld counsel of the revenue submitted that the assessee has admitted additional income for various years in the statement recorded from him u/s 132(4) of the Act. Accordingly he submitted that there were incriminating materials available with the AO and hence the impugned additions were made by him.

In support of addition on account of estimated professional income, he supported the estimation made by AO. He placed reliance on the decision rendered by Hon’ble Punjab & Haryana High Court in the case of Ved Prakash Vs. CIT (265 ITR 642) to support the estimation made by the assessing officer.

In support of penalty proceedings u/s 271(1) (c), he submitted that the assessee has undisclosed income, which is within his personal knowledge, by way of additional disclosure. He submitted that the assessee would not have disclosed additional income, had there been no search. Accordingly, he contended that the additional disclosure made by the assessee is liable for penalty u/s 271(1) (c) of the Act. He placed reliance on the decision rendered by Delhi bench of Tribunal in the case of JRD Stock Brokers (P) Ltd Vs. ACIT (2009)(124 TTJ 566).

In support of penalty proceedings u/s 271 AAA, it was submitted that the assessee did not specify the manner in which the undisclosed income was derived.

Held by CIT (A)

The CIT (A) confirmed the additions relating to disallowance of expenses and also the additions made u/s 69C of the Act. He, however, deleted the additions relating to estimated professional income on the reasoning that there is no material to support the inference drawn by the assessing officer.

In relation to penalty u/s 271 AAA, CIT (A) observed that the assessee has not disclosed the manner in which the undisclosed income was earned and accordingly confirmed the penalty.

Held by ITAT

Admittedly, these are estimated disallowances made out of expenses that were already claimed in the original return of income filed by the assessee. The assessee has submitted that the assessment years up to 2006-07 falls in the category of concluded assessments, i.e., assessments of those years were not pending on the date of initiation of search. Hence, in our view, the assessing officer could not have made these additions for AY 2004-05 to 2006-07 in the absence of any incriminating materials.

We accept the alternative contentions of the assessee and hence the additions made by the AO, after accepting the additional disclosure of Rs.20.00 lakhs, would result in double assessment, since it is stated that the assessee has not capitalised the above said amount in his books of account.

In relation to addition made u/s 69C, we have already noticed that the assessee has offered additional income of about Rs.20.00 lakhs over and above the excess cash balance found during the course of search. It is also an admitted fact that the revenue did not seize any other incriminating material which compelled the assessee to make this disclosure. Hence the additional income of about Rs.20.00 lakhs was a voluntary offer. We notice that the disallowances of expenses as well as the addition made u/s 69C of the Act formed a small part of the above said amount of Rs.20.00 lakhs, thus leaving huge balance remaining to be adjusted. We notice that the assessing officer has made the additions u/s 69C of the Act without examining the claim of availability of sources out of drawings made by the assessee and his wife.

In context to revenue appeal regarding deletion of estimated professional income, we found that there is no dispute with regard to the fact that the revenue did not unearth any incriminating material, which could suggest that there was under billing or evasion of professional receipts. The revenue only stumbled with excess cash balance and the same was surrendered as income of the year in which the search took place. The assessee offered the same as his professional income. In our view also, the assessing officer misguided himself by presuming that the entire undisclosed cash balance represents his professional fee collected during the financial year relevant to the assessment year 2008-09.

We also notice that the assessing offer has assessed the net profit on the alleged suppressed professional receipts, meaning thereby, the assessing officer has presumed that the assessee would have suppressed corresponding expenses also. Again it is only a guess work only, unsupported by any material. Similarly, the average daily collection estimated by the AO was also mere guess work. In effect, there is no material available with the AO to show that the assessee has suppressed professional receipts as well as expenses in order to substantiate the estimation made by him.

The case referred by the ld counsel of the revenue does not support them because in this case additions were confirmed on the ground wherein materials were found during the course of search. However, in the instant case, no material relating to suppression of professional fee receipts was found.

In relation to penalty proceedings u/s 271 (1) (c), we notice that the decision in the case of JRD Stock brokers (P) Ltd. (2009)(124 TTJ 566) has been rendered in the context of penalty levied u/s 158BFA of the Act. Further, we notice that the assessee therein did not disclose additional income in the return of income filed by it u/s 158BC of the Act. Further it is stated that the undisclosed income was discernible from the seized materials. Where as in the instant case, the penalty has been levied u/s 271(1)(c) of the Act, the assessee has disclosed additional income in the return of income filed by him and further there was no seized material to support the additional disclosure made by the assessee.

In relation to penalty proceedings u/s 271AAA, there is no dispute with regard to the fact that the assessee has disclosed the undisclosed income as his professional income and the same has been accepted by the assessing officer. In fact, the assessing officer has proceeded to estimate the professional income of the preceding years on the basis of the above said disclosure. Hence, we are of the view that the decision rendered by the Cuttack bench in the above said case squarely applies to the facts prevailing in the instant case. We also notice that the Nagpur bench of Tribunal has also taken identical view in the case of Concrete Developers V/s ACIT in ITA No.381/Nag/2012 dated 20.3.2013. The assessee has complied with all the three conditions specified in sec. 271AAA (2) of the Act and accordingly, the penalty levied by the AO u/s 271AAA (1) of the Act is liable to be deleted.

Accordingly, all appeal of the assessee allowed.

Link to download the full text of the above judgment –

http://www.itatonline.in:8080/itat/upload/-494019102248708014313$5%5E1REFNO711-712-713-714-715-857-858-859-860-861-862-3579-35803581-3582-3583–Amarjit-D.pdf

Article Credit - CA Deepak Aggarwal

9:24 am
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Gold Monetisation Scheme, 2015

RBI

Gold Monetisation Scheme, 2015

RBI/2015-16/211
Master Direction No.DBR.IBD.No.45/23.67.003/2015-16

Gold Monetisation Scheme, 2015

In exercise of the powers conferred on the Reserve Bank of India (RBI) under Section 35 A of the Banking Regulation Act, 1949 and in pursuance of the Central Government notification issued vide Office Memorandum F.No.20/6/2015-FT dated September 15, 2015 regarding ‘Gold Monetization Scheme (GMS)’, the RBI being satisfied that it is in the public interest, so to do, hereby issues this Direction to all Scheduled Commercial Banks (excluding Regional Rural Banks).

CHAPTER – I
PRELIMINARY

1.1 Objective

GMS, which modifies the existing ‘Gold Deposit Scheme’ (GDS) and ‘Gold Metal Loan Scheme (GML), is intended to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold.

1.2. Short title and commencement

This Direction shall be called the Reserve Bank of India (Gold Monetization Scheme) Direction, 2015.
All Scheduled Commercial Banks excluding RRBs will be eligible to implement the Scheme.
The banks intending to participate in the Scheme should formulate a comprehensive policy with approval of the board to implement it.
1.3 Definitions

In this Direction, unless the context otherwise requires, the following terms shall bear the meanings assigned to them below:

Collection and Purity Testing Centre (CPTC) – The collection and assaying centres certified by the Bureau of Indian Standards (BIS) and notified by the Central Government for the purpose of handling gold deposited and redeemed under GMS.
Designated bank – All Scheduled Commercial Banks (excluding RRBs) that decide to implement the Scheme.
Gold Deposit Account – An account opened with a designated bank under the Scheme and denominated in grams of gold.
Medium and Long Term Government Deposit (MLTGD) – The deposit of gold made under the GMS with a designated bank in the account of the Central Government for a medium term period of 5-7 years or a long term period of 12-15 years or for such period as may be decided from time to time by the Central Government.
Nominated bank – A Scheduled Commercial Bank authorized by RBI to import gold in terms of RBI circular A.P.(DIR Series) Circular No.79 dated February 18, 2015
Refiners – The refineries accredited by the National Accreditation Board for Testing and Calibration Laboratories(NABL) and notified by the Central Government for the purpose of handling gold deposited and redeemed under GMS.
Scheme – Gold Monetization Scheme, 2015 which includes Revamped Gold Deposit Scheme (R-GDS) and Revamped Gold Metal Loan Scheme (R-GML).
Short Term Bank Deposit (STBD) – The deposit of gold made under the GMS with a designated bank for a short term period of 1-3 years.
Chapter II
Revamped Gold Deposit Scheme (R-GDS)

2.1 Basic features

2.1.1 General

This scheme will replace the existing Gold Deposit Scheme, 1999. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless these are withdrawn by the depositors prematurely as per existing instructions.
All designated banks will be eligible to implement the scheme.
The principal and interest of the deposit under the scheme shall be denominated in gold.
Persons eligible to make a deposit – Resident Indians (Individuals, HUFs, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme. Joint deposits of two or more eligible depositors are also allowed under the scheme and the deposit in such case shall be credited to the joint deposit account opened in the name of such depositors. The existing rules regarding joint operation of bank deposit accounts including nominations will be applicable to these gold deposits.
All deposits under the scheme shall be made at the CPTC. However, at their discretion, banks may accept the deposit of gold at the designated branches, especially from the larger depositors.
Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be, whichever is earlier.
During the period commencing from the date of receipt of gold by the CPTC or the designated branch, as the case may be, to the date on which interest starts accruing in the deposit, the gold accepted by the CPTC or the designated branch of the bank shall be treated as an item in safe custody held by the designated bank.
On the day the gold deposited under the scheme starts accruing interest, the designated banks shall translate the gold liabilities and assets in Indian Rupees by crossing the London AM fixing for Gold / USD rate with the Rupee-US Dollar reference rate announced by RBI on that day. The prevalent custom duty for import of gold will be added to the above value to arrive at the final value of gold. This approach will also be followed for valuation of gold at any subsequent valuation dates and for the conversion of gold into Indian Rupees under the Scheme.
Reporting – The designated banks need to submit a monthly report on GMS to the RBI in the prescribed format.
2.1.2 Acceptance of deposits

The minimum deposit at any one time shall be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of gold of 995 fineness. There is no maximum limit for deposit under the scheme. All transactions under the scheme with the designated bank shall be in gold of 995 fineness.
All gold deposits under the scheme, whether tendered at the CPTC or the designated branches, shall be assayed at CPTC:Provided that the designated banks are free not to subject the standard good delivery gold accepted directly at branches to fire assaying at the CPTC.
2.2 Types of deposits

There shall be two different gold deposit schemes as under:

2.2.1 Short Term Bank Deposit (STBD)

All provisions of para 2.1 above shall apply to this deposit.
The deposit will be made with the designated banks for a short term period of 1-3 years (with a roll over in multiples of one year) and will be treated as their on-balance sheet liability.
The deposit will attract CRR and SLR requirements as per applicable instructions of RBI from the date of credit of the amount to the deposit account. However, the stock of gold held by banks in their books will be an eligible asset for meeting the SLR requirement in terms of RBI Master Circular – Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) dated 1 July 2015.
The designated banks may, at their discretion, allow whole or part premature withdrawal of the deposit subject to such minimum lock-in period and penalties, if any, as may be determined by them.
The designated banks are free to fix the interest rates on these deposits. The interest shall be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit.
Redemption of principal and interest at maturity will, at the option of the depositor be either in Indian Rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. The option in this regard shall be made in writing by the depositor at the time of making the deposit and shall be irrevocable:
Provided that any premature redemption shall be in Indian Rupee equivalent or gold at the discretion of the designated bank.
2.2.2 Medium and Long Term Government Deposit (MLTGD)

All provisions of guidelines at para 2.1 above will apply to this deposit.
The deposit under this category will be accepted by the designated banks on behalf of the Central Government. The receipts issued by the CPTC and the deposit certificate issued by the designated banks shall state this clearly.
This deposit will not be reflected in the balance sheet of the designated banks. It will be the liability of Central Government and the designated banks will hold this gold deposit on behalf of Central Government until it is transferred to such person as may be determined by the Central Government.
The deposit can be made for a medium term period of 5-7 years or a long term period of 12-15 years or for such period as may be decided from time to time by the Central Government. The designated banks may allow whole or part premature withdrawal of the deposit subject to such minimum lock-in period and penalties, if any, as determined by the Central Government.
Redemption of the deposit including interest accrued will be only in Indian Rupee equivalent of the value of the gold and accumulated interest as per the price of gold prevailing at the time of redemption.
The gold received under MLTGD will be auctioned by the agencies notified by Government and the sale proceeds will be credited to Government’s account held with RBI.
Reserve Bank of India will maintain the Gold Deposit Accounts denominated in gold in the name of the designated banks that will in turn hold sub-accounts of individual depositors.
The details of auctioning and the accounting procedure will be notified by Government of India.
2.3 Opening of gold deposit accounts

The opening of gold deposit accounts shall be subject to the same rules with regard to customer identification as are applicable to any other deposit account. Depositors who do not already have any other account with the designated bank, shall open a gold deposit account with the designated banks with zero balance at any time prior to tendering gold at the CPTC after complying with KYC norms as prescribed by Reserve Bank of India.

The designated banks will credit the STBD or MLTGD, as the case may be, with the amount of 995 fineness gold as indicated in the advice received from CPTC, after 30 days of receipt of gold at the CPTC, regardless of whether the depositor submits the receipt for issuance of the deposit certificate or not.

2.4 Collection and Purity Testing Centres

The Central Government will notify a list of BIS certified CPTCs under the Scheme.
The designated banks will be free to select and authorize the CPTCs out of the list notified by the Central Government for handling gold as their agents based on their assessment of the credit worthiness of these centres. (Please see paragraph 2.6 for tripartite agreement among banks, refineries and CPTCs).
Each designated bank authorizing a CPTC to collect deposit of gold on its behalf shall ensure that its name is included in the list of such banks displayed by the CPTC.
The schedule of fees charged by the CPTCs shall be displayed at a prominent place at the centre.
Before tendering the raw gold to a CPTC, the depositor shall indicate the name of the designated bank with whom he would like to place the deposit1.
After assaying the gold, the CPTC will issue a receipt signed by authorised signatories of the centre showing the standard gold of 995 fineness on behalf of the designated bank indicated by the depositor. Simultaneously, the CPTC will also send an advice to the designated bank regarding the acceptance of deposit.
The 995 fineness equivalent amount of gold as determined by the CPTC will be final and any difference in quantity or quality found after issuance of the receipt by the CPTC including at the level of the refinery due to refinement or any other reason shall be settled among the three parties viz., the CPTC, the refiner and the designated bank in accordance with the terms of the tripartite agreement.
The depositor shall produce the receipt showing the 995 fineness equivalent amount of gold issued by the CPTC to the designated bank branch, either in person or through post.
On submission of the deposit receipt by the depositor, the designated bank shall issue the final deposit certificate on the same day or 30 days after the date of the tendering of gold at the CPTC, whichever is later.
The assaying process at the CPTC is described in Annex-1.
2.5 Transfer of gold to the Refiners

The designated banks will be free to select the refiners based on their assessment regarding the credibility of these entities.
The CPTCs will transfer the gold to the refiners as per the terms and conditions set out in the tripartite agreement.
The refined gold may, at the option of the designated bank, be kept in the vaults maintained by the refiners or at the branch itself.
For the services provided by the refiners, the designated banks will pay a fee as decided mutually.
The refiners shall not collect any charge from the depositor.
2.6 Tripartite agreement between the designated banks, refiners and CPTCs

Every designated bank shall enter into a legally binding tripartite agreement with the refiners and CPTCs with whom they tie up under the Scheme.
The agreement shall clearly lay down the details regarding payment of fees, services to be provided, standards of service, the details of the arrangement regarding movement of gold and rights and obligations of all the three parties in connection with the operation of the Scheme.
2.7 Utilization of gold mobilized under GMS

2.7.1 Gold accepted under STBD

Without prejudice to the generality of the uses of the gold mobilised under the STBD, the designated banks may

sell the gold to MMTC for minting India Gold Coins (IGC), to jewellers and to other designated banks participating in GMS; or
lend the gold under the GML scheme to MMTC for minting India Gold Coins (IGC) and to jewellers.
2.7.2 Gold accepted under MLTGD

Gold deposited under MLTGD will be auctioned by MMTC or any other agency authorized by the Central Government and the sale proceeds credited to the Central Government’s account with RBI.
The entities participating in the auction may include RBI, MMTC, banks and any other entities notified by the Central Government in this regard.
Gold purchased by designated bank under the auction may be utilized by them for any purposes indicated at para 2.7.1 above.
2.8 Risk management

The designated banks are allowed to access the International Exchanges, London Bullion Market Association or make use of Over-the-counter contracts to hedge exposures to bullion prices subject to the guidelines issued by RBI.
The designated banks should put in place suitable risk management mechanisms including appropriate limits to manage the risk arising from gold price movements in respect of their net exposure to gold.
2.9 Oversight over the CPTCs and Refineries

The Central Government, in consultation with BIS, NABL, RBI and IBA, may put in place appropriate supervisory mechanism over the CPTCs and the refiners so as to ensure observance of the standards set out for these centres by Government (BIS and NABL).
The Central Government may take appropriate action including levy of penalties against the non-compliant CPTCs and refiners.
The Central Government may also put in place appropriate grievance redress mechanism regarding any depositor’s complaints against the CPTCs.
The complaints against the designated banks regarding any discrepancy in issuance of receipts and deposit certificates, redemption of deposits, payment of interest will be handled first by the bank’s grievance redress process and then by the Banking Ombudsman of RBI.
Chapter III
GMS – linked Gold Metal Loan (GML) Scheme

3.1.1 General

The gold mobilized under STBD may be provided to the jewellers as GML. The designated banks can also purchase the gold auctioned under MLTGD and extend GML to the jewellers.
The jewellers will receive the physical delivery of gold either from the refiners or from the designated bank, depending on the place where the refined gold is stored.
The existing Gold (Metal) Loan (GML) Scheme operated by nominated banks in terms of paragraph 2.3.12 of the RBI Master Circular on Loans and Advances dated July 1, 2015 will continue in parallel with GMS-linked GML scheme. All prudential guidelines for the existing GML Scheme as prescribed in the Master Circular as amended from time to time will also be applicable to the new Scheme.
The designated banks other than the nominated banks shall be eligible to import gold only for redemption of the gold deposits mobilised under the STBD.
3.1.2 Interest to be charged

The designated banks are free to determine the interest rate to be charged on GMS-linked GML.

3.1.3 Tenor

The tenor of GMS-linked GML will be the same as under the extant GML scheme.

Rajinder Kumar
Chief General Manager

Annex 1
Assaying process at the CPTCs

I. The fees to be charged by a CPTC shall be informed to the customer before doing the XRF test.

II. There will be a BIS certified protocol of operations and processes at all stages of purity verification and deposit of gold which are as under:

XRF machine-test and weighing of all articles shall be done in the presence of the customer and will be recorded by CCTV Camera.
After XRF test, the customer will be given the option to disagree with the preliminary test or withdraw the tendered gold or he will give his consent for melting and fire assay test.
On receipt of the customer consent, the gold ornaments will be cleaned of its dirt, studs, meena etc. and thereafter, the purity of the tendered gold will be ascertained through a fire assay test in the presence of the customer.
In case the customer agrees with the result of the fire assay test, he will exercise his option to deposit the gold with the bank and in that case the fee charged by the centre will be paid by the bank. However, in case of any disagreement with the fire assay result, the customer will be given the option to take back the melted gold after paying a nominal fee to the centre.
In case the customer exercises the option to deposit the gold, he will be provided a certificate by the CPTC certifying the weight of the gold tendered in equivalence of 995 fineness of gold.
On receipt of this certificate from the customer, the bank will credit the equivalent quantity of Standard gold of 995 fineness in to the depositor’s account.
Simultaneously, the CPTC has also to inform the bank about the details of the deposit made by the customer.
1 The Indian Banks’ Association (IBA) has agreed to design appropriate standard documentations in connection with the GMS including application form for tendering raw gold to the assaying centers, description of the physical appearance and other characteristics of the gold, the recording of the results of XRF by the assaying centre, customer’s consent for melting the gold for fire-assaying, customer’s consent for making the final deposit, the Final Receipt to be issued to the depositor and any other documents that may be considered by the banks. The entire set of documents should be made available to the depositor upfront and should include all the terms and conditions of the scheme including the schedule of charges. The documentation should be posted on IBA’s website and should also be available in physical form at the CPTCs.

9:22 am
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Arrest Limit increased in case of outright smuggling or mis-declaration of baggage

CBEC

Arrest Limit increased in case of outright smuggling or mis-declaration of baggage

Persons involved in serious offences of tax evasion are liable for arrest and prosecution under the Central Excise Act, 1994, Finance Act, 1994 dealing with Service Tax and Customs Act, 1962. Central Board of Excise and Customs (CBEC) has issued instructions from time to time prescribing the procedures, safeguards and threshold limits above which these powers are to be exercised with discretion and responsibility. CBEC has now issued fresh instructions today rescinding the past circulars and consolidating them at one place with following objectives. Circular No. 1009/16/2015-CX Dated- 23.10.2015
The monetary limits for arrest and prosecution have been revised substantially upwards to ensure that these powers are not used against small and medium businesses.

Thus the limits in case of offence of evasion of tax or wrongful utilization of input tax credit in case of Central Excise and Service tax have been revised to Rs.1 crore from Rs. 25 lakh and Rs. 10 lakh respectively. Circular No. 1010/17/2015-CX Dated- 23.10.2015

In case of evasion of tax under the Customs Act, the limits have been revised to Rs. 1 crore from Rs. 10 lakh in case of evasion of tax by wrongful availment of exemption or duty drawback. Similar, revisions regarding value of goods have been carried-out regarding appraisement of tax during import or export.

In cases of outright smuggling or mis-declaration of baggage, the limits regarding value of offending goods have been revised from Rs. 5 lakh to Rs. 20 lakh. As in the past, there shall be no lower limit for arrest and prosecution in the cases of smuggling of fake Indian currency notes, arms, ammunitions and explosives and endangered species.

The procedure to be followed for arrest and sanction of prosecution has been revised and specified with adequate safeguards in these instructions to ensure that only in cases of serious nature above the revised thresholds, where there is strong prima-facie evidence, these powers are exercised.

9:21 am
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Arrest Limit for Service Tax or Excise offences increased to one Crore

Service tax notifications

9:20 am
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Prosecution Guidelines in case of Excise duty / Service Tax Evasion

Indirect Tax

Prosecution Guidelines in case of Excise duty / Service Tax Evasion

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI

CIRCULAR NO. 1009/16/2015-CX, Dated: October 23, 2015

Principal Chief Commissioner/ Chief Commissioner of Central Excise (All),
Principal Chief Commissioner/ Chief Commissioner of Central Excise and Service Tax (All),

Sub: Central Excise – Guidelines for launching of Prosecution under the Central Excise Act, 1944 and Finance Act, 1994 regarding Service tax-reg.

I am directed to refer to following circulars/instructions issued by the Board regarding guidelines for launching of prosecution under the Central Excise Act, 1944 and the Finance Act, 1994:

(1) Circular No. 15/90-CX.6 dated 09.08.1990 issued from F. No. 218/7/89-CX.6.

(2) Circular No. 30/30/94-CX dated 04.04.1994 issued from F. No. 208/20/93/CX.6.

(3) Letter F. No. 208/31/97-CX.6 dated 04.04.1994 regarding enhancement of monetary limit.

(4) Circular No. 35/35/94-CX dated 29.04.1994 issued from F. No. 208/22/93-CX.6.

(5) Letter F. No. 203/05/98-CX.6 dated 06.04.1998 regarding making DG, CEI competent authority to sanction prosecution in respect of cases investigated by DGCEI.

(6) Letter F. No. 208/05/98-CX.6 dated 20.10.1998.

(7) Letter F. No. 208/21/2007-CX.6 dated 15.06.2007.

2. In super session of these instructions and circulars, following consolidated guidelines are hereby issued for launching prosecution under the Central Excise Act, 1944 and the Finance Act, 1994.

3. Person liable to be prosecuted

3.1 Whoever commits any of the offences specified under sub-section (1) of Section 9 of the Central Excise Act, 1944 or sub-section (1) of section 89 of the Finance Act, 1994, can be prosecuted. Section 9AA (1) of Central Excise Act, 1944 provides that where an offence under this Act has been committed by a company, every person who, at the time offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Section 9AA (2) of Central Excise Act, 1944 provides that where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation to Section 9AA provides that (a) “Company” means anybody corporate and includes a firm or other association of individuals and (b) “director” in relation to a firm means a partner of the firm. These provisions under Section 9AA of Central Excise Act, 1944 have been made applicable to Service Tax also vide Section 83 of the Finance Act, 1994.

4.1 Monetary Limit: In order to optimally utilize limited resources of the Department, prosecution should normally not be launched unless evasion of Central Excise duty or Service Tax, or misuse of Cenvat credit in relation to offences specified under sub-section (1) of Section 9 of the Central Excise Act, 1944 or sub-section (1) of section 89 of the Finance Act, 1994 is equal to or more than Rs. One Crore.

4.2 Habitual evaders: Notwithstanding the above limits, prosecution can be launched in the case of a company/assessee habitually evading tax/duty or misusing Cenvat Credit facility. A company/assessee would be treated as habitually evading tax/duty or misusing Cenvat Credit facility, if it has been involved in three or more cases of confirmed demand (at the first appellate level or above) of Central Excise duty or Service Tax or misuse of Cenvat credit involving fraud, suppression of facts etc. in past five years from the date of the decision such that the total duty or tax evaded or total credit misused is equal to or more than Rs. One Crore. Offence register (335J) may be used to monitor and identify assessees who can be considered to be habitually evading duty.

4.3 Sanction of prosecution has serious repercussions for the assessee and therefore along with the above monetary limits, the nature of evidence collected during the investigation should be carefully assessed. The evidences collected should be adequate to establish beyond reasonable doubt that the person, company or individual had guilty mind, knowledge of the offence, or had fraudulent intention or in any manner possessed mens-rea (guilty mind) for committing the offence.

5. Authority to sanction prosecution

5.1 The criminal complaint for prosecuting a person should be filed only after obtaining the sanction of the Principal Chief/Chief Commissioner of Central Excise or Service Tax as the case may be.

5.2 In respect of cases investigated by the Directorate General of Central Excise Intelligence (DGCEI), the criminal complaint for prosecuting a person should be filed only after obtaining the sanction of Principal Director General/ Director General, CEI.

5.3 An order conveying sanction for prosecution shall be issued by the sanctioning authority and forwarded to the Commissionerate concerned for taking appropriate action for expeditious filing of the complaint.

6. Procedure for sanction of prosecution

6.1 Prosecution proposal should be forwarded to the Chief Commissioner / Principal Chief Commissioner or Director General / Principal Director General of DGCEI ( in respect of cases booked by DGCEI) after the case has been carefully examined by the Commissioner/ Principal Commissioner or Additional Director General /Principal Additional Director General of DGCEI who has adjudicated the case. In all cases of arrest, examination of the case to ascertain fitness for prosecution shall be necessarily carried out.

6.2 Prosecution should not be launched in cases of technical nature, or where the additional claim of duty /tax is based totally on a difference of opinion regarding interpretation of law. Before launching any prosecution, it is necessary that the department should have evidence to prove that the person, company or individual had guilty knowledge of the offence, or had fraudulent intention to commit the offence, or in any manner possessed mens-rea ( guilty mind ) which would indicate his guilt. It follows, therefore, that in the case of public limited companies, prosecution should not be launched indiscriminately against all the Directors of the company but it should be restricted to only against persons who were in charge of day-to-day operations of the factory and have taken active part in committing the duty /tax evasion or had connived at it.

6.3 Prosecution should not be filed merely because a demand has been confirmed in the adjudication proceedings particularly in cases of technical nature or where interpretation of law is involved. One of the important considerations for deciding whether prosecution should be launched is the availability of adequate evidence. The standard of proof required in a criminal prosecution is higher as the case has to be established beyond reasonable doubt whereas the adjudication proceedings are decided on the basis of preponderance of probability. Therefore, even cases where demand is confirmed in adjudication proceedings, evidence collected should be weighed so as to likely meet the test of being beyond reasonable doubt for recommending prosecution. Decision should be taken on case-to-case basis considering various factors, such as, nature and gravity of offence, quantum of duty /tax evaded or Cenvat credit wrongly availed and the nature as well as quality of evidence collected.

6.4 Decision on prosecution should be normally taken immediately on completion of the adjudication proceedings. However, Hon’ble Supreme Court of India in the case of Radheshyam Kejriwal [2011 (266) ELT 294 (SC)] – 2011-TIOL-19-SC-FEMA has interalia, observed the following :- “(i) adjudication proceedings and criminal proceedings can be launched simultaneously; (ii) decision in adjudication proceedings is not necessary before initiating criminal prosecution; (iii) adjudication proceedings and criminal proceedings are independent in nature to each other and (iv) the findings against the person facing prosecution in the adjudication proceedings is not binding on the proceeding for criminal prosecution.” Therefore, prosecution may even be launched before the adjudication of the case, especially where offence involved is grave, qualitative evidences are available and it is also apprehended that party may delay completion of adjudication proceedings.

6.5 Principal Commissioner/Commissioner or ADG (Adjudication) acting as adjudicating authority should indicate at the time of passing the adjudication order itself whether he considers the case to be fit for prosecution so that it can be further processed and sent to Principal Chief Commissioner/ Chief Commissioner or Principal Director General/ Director General of DGCEI, as the case may be, for sanction of prosecution. Where at the time of adjudication proceedings no view has been taken on prosecution by the Adjudicating Authority then the adjudication wing shall re-submit the file within 15 days from the date of issue of adjudication order to the Adjudicating Authority to take view of prosecution. Where, prosecution is proposed before the adjudication of the case, Commissioner/Principal Commissioner or Principal Additional Director General/Additional Director General, DGCEI who supervised the investigation shall record the reason for the same and forward the proposal to the sanctioning authority. The adjudicating authority shall also be informed of the decision to forward the proposal so that there is no need for him to examine the case at the time of passing of adjudication order from the perspective of prosecution. Principal Chief Commissioner/ Chief Commissioner or Principal Director General/ Director General of DGCEI may on his own motion also, taking into consideration the seriousness of an offence, examine whether the case is fit for sanction of prosecution irrespective of whether the adjudicating authority has recommended prosecution.

6.6 In respect of cases investigated by DGCEI, the adjudicating authority would intimate the decision taken regarding fitness of the case for prosecution to the Principal Additional Director General/ Additional Director General of the Zonal Unit or Headquarters concerned, where the case was investigated and show cause notice issued. The officers of unit of Directorate General of Central Excise Intelligence concerned would prepare an investigation report for the purpose of launching prosecution, within one month of the date of receipt of the decision of the adjudicating authority and would send the same to the Director General, CEI for taking decision on sanction of prosecution. The format of investigation report is annexed as Annexure-I to this Circular.

6.7 In respect of cases not investigated by DGCEI, where the Principal Commissioner/Commissioner who has adjudicated the case is satisfied that prosecution should be launched, an investigation report for the purpose of launching prosecution should be carefully prepared within one month of the date of issuance of the adjudication order. Investigation report should be signed by an Assistant/Deputy Commissioner, endorsed by the jurisdictional Principle Commissioner/Commissioner and sent to the Principal Chief/ Chief Commissioner for taking a decision on sanction for launching prosecution. The format of investigation report is annexed as Annexure-I to this circular. A criminal complaint in a court of law should be, filed by the jurisdictional Commissionerate only after the sanction of the Principal Chief / Chief Commissioner or Principal Director General/Director General of DGCEI has been obtained.

6.8 Principal Commissioner/Commissioner or Additional Director General (Adjudication) shall submit a report by 10th of every month to the Principal Chief /Chief Commissioner or the Principal Director General/ Director General of CEI, who is the sanctioning authority for prosecution, conveying whether a view on launching prosecution has been taken in respect of adjudication orders issued during the preceding month.

6.9 Once the sanction for prosecution has been obtained, criminal complaint in the court of law should be filed as early as possible by an officer of the jurisdictional Commissionerate authorized by the Commissioner.

6.10 It has been reported that delays in the Court proceedings are often due to non-availability of the records required to be produced before the Magistrate or due to delay in drafting of the complaint, listing of the exhibits etc. It shall be the responsibility of the officer who has been authorized to file complaint, to take charge of all documents, statements and other exhibits that would be required to be produced before a Court. The list of exhibits etc. should be finalized in consultation with the Public Prosecutor at the time of drafting of the complaint. No time should be lost in ensuring that all exhibits are kept in safe custody. Where a complaint has not been filed even after a lapse of three months from the receipt of sanction for prosecution, the reason for delay shall be brought to the notice of the Principal Chief/ Chief Commissioner or the Principal Director General or Director General of DGCEI by the Principal Commissioner/ Commissioner in charge of the Commissionerate responsible for filing of the complaint.

7.1 Prosecution, once launched, should be vigorously followed. The Principal Commissioner/Commissioner of Central Excise/Service Tax should monitor cases of prosecution at monthly intervals and take the corrective action wherever necessary to ensure that the progress of prosecution is satisfactory. In DGCEI, an Additional/ Joint Director in each zonal unit and DGCEI (Hqrs) shall supervise the prosecution related work. For keeping a track of prosecution cases, a prosecution register in the format enclosed as Annexure-II to this Circular should be maintained in the Prosecution Cell of each Commissionerate. The register shall be updated regularly and inspected by the Principal Commissioner/Commissioner at least once in every quarter of a financial year.

7.2 For keeping a track of prosecution cases, a prosecution register in the format enclosed as Annexure-III to this Circular should be maintained in the Zonal Units of DGCEI and DGCEI (Hqrs.) pertaining to cases investigated by them.

8.1 Principal Commissioner/Commissioner responsible for the conduct of prosecution or Principal Additional Director General or Additional Director General of DGCEI (in respect of cases booked by DGCEI), should study the judgement of the Court and, where it appears that the accused person have been let off with lighter punishment than what is envisaged in the Act or has been acquitted despite the evidence being strong, appeal should be considered against the order. Sanction for appeal in such cases shall be accorded by Principal Chief/ Chief Commissioner or Principal Director General/ Director General of DGCEI.

9. Publication of names of persons convicted:

9.1 Section 9B of the Central Excise Act, 1944 also made applicable to Service Tax vide section 83 of the Finance Act, 1994 grants power to publish name, place of business etc. of the person convicted under the Act by a Court of Law. The power is being exercised very sparingly by the Courts. It is directed that in deserving cases, the department should make a prayer to the Court to invoke this section in respect of all persons who are convicted under the Act.

10.1 Procedure for withdrawal of sanction-order of prosecution

10.1.1 In cases where prosecution has been sanctioned but complaint has not been filed and new facts or evidences have come to light necessitating review of the sanction for prosecution, the Commissionerate or the DGCEI unit concerned should immediately bring the same to the notice of the sanctioning authority. After considering the new facts and evidences, the sanctioning authority namely Principal Chief/ Chief Commissioner or Principal Director General or Director General of DGCEI, if satisfied, may recommend to the Board (Member of the policy wing concerned) that the sanction for prosecution be withdrawn.

10.2 Procedure for withdrawal of Complaint already filed for prosecution

10.2.1 In cases where the complaint has already been filed complaint may be withdrawn as per Circular No. 998/5/2015-CX dated 28.02.2015 which provides that where on identical allegation a noticee has been exonerated in the quasi-judicial proceedings and such order has attained finality, Principal Chief Commissioner/ Chief Commissioner or the Principal Director General/ Director General of DGCEI shall give direction to the concerned Commissionerate to file an application through Public Prosecutor requesting the Court to allow withdrawal of the Prosecution in accordance with law.

11. Transitional Provisions

11.1 All cases where sanction for prosecution is accorded after the issue of this circular shall be dealt in accordance with the provisions of this circular irrespective of the date of the offence. Cases where prosecution has been sanctioned but no complaint has been filed before the magistrate shall also be reviewed by the prosecution sanctioning authority in light of the provisions of this circular.

12. Compounding of offences

12.1 Section 9A(2) of the Central Excise Act, 1944 also made applicable to Service Tax vide section 83 of the Finance Act,1994 provides for compounding of offences by the Principal Chief/ Chief Commissioner on payment of compounding amount. Circular no. 54/2005-Cus dt 30-12-2005 and Circular no 862/20/2007-CX-8 dated 27-12-2007 on the subject of compounding of offences may be referred in this regard which inter alia provides that all persons against whom prosecution is initiated or contemplated should be informed in writing, the offer of compounding.

13. Inspection of prosecution work by the Directorate of Performance Management:

13.1 Director General, Directorate of Performance Management and Chief Commissioners, who are required to inspect the Commissionerates, should specifically check whether instruction contained in this Circular are being followed scrupulously and to ensure that reasons for pendency and non-compliance of pending prosecution cases are looked into during field inspections apart from recording of statistical data.

14. The field formations may suitably be informed. Receipt of this Circular may please be acknowledged. Hindi version will follow.

F. No. 96/54/2014-CX.1

(ROHAN)
Under Secretary to the Govt of India

Annexure-I

F. No. ——-

INVESTIGATION REPORT FOR THE PURPOSE OF LAUNCHING PROSECUTION AGAINST ——- COMMISSIONERATE ———– DIVISION ——–

1. Name & address of the person(s) (including legal person(s):

2. Central Excise/Service Tax Registration No.(If any):

3. Nature of offence including commodity:

4. Charges:

5. Period of offence:

6. Amount of evasion involved

7. Particular of persons proposed to be prosecuted :

(a) Name:

(b) Father’s Name:

(d) Address:

(e) Occupation:

(f) Position held in the Company/Firm:

(g) Role played in the offence :

(h) Material evidence available against the accused (please indicate separately documentary and oral evidence).

(i) Action ordered against the accused in adjudication.

(Deputy/Assistant Commissioner or Deputy/ Assistant Director, DGCEI)

Place

Date

I have carefully examined the Investigation Report and find it in order for filling criminal complaint under Section 9 and 9AA of the Central Excise Act, 1944.
(Commissioner, Central Excise_________)/ (Additional Director General, DGCEI——-)

Place

Date

1. The proposal should be made in the above form in conformity with the guidelines issued by the Ministry. With regard to column 4 above, all the charging sections in the Central Excise Act/Service Tax and other allied Acts should be mentioned. With regard to column 7, information should be filled separately for each person sought to be prosecuted.

2. A copy of the Show Cause Notice as well as the Order of Adjudication (Wherever adjudication has been issued) should be enclosed with this report.

3. If any appeal has been filed, then this fact should be specifically stated.

Annexure-II

FORMAT OF PROSECUTION REGISTER

ANNEXURE-III

FORMAT OF PROSECUTION REGISTER TO BE MAINTAINED BY DGCEI

9:19 am
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Reg. Mandatory Filing of customs documents under digital signature from 01.01.2016

CBEC

Reg. Mandatory Filing of customs documents under digital signature from 01.01.2016

Circular No. 26/2015- Customs

Dated 23.10.2015

F.No. 450/2/2015- Dir( Cus ) ( Pt)

Government of India

Ministry of Finance

Department of Revenue

(Central Board of Excise and Customs)

****

To.

All Chief Commissioners of Customs

All Chief Commissioners of Customs and Central Excise

All Commissioners of Customs

All Commissioners of Customs and Central Excise

Sir / Madam,

Subject: Use of digital signature for submission of documents – regarding

Attention is invited to Board Circular No. 10/2015- Customs dated 31.03.2015 which lays guidelines for use of digital signature certificates for submission through remote EDI filing of customs process documents viz. Bill of Entry, Shipping Bill , Import General Manifest (IGM), Export General Manifest (EGM) by importers, exporters, Customs brokers, airlines and their agents, with effect from 01.04.2015.

2. In terms of Board Circular No 10/2015– Customs, dated 31.03.2015, importers registered under Accredited Client Programme (ACP) are mandatorily required to file Bills of Entry with digital signature with effect from 01.05.2015.Wherever the customs process documents are digitally signed, the Customs will not insist on the user to physically sign the said documents.

3. In order to increase coverage of digitally signed documents and subsequent phasing out of physical /manual submission of documents, Board has decided that all importers, exporters using services of Customs Brokers for formalities under Customs Act, 1962, shipping lines and air lines shall file customs documents under digital signature certificates mandatorily with effect from 01.01.2016. The importers/ exporters desirous of filing Bill of Entry or Shipping Bill individually may however have the option of filing declarations/ documents without using digital signature. Further, wherever the customs process documents are digitally signed, the Customs will not insist on the user to physically sign the said documents.

4. All Chief Commissioners of Customs should issue suitable instruction to staff working under their charges for adherence to these guidelines. Further, wide publicity may be given to trade and stakeholders for smooth implementation of aforementioned guidelines.

5. Difficulty, faced if any, may be brought to the notice of the Board.

Yours faithfully

( A.K. Sapra )

OSD( Customs IV

9:17 am
0 Comments

A Brief on Section 8 Company Under Companies Act, 2013

Companies Act 2013

A Brief on Section 8 Company Under Companies Act, 2013

This section corresponds to Section 25 of the Companies Act, 1956 and empowers the central Government to register an association as limited company having charitable objects to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment etc., without adding to its name the words ‘Limited’ ‘Private Limited’. The Profit or any income of the Company shall be used for promoting the objects of the Company. Payment of dividend to members is prohibited. The Central Government (Regional Director) shall issue license on such terms and conditions as shall be prescribed by it for registration of such companies and these companies shall be subject to certain exemptions and restrictions. In the event of any violation of conditions on which a license is issued, the Central Government may revoke the license and order the company, after giving a reasonable opportunity of being heard, to be wound up or amalgamated with another company having similar objects. A firm may be allowed to become a member of such company. Where it is proved that the affairs of the Company were conducted fraudulently, penal action for fraud shall be applicable to every officer of the Company.

Rule No. of The Companies (Incorporation) Rules, 2014 19, 20, 21, 22 and 23
Form No. INC-12, INC-13, INC-15, INC-16, INC-17, INC-18, INC-19, INC-20
Corresponding sections of the Companies Act, 1956: 25
Eligibility for forming Section 8 Company

A person or an association of persons intending to be registered under Section 8 of the Companies Act, 2013 as a limited company –

(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b) intends to apply its profits, if any, or other income in promoting its objects; and

E-filing for Section 8 Company

A person or an association of persons shall make an application in Form No. INC-12 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the Registrar for a license under sub-section (1) of Section 8.

The Memorandum of association of the proposed company shall be in Form No. INC-13.

Form INC-13 shall be accompanied by the following documents

The draft memorandum and articles of association of the proposed company
The declaration in Form no. INC-14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft Memorandum and articles of Association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the Company under section 8 and matters incidental or supplemental thereto have been complied with;
an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
the declaration by each of the persons making the application in Form No. INC-15.
the Company shall, within a week from the date of making the application to the Registrar, publish a notice at his own expense, and a copy of the notice, as published, shall be sent forthwith to the Registrar and the said notice shall be in Form No. INC-26 and shall be published-
– at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated or is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district; and

– on the websites as may be notified by the Central Government.

Other Points to be considered while forming Section 8 Company:-

The Company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.
A firm may be a member of the Company registered under this section.
A Company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
A Company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.
Where it is proved to the satisfaction of the Central Government that a limited Company registered under this Act or under any previous company law has been formed with any of the objects specified in clause (a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in clauses (b) and (c) of that sub-section, it may by license, allow the Company to be registered under this section subject to such conditions as the Central Government deems fit and to change its name by omitting the word “Limited”, or as the case may be, the words “Private Limited” from its name and thereupon the Registrar shall, on application, in the prescribed form, register such company under this section and all the provisions of this section shall apply to that Company.
Where the license granted to a Company registered under Section 8 has been revoked, the company shall apply to the Registrar in Form No. INC-20 along with the fee to convert its status and change of name accordingly.
Where a License is revoked under sub-section (6), the Central Government may, by order if it is satisfied that it is essential in the public interest, direct that the Company be wound up under this Act or amalgamated with another company registered under Section 8.
Conversion of Section 8 Company into Company of another class:-

The Companies (Incorporation) Rules, 2014 prescribes the detailed procedure to be followed by Section 8 Company for converting itself into company of another class. The application shall be made in Form No. INC-18 along with fees as prescribed in the Companies (Registration offices and fees) Rules 2014. Some of the key points are provided below:

Special resolution is required to be passed
Detailed disclosures to be made in the explanatory statement.
Publication of advertisement in at least one vernacular and English newspaper circulating in the district where registered office is situated.
Copy of notice published in newspaper, shall be sent to various authorities including but not limited to Income Tax, the charity Commissioner, chief Secretary of the State etc. intimating them that if they can make representation in respect of the said application before the Regional Director.
Declaration from the Board
If company has obtained any special status, privileges etc., a no objection certificate shall be required.
The Company should have filed all its financial statement and annual return upto the financial year preceding the date of the application.
Certificate from Chartered Accountant, Company Secretary or Cost Accountant in practice as to compliance of all provisions of the Act and Rules.
In case Regional Directors approves the application, it may ask the company to pay for different in the price of property paid by them and the actual market price of the property, where such property has been purchased by them at concessional cost from the Government or any authority. (Rule No. 21 and 22 of the Companies (Incorporation) Rules, 2014).

(Article Credit - Sudish Kumar Gupta, Managing Partner, Compliance Professionals, Law Firm, Contact: +91-7827875767, Mail: info@cplaw.in, Web: www.cplaw.in)

9:17 am
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Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

LLP

Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

FLA is the Annual return on Foreign Assets and Liabilities. As per the latest circular issued by the RBI Circular No. A. P. (DIR Series) Circular No. 22 Dated- 21.10.2015 even LLPs have to file FLA returns with the RBI. The concept and the filing procedure remains the same, here is a bird’s eye view of the same.

What is it?

An Annual return on the Foreign Assets and Liabilities of the Company, notified under FEMA 1999. Return to be filed under A.P. (DIR series) and to be submitted to the Department of Statistics and Information Management, RBI Mumbai.

Which LLPs need to file this?

It is required to be submitted directly by all the Indian LLPs which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who hold foreign Assets or Liabilities in their balance sheets.

Due dates to file it?

FLA Return is mandatory under FEMA 1999 and LLPs are required to submit the same based on audited/ unaudited account by 15th July every year through official email id of any authorized person of the LLP like Designated Partner/Partner at fla@rbi.org.in

Before 30th September each year, audited details are required to be filed.

Format of filing it?

The FLA Return has to be submitted in excel based format, which has inbuilt checks and validations. The latest format of FLA return is available on RBI’s website at the following link:

https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx

For detailed FAQs on FLA Return you may please read more on the following link:

http://taxguru.in/rbi/day-file-rbi-return-foreign-liabilities-assets-faq.html

Points to note:

1. FLA return is an annual return and is not dependent on whether the LLP has received or given out foreign exchange in the past year.

2. Applicable to registered partnership firms as well

If the Partnership firms, Branches or Trustees have any outward FDI outstanding as of end-March of the reporting year, then they are required to send a request mail to get a dummy CIN number which will enable them to file the Excel based FLA Return. If any entity has already got the dummy CIN number from the previous survey, they should use the same CIN number in the current survey also. It is also informed that these dummy CIN numbers are provided by RBI for filling the excel based FLA return only and not for any other purpose.

3. It is separate and independent of the Annual Performance Report

4. FLA return being a mandatory reporting compliance, any non-compliance will attract stringent penal provisions and penalties under FEMA, and the officers of the company would be held liable consequently.

Kunal R. Sarpal, is the Founder Partner of White Collar Legal LLP, Company Secretaries, a firm which is based in Pune and specialises in Company Law, IPR and FEMA Compliance and Consultancy, reach us at whitecollarlegal@gmail.com and visit our website at www.whitecollarlegal.in

Source : Taxguru.in

9:15 am
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Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

LLP

Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

What is it?

Which LLPs need to file this?

Due dates to file it?

Before 30th September each year, audited details are required to be filed.

Format of filing it?

The FLA Return has to be submitted in excel based format, which has inbuilt checks and validations. The latest format of FLA return is available on RBI’s website at the following link:

https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx

For detailed FAQs on FLA Return you may please read more on the following link:

http://taxguru.in/rbi/day-file-rbi-return-foreign-liabilities-assets-faq.html

Points to note:

1. FLA return is an annual return and is not dependent on whether the LLP has received or given out foreign exchange in the past year.

2. Applicable to registered partnership firms as well

3. It is separate and independent of the Annual Performance Report

Source : Taxguru.in

9:15 am
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Top 10 Indian tier II cities to invest in

Investment Tips

Top 10 Indian tier II cities to invest in

Projects launched

Vadodara saw 200 project launches, the highest average in 2014-15. While it mainly has affordable housing, Nashik and Jaipur have a high midhousing supply.

Residential supply

Again Vadodara was at the top, with the highest yearly average launch of 12,000 units in 2014-15. Three northern cities are in the top 4 because of much bigger projects in north than in the rest of India.

Possession by projects
Vadodara has delivered twice the number of projects in the past two years as launched in this period. Western tier II cities, unlike their tier I counterparts, delivered more projects, indicating the commitment of developers here.

Unsold stock

Vadodara leads the unsold inventory with over 20,000 units. Inventory in top five cities is more than the combined inventory of the next 14 cities. It fell in all cities due to a fall in new product launches.

Residential absorption

Vadodara leads tier II cities, with an average absorption of 12,500 units, at least four times more than in Dehradun, Gandhi Nagar and Thiruvanan thapuram. It validates the resilience of affordable segment in troubled times as in Vadodara.

Source: PropEquity

ADVANCED INDICATORS

Parameters that helped pick the winners

Increase in size of market

Change in the size of the market measures the health of the real estate sector. The jump in Dehradun (69%) was due to improvement in the number of units sold and average price of units sold. Dehradun market is just worth `8 billion, compared with `43 billion of Vadodara.

Absorption to supply ratio

This ratio (number of units absorbed to number of units launched) indicates the sales conversion in the market. Even with a huge fall in new launches, north India was the worst performer, where four out of six cities had less than 85% ratio, possibly leading to higher inventory build-ups in the coming years.

Unsold inventory to yearly absorption ratio

Thiruvananthapuram and Visakhapatnam are best placed in tier II cities, with only one year worth of inventory. So, the south is expected to benefit the most as soon as the economy picks pace. Mohali has nearly five years of inventory.

Percentage completed projects
Of 2,000 projects launched in 19 top tier II cities between 2009-10 and 2011-12, 550 or 27%, are still not completed. All northern cities, except Jaipur, have been the worst performers, with more than 40% of the projects still under construction.

Average delay in project execution
Lucknow leads with 20 months of average delay during the review period. Compared to average delay of 21 months for tier I cities, the figure for tier II cities stands at 15 months.

METHODOLOGY

Attractiveness index

The study is divided into two parts. The first is the ranking of cities on individual base indicators. The second deals with composite rankings, calculated via advanced indicators. Base indicators include projects launched, projects offered possession, units launched, units absorbed, total unsold stock, launch price increase, and size of market.

Advanced indicators drive the cities' real estate potential and include size of market, increase in size of market, possession/launch ratio (project launched in 2010-12), absorption to supply ratio (unit based), CAGR of absorption (2014-15), absorption in new launches, increase in absorption prices, total unsold inventory to yearly absorption ratio, average delay in project execution (months), and construction committed to completed.

Scope of study includes apartments, independent floors and villas, and does not take into account plotted development. It only looks at residential supply in the organised domain and does not include housing schemes by government bodies. The scope of time utilised for this study is two years (April 2013 to March 2015), except for calculation of delays, where four-year period is taken, and for project completion trend, where 2010-12 period launched projects are considered.

Ranking technique is used to normalise a set of data points. The variables are segregated into positive and negative, based on their effect on the residential real estate sector. While positive variables are given rankings of 19 - 1 (19 being the best), the negative variables are given rankings of 1 -19. The resultant variables are then subjectively given weights. The weighted scores are calculated to arrive at cumulative scores for each city and the one with the highest cumulative score is ranked the highest.

Source : ET wealth

9:11 am
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Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

Wake up call. Even LLPs under an obligation to file FLA returns henceforth!

Top 10 Indian tier II cities to invest in

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