CBEC’s circular may jeopardize tax penalties

While the judgment was reserved on 21 cases by a bench of Customs,Excise and Sales Tax Appellate Tribunal (CESTAT) on July 6,the issue was compounded by this circular dated July 10.

Written by Appu Esthose Suresh | New Delhi | Published: July 30, 2012 12:42:35 am

In an unprecedented development,the CBEC (Central Board of Excise and Customs ) has issued fresh instructions on tax implications for money transfer agents,which enforcement agencies feel may jeopardize the recovery of over Rs 100 crore from defaulters.

While the judgment was reserved on 21 cases by a bench of Customs,Excise and Sales Tax Appellate Tribunal (CESTAT) on July 6,the issue was compounded by this circular dated July 10.

Enforcement agencies,especially Directorate General of Central Excise Intelligence,have already aired their apprehension,with the board chairman SK Goel. Interestingly,the contents of the circular,according to senior CBEC officials,was never discussed by the board.

The on-going tussle assumes significance given the fact that in the new negative list regime,all money transactions have been excluded from service tax.

Prior to this,the DGCEI and other agencies under the CBEC board had initiated several cases against operators such as Western Union money transfer. Microsoft is also facing a 250 crore demand over foreign remittances.

Subsequent to the circular,the DGCEI wrote a confidential letter on July 16 to the board,“Any perceived effect of this circular having retrospective effect can adversely effect the judgments of CESTAT… An unambiguous clarification to referred circular is necessary so as to safeguard the interest of revenue.”

According to sources,the cases pending before CESTAT is about Rs 65 crore and the various units of DGCEI has made a case of Rs 100 crore against various companies.

While CBEC member in charge of service tax,Shiela Sangwan,refused to comment,chairman SK Goel was not available for comments.

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