The Hindu Business Line : A few lessons on commodity markets

THE Kaksons Tradeways case that came up before the Bangalore CESTAT illustrates an interesting situation for those tracking international trade. The question here was about free access to imports from a SAARC country. The company had imported betel-nut splits from a Sharjah trader, and the certificate of origin issued by the Sharjah Chamber of Commerce and Industry stated the country of origin as Sri Lanka, a SAARC country. On arrival of the consignment at Kochi, authorities confiscated the same stating that the certificate of origin was not from Sri Lanka. Kaksons contended that the shipment was directly from Sri Lanka and also the phytosanitary certificate issued by the Sri Lankan authorities showed the place of origin as Sri Lanka. Mr C.N.B.Nair, Tribunal Member observed: "Country of origin of goods is not to be determined by the location of the trader. Adopting that criterion would yield entirely incorrect results and distort the arrangement among SAARC countries. This is particularly so inasmuch as, often, commodity markets are located at trading centres rather than at producing areas of the commodities. This commercial fact should be recognised by Customs authorities also."

Refreshing thinking.

Stick and carrot

VOLUNTARY disclosure is an attractive carrot as the Irish Revenue realised recently. More than 15,000 taxpayers rushed, reports Accountancy. To help the Revenue's exercise, foreign subsidiaries of the 10 leading banks in Ireland "sent letters to up to 120,000 customers with Irish addresses informing them of the Revenue's intention to investigate offshore accounts held by Irish residents." As such, the Revenue is not able to predict the likely amount to be unearthed, though "more than euro 1bn has been collected in recent years from several Revenue investigations into bogus non-resident accounts set up for the purpose of tax evasion." Is there a case for announcing another VDIS here?

Address to jail

SHOW cause notice was served to appellants by the Customs Department. Something too routine, one might say, but this notice was sent to the village address of the appellants, though they were at that time in jail in connection with criminal cases launched against them by the Customs authorities. "No copy of the show cause notice was even attempted to be served on any of these appellants in jail even though their being in jail was a fact well known to the Customs authorities." Thus read the facts of Rajesh Kumar vs Commissioner of Customs, Patna, which was discussed by the New Delhi CESTAT. Tribunal's ruling observed that it was the bounden duty of the Department to ensure that the notice was duly served through the Jail Superintendent. Failing that, there was a violation of natural justice, and so the case was remanded.

An instance of officials forsaking the principle of being seen to be fair.

Rough weather

RECENTLY there was a case where a studio's sets were held to be plant. Here is a reverse ruling from the UK. In what is described by the Accountancy as a `tax blow for leisure industry', London's Court of Appeal today ruled that an artificial all-weather racetrack installed at Lingfield Park Racecourse was part of the `premises', and not `plant' deductible as a capital allowance. The park had claimed that its capital expenditure of about £3 million on the installation of the `equitrack' surface, plus drainage works and safety fencing, was expenditure on plant. The Court felt "it was `more accurate' to describe the new track as `part of the premises'."

Case based on chits

IN Essvee Polymers case, the Chennai CESTAT had to deal with allegation of clandestine removal, with the Department relying on slips it had seized from the MD's residence. The Tribunal stated that mere slips recovered or statements are not sufficient to confirm the demand of duty and allegation of clandestine removal. "There has to be some evidence in the form of receipt of raw materials, shortage of raw materials, clandestine manufacture including the use of electricity, excess or shortage of inputs found in the stock, flow back of funds, purchase of final products by parties alleging receipt and removal of goods and any such evidence which would show clandestine manufacture of goods... Therefore, the entire case is based on chits and does not have reliability and credibility."

A complete checklist for the Department to vet before arguing a similar case in future.

Dodging Uncle Sam

BUSH should be a worried man to know that more than 60 per cent of the US corporations paid no federal taxes from 1996 through 2000, even as the economy clocked a good speed. AccountingWEB cites a similar study conducted by the General Accounting Office analysing the Internal Revenue Service data. Finding: About 70 per cent of foreign-owned companies doing business in the US paid no federal taxes during the late 1990s. At 7.4 per cent, share of corporate tax receipts in overall federal revenue is at its lowest since 1983, and the second-lowest rate since 1934. "The latest GAO study on corporations seems to echo the results of a recent survey of individual taxpayers. Last year, 17 per cent of Americans said that cheating on their taxes is okay versus 11 per cent in 1999. The IRS estimates that 15 per cent of taxpayers paid nothing in 2001, owing the government a total of $311 billion." Though corporate-tax rate for big corporations is 35 per cent, many companies pay far less "by taking advantage of the many credits and loopholes in the federal tax code". One school of thought supports this because "corporations have an obligation to shareholders to pay as little tax as they legally can."

Tailpiece

Overheard in hell:

"Is it true that all those people who die without paying taxes are chased by tax officers who die in harness?"

"Now I know whom I came looking for!"

Detaxification@thehindu.co.in

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