Monday, September 22, 2014

MEANING OF INOPERATIVE COMPANIES UNDER COMPANIES ACT


Many things are easier to get into than out of. Companies are in that list – it is easy to form them, but difficult to demolish. It is quite common for entities to form companies that were formed for a once-conceived business, but that never took off and therefore, the company remains unused. Or it may be that the business ceased quite some time back and the company is lying like a shell entity over the years. This is what is known as “defunct company”.

After commencement of Companies Act, 2013 from 01st April, 2014 compliance requirement of companies has been increased. Therefore it’s difficult for the Non-working Private Company to continue with Status of Active Company, because maintenance of company is expensive under companies Act, 2013 comparison to Companies Act, 1956.

If the companies are non-working than Companies two options to save cost:

1. Strike off Company (Under Section-560 of Companies Act, 1956 with FTE scheme)

2. Dormant Status of Company (Under Section- 455 of Companies Act-2013.

Definitions: 

Fast Track Exit: Fast Track Exit (FTE)mode is introduced by Ministry of Corporate Affairs for giving opportunity to non-operating companies for getting their names struck off from the records of Ministry of Corporate Affairs. Fast Track Exit mode is an easy mode of closing non-operating companies at cheaper cost with lesser formalities under section 560.

Dormant Company: Section-455 of Companies Act, 2013 talks about a New Provision Calls “DORMANT COMPANY”. This concept was not there in Companies Act, 2013. Another Name of this concept by Professionals is “ASSET SHIELDING CONCEPT UNDER COMPANIES ACT 2013”. A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage.

Checks for FTE: This scheme come into force by circular No. 36/2011 dated: 07th June, 2011. This scheme is effective from 03rd July, 2011.

A. Company has not commenced any business activity or operation since incorporation; or

B. Company is not carrying over any business activity or operation for last one year before making the application of FTE.

C. Assets & Liabilities of company are nil.

D. Documents require for FTE & require to attach in form:

  • i. An affidavit (on Stamp Paper as per Stamp Act of State and duly notarized) from the all director (Mentioned company has not carried on any business since incorporation or that the company did some business for a period up to a date and then discontinued its operations, as the case may, be)
  • ii. Am Indemnity Bond (on Stamp Paper as per Stamp Act of State and duly notarized), duly notarized by every director (Mentioned any losses, claim and liabilities on the company, will be met in full by every director)
  • iii. A Statement of Account as on date not prior to more than one month preceding the date of filling of application in Form FTE, duly certified by Statutory Auditor or Chartered Accountant Whole time Practice.
  • iv. Copy of Board Resolution authorizing directors to file application

Procedure for FTE: 
After above mention checks and preparation of above mentioned documents company can apply for FTE with ROC.



A. A Company eligible to apply for striking off its name needs to apply to Registrar of Companies in Form FTE.

B. The Form FTE, should be filed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in and by making payment of Rs. 5000/- as the ROC fees;

C. Form FTE, shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice;

D. The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under Fast Track Exit mode, on daily basis, on the MCA portal www.mca.gov.in, giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar;

E. The Registrar of Companies immediately after passing of time given in above Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under Section 560(5) of the Companies Act, 1956 for publication in the Official Gazette and the applicant company under this Scheme shall stand dissolved from the date of publication of the notice in the Official Gazette.

F. As per CLLS Scheme: The defaulting inactive companies, while filing due documents under CLLS-2014 can, simultaneously apply for striking off the name of company by filling e-form FTE at 25% of the fee payable on form FTE. (But practically I filled the form fee is coming Rs. 5000 not 25%)


Few other Checks for FTE: Get the complete scheme on

1.      Any defunct company (Described below) which has active status or identified as dormant by the Ministry of Corporate Affairs, may apply for getting its name struck off from the Register of Companies.
2.      Any defunct company which is a Government company is to submit a ‘No Objection Certificate’ issued by concerned administrative Ministry or Department or State Government along with the application.
3.      In case of foreign nationals and NRIs, indemnity bond and affidavit may be notarized as per the respective country’s law.
4.      Litigation: Fast track exit mode does not mention anywhere that a Company against which litigation is pending cannot apply for striking off the name of the Company from the Register maintained by the ROC. Hence, a Company against which litigation is pending can apply under fast track mode. Further, details of pending litigations are required to be filled up in e-form FTE which has a reference in affidavit format too. Any pending litigations involving the company should be disclosed while applying under this Scheme;
5.      NOC is not required from Income Tax / Sales Tax / Central Excise / other Govt authorities. But all directors need to confirm that there are no dues pending against Company with any such

authorities. And MCA will send letter confirming that Income Tax has no objection for striking off the name of the said Company.
Defunct Company: For the purpose of the scheme “defunct company” shall mean a company which has-
·         Nil asset and nil liability
·          Not commenced any business or activity since incorporation
·          Not been carrying any business operation since last one year before making an application under Fast Track Exit Scheme.

FAQ’S of FTE:

1.        The defaulting companies can apply under FTE.
Solu: Defaulting companies are identified as companies which have not filed their statutory documents, i.e. balance sheet and annual return for any of the financial year 2006-07, 2007-08, 2009-10, 2010-2011, 2011-2012, 2012-2013, and 2013-2014. Directors of such defaulting companies are debarred from filing any document until the default is made good. Such defaulting companies can apply under FTE.
2.      How to Apply for FTE?
Sol:  Any defunct company desirous of getting its name strike off the Register under Section 560 of the Companies Act, 1956 shall make an application in the Form FTE, annexed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in accompanied by filing fee of C 5,000/-;
3.         Which Companies cannot apply under fast track exit mode?
Sol:   Following Companies cannot apply under fast track exit mode:-
ü  Listed Companies
ü  De-listed Companies due to non- compliance of Listing Agreement or any other statutory Laws
ü  Section 25 Companies
ü  Vanishing companies
ü  Companies where investigation / inspection ordered and yet to be taken up or pending
ü  Companies where order u/s 234 has been issued by ROC and reply is pending
ü  Companies where prosecution for a non-compoundable offence is pending in court
ü  Companies accepted deposits which are outstanding or default in repayment
ü  Company having secured loan
ü  Company having management dispute
ü  Company for which filing of docs have been stayed by court or CLB or CG or any other competent authority
ü  Company having dues of Income tax / sales tax / central excise / banks / financial institutions / CG / SG / other local authorities
ü  Companies not having active / dormant status on MCA portal

4.      Can an inoperative company with assets and liabilities apply under FTE?
Sol:   The FTE scheme talks about a defunct company to mean a company with nil asset and nil liability. Though proviso (a) to section 560 (5) states that liability, if any of the director shall continue, but the scheme deals with a defunct company with nil asset and nil liability. This reflects that zero asset-liability is a condition precedent to the application under the present scheme.
Dormant Company:  This Cover under Section-455 of Companies Act, 2013 comes into effect from 01st April, 2014.
Lets emphasis on Definition of Dormant Company:
Dormant Company means a company
1.      If a company is formed and registered under the Act for a future project and has no significant accounting transaction or
2.      If a company is formed and registered under the Act to hold assets and has no significant accounting transaction or
3.      If a company is formed and registered under the Act for Intellectual property and has no significant accounting transaction such a company OR
4.      An Inactive company may make an application in such manner as may be prescribed for obtaining the status of dormant company.


Now Lets Discuss Inactive Company: 

Inactive company means a company which:

  • Ø has not been Carrying on Any Business, or 
  • Ø has not been Carrying on operation or
  • Ø has not made any Significant Accounting Transaction During The Last Two Financial Years, or
  • Ø has not filed Financial Statements and Annual Returns during the LAST TWO FINANCIAL YEARS.
Now Lets Discuss Significant Accounting Transaction

“Significant Accounting Transaction” means any transaction other than- 

  • Ø Payment of Fees by a company to the Registrar;
  • Ø Payments made by it to fulfill the requirements of this Act or any other law;
  • Ø Allotment of shares to fulfill the requirements of this Act; and
  • Ø Payments for maintenance of its office and records.
Checks for Dormant Company: 

  1. Company incorporates for a future project or to hold an asset or intellectual property and has no significant accounting transaction. Or;
  2. A Company is inactive company (as per Definition given above)
  3. Documents require for Dormant & require to attach in form:
    • a. CTC of Board Resolution.
    • b. CTC of Special Resolution.
    • c. Auditor’s Certificate.
    • d. Statement of Affairs duly certified by Chartered Accountant or Auditor(s) of the company.
    • e. Latest Financial Statement and Annual Return of the Company is mandatory to attach In Case The Same Is Filed To Registrar.
    • f. Certificate regarding no dispute in the management or ownership
    • g. Consent of lender, if any loan is outstanding.
  4. As per Sub- Section 4 Section- 455: Where a company Not Filed or Fails to File Financial Statements or Annual Return for TWO (2) Financial Year consecutively, The Registrar of Company (ROC) shall issue a notice to that company and enter the name of such company in register maintain for Dormant Company.
  5. As per CLLS Scheme: The defaulting inactive companies, while filing due documents under CLLS-2014 can, simultaneously apply to get themselves declared as Dormant Company under Section- 455 of the Companies Act 2013 by filling e-form MSC-1 at 25% of the fee payable on form FTE.

Few other Checks for Dormant Status: As per Section 455(1) Explanation (ii). 

This Section comes into effect from 01st April, 2014.

  • A. No inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
  • B. The company is neither having any public deposits which are outstanding nor is the company in default in payment thereof or interest thereon;
  • C. No prosecution has been initiated or pending against the company under any law;
  • D. The company has not defaulted in the payment of workmen’s dues;
  • E. The company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.;
  • F. The application has not been made with an objective to deceive the creditors or to defraud any other person;
  • G. The securities of the company are not listed on any stock exchange within or outside India;
  • H. The company is not having any outstanding loan, whether Secured and Unsecured- But if company has any Outstanding Unsecured Loan then the company may apply for status of DORMANT only after obtaining NOC from the lender. Such NOC required to be attached in the Form which requires filing with ROC.
  • I. There is No Dispute in the Management or Ownership of The Company; A certificate in this regard required to taken from Management. Such Certificate required to be attached in the Form which requires filing with ROC.
FAQ’S of Dormant Company:


1. A company which is in existence from the period less than 2 year can go for Status of Dormant?

View: Yes As per Definition of Inactive Company given above [Section 455(1) explanation (I)

Means a company which not carrying any business or operation.

2. What is the procedure to get Status of Active company.

View: If company wants to get Active status to be file e-form MSC-4 with ROC, then gets active company status.

3. Transaction which a company can do during Dormant Status.

View:
  • Payment of fees by a company to the Registrar; 
  • Payments made by it to fulfill the requirements of this Act or any other Law; 
  • Allotment of shares to fulfill the requirements of this Act; and 
  • Payments for maintenance of its office and records.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com Mob: +91-8130757966) 

Friday, September 19, 2014

AGENDA FOR BOARD MEETING REQUIRED TO BE HELD BEFORE AGM FOR PRIVATE LIMITED COMPANIES.


As all of us aware that there are some Resolutions {Mention under Section179(3)} which company required to file with ROC inform  MGT-14 within 30 days of passing of resolution. {In my earlier Article mentioned list of Resolution which we require to file with ROC). 


If you required that list mail me on csdiveshgoyal@gmail.com

Companies, who still not held Board Meeting for calling AGM or will show board meeting on papers in back date. So in this article am trying to help you by providing the following:

1. Draft Detailed Agenda for Private Companies under Companies Act- 2013, by covering maximum resolution (which will help Companies to *save cost of Filling of e-form MGT-14 on different-2 time in future).

2. Draft Minutes for According to given Agenda.

3. Draft Notice Calling Board Meeting.

4. Draft Attendance Sheet of meeting.

5. Draft Notice Calling Annual General Meeting.

6. If Auditor Absence from AGM than a Leave of Absence from the Auditor of company.

7. Draft Director Report for F.Y. Ended on 31st March, 2014.

8. Draft Consent and certification of qualification of Auditor.

9. Draft Minutes of Annual General Meeting.

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Board Meeting through Video‐conferencing


In general parlance, meeting refers to formal or informal deliberative assembly of individuals called to debate certain issues and problems, and to take decisions. Formal meetings are held at definite times, at a definite place, and usually for a definite duration to follow an agreed upon agenda. Meeting can be understood as a meeting of minds, rather than a physical gathering of individuals at a common place, to discuss a common issue. With the advancement in technology, it is now possible to
hold meetings virtually also i.e. through means of audio‐video conferencing. This mode of conducting meetings has been given due recognition under the Companies Act 2013. In the present article we have highlighted the provisions of Companies Act, 2013, along with the prescription contained in the final rules, relating to holding of board meetings through video conferencing. The requirements listed below are in addition to the general requirements specified for conducting board meetings physically.


Meaning of video conferencing or other audio visual means

“Video‐conferencing or other audio visual means” means audio‐visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting.

Matters which cannot be dealt through video conferencing


  1. the approval of the annual financial statements;
  2. the approval of the Board’s report;
  3. the approval of the prospectus;
  4. the Audit Committee Meetings for "consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub‐section (1) of section 134 of the Act;  and
  5. the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
General Rules regarding quorum, venue and participation


  • Participation of a director through video‐conferencing will be counted for the purpose of quorum,unless it is to be specifically excluded for any items of business under any provisions of the Act or the rules.
  • The scheduled venue of the meeting as set forth in the notice convening the meeting, shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.
  • The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.
  • No person other than directors, Company Secretary, Chairperson and persons whose presence is required pursuant to a legal provision shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing.

Requirements regarding notice 

Notice shall contain details regarding availability of facility of video conferencing and all necessary details to enable the directors to participate in the meeting through video‐conferencing.

Duties of Individual Directors
  • A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the company secretary of the company by giving prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. If this intimation is not given, it shall be presumed that the director shall attend the meeting in person.
  • The director, who desires, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

Procedural requirements On Commencement of the meeting:
At the commencement of the meeting, 

  • - a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record his name, location, confirmation that he has received the agenda and all relevant papers for the meeting and confirmation that no one other than the concerned director is attending or having access to the proceedings of the meeting at his location.
  •  After the roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairperson and confirm that the required quorum is complete.
On transaction of business:


  • Every participant shall identify himself for the record before speaking on any item of business on the agenda
  • If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.
  • If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote. 
  • At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.
Requirements throughout the meeting:


  1. Every Company shall make necessary arrangements to avoid failure of video or audio visual connection.
  2. Chairperson of the meeting and the CS, if any, shall take due and reasonable care –
    1. - to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;
    2. - to ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;
    3. - to ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and 
    4. - to ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting.
  3. The Chairperson shall ensure that the required quorum is present throughout the meeting. 
  4. From the commencement of the meeting till its conclusion no person other than the Chairperson,Directors, Company Secretary and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.
On conclusion of the meeting:

  1. Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care:
    1. - to record proceedings and prepare the minutes of the meeting;
    2. - to store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.

Requirements regarding minutes and secretarial records


  • Minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio visual means.
  • The draft minutes of the meeting shall be circulated among all the directors within 15 days of the meeting either in writing or in electronic mode as may be decided by the Board.
  • Every director who attended the meeting, whether personally or through video conferencing, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.
  • Thereafter, minutes to be entered in minutes book as per provisions discussed under the heading “Minutes”, later in this chapter.

Thursday, September 18, 2014

Know the Impact –‘Increase in EPF Ceiling from Rs.6,500/- to Rs.15,000/- !’


By this time all of you would have read the increase in the EPF ceiling limit finally confirmed through Gazette Extraordinary Notification made on 28th Aug’14 which is effective from 01st Sept’14. This amendment has several impacts apart from increase in contribution. Key highlights and impact analysis of the amendment are summarized in trail:

A. Salary ceiling limit for EPF coverage has been increased from Rs.6,500/‐ to Rs.15,000/‐ p.m.

B. Salary means only Basic + DA + VDA + Retaining Allowance + Cash value of any food concession + any other allowance paid in cash & not defined.

C. Minimum Employee’s Pension w.e.f., 01st Sept’14 will be Rs.1,000/‐ p.m

D. Salary ceiling limit for Employee’s Pension will be Rs.15,000/‐ p.m. Hitherto it was Rs.6,500/‐

E. This means 8.33% of on Rs.15,000/‐ basic i.e. Rs.1250/‐p.m will be diverted to pension fund.Earlier it was Rs.541/‐ only on Rs.6,500/‐ @ 8.33%

F. Those who want to contribute above Rs.15,000/‐ for pension fund – will have to shell out 1.16% additional contribution on the amount in excess of Rs.15,000/‐ from employees share & give declaration (both employer & employee) to that effect within 06 months from the date of this notification failing which any additional contribution made above Rs.15,000/‐ to pension fund would be diverted to EPF fund & will be given the interest as declared from time to time.

G. Employer in addition to 12% of Basic, now will have to contribute 0.50% of Rs.15,000/‐ to EDLI A/C, 1.10% on Rs.15,000/‐ as administration expenses on EPF A/C & 0.01% of Rs.15,000/‐ as administration expenses for EDLI A/C.

H. Minimum Widow Pension w.e.f., from 01st Sept’14 will be Rs.1,000/‐p.m

I. For dependent children with widow, the Children Pension will be Rs.250/‐p.m

J. If the deceased employee is not survived by widow but by the dependent children Rs.750/‐p.m will be the children pension.

K. Eligibility for pension: 10 years of service under pension scheme and on attaining the age of 58years – both condition have to be fulfilled.

L. If the service is below 10 years of service & has not attained the age of 58 years, can withdraw the pension amount or obtain certificate to that effect & resume the count of service in future, if the employee joins for the employment service covered under EPF&MP Act,1952.

M. Pensionable salary up to 31st Aug’14 will be Rs.6,500/‐ thereafter it will be Rs.15,000/‐ till further amendment.

N. If the Employee’s Pension contribution is restricted to Rs.15,000/‐ then the maximum pension at the age of 58 years shall not be more than Rs.15,000/‐ p.m as on date. Hitherto it was Rs.6,500/‐p.m

O. Pension calculation: (Pensionable salary *Pensionable Service)/70

P. 20% increase in the EDLI claim benefits amount. At present the maximum benefit payable under EDLI is Rs.130,000/‐ & the increase of 20% would result in Rs.146,000/‐ as maximum benefit.

Q. There will be no contribution to pension fund for an  International Worker assigned to India w.e.f., 01st Sept’14 if their salary is above Rs.15000/‐ p.m. This means entire contribution both employer &
employees will be apportioned to EPF A/c.

R. Any International Worker who is an existing member of the Pension Scheme as on 01st Sept’14, 8.33% of the employers share would continue to be contributed to Pension Account.

This amendment will have marginal cost escalation on Employers to the extent as mentioned in point “G” above w.r.t., Permanent Employees as well as for contingent employees whose basic salary is more than Rs.6500/‐.

It may be noted that the last amendment w.r.t., ceiling was on 01st June’2001. It is after 13 years the ceiling limit is enhanced, rightly so as economic & business dynamics have changed greatly in the past 13 years!!!''

Check notification for increase in limit of epf from 6500 to 15000/-

Clarifications on mandatory pre-deposit for filing appeals under Service tax, Excise and Customs


The Finance Act (No.2), 2014 (“the Finance Act”) has substituted new Section 35F of the Central Excise Act, 1944 (“the Excise Act”) which is also applicable for Service Tax vide Section 83 of the Finance Act, 1994 and Section 129E of the Customs Act, 1962 (“the Customs Act”) to prescribe mandatory pre-deposit of 7.5% or 10% for first stage or second stage appeal, of duty demanded where duty demanded is in dispute or where duty demanded and penalty levied are in dispute and where penalty alone is in dispute, the pre-deposit shall be calculated on the penalty imposed. The said amendments have become applicable for the appeals to be filed after August 6, 2014 and all pending appeals/stay applications filed prior to August 6, 2014 shall be governed by the erstwhile provisions.

The Central Board of Excise & Customs has issued Circular no. 984/08/2014-CX dated September 16, 2014 (“the Circular”) providing clarifications on various doubts / issues raised by trade bodies, industry associations and field formations etc., on implementation of new provisions pertaining to amendments made in appeal provisions in Customs, Central Excise and Service Tax are as under:

1.    Quantum of pre-deposit in terms of Section 35F of the Excise Act and Section 129E of the Customs Act

Issue: There is confusion/ doubt if an appellant has already deposited 7.5% in first stage of appeal then, the Appellant is required to deposit another 10% in second stage of appeal or differential 2.5% only.

The CBEC has clarified that in the event of appeal against the order of Commissioner (Appeals) before the Tribunal, 10% pre-deposit has to be paid on the amount of duty demanded or penalty imposed by the Commissioner (Appeals). However, this amount need not be the same as the amount of duty demanded or penalty imposed in the Order-in-Original in the said case.

Further, it has been clarified that in a case, where penalty alone is in dispute and penalties have been imposed under different provisions of the Act, the pre-deposit would be calculated based on the aggregate of all penalties imposed in the order against which appeal is proposed to be filed.

Furthermore, in case of any short payment or non-payment of the amount stipulated under Section 35F of the Excise Act or Section 129E of the Customs Act, the appeal filed is liable for rejection.

2.    Payment made during investigation:

The CBEC has clarified that payment made during the course of investigation or audit, prior to the date on which appeal is filed, to the extent of 7.5% or 10%, subject to the limit of Rs 10 crores, can be considered to be pre-deposit made towards fulfilment of stipulation under Section 35F of the Excise Act or Section 129E of the Customs Act.

However, amounts paid over and above the amounts stipulated under Section 35F of the Excise Act or Section 129E of the Customs Act shall not be treated as deposit under the said sections. Further, the date of filing of appeal shall be deemed to be the date of deposit made in terms of the said sections.

Important to note: It means that No Interest benefit as granted under Section 35FF of the Excise Act or Section 129EE of the Customs Act on any excess payment made beyond 7.5% or 10% of duty or penalty.

3.    Refund of pre-deposit:

In case appeal is decided in favour of the assessee, he shall be entitled to refund of amount deposited along with the interest at the prescribed rate (recently notified @ 6% PA) from the date of making the deposit to the date of refund in terms of Section 35FF of the Excise Act or Section 129EE of the Customs Act.

Further, the refund of pre-deposit made by the assessee should not be withheld on the ground that Department is proposing to file an appeal or has filed an appeal against the order granting relief to the assessee. The concerned Jurisdictional Commissioner should ensure that refund of pre-deposit made for hearing the appeal should be refunded within the stipulated time of 15 days of the receipt of the letter of the assessee seeking refund.

A simple letter from the person who has made such deposit, requesting for return of the said amount, along with a self attested Xerox copy of the order in appeal or the CESTAT order consequent to which the deposit becomes returnable and attested Xerox copy of  the document evidencing payment of such deposit, addressed to Jurisdictional Assistant/Deputy Commissioner of Central Excise and Service Tax or the Assistant/Deputy Commissioner of Customs, as the case may be, would suffice for refund of the amount deposited along with interest at the rate specified. Record of deposits made under Section 35F of the Excise Act or section 129E of the Customs Act should be maintained by the Commissionerate so  as to facilitate seamless verification of the deposits at the time of processing the refund claims made in case of favourable order from the Appellate Authority.

It has been further clarified that if the Department contemplates appeal against the  order of the Commissioner (A) or the order of CESTAT, which is in favour of the appellant, refund along with interest would still be payable unless such order is stayed by a competent Appellate Authority.
In the event of a remand, refund of the pre-deposit shall be payable along with interest.

4.    Recovery of the Amounts during the Pendency of Appeal:

It is clarified that no coercive measures for the recovery of balance amount i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of the Excise Act or Section 129E of the Customs Act shall be taken during the pendency of appeal where the assessee shows to the jurisdictional authorities:

(i)            Proof of payment of stipulated amount as pre-deposit of 7.5% / 10%, subject to a limit of Rs.10 crores , as the case may be; and

(ii)     Copy of appeal memo filed with the appellate authority.

It has been further provided that recovery action, if any, can be initiated only after the disposal of the case by the Commissioner (Appeals)/ Tribunal in favour of the Department unless the order of the Tribunal is stayed by the High Court/Supreme court. The recovery, in such cases, would include the interest, at the specified rate, from the date duty became payable, till the date of payment.

5.    Other clarifications on Procedure and manner of making pre-deposits:

The Circular has also clarified on procedure and manner of making the pre-deposit while filing the appeal by the assessee.

The Circular may be viewed by clicking on the following link:


Thanks & Best Regards.

Bimal Jain 
FCA, FCS, LLB, B.Com (Hons)Flat No. 34B, Ground Floor, Pocket - 1,Mayur Vihar, Phase - I,
Delhi – 110091, India Desktel: +91-11-22757595/ 42427056 Mobile: +91 9810604563

Wednesday, September 17, 2014

CLARIFICATIONS ON AMENDED APPEAL PROVISIONS UNDER INDIRECT TAXES



Vide the aforesaid circular, Central Board of Excise & Customs (CBEC) has addressed various issues emerging out from the introduction of mandatory pre-deposit for filing appeal before CCE(A) or CESTAT, after 6th August, 2014[i.e. enactment of Finance(no.2) Act, 2014].

The said circular has dealt upon the following areas:

Quantum of pre- deposit:

  • o Appeal before CESTAT against the order of CCE(A) shall be accompanied with 10% of duty or penalty imposed by CCE(A), which may not be the same as determined originally by adjudicating authority;
  • o Therefore, it is intended that no adjustment shall be allowed on account of pre-deposit made earlier equal to 7.5% of duty at the time of filing appeal before CCE (A).

Note: The circular has used the expression 10% of duty or penalty, whereas, it has been categorically amended in Finance (no.2) Act, 2014 that in case of penalty and duty under appeal, the prescribed percentage shall be computed only on duty and not penalty.

Payment made during investigation:

  • o The payment made during the course of investigation or audit, prior to filing of appeal, shall be considered as pre-deposit as well and be  adjusted accordingly;
  • o If excess amount (i.e. over and above 7.5% or 10%, as the case may be) is paid earlier during audit, the said excess amount shall not be treated as pre-deposit.
  • o The date of filing of appeal shall commence from the time when the aforesaid amount is deposited during the audit/investigation.
Recovery of amounts during appeal

  • o Circular for recovery of demand (issued in Jan’13) has become redundant for appeals filed post 6th Aug’14.
  • o No recovery proceedings shall be initiated till the appeal is disposed of by CESTAT.
  •  In other words, no separate stay application is required till the order of CESTAT. Only, after the order of CESTAT/High Court, the stay application needs to be filed to High Court/ Supreme Court
  • o Earlier, stay application was required to be made at the time of filing appeal before CESTAT as well, against the order of CCE(A)/CCE.
Refund of pre-deposit:

  • o Interest @ 6% p.a. on delay in refund of pre-deposit shall be payable from the date of making the deposit till the date of refund;
  • o Refund application needs to be made by the appellant and within 15 days from the receipt of letter (whether order is further challenged by department or not), the refund along with interest shall be paid. 
  • o The application shall be accompanied by self attested Xerox copy of order in appeal or order of CESTAT, and attested Xerox copy of document evidencing the payment of pre-deposit.
Prepared By: CA Sumit Grover Sumitgrover.ca@gmail.com +91-9910946323
Download Circular No 984/08/2014CX Date- 16th September, 2014

Tuesday, September 16, 2014

TABLE FOR STEP OF INCORPORATION OF COMPANY


This table is for those people, applying for Company Incorporation after 1st April, 2014. Form INC-22 and form INC-7 are being rejected by the ROC Authorities, as many people are using the same old AOA formats for incorporating company. 

The first thing to take care of under the new Companies Act, 2013 is to follow a changed procedure for giving birth to a Company.

Complete and detailed procedure is available here


EXPLANATORY STATEMENTS UNDER COMPANIES ACT, 2013


INTRODUCTION 

General principle of law is that the decisions which are serious in nature or which involve significant business transactions are taken at Shareholders meetings. The scope of this decision making power has been increased by Companies Act, 2013. 

To enable shareholders to take apt and a well informed decision, it is necessary to provide them with requisite information. Under Companies Act, 1956 section 173 ensured that the shareholders are well equipped with necessary information, but as the decisions to be taken at the meeting are of various types therefore the information required also cannot be framed in a particular stereotype format and unlike Companies Act, 1956 proper care has been taken of this in the new law.

EXPLANATORY STATEMENT 
Different requirements with respect to explanatory statements pursuant Companies Act, 2013 are stated as under:-