TIOL-DDT 1029 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1029</font><br> 12.01.2009<br> Monday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Branded labels - SSI exemption – Metal Labels Vs Paper Labels.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT received this mail from a netizen –</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Government has issued a notification 47/2008-CE, dated 01.09.2008 inserting the following clause 4(e) and paragraph 4B in notification 8/2003-CE which is as under</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“4. The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, <strong>except in the following cases </strong>: -</em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(e) Where the specified goods are in the nature of packing materials, <strong>namely</strong>, printed cartons of paper or paper board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps, crown corks, <strong>metal labels</strong>.</em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>4B. Notwithstanding anything contained in the preceding paragraphs, the exemption in respect of goods specified in clause (e) of paragraph 4, contained in this notification, shall be restricted to rupees ninety lakhs for the remaining part of the financial year 2008-09.”</em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">There are assessees manufacturing ‘paper labels' carrying a brand name and these paper labels are tagged on to ready made garments such as shirts, trousers, pants etc. In our excise formations, it is contended that such ‘ <strong>branded paper labels </strong>' are <strong>NOT </strong> entitled to the benefit flowing out of this amending notification 47/2008-CE as they are not specifically mentioned in clause (e) [above] inasmuch as only ‘metal labels' are referred to. It is also being contended that the usage of the term ‘namely' indicates the exclusive nature of the ‘specified goods' entitled to the benefit of SSI exemption.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When metal labels are entitled for exemption, why not paper labels?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court in the case of <em>Suksha International & Nutan Gems </em><strong><em>[<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2002/2002-TIOL-660-SC-EXIM.htm" target="_blank">2002-TIOL-660-SC-EXIM</a></font>] </em></strong> has held that interpretation which would unduly restrict the scope of the beneficial provision and take away with one hand what is given with the other is to be avoided. So also, in the case of <em>Shriram Vinyl & Chemical Industries</em>, <strong><em>[<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2002/2002-TIOL-663-SC-CUS.htm" target="_blank">2002-TIOL-663-SC-CUS</a></font>]</em></strong>, it was held that interpretation of an exemption notification must be rational and it must not result in denial of benefit thereof.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is also held by the Apex Court in the case of <em>Mahindra Engg . & Chemical Products Ltd. </em><strong><em>[<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-673-SC-CX.htm" target="_blank">2002-TIOL-673-SC-CX</a></font>] </em></strong> that <em>the use of expressions “namely”, “that is to say”, followed by description of goods is usually exhaustive unless there are strong indications to the contrary. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Secondly, how can the term ‘namely' be construed as exclusive in nature when the fact remains that the clause (e) begins with the words ‘Where the specified goods are in the nature of packing materials…”. The fact of the matter is that the word ‘namely' extrapolates the word ‘packing materials'. So, if the Central government has failed to make a mention of the word ‘paper labels' in explicit terms in the exclusion clause (e), that cannot be a ground to deny the SSI exemption in respect of ‘branded paper labels'. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Will the Board clarify or leave the matter to the consultants and courts?</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Common Adjudicating Authorities Notified for DGCEI and DRI SCNs</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has notified various common adjudicating authorities for the various show cause notices issued by the DGCEI and DRI. One question that is frequently asked by <strong>DDT </strong> is why should there be different notifications to notify the authorities when such notifications are issued by a single authority for addressing a common purpose. Instead it would be simpler to consolidate all the information pertaining to SCNs and the respective adjudicating authority and issue a single notification. Indeed the functions of the bureaucracy are mysterious.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_005.htm" target="_blank">Notification No. 5/2009 – Cus (NT)</a>,<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_006.htm" target="_blank"> 6/2009 – Cus (NT)</a>,<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_007.htm" target="_blank">7/2009 – Cus (NT)</a> and<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_008.htm" target="_blank"> 8/2009 – Cus (NT)</a> All Dated: 6th January, 2009</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Provision related to grant of extension of EO amended</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has amended paragraph 5.11 of the HBP V.I which provides for grant of extension of export obligation for the first two years as follows:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Concerned Regional Authority may consider request for grant of first extension in E.O. period on payment of composition fee equal to 2% of <strong><font color="#FF6633">proportionate</font> </strong> duty saved (<strong>earlier this was 2% on total duty saved</strong>) amount on unfulfilled export obligation or an enhancement in export obligation imposed to the extent of 10% of total export obligation imposed under authorization, as the case may be at the choice of exporter, for each year of extension sought. Such first extension in EO period can be for a maximum period of two years”.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2008/dgft08pn126.htm" target="_blank">DGFT Public Notice No. 126 (RE-2008)/ 2004-2009, Dated: January 6, 2009</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Restriction on Import of Other Transmission Shafts and Cranks removed</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has removed the restriction on import of items falling under Exim Code No. 8483 10 99 by upgrading it from the ‘restricted' category to ‘free' category of imports.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The item was kept under restricted category vide Notification No 63/( RE-2008)/ 2004-2009 dated 21st November 2008.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2008/dgft08not076.htm" target="_blank">DGFT Notification No. 76 (RE-2008)/2004-2009, Dated: January 7, 2009</a></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">CBDT/CBEC Chairmen to have minimum one year service</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The President has amended the <font color="#FF6633"><strong>Central Board of Direct Taxes (Chairman and Members) Recruitment Rules, 2006</strong></font> and the Central Board of Excise and Customs (Chairman and Members) Recruitment Rules, 2006 to make it mandatory that a Member of the Boards appointed as Chairman has a minimum of one year service left. During the last couple of years, we had seen the CBDT being headed by chairmen for one month, three months and such short periods.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even one year period is too short for the post of Chairman. It should be made a tenure post and once you appoint somebody there, he should have at least a tenure of three years. Frequent changes at the top will rattle the bottom.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ministry of Finance <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/notification_cbdt.htm" target="_blank">Notifications Dated: December 24, 2008 for CBDT</a> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/cbce_notification.htm" target="_blank">Notification Dated: December 24, 2008 for CBEC</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Up-gradation of Pay Scale of CBDT/CBEC Members – Members and Chairmen are of equal rank and pay</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The much sought elevation for the post of Members of the CBDT and CBEC is finally notified. The IRS will now get about 12 posts of Secretary rank. Members of the Boards will now be of the rank of <strong>Special Secretary</strong>. There is nothing <strong>special </strong> about this Secretary, except that he does not belong to the IAS.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The pay scales for the post of Member in the Central Board of Excise & Customs (CBEC) and the Central Board of Direct Taxes (CBDT) were upgraded from HAG+Scale of Rs.75,500-80,000/- (pre-revised scale of Rs.24050-650-26000) to the apex scale of Rs.80,000 (fixed) with rank of Special-Secretary to the Govt. of India with effect from 24.12.2008</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Members and Chairmen of the Boards will be equal rank and pay – the Chairman will be a ‘first among equals'.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the ‘Pay Commission' recommendations were released, DDT called up a Member and congratulated him and informed him that he is going to be Secretary to the Government – he simply couldn't believe it and said, ‘it's only a recommendation, which will not be accepted”</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently DDT spoke to a Chief Commissioner and wished him that he would become a Member of the Board soon. He said he was not very keen and these things are very uncertain, but it is now very attractive in the sense that there is a huge pay hike.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After so many years, now the Revenue Boards Members are equal to the Railway Board Members.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government's New Year gift to the IRS.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But should the Boards not be made more autonomous and vested with a little more powers, especially administrative and fiscal? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sanction_order.htm" target="_blank">Ministry of Finance Sanction Order No. 01/2009 Dated: January 1, 2009</a></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600">– Tuesday's cases</font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income tax - PE set up to execute project - payments made to non-residents - Disallowance u/s 40(a)(i) not sustainable as non-residents have no PE in India; Salary paid to technical personnel deployed in India not covered under 'Head Office expenses' as defined in Sec 44C</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is no dispute between the parties that payment received by the non-resident would be treated as business profit as per Article 7 of DTAA between India and U.K. and such profit would be taxable in India only if it is established that the assessee has a PE in India. According to the Assessing Officer the case of the assessee falls under clause (k) of Article 5(2) while as per the assessee, its case falls under clause (j) of Article 5(2). However, since the non-resident did not have a PE in India, it cannot be taxed.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excise</strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Furnace Oil is a consumable and entitled to benefit of exemption under notification 1/95-CE much before its amendment on 15.09.1998 </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is undisputed that respondents is an EOU and has procured furnace oil for use in boilers and it is on record that on 24th April 1995 respondent had declared their intention of use of furnace oil for boiler. Revenue is not disputing this fact but it is the submission that a specific entry for use of furnace oil as fuel in boiler was made in notification no. 1/95-CE on 15.9.98 hence the eligibility will be effective from 15.5.1998 and not prior.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs - Jurisdiction of officers for Issuance of Show Cause Notices & Adjudications – Show Cause Notices issued by ADG, DGCEI under Customs Act, 1962 – ADG, DGCEI has no jurisdiction to issue show cause notice in absence of any territorial jurisdiction for ADGCEI to exercise the powers of Commissioner of Customs specified by the Central Government/CBEC - It was for the CBEC under sub-section (1) of Section 5 of the Act to specify the area of jurisdiction – The show cause notice is not valid, <em>ab initio </em> bad in law and liable to be quashed</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Additional Director General, DGCEI, Chennai issued a Show Cause Notice alleging illicit import of photocopier sub-assemblies which was adjudicated by the Commissioner of Customs (Imports), Chennai. The importers contended that the DGCEI had no jurisdiction in the case. The Tribunal relying on the earlier case held that the ADG, DGCEI has no jurisdiction to issue the notice and allowed the appeal.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns tomorrow for the judgements</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p> </body> </html>