TIOL-DDT 1032 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1032</font><br>
15.01.2009<br>
Thursday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Board Revises Examination Norms for Certain Export Promotion Schemes</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Board's Circular No.6/2002-Customs dated 23.1.2002 as amended in respect of exports under Free Shipping Bills, for which no benefits/export incentives are claimed, it has been prescribed that there would be no examination unless there is specific intelligence.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, export incentives are available even against Free Shipping Bills in respect of certain Export Promotion Schemes such as Served from India Scheme (SFIS), Vishesh Krishi and Gram Udyog Yojana (VKGUY), Focus Market Scheme (FMS), Focus Product Scheme (FPS), High-Tech Products Export Promotion Scheme (HTPEPS) etc. Therefore, exporters who want to claim incentives under any of the aforementioned schemes should make their intention clear to claim such benefits at the time of export itself in terms of Para 3.23.8 of the FTP 2008-09 by declaring the following on the Free Shipping Bills:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">‘I/We, hereby, declare that I/We shall claim the benefits, as admissible, under Chapter 3 of FTP.'</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of this, the Board has revised the examination norms for exports made on Free Shipping Bills, where the exporter is claiming benefits of only Schemes under Chapter 3 of FTP, as follows:</font></p>
<div align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S.No. </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category of Exports </font></strong></p></td>
<td valign="top" colspan="2"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Scale of Examination </font></strong></p></td>
</tr>
<tr>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Export consignments shipped to sensitive places viz. Dubai, Sharjah, Singapore, Hong Kong and Colombo </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Others </font></p></td>
</tr>
<tr>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Exports under Free Shipping Bills where benefits under Chapter 3 of the FTP have been claimed by the Exporter and where the FOB value is Rs.20 lakhs or less </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">25% </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2% </font></p></td>
</tr>
<tr>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Exports under Free Shipping Bills where benefits under Chapter 3 of the FTP have been claimed by the Exporter and where the FOB value is more than Rs.20 lakhs. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10% </font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, if the export is made against claims of Drawback/DEPB benefits or any other Export Promotion Scheme in addition to benefits under any of the Schemes of Chapter 3 of FTP, then the examination norms as prescribed by the Board for the respective Export Promotion Schemes would apply.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the exports are made on free shipping bill without any declaration of any claim under Chapter 3 of FTP, the existing norms of “no examination except where there is specific intelligence” would continue to apply. The revised examination norms under these Schemes will be implemented with effect from 1.2.2009.</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=25&filename=notification/custom/2009/cuscir09_001.htm" target="_blank">Circular No. 1/2009-Cus., Dated: January 13, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Re-introduction of export release orders for sugar exports under OGL</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the production of sugar in 2008-09 season would be substantially less than the last two sugar seasons, the Ministry of Consumer Affairs, Food & Public Distribution, Department of Food & Public Distribution <strong>has decided to re-introduce the system of export release orders with effect from 1.1.2009 for exports under OGL</strong>. Therefore, export of sugar would be permitted only if the exporters obtain release orders from the Directorate of Sugar. However, in respect of exports under advance authorization scheme export release orders are dispensed with until further orders.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">What would happen to the export consignments cleared without export release orders from January 1 to January 12, 2009? Will the Customs initiate penal action against the exporters for exporting sugar without export release orders?</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=25&filename=notification/custom/2009/instruction09_001.htm" target="_blank">F.No.528/64/2007-Cus (TU) Dated: January 13, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Determination of Assessable Value by units availing VAT remission in J & K</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification SRO-91 dated 16.03.2006 issued by the Government of J & K states that every registered industrial unit claiming VAT remission shall make price adjustment in the selling price equivalent to the amount of tax chargeable on the finished goods sold, whereafter the tax shall be charged on the net selling price so that the benefit of such price adjustment is passed on to the purchasing dealer/consumer. In order that transparency is maintained in the transactions, every sale invoice shall invariably mention the amount of price adjustment made in the selling price. In case no price adjustment is made the industrial unit shall not be entitled to any tax remission. The scheme of remission is elaborated with the following illustrations in the said Notification:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the illustration at “a” below there shall be no remission of tax while in the illustration at “b”, there shall be remission of Tax</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>a. No remission of Tax</strong></font></p>
<div align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Qty </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Description of goods </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unit price </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Value (Rs.) </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">VAT Rate </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Amount of VAT (Rs.) </font></strong></p></td>
</tr>
<tr>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Transformer </font></p></td>
<td valign="top" width="94"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10000 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10000 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4% </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">400 </font></p></td>
</tr>
<tr>
<td valign="top" colspan="3"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total </font></p></td>
<td valign="top"><p><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif">10000 </font></p></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">400 </font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total Amount Paid by the Buyer = Rs. 10,400.00 (Rs 400 is paid by the manufacturer to the state as VAT hence total value of transaction for the manufacturer is Rs 10000)</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>b. Price adjustment Method for tax remission.</strong></font></p>
<div align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Qty </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Description of goods </font></strong></p></td>
<td valign="top" colspan="3"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unit Price </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Value(Rs.) </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">VAT Rate </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Amount of VAT(Rs) </font></strong></p></td>
</tr>
<tr>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Price adj. </font></p>
</td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Price</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjustment </font></p> </td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Net unitPrice </font></p> </td>
<td><font color="#000000"> </font></td>
<td><font color="#000000"> </font></td>
<td><font color="#000000"> </font></td>
</tr>
<tr>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Transformer </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10,000 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">384.6 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9615.4 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9615.4 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4% </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">384.6 </font></p></td>
</tr>
<tr>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total </font></p></td>
<td valign="top"><p><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif">9615.4 </font></p></td>
<td valign="top"><font color="#000000"> </font></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">384.6 </font></p></td>
</tr>
<tr>
<td valign="top" colspan="8"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total Amount Paid by the Buyer = Rs 10,000 (Since no VAT is paid to the State, total value of transaction for the manufacturer is Rs 10000) </font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the illustration at ‘a' above, the transaction value of Rs 10,000 is exclusive of the VAT and the VAT of Rs 400 is charged separately from the customer and paid to the exchequer. In this case, as there is no remission of VAT by the state, the price inclusive of excise duty is Rs 10,000 from which the transaction value for the purpose of excise duty shall be determined. In the illustration at ‘b', the assessee has determined the assessable value taking transaction value as Rs 10,000, because for the said transaction he gets Rs 10,000 from the customer inclusive of a notional amount of Rs 384.6 as VAT. However this VAT is not paid to the State.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus in both the cases the assessee has received Rs 10,000 for the transactions. This scheme implies that the VAT element is only notional as far as the manufacturer is concerned and is neither paid nor payable to the Government. The question for consideration is what would be the price inclusive of excise duty from which transaction value shall be determined for the purpose of discharging excise duty.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Section 4, ‘transaction value' is defined as the price actually paid or payable for the goods, .........but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. Further, Circular F. No. 354/81/200-TRU dated 30.6.2000 in Paras Nos. 10 and 11 explains that only those taxes which are actually paid or are payable to the concerned governments are deductible for determination of Assessable value. Those amounts which are neither paid nor payable at a later date cannot be deducted while arriving at the assessable value.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of above, Board clarifies that the VAT element indicated as price adjustment in the invoices in terms of SRO 91 and remitted by the State is not to be deducted for determining the assessable value.</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=31&filename=notification/excise/2008/excircular880.htm" target="_blank">Circular No. 880/18/2008-CX. Dated: December 22, 2008</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs – security tiff at Kolkata – Clash of Ego</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In India avoiding the security check is considered to be a status symbol. Powerful persons like Customs officers get very angry when Security personnel demand identity cards or seek to check them. Yet another such incident is reported to have occurred in Kolkata airport on Tuesday and the security staff have alleged that the Customs men have beat them up – all for asking the identity – card.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The main problem is EGO, not the card and what is needed is an understanding that even the janitor in the airport is performing an important duty and is no less than the other worthies.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Yesterday's Judgement Today</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Keeping
pace with the promise made to our Netizens that TIOL will make all efforts
to bring you the latest policy and judicial decisions, today we are carrying
an ITAT Special Bench decision given yesterday on a very vital issue of <strong>retrospective
or prospective applicability of new Sec 292BB</strong> inserted into the Act
vide Finance Act, 2008</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Breaking News</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">– Tomorrow'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>To apply the provisions of section 10A, one has to consider the profit and gains as derived by an undertaking</strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">INCOME TAX</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> - Sec 10A - assessee owns two STP units for export of software - Unit 1 logs profits whereas Unit 2 records losses - CIT invokes Sec 263 for setting off loss of Unit 2 against profit of Unit 1 before Sec 10A benefits are allowed - held, the word 'an' has been used before the undertaking in Sec 10A( 1), and deduction is to be allowed on such profit and gains as are derived from the undertaking. Hence, to apply the provisions of section 10A, one has to consider the profit and gains as derived by an undertaking. CIT order set aside and assessee's appeal allowed</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commissioner(Appeals) going beyond the issue involved in the O-in-O as well in the Show cause notice – Matter remanded by Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> <strong>maladroit </strong> as it gets can best describe the happenings of the present case. The assessee manufactures textile hose pipes and was enjoying the benefit of small scale exemption 1/93-CE at the material time. The ‘<strong>unlined </strong> textile hose pipes' were being sent to a job worker for carrying out the process of <strong>lining </strong> and subsequent return to the assessee for clearance from the factory. But naturally, the exemption notifications 83/94-CE and 84/94-CE, both dated 11.04.1994 were being put into circulation by the assessee for enjoying the exemptions envisaged therein.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Finalisation of Provisional assessment - LB decision in <em>Cadbury </em> helps Revenue get back refunds of 'interest' granted by the Assistant Commissioner relying on <em>MSEB Pole Factory </em> decision – Tribunal
directs respondent to pay back the refund amounts within ten days of receipt
of order</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest is required to be paid even when the differential amount is paid before the finalization of the assessment and that the none of the decisions viz. MSEB Pole Factory etc. had considered the language of Rule 7(4) ie . the words “succeeding the month for which such amount is determined” inasmuch as all the decisions had proceed on an unreasoned basis that the interest is payable ‘from the month in which the amount is determined/assessment is finalized'.</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>
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