TIOL-DDT 1041 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong><font color="#660099" size="3">TIOL-DDT
1041</font><br>
29.01.2009<br>
Thursday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bond
and Bank Guarantee (BG) under Advance Authorization and EPCG – Interest
not to be included - CBEC Clarifies </font></strong></p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Doubts
have been raised, whether the amount of Bond and Bank Guarantee (BG) to be executed
under Advance Authorization and Export Promotion Capital Goods schemes, include
the interest amount also.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
clarifies:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para
3 of Board’s Circular No.58/2004-Cus. dated 21.10.2004 states that, for
clearances under Advance Authorisation and EPCG licence the bond shall be taken
for an amount equivalent to the duty ordinarily leviable on the goods but for
the exemption. The said circular has not envisaged the concept of adding interest
amount to the duty foregone for quantifying the amount for bond/BG purposes.
This is because the interest element is penal in nature and will arise only
if the authorization holder defaults in discharging his obligations under the
above schemes. Hence, it is not the intention of the Board to add the interest
component either simple or compound for the purpose of calculation of bond amount
under the said Para in respect of clearances of EPCG/Advance Authorisations.
The assessee, however, binds himself to pay the interest in case of default
as specified in condition 4 of the Bond format enclosed to the Circular No.58/2004-Cus.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
the Board clarifies that the Bond shall cover only the duty ordinarily leviable
on the goods but for the exemption. Similar analogy will apply for quantification
of the BG amount.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
adds that, “However, the bond executed under both the schemes should include
a condition that the interest and other charges as applicable will be paid by
the authorization holder in case of non compliance of the conditions of the
notifications under the above mentioned schemes.”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
is already included in the Condition No.4 in the Bond format, as noticed by
the Board itself!</font></p>
<p align="justify"><strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/cuscir09_004.pdf" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC
Circular No. 4/2009–Cus Dated: 28th January, 2009.</font></a></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax – Access to Registered Premises – Only Superintendents and above
authorised - CBEC Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule
5A was inserted in the Service Tax Rules, 1994, vide Notification No.45/2007-ST
dated 28.12.2007. Board had also issued instructions vide F.No.137/26/2007-CX.4
dated 01.01.2008 in this regard.[see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6587" target="_blank">TIOL-DDT 772 - 01.01.2008</a> </strong>and
<strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6792" target="_blank">TIOL-DDT 802 - 12.02.2008</a></strong>]. The service tax rules were amended
to allow the officers to access the registered premises of the taxpayer for
carrying out scrutiny, verification and checks as necessary to safeguard the
government revenue. The rule 5A envisages that Commissioners are required to
duly authorize the officers before such access.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While
reporting this in DDT 802, it was mentioned,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
clarifies that this rule does not envisage issue of any notification by a Commissioner
for such authorisation of officers. The requirement of authorisation could be
fulfilled by issue of an office order. <font color="#FF6633">How will the assessee
know that the officer wanting to have access to the premises is authorised by
the Commissioner? Can he ask for the authorisation?</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has now noted,</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Instances
have come to the notice that some of the Commissionerates have issued Trade
Notices, authorizing all the officers of rank of Inspectors and above, posted
in the Commissionerate, to visit the taxpayers. It was never the intention of
the said amendment to allow unrestricted access to the premises of the taxpayer
by the officers. Issuance of such Trade Notices giving unfettered power to all
the officers to visit taxpayers is against the spirit of the amendment in particular
and policy of the Government in general. While it is not necessary that Commissioners
should authorize individual visits to taxpayer and a general authorization can
be granted, however, for each visit to the premises of the taxpayer, permission
must be given in writing by an officer not below the rank of Assistant/Deputy
Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So,
Board has now decided that:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
Henceforth officers above the rank of Inspectors should be allowed access to
the premises of tax payers in terms of Rule 5A of the Service Tax Rules, only
after they are duly authorized in writing, in each case, by an officer not below
the rank of <em><strong>concerned</strong></em> Assistant/Deputy Commissioner.
[Who is this <strong><em>concerned</em></strong> AC/DC?]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
To facilitate such authorization/permission, the same can be given through a
register maintained for the purpose.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
Such register should be reviewed and signed at the end of each month by the
<strong>concerned </strong>Joint/Additional Commissioner and once in every quarter
by the <strong>concerned </strong>Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
This instruction would ipso facto apply to formations carrying out investigation
functions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.
All instructions/clarifications/trade notices contrary to the aforesaid instructions
stand cancelled/withdrawn.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
even now, how will an assessee know that the officers visiting him are authorized
to do so? Can’t it be made mandatory for the officers to give a letter
to the assessee that they have visited his premises? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Should
the JC/ADC/Commissioner also take authorization from the<strong> concerned </strong>AC/DC?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again
keeping its recent practice of keeping important instructions under cover, the
Board has sent this as a letter to the field and not as a public circular. It’s
really a mystery why the Board wants to keep its good work under wraps!</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/file_137_09.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC
F.No.137/26/2007-CX.4 Dated: 15th December, 2008.</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax on Commission paid to non-executive Directors?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
received a letter from a <strong>concerned</strong> Netizen,</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">I
have read today’s DDT and also letter No. Dy.No.324/Comm (Service Tax)/
2008 dated 01.12.2008 issued by the Commissioner (ST) clarifying that service
tax would not be leviable on commission paid to the Directors of the Company.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
circular deals with commission to directors who are employees. What about commission
being paid to other non-executive directors?</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Please
clarify.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Can
any enlightened Netizen clarify or shall we wait for the Board?</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">National
Pharmaceutical Pricing Authority - Study/revision of norms for CC, PC PL &
PM for the year 2009.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
National Pharmaceutical Pricing Authority has decided to revise/ fix the norms
for Conversion Cost (CC), Packing Charges (PC), Process Loss (PL) and Packing
Material (PM) for the year 2009 as per the provisions of DPCO’1995.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Norms
for CC, PC, PL & PM are to be based on the actual cost data and information
received from various manufacturers and formulators.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
NPPA has sent a detailed questionnaire to pharma units.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
information and data and a copy of the Annual Report for the last two years
are to be submitted latest by 15.02.2009 by speed post / registered post in
a sealed cover.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suggestions
are also solicited to the Questionnaire for a suitable method of indexing the
variable & major cost elements, which constitute CC & PC and the appropriate
basis for indexing process losses. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax
Evasion – Unique?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
1952, Joseph Nunan won a bet of USD 1800/- that Harry Truman would be re-elected
President. He forgot to pay Income Tax and got caught. And it turned out
the bet was just the tip of the iceberg. Nunan had concealed more than USD
90,000/-. He was convicted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What’s
so unique about it? Joseph Nunan was the Commissioner of Internal revenue!</font></p>
<p align="center"><strong><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></strong></p>
<p align="justify"><strong><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">Income
Tax - Indo German Tax Treaty</font></strong></p>
<p align="justify"><strong><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">In
view of the provisions of Article 24(4) of the Treaty, the disability on carry
forward and set off of accumulated losses under Section 79 cannot be extended
to the Indian subsidiaries - rigour of Section 79 must stand relaxed due to
treaty override – ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
view of the provisions of Article 24(4) of the Indo German tax treaty and in
view of the discussions, the ITAT was of the considered view that the disability
on carry forward and set off of accumulated losses on account of change in shareholding
pattern, under Section 79 r.w.s 2(18), cannot be extended to the Indian subsidiaries
of German parent companies as long as German parent companies are listed on
a German stock exchange recognized under their domestic laws. To this extent,
the rigour of Section 79 must stand relaxed due to treaty override.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central
Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Supplementary
Invoice – No interest – Reliance placed on quashed High Court order
– Revenue loses in High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
situation is the Bombay High Court order relied on by this High Court is no
more valid and the issue is with a Five Member Larger Bench. Apparently these
facts were not brought to the notice of the High Court and Revenue has lost
one more case because it has not kept itself updated with the latest case law.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Set
off of the loss suffered in any of the previous year in the block period against
the income assessed in other previous years in the block period is not prohibited – Supreme Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Only
brought forward losses of the past years under Chapter VI and unabsorbed depreciation
under Section 32(2) are to be excluded while aggregating the total income or
loss of each previous year in the block period but set off of the loss suffered
in any of the previous year in the block period against the income assessed
in other previous years in the block period is not prohibited. The Settlement
Commission had erred in disallowing the application of the assessee for set
off of inter se losses and depreciation accruing in any of the previous year
in the block period against the income returned/assessed in any other previous
year in the block period. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Exemption – burden is on the claimant that he has satisfied the conditions of the
exemption notification – Appellant failed to discharge burden - No reason
to interfere with the concurrent findings of the authorities below – Supreme
Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is well settled that Exemption Notification have to be read in the strict sense.
In this case the appellant had led evidence of an expert, twice. It appears
that the Operational Manual was not placed before him. No questions were asked
to the expert on the terminology used in the Manual which described the imported
items as "Heat Pump Type Air Conditioner". Therefore, on the facts
and circumstances of the case, we do not see any reason to interfere with the
concurrent findings recorded by the authorities below.”</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See
our columns tomorrow for the judgements</font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
tomorrow with more DDT </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">
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