TIOL-DDT 1048 · 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 1048</font><br>
09.02.2009<br>
Monday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SEZ Rules Amended</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Amendments have been made to various Rules of the SEZ Rules, 2006. Salient features.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rule 2 (za) – Definition of ‘Special Economic Zone for multi- product' :The </strong> Rule earlier read as <font color="#FF6600">"Special Economic Zone for multi-product" means a Special Economic Zone where Units may be set up for manufacture of two or more goods in a sector or goods falling in two or more sectors or for trading and warehousing or rendering of two or more services in a sector or rendering of services falling in two or more sectors”. </font>Now it is amended to read as,<font color="#FF6600"> <font color="#006600">"Special Economic Zone for multi-product' means a Special Economic Zone for more than one sector where Units may be set up for manufacture of goods falling in two or more sectors or rendering of services falling in two or more sectors or any combination thereof including trading and warehousing'</font></font><font color="#006600">.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Concessions available to sub-contractor also: </strong>Provisos to Rule 10 read as</font></p>
<blockquote>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided further that exemptions, drawbacks and concessions on the goods and services allowed to a Developer or Co-developer, as the case may be, shall also be available to the contractors appointed by such Developer or Co-developer and all the documents in such cases shall bear the name of the Developer or Co-developer alongwith the contractor and these shall be filed jointly in the name of the Developer or Co-developer and the contractor:</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided also that the Developer or Co-developer, as the case may be, shall be responsible and liable for proper utilization of such goods in all cases.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now they are amended to read as,</font></p>
<blockquote>
<p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">"Provided further that exemptions, drawbacks and concessions on the goods and services allowed to a Developer or Co-developer, as the case may be, shall also be available to the contractors including sub-contractors appointed by such Developer or Co-developer, and all the documents in such cases shall bear the name of the Developer or Co-developer along with the contractor or sub-contractor and these shall be filed jointly in the name of the Developer or Co-developer and the contractor or sub-contractor, as the case may be:</font></p>
<p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided also that the Developer or Co-developer, as the case may be, or the Special Economic Zone Unit shall be responsible and liable for proper utilization of such goods in all cases".</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Entry to the SEZ :</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Rule 11(4), <font color="#FF6600">The authorized persons shall only be allowed to enter the processing area of a Special Economic Zone.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now it reads as, <font color="#006600">"The persons authorised by the Development Commissioner shall only be allowed to enter the processing area of a Special Economic Zone”</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Housing for Staff in SEZ : </strong>A new proviso is added to Rule 11(10), that the Developer or Co-Developer shall strive to provide adequate housing facilities not only for the management and office staff but also for the workers of the Special Economic Zones Units.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Registered Lease Deed: </strong>As per the Proviso to Rule 18(2),<font color="#FF6600"> “Provided further that a copy of the registered lease deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval;”</font> Now this is changed to <font color="#006600">"Provided further that a copy of the registered Lease Deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval and failure to do so, the Approval Committee may take action to withdraw the Letter of Approval after giving an opportunity of being heard."</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Approval: As per Proviso to Rule 19(2), <font color="#FF6600">“the Approval Committee may also approve proposal for broad- banding, diversification, enhancement of capacity of production, change in the items of manufacture or service activity, if it meets the requirements of rule 18”</font>; now this is changed to, <font color="#006600">“Provided that no such approval shall be granted by the Approval Committee in those cases which fall within the competence of the Board of Approval”</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import to SEZ – A major Blunder corrected: </strong> As per Rule 28(7),<font color="#FF6600"> “Where import cargo destination is <strong>other than the Special Economic Zone </strong>, delivery shall be allowed at the destination port or airport on the strength of Bill of Entry assessed by Special Economic Zone Customs without any Transshipment Bond”</font> ; Now the <font color="#FF6600">“<strong>other than the Special Economic Zone ”</strong></font><strong> is </strong> amended to “Where import cargo destination <strong>is the Special Economic Zone ....” . Apparently all the Customs Clearances to SEZ in the ports were wrong – and this went unnoticed for nearly three years.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Re-import of exported goods when payment not forthcoming or change of fashion: </strong>Rule 29(7)stipulated that , <font color="#FF6600">“A Unit may import the goods exported by it which are either found to be defective or damaged by the overseas buyer or have not been taken delivery of by the overseas buyer, by following the procedure under sub-rule (2) and subject to the following conditions</font>; Now this is amended to , <font color="#006600">“A Unit may import the goods exported by it which are either found to be defective or damaged by the overseas buyer or have not been taken delivery of by the overseas buyer or <strong>when the payment is not forthcoming from the buyer as per agreed schedule after having taken delivery of goods or when buyers return goods due to change of fashion and other market factors </strong> by following the procedure under sub-rule (2) and subject to the following conditions, namely”</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Destruction of Goods – at least seven days notice: </strong>As per Rule 39(1), <font color="#FF6600">“After <strong>advance intimation </strong> to the Specified Officer, a Unit may destroy, without payment of duty, goods including capital goods, procured from Domestic Tariff Area or goods imported or goods manufactured or produced by the Unit including rejects or waste or scrap or remnants within the Special Economic Zone” </font>Now it is stipulated that the advance intimation should of <font color="#006600">of not less than seven days</font>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Return of exported jewellery – time extended to one year from the present six months. </strong> Rule 46 amended.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Valuation for DTA Clearances: </strong> As per proviso to Rule 48(2), <font color="#FF6600">“where the goods are supplied in Domestic Tariff Area by a contract manufacturing Unit on the instructions of an Overseas entity, the Bill of Entry shall be filed by the Domestic Tariff Area buyer on the basis of transaction value recorded on the commercial invoice issued by the Overseas entity”</font>. This proviso is now omitted.</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=261&filename=sez/amendment_2009.htm" target="_blank">Department of Commerce Notification Dated: February 3, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Right To Information – DRI Exempted – CPIO can appeal against Appellate Authority</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have you heard of an Assistant Commissioner appealing against an order of a Joint Commissioner? Well, it happened in Delhi Customs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One Ms Yogitha Chavan asked the Assistant Commissioner the CPIO for some information under the RTI Act. The Assistant Commissioner informed her that the information cannot be provided as it relates to DRI which is an organisation exempted under Section 24 of the Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The First Appellate Authority, the Joint Commissioner was not impressed and he remanded the matter to the Assistant Commissioner for looking into the matter again and “if on examination it is found by the CPIO that disclosure would hamper investigation, the appellant should be informed with reasons as to how it will hamper the investigation”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Assistant Commissioner was not impressed and he filed an appeal with the Commission against the order of his boss, the JC.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As this was a strange situation, the matter was heard by a full Bench of the CIC. The Chairman of the CBEC in his written submissions supported the Assistant Commissioner.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the two questions before the CIC were:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether the CPIO/Public Authority concerned is entitled to appeal against the order of the 1st Appellate Authority u/s 19(3) of the RTI Act?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Whether the disclosure of information concerning DRI even if not held by it is barred u/s 24 of the RTI</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CIC held that:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The CPIO can appeal against the order of the Appellate Authority.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Information concerning DRI need not be made available.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has communicated this landmark decision of the CIC to the field.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cic_circulal_01.htm" target="_blank">Board's
letter in F.No.402 /24/2008- Cus III Dated: October 16, 2008</a></strong></font> + <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sercaselaw/caselaw/2009/2009-TIOL-02-CIC.htm" target="_blank">CIC
Order</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RTI – DG, Valuation also need not part with certain Information</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a similar case data with the DG, Valuation was also held to be outside RTI purview, though it is not an exempted organisation.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question before the CIC was whether certain data apparently collected by the Directorate General of Valuation of the Department of Customs and Central Excise aimed at protecting the customs revenue and to prevent leakages could be disclosed to the appellant.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department urged that it was true that certain data was collected, which was analyzed and an advisory was issued to all departmental officers about how to apply discounting processes for the determination of the revenue liability for certain items of import and export. It claimed that a copy of the final advisory issued to all officers of the department has already been provided to the appellant on the orders of the Appellate Authority. It however, declined to disclose the database on the basis of which the advisory was issued. Their case was that this database and the analysis of the information collected was essentially an internal process, which was periodically carried out by the Department with the sole purpose of equipping itself to meet attempts at evasion of customs revenue by importers and exporters. There was no public interest in disclosing this information. On the contrary, if disclosed, such information could be used by interested parties to devise ways and means to beat the system and evade duty. Such information is always a privileged information held by the revenue collecting department and cannot be disclosed without inflicting severe damage on the system and adversely impacting revenue collection.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commission held, “The department has already disclosed to the appellant the advisory (Valuation Alert) it had issued to all departmental officers in respect of how to apply formulae for discounting purposes. There is no reason why the material which was examined by the Department to arrive at a conclusion which led to the issue of the advisory, should be disclosed to the appellant. There is merit in the respondents' submission that such disclosure was not in public interest and would adversely impact revenue collection. It attracts the exemption under Section 8(1)(a) as well as under Section 8(1)(d) of the RTI Act. It is also noted that the data which formed the basis for the alert issued by the public authority was collected, collated and analyzed through own efforts of the public authority. There is no reason why they should pass on such information - based as it is on their own labours - to an outsider who wishes to access these. This variety of information attracts the exemption specified in Section 8(1)(d) - being the intellectual property of the respondents, which, if allowed to be disclosed, had the potentiality to harm the revenue interests of the State, which the respondents were duty-bound to protect.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department had communicated this order also to the field.</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/sercaselaw/caselaw/2009/2009-TIOL-03-CIC.htm" target="_blank">The CIC order</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Election Expenditure Report – Jammu and Kashmir - all candidates are Defaulters</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A candidate contesting the Elections is required to submit a report to the Election Commission on his campaign expenditure within 30 days of the declaration of election results. Election results were declared in J&K on December 28 and the candidates were supposed to file the report by 28 January 2009. For the record, none of the 1350 candidates, including the Chief Minister and three former Chief Ministers, has submitted the report.</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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><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></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Valuation – Motor vehicle parts – cost of design and drawings to be included in Assessable Value – mistaken view by assessee and Department – no suppression and extended period of limitation: CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THESE </strong>85 Appeals filed by the Department and 29 Cross Objections filed by the Respondents have been taken up together for hearing and disposal, which relate to two impugned Orders-in-Appeal passed by the lower Appellate Authority and deal with a common issue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is pertinent to note that though such a large number of vendors were manufacturing and supplying the components to M/s. Tata Motors over a long period, and in respect of which M/s. Tata Motors have been taking credit of input duty, the Departmental Authorities themselves had not raised the issue at any point of time earlier that the value of drawings and designs should be included in the assessable value of the components. This has also not been done after introduction of the new Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 specifically providing for addition to be made to the value towards drawings, designs etc., supplied free. As such, Tribunal was of the view that the escapement of the additional duty for the impugned period was not on account of suppression, misstatement etc, but on account of a mistake of law on the part of the assessees as well as the Departmental Authorities. Hence, while holding that the cost of drawings and designs @0.085%, as provided by M/s. Tata Motors, is includible in the assessable value of the components, Tribunal held that the demand for the same can only be sustained for the normal period of limitation</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Royalty paid to non-resident for use of brand name NIKE - It is revenue Expenditure and not Capital expenditure as there was no transfer of technical knowhow and payment of royalty was only for licensed use of trademark: ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> was made clear as per clause 6 of licence agreement that the trade marks, registrations, applications, goodwill associated with them would remain exclusive property of licensor. As per clause 15 it was further provided that in the event termination of agreement the licensee (i.e. the assessee) was supposed to deliver within 20 days of termination notice all the goods and items bearing trade mark, the confidential information in the form of drawings, designs including the copies made to the license. It was made clear that the assessee would not have any right whatsoever to use the technical information and the trade mark after termination of the agreement."; the CIT(A) in his well reasoned and well discussed order has rightly deleted the impugned addition made by AO by holding that the royalty expenditure involved in the instant ground of appeal is revenue expenditure and not capital expenditure.</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="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DEPB Scrip was issued by DGFT - even if there was any condition to Brand Approval letter that had been not complied with, Dy Commissioner of Customs had no authority to sit in judgment over DEPB credit allowed by DGFT: Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> was for the DGFT which issued the Brand Approval Letter to the appellants, to verify the records and to find out whether any condition attached to the BAL had not been complied with. It was not open to the Deputy Commissioner of Customs to sit in judgment over the quantum of DEPB credit allowed by DGFT under the licence in question. He could, at best, convey the results of his verification to the licensing authority.</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="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></p>
<p align="justify"><font color="#FF6600" 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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