TIOL-DDT 1062 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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">
<style type="text/css">
<!--
span.GramE1 {mso-style-name:"";
mso-gram-e:yes;}
span.GramE2 {mso-style-name:"";
mso-gram-e:yes;}
span.SpellE1 {mso-style-name:"";
mso-spl-e:yes;}
span.SpellE2 {mso-style-name:"";
mso-spl-e:yes;}
-->
</style>
</head>
<body bgcolor="#FFFFFF">
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1062</font><br>
27.02.2009<br>
Friday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Welcome Back OscAR Rahman – Without Customs Duty – Jai Ho</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE </strong>all felt proud when AR Rahman and Resul Pookutty flew in with the three Oscar golden statuettes between them. But one feels sorry that our Customs Administration failed to live up to expectations and clear Rahman and Pookutty honourably.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It would have been a great day for Indian Customs, if the Customs Commissioner had received Rahman at the airport and handed over to him an exemption notification exempting his trophies from Customs duty, as a small gesture from the Customs Department to a man who brought in so much honour and goodwill for the country. They lost the great opportunity and chose to look the other way and pretend that no duty was payable.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Customs, both at Mumbai and Chennai, gave evasive excuses like, “it was not commercial”, “its value is only one dollar”, “ there is no need of any exemption”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Is it so?</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First of all Commercial quantities are not allowed to be imported as baggage even on payment of duty as per CBEC Circular No. 9/2001- Cus , Dated : February 22, 200. This does not mean that if it is not commercial, it can be freely cleared in the baggage.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To say the value of the statuette is One Dollar is an insult to Rahman and Oscar. The making cost of this year's Oscar statuette has been declared as 500 US Dollars. Michael Jackson had paid over a Million Dollars to buy the statuette presented for “Gone with the wind”. Of course now there is a contract that the statuette cannot be sold, even by the inheritors. The value is invaluable and no Customs Valuation Rules anywhere in the world can value it.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming back to baggage Rules, a passenger returning after three days of stay abroad is allowed a duty free baggage up to the value of Rs. 25,000/- but this cannot include Gold or Silver in any form, other than ornaments. So the statuette is clearly out of baggage.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a Customs Notification which exempts,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Medals and trophies - If awarded to members of Indian teams for their participation in international tournaments or competitions outside India;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Prizes won by any member of an Indian team - If the team has participated in any international tournament or competition in relation to any sport or game, with the approval of the Government of India in the Department of Youth Affairs and Sports</font></p>
</blockquote>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cusnot146.htm" target="_blank">Notification No. 146/1994-Customs, DATED : July 13, 1994</a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This clearly shows that there is need for an exemption for this kind of prizes and awards and they cannot be cleared just by closing one's eyes. If the Oscar trophy can be cleared without an exemption, why should there be an exemption notification for a sports trophy? The fact is, we do win some sports trophies, but so far we never had the honour of a passenger landing up in an airport with an Oscar Statuette – actually two! And the Customs was caught napping – not that we didn't tell them! But they chose rather to break the law than make one.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A blog in siliconeindia said, <font color="#663399">when I get down at Delhi airport, a lot of people
offer to take me thru green channel for $20. Maybe, the Mumbai high commissioner<br>
can do the same for ARR. Just smile and look the other way”</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is sad to note that instead of granting an honourable exemption, the Indian Customs chose to look the other way – this is not what a law enforcing Authority should do. They could have simply amended Notification No. 146/1994. At least now they should do it with retrospective effect for the past and let us hope we have more Indians winning international awards who will have the honour of claiming exemption. Let the Majesty of Law prevail at least during the heights of honour.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cess on sugar manufactured out of cess paid raw material – CBEC Clarifies</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">References have been received from some field formations that some manufacturers purchase sugar, on which central excise duty and sugar cess is paid by sugar manufacturers. Such manufacturers use the duty paid sugar to manufacture products like Pharmaceutical grade sugar and Bura sugar. All the products, namely sugar, pharmaceutical sugar and Bura sugar fall under the same tariff classification. The manufacturers have represented that both the raw material and final product fall under the same tariff heading, and as cess has been paid on raw material viz., sugar, they are not required to pay sugar cess on products as it amounts to double taxation.</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">The Ministry of Public Distribution and Consumer Affairs has now <strong>exempted the levy of cess on sugar, collected as a duty of excise, under subsection (1) of the Section 3 of Sugar Cess Act, 1982, on any sugar “manufactured from such other sugar” on which cess, leviable under sub section (1) of Section 3 of the said Act has been paid already </strong>. <strong>- Notification S.O.102 (E) </strong> published in Gazette of India on 7th January, 2009</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Notification has no retrospective effect.</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/2009/excircular883.htm" target="_blank">CBEC Circular No. 883/3/2009- CX - Dated: February 26, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Foreign Trade Policy – Kamal Nath bids adieu with more announcements</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commerce Minister Kamal Nath announced his first Foreign Trade Policy in August 2004 and we carried a story - <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4695">Is the Foreign Trade Policy valid?</a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well Kamal Nath went on to present that invalid Policy year after year and yesterday was the grand finale for his five year policy which in the normal course should have ended on 31 st March, 2009 but which is extended indefinitely, maybe till the new Government can put its ACT together.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DGFT has amended the HOP – some details:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <strong>Promotional Schemes: </strong>Freely Transferable Duty Credit scrip shall be granted on FOB value of exports, including commission, discounts, if any</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. All the pre-realization cases are to be monitored by RA concerned with respect to realization of export proceeds.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In case the FOB value realized in free foreign exchange is lower as per BRC, when compared to the FOB value in free foreign exchange as declared on the Shipping Bill(s) on which the original duty credit scrip was issued, excess duty credit scrip so granted earlier shall be adjusted from any future claim(s) (of any Duty Credit Scrip, including DEPB ), or by way of cash deposit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In case the FOB value realized in free foreign exchange is higher as per BRC , when compared to the FOB value in free foreign exchange as declared on the Shipping Bill(s) on which the original duty credit scrip was issued, supplementary claim shall be filed within a period of six months from the date of realization.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. DEPB shall be issued with transferable endorsement. – Without waiting for payment confirmation.</font></p>
</blockquote>
<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/2009/excircular883.htm" target="_blank">DGFT Public Notice No. 151 (RE-2008) 2004-2009, Dated: February 26, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC notifies exchange rates for March 2009</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has notified the Exchange Rates for Imported Goods and Export Goods with effect from 1st March 2009. Notification No <strong>. </strong>18/2009-Customs (N. T.), dated the 28 th January, 2009, is superseded.</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_021.htm" target="_blank">Notification NO. 21/2009 -CUSTOMS(NT), Dated: February 25, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Provisional assessment and finalization – what is the rate of interest to be paid?</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A distinguished Netizen sent us this:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Larger Bench decision in the case of <em>Cadbury India Ltd. </em><strong>[</strong></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2008/2008-TIOL-1986-CESTAT-MUM-LB.htm" target="_blank">2008-TIOL-1986-CESTAT-Mum-LB</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>] </strong> has held that in case of provisional assessment under Central Excise Rules, 2002, interest is required to be paid from the first day of the month succeeding the month for which such amount is determined and that interest is required to be paid even if the differential amount is paid before the order under Rule 7(3) of the said rules is issued finalizing assessment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 7(4) of CER, 2002 reads –</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“4. The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub-rule (3),<font color="#663399"> <strong>at the rate specified by the Central Government by notification issued under section 11AA or section 11AB</strong></font> of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.” </em></font></p>
</blockquote>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">So, if one wishes to pay the interest, at what rate should he pay?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is because the rate of interest u/s 11AB in vogue is <strong>13% </strong> as prescribed by notification 66/2003-CE(N.T), dated 12.09.2003 and the rate of interest under Section 11AA prevalent today is <strong>15% </strong> as prescribed by notification 18/2002-CE(N.T) dated 13.05.2002.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, when the CER, 2002 came into being on 01.03.2002, the rates of interest u/s 11AB and u/s 11 AA of the CEA'44 was the same viz. 24%. The rate of interest under both the sections were simultaneously changed to 15% by notifications 18/2002- CE(N.T) and 19/2002-CE(N.T), both dated 13.05.2002. There was no conflict in the language of the said rule 7(4) of the CER , 2002 even then. But things changed with the entry of Notification 66/2003- CE(N.T) dated 12.09.2003 which reduced the rate of interest u/s 11AB from 15 % to 13%. Unfortunately, the rates of interest u/s 11AA remained unchanged.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>If this be so, shouldn't the Rule 7(4) be amended immediately before it brings tears? After all, 2% is not a small amount.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see the case we are reporting on Monday.</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">–Monday'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>Tribunal has to pass reasoned orders - <em>reasons </em> are like the bricks with which the edifice of justice is built. If bricks are not in place, or are missing, entire edifice comes crashing down – Copy of the Order to be sent to CESTAT President: Gujarat HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> High Court observed that an order made by the Tribunal is required to be made after giving an opportunity to the parties, of being heard. While making an order under Section 35C of the Act, the Tribunal must keep in mind that the proceedings before it are likely to have far-reaching financial implications so far as parties, i.e. the assessee as well as the Revenue are concerned and it is, therefore, essential that the order made by the Tribunal should reflect an application of mind before fastening of liability upon an assessee or granting relief against the Revenue.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income
Tax</strong></font></p>
<p style='text-align:justify'><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b style='mso-bidi-font-weight:normal'>Income
Tax – cash sales of over Rs 1 Crore – Some evidence of sale
generating extraordinary income of about 100% in hands of a loss making
company required to be placed by assessee - Mere entries of sale to justify
credit of <span class="SpellE1">Rs 1<span class="GramE1">,00,04,855</span></span> were
not good enough: ITAT by Majority</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> account
of difference between Members of ITAT, this matter has been placed before
the President as Third Member with the following questions:</font></p>
<p align="justify" style='margin-left:36.0pt;text-indent:-18.0pt;mso-list:l1 level1 lfo2'> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<![if !supportLists]>
<span
style='mso-fareast-font-family:Verdana'><span style='mso-list:Ignore'>1.<span
style='font:7.0pt "Times New Roman"'> </span></span></span>
<![endif]>
Whether, on the facts and in the circumstances of the case, the addition of <span
class="SpellE2">Rs.1<span class="GramE2">,00,04,855</span></span>/- on account
of cash credited in the books of accounts of the assessee is justified?</font></p>
<p align="justify" style='margin-left:36.0pt;text-indent:-18.0pt;mso-list:l1 level1 lfo2'> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<![if !supportLists]>
<span
style='mso-fareast-font-family:Verdana'><span style='mso-list:Ignore'>2.<span
style='font:7.0pt "Times New Roman"'> </span></span></span>
<![endif]>
Whether, on the facts and in the circumstances of the case, investment in cash
of <span
class="SpellE2">Rs.51<span class="GramE2">,65,820</span></span>/- is explained
satisfactorily on the basis of material placed on record?</font></p>
<p align="justify" style='margin-left:36.0pt;text-indent:-18.0pt;mso-list:l1 level1 lfo2'> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<![if !supportLists]>
<span
style='mso-fareast-font-family:Verdana'><span style='mso-list:Ignore'>3.<span
style='font:7.0pt "Times New Roman"'> </span></span></span>
<![endif]>
Whether, on the facts and circumstances of the case, the issue relating to
source of investment in purchases should be restored back to the file of the <span
class="SpellE2">A.O</span> for fresh decision as proposed by the Ld. A.M.?</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT Credit – Service Tax paid on Erection and Commissioning at Buyer's premises – Entitled for Credit - Rules does not require that service has to be rendered at the factory of the manufacturer for the purpose of eligibility for service tax credit - CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> this case erection and commissioning charges have been included in the cost of the machines sold. The appellants have selected the agency to do this work and once the purchaser enters into an agreement for supply of the machine including the erection and commissioning charges, the responsibility for erection and commissioning is of the manufacturer. Therefore what is happening in this case is that the supplier of the machine is not only selling the machine but is also providing the service of erection and commissioning. Once erection and commissioning cost is included in the transaction value, the natural conclusion that would emerge is that the processes undertaken in the buyer's premises are actually incidental to manufacturing activity undertaken in the manufacturer's premises. What has been sold in this case is the complete machine duly erected and commissioned and operational.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
</body>
</html>