TIOL-DDT 1063 · 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 1063</font><br>
02.03.2009<br>
Monday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax – Date vs Rate</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> the first time in the fifteen year old history of Service Tax in India, the Tax rate was reduced w.e.f 24.02.2009. On 25th, we carried an article by the Chennai Duo, Jai Kumar and Natarajan - <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8658">Service Tax: 12 to 10. How to be done? </a></strong>wherein the authors took a view that the rate of Service Tax is the rate prevailing on the date of realisation. All our distinguished contributors vehemently disagreed and opined that the rate is the rate prevailing on the date of rendering service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the contributors have referred to the Tribunal judgement in <em>Reliance Industries Ltd., vs CCE </em></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2008/2008-TIOL-283-CESTAT-AHM.htm" target="_blank">2008-TIOL-283-CESTAT-AHM</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> wherein the Tribunal held that<font color="#FF6600"> in absence of specific provision, the rate of tax applicable to the service tax shall be the rate prevailing on the date of rendering the services</font>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But as rightly noted by the Tribunal, there is <strong><font color="#FF6600">absence of specific provision</font></strong><font color="#FF6600">.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why so?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Customs, there is Section 15, for <strong>Date for determination of rate of duty and tariff valuation of imported goods.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similarly in Central Excise, there is Rule 5 - <strong>Date for determination of duty and tariff valuation</strong>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But unfortunately, in Service Tax, there is no such provision. And <font color="#FF6600">in the absence of a specific provision</font>, the Tribunal has held that it is the date of rendering the service. This is a LAW created by the Tribunal.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is the <strong>Date of Rendering Service </strong>? In Service Tax, it is really difficult to ascertain this date, at least in some services. Is Rendering the starting point or ending point – remember the classic concept that service tax is a consumption based service! Take our own case. When somebody subscribes to TIOL, he pays us in advance sometimes for two or three years and we pay the Service tax in the month after the month of receipt of payment. We mail him a password on receipt of payment and sometimes even without receiving the payment. Now on sending the password, have we rendered service? The subscriber may not use it at all. Have we rendered the service when we got the payment, when we gave the subscriber a password or when he started using our service?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rejection of Service vs Return of duty paid goods: </strong> In Central Excise, when duty paid goods are returned, there is a system of taking credit of the duty paid, but what happens when services are rejected? Suppose our subscriber has not used our service and asks for a refund of the subscription fee paid and we refuse, are we liable to pay Service Tax? And what happens if our fee is inclusive of Service Tax? Have we collected any amount as representing service tax?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>So the Date of rendering Service is a mythical date – difficult to ascertain. </strong>In Customs, the duty is on import and in Central Excise, it is on manufacture, but still, the rate is the one prevailing on the date of filing Bill Of Entry and the date of clearance respectively, even though the dates of import and manufacture can be easily ascertained. Then in Service Tax, can the unascertainable date of rendering service be the valid date for determining the rate of tax? The only clear available date is the date of payment and it seems to be the most logical date that can be accepted. The date of rendering the service, like paternity, is only an opinion, while the date of receipt of payment, like maternity, is a fact and perhaps we should follow a fact rather than an opinion.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is time the Board should come up with a clarification immediately, not that Board can clarify <font color="#FF6600">in the absence of a specific provision</font> and that Board clarification is going to be accepted but at least for the sake of uniformity, Board should issue a clarification and later amend the law in tune with Section 15 of the Customs Act and Rule 5 of the Central Excise Rules.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are happy that the issue has provoked so much debate and we hope the Board will react sooner than later! A Netizen asked us, will Jai Kumar and Natarajan have the same opinion, if the service Tax rate was increased? Perhaps then they would have advocated the Tribunal decision in <em>Reliance.</em></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Anti Dumping Duty on Plain Medium Density Fibre Board</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Designated Authority in his preliminary findings has concluded that injury has been caused to the domestic industry both by the volume and price effect of dumped import of Plain Medium Density Fibre Board falling under heading 4411 of the First Schedule to the Customs Tariff Act, originating in or exported from China PR, Malaysia, New Zealand, Thailand and Sri Lanka and has recommended imposition of provisional anti-dumping duty.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has therefore imposed the Provisional Dumping Duty as recommended – this is valid till 26th day of August, 2009 and will of course be valid even if the government forgets to extend it then and chooses to do it on a later day.</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=23&filename=notification/custom/2009/ctariff09_021.htm" target="_blank">Notification NO. 21/2009 -CUSTOMS, Dated: February 27, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tariff Value of Brass Scrap and Poppy Seeds Reduced</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has decreased the Tariff Value of Brass Scrap from 2775 US Dollars to 2643 and increased the Tariff Value of Poppy Seeds from 3793 Dollars to 4192 Dollars. There is no change in the Tariff Values of other items.</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_022.htm" target="_blank">Notification NO. 22/2009 -CUSTOMS(NT), Dated: February 27, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Free Sale and Commerce Certificate – DGFT simplifies procedure</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the amended HBP, (by PN No. 137/19.01.2009 – <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8465" target="_blank">DDT 1035</a></strong>), <strong>RAs </strong> may also issue, on application, Free Sale and Commerce Certificate for export of items not covered under Drugs & Cosmetics Act, 1940, which have usage in hospitals, nursing homes and clinics, for medical and surgical purposes and are not prohibited for export. Validity of such certificate shall be one year from date of issue unless otherwise specified.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, to simplify the procedure, DGFT has decided that</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Purchase order is not required to be filed with application for Free Sale and Commerce Certificate;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) A system should be developed by which all instruments/items approved earlier should be automatically covered for issuing Free Sale and Commerce Certificate, without referring any subsequent application to Drug Controller General (I) (DCGI) again. DGFT officials may also check the items in the relevant Act/Rules before issuing the certificate. A copy of the approval letter must be endorsed to DCGI, also.</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=46&filename=notification/dgft/2008/dgft08cir064.htm" target="_blank">DGFT Circular No. 64 (RE 2008) 2004-09 Dated: February 26, 2009 </a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of Rough Marble Blocks and Parliament Elections</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Representations have been received from trade and industry, who have been granted licences for import of rough marble blocks/slabs for the year 2008-09 stating that on account of Parliamentary elections, the new Policy for import of rough marble blocks/slabs for the year 2009-10 is likely to be delayed. This delay is likely to cause disruption in their business. They have further requested that they may be allowed to import a quantity equivalent to 25% of the licences granted to them for the year 2008-09, so that their business needs of the first three months of the next financial year are met.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The gracious government has agreed. However the utilization of the additional quantity and actual import may only be made after 1.4.2009. An endorsement to this effect shall be made on the licence by the R.A. concerned.</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=46&filename=notification/dgft/2008/dgft08cir065.htm" target="_blank">DGFT Circular No. 65 (RE 2008) 2004-09 Dated: February 26, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of Rough Marble Blocks and Slabs of agglomerated/artificial stones – recession effects – DGFT concedes trade demand</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Representations have been received from the Association of eligible entities who received the licences for rough blocks/slabs of agglomerated/artificial stones stating that on account of slow down in the economy and real estate sector, demand for agglomerated/artificial stones has temporarily come down very significantly. Accordingly, Association has requested that for the said allotted quota, the licence holders may be provided an option to import either the items indicated in the licence or rough marble blocks/slabs as detailed in Policy Circular No.13 ((RE-08)/2004-2009 dated 30.6.2008.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Government is in a kind mood and allowed the request.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, it is clarified that all licence holders of rough/ unprocessed blocks and slabs of agglomerated/artificial stones, issued to them as per provisions of Policy Circular No.34 dated 10.10.2008 are hereby given an option to either import rough marble blocks/slabs (Exim Code Nos. 25151100, 25151210, 25151220, 25151290 indicated in Schedule-1 (imports) of ITC (HS) Classifications of Export and Import Items, 2004-2009) or the items indicated in their licenses, i.e. artificial/agglomerated stones. The import of rough marble blocks/slabs under these licences, if any, shall be subject to all the conditions including floor prices, among others, as applicable on import of rough marble blocks/slabs notified by the Government. Eligible entities may approach the RA concerned for getting an endorsement to this effect made on their licences within a period of 15 days from date of issue of this Circular.</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=46&filename=notification/dgft/2008/dgft08cir066.htm" target="_blank">DGFT Circular No. 66 (RE 2008) 2004-09 Dated: February 26, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>An Exporter's Woes – Letter to Chairman CBEC - SOS</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the copy of a letter sent by an exporter to the Chairman, CBEC. We hope the dynamic Chairman sorts out his problem.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Thank you very much for the courtesies extended to me when I called on your good selves on 12th February 2009 in connection with the above matter.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">As advised by your good selves, I had called on personally Mr N Sasidharan, Chief Commissioner, Nhava Sheva Port on 18th February 2009 and explained our problems. Mr Sasidharan asked us to submit certain information on our past exports, bank guarantees furnished and details on refund of revenue deposits etc,.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">We immediately furnished all the details with Chief Commissioner and the matter was examined in light of the submissions. A verification report was submitted by DEEC section that BG worth Rs.1.51 Crores is with Customs and entire export obligation has been fulfilled but Export Obligation Discharge Certificate is yet to be furnished and Refund section too confirmed that an amount Rs. 5.25 lacs Revenue Deposit is pending and the matter is under consideration. Based on these facts the Chief Commissioner permitted furnishing of LUT instead of BG for Rs.216000/- with a condition that the refund of 1% (Rs.2.89 + Rs.1.83 + Rs.0.48 + 0.03 lacs) deposit pending with Customs will be considered and released after we furnish BG of Rs.2.16 lacs within 60 days of clearance of the goods. The furnishing of LUT was considered for a temporary period of 60 days against the refund of Rs.5.25 lacs.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Asstt Commissione/Dy Commissioner resubmitted our file stating that refund amount of Rs.2.89 lacs is due and Rs.2.36 lacs refund is not clear and therefore, we may insists for BG instead of LU. Finally, we were asked to furnish BG for Rs.2.16 lacs on 26th February 2009. Accordingly, we have furnished BG for Rs.2.16 lacs and have requested for an early clearance of the goods.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>In the entire exercise, we have incurred demurrage and detention charges of over Rs.2 lacs , furnished 100% cash margin with the Bank for Rs.2.16 lacs bank guarantee and also delay of 4 weeks.</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a need to draw a distinction between a manufacturer exporter and exporter and rules should be framed separately for both types of exporters. In a current economic situation, nobody manufacturer exporter can waste financial resources and increase transaction cost.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is also an urgent need to reconsider the amendment in the Board's circular 58/2004 the eligibility for manufacturer exporter for furnishing LUT. The manufacturer exporter, who have achieved Rs.5 Crores or above physical exports in the current year, should be permitted to clear goods imported against EPCG and DEEC license by furnishing LUT instead of BG. The condition of past 3 years exports performance and good track record should be deleted.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">A new manufacturer exporter like us, are finding it difficult to meet these kind of stringent rules in current tight financial market condition and this is making exports from India unviable. An immediate attention to the above matter would be highly appreciable.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The few lakhs of rupees involved here may not be much for the Customs who are tuned to Crores, but for an individual, this is good money hard to come by and the Department should understand the plight, especially in these difficult times.</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>Miscellaneous – Don't miss this important order tomorrow</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>State Dues vs Dues to banks - DRT Act and Securitisation Act do not provide first charge to banks over State Dues: SC Larger Bench</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DRT</strong> Act and Securitisation Act do not create first charge in favour of banks, financial institutions and other secured creditors and the provisions contained in Section 38C of the Bombay Act and Section 26B of the Kerala Act are not inconsistent with the provisions of the DRT Act and Securitisation Act so as to attract non obstante clauses contained in Section 34(1) of the DRT Act or Section 35 of the Securitisation Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What
about Central Excise? </strong> Section 11 of the Central Excise Act, which
was considered by the two-Judge Bench in SICOM's case - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><b><a
href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2008/2008-TIOL-225-SC-CX.htm"
target="_blank">2008-TIOL-225-SC-<span class="SpellE">CX</span></a></b></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
does not contain a provision similar to those in Central legislations like
Section 14A of the Workmen's Compensation Act, 1923, Section 11 of the
EPF Act, Section 74(1) of the Estate Duty Act, 1953, Section 25(2) of the
Mines and Minerals (Development and Regulation) Act, 1957, Section 30 of
the Gift Tax Act, 1958 and Section 529A of the Companies Act, 1956, under
which statutory first charge has been created in respect of the dues of
workmen or gift tax etc.</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>JV - non-resident pays additional share capital for land purchase - legal tangle - fund deposited in bank - interest income - Since income was earned prior to commencement of business it is capital receipt and needs to be set off against pre-operative expenses and cannot be treated as 'income from other sources': HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ONE</strong> income head the Revenue is generally seen to be in love with is 'Income from Other Sources'. Quite often it has been seen that the moment an assessing officer finds that a particular type of income does not fit into business income as claimed by the assessee, he tends to treat the same as 'income from other sources'. However, in an interesting decision the High Court has observed that it is a residuary head and an income is to be treated as 'Income from Other Sources' only when it does not fit into other heads. But fitting an income under a specific head requires laborious efforts and application of mind which are generally avoided.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sales Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Taking Delivery of goods by dealers in Delhi for sale in other States – sales are Inter-State sales: Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Question before the Supreme Court: “Whether the taking of the delivery of chemicals in Delhi by the purchasing dealers, in the context of they being the distributors/stockists of the assessee (appellant), for the assigned territories outside Delhi would take away the transaction in question from the category of sale inter-State sale(s)?”</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="#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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