TIOL-DDT 1068 · 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">
</head>
<body bgcolor="#FFFFFF">
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1068</font><br>
09.03.2009<br>
Monday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pan Masala – No export and clearance without duty</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS </strong>per Rule 19 of the Central Excise Rules,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Commissioner.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises,for use in the manufacture or processing of goods which are exported, as may be approved by the Commissioner.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now these facilities will not be available for Pan Masala that is pan masala cannot be exported without payment of duty and no goods can be cleared from a factory without payment of duty for manufacture of Pan Masala.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 has been amended.</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=30&filename=notification/excise/2009/exnt09_05.htm" target="_blank">Notification NO. 5/2009-Central Excise ( N.T.) Dated: March 05, 2008</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sale of light energy – VAT and Service Tax – matter remanded to Appellate Authority</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While reporting the case of <em>Bharti Airtel vs State of Karnataka </em>- </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2009/2009-TIOL-99-HC-KAR-VAT.htm" target="_blank">2009-TIOL-99-HC-KAR-VAT</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>, </strong>we
had asked, “<strong>CAN </strong>there be a liability to pay both VAT and
Service Tax on the same activity?”, and answered “While deciding a VAT case,
the Karnataka High Court held that the assessee was liable to pay VAT on
the whole value in spite of the fact that they were paying Service Tax.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Bharti Airtel Ltd had challenged the order dated: 16.03.2007 passed by the Single Judge of the High Court declining to interfere with and quash the order of Re-assessment dated 12.01.2007 passed by the Deputy Commissioner, Commercial Tax, - "Assessing Authority" and consequent 12 notices of demand issued by him for the months of April 2005 to March 2006 demanding the tax from the appellant – company. The Single Judge declined to interfere with and quash the said order and notices on the ground that the Appellant did not avail the statutory remedy provided under the Karnataka Value Added Tax Act, 2003 (" KVAT Act”). Therefore, the appellant has also challenged the legality and correctness of the said order of re-assessment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court Division Bench had upheld the assessment and held that</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. the activity of providing Broad Band Connectivity by the appellant company to its subscribers amounts to ‘sale of light energy' taxable under Section 3 of the KVAT Act 2003,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. the Government of Karnataka is competent to levy tax on the said sale under the provisions of the KVAT Act, 2003 on the entire proceeds collected by it from its subscribers as “lease rentals” despite the appellant company being assessed to service tax on the said activity by the Union Government under the provisions of Finance Act, 1994, treating it as ‘service'.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We had also reported, “ <strong>Bharti Airtel has appealed to the Supreme Court and the Court has ordered, “List on 02.03.2009. Status quo, as on today, shall be maintained till then.”</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Supreme Court has decided the issue and held that the “Single Judge was right in directing the assessee to exhaust statutory alternate remedy. Looking to the nature of the concept involved in these matters (in which technical evidence needs to be looked into and cross-examination of the experts is warranted) we are of the view that the matters need adjudication.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court directed “the assessees to file statutory appeals before the First Appellate Authority within four weeks from today. On filing of the appeals the First Appellate Authority will hear and dispose of the appeals as expeditiously as possible, preferably within three months.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us recap the issue again.</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Karnataka VAT Department taxed Bharti Airtel for 'broadband connectivity'. They were paying Service Tax for the same activity.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Instead of following the appellate Channel, Bharti filed a writ in the High Court and the Single Judge held that they had to exhaust the appellate channels.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. On appeal by them, the Division Bench of the High Court held that VAT levy is correct, in spite of the fact that Service tax was paid. <font color="#FF6600">This actually opened up a Pandora's Box as the theory that Service Tax and VAT were mutually exclusive went for a toss.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. On further appeal to Supreme Court, the Apex Court held that the Single Judge was right.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. And so the case is back with the Departmental Appellate Authority.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This raises some important questions:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Can the VAT Appellate Authority decide on the validity of Service Tax and VAT on the same activity?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Is the VAT Appellate Authority bound by the decision of the Division Bench of the High Court which was set aside by the Supreme Court?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Will not the Authority be influenced by the erudite judgement of the Division Bench?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Can it quote from the Division Bench Order?</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of our prolific writers is worried that this would have nationwide ramifications on issues concerning the interpretation of “goods” vs “services”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the same activity can be both service and sale, there is something terribly wrong with the LAW and what requires urgent change is the Law and not the Business Practice.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today
we bring you the Supreme Court order in the <em> Bharti </em> case.
Please <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2009/2009-TIOL-36-SC-VAT.htm">click here to open the Judgement</a>.</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Transfer Policy – CBDT invites suggestions from IRS officers</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Committee to suggest amendments to the Transfer Policy of Group A Services in the IRS has been constituted and the Committee has already commenced its exercise. To make the process wide and stakeholder inclusive, suggestions are invited from all stakeholders in the Department.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suggestions may be sent to the Committee latest by 12th march 2009. You have three more days and if you have any suggestions, mail them to <a href="mailto:maheshirs@yahoo.in">maheshirs@yahoo.in </a> or <a href="mailto:binayakjhirs@yahoo.co.in">binayakjhirs@yahoo.co.in</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/transferpolicysuggestions.pdf" target="_blank">CBDT F.No. HRD/CM/103/02/2008-09/326 Dated 6th March 2009</a></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 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>Commercial
Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Is Oxygen gas used in manufacture of steel, raw material? – Question cannot be decided on basis of Wikipedia alone – matter remanded to AO to decide the issue: Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> do not know what are the manufacturing processes involved and what role oxygen gas has to play in the matter of manufacturing of steel. It is also not possible for us to base our decision solely on the basis of a diagram contained in Encyclopaedia Britannica. Whether oxygen gas can be considered to be a raw material is essentially a question of fact. Evidence is required to be adduced. Such evidence although may be in possession of TISCO. In the event, such a question is raised by the assessee, namely, BOC, the Assessing Authority must go therein. For the purpose of claiming exemption from payment of tax and/or special rate of tax applicable to a particular gas or commodity or goods, the assessee itself must bring on record sufficient materials to show that it comes within the purview of the notification. Both in <em>M/s Ballarpur Industries Ltd </em> and <em>Tata Engineering & Locomotive Company Limited, </em> the question as to whether sodium sulphate and/or batteries, tyres, tubes were raw materials or not could be determined by this Court as such a question had been raised by the Assessing Authority.</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>Sales tax collected from customers, not deposited with Government under a deferral scheme - Future liability settled for a lesser amount – Difference is Revenue Income and chargeable to income tax: ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> sales tax collected by the assessee being a trading receipt was required to be deposited with the sales tax department. Otherwise it would be chargeable to tax. But, it was not deposited and benefit of section 43B was claimed by the assessee on account of deferral scheme of the State Government and the Circular of the CBDT and this sales tax liability which is a trading liability was converted into a loan liability payable from April 2010 in five annual equal instalments. But, in fact, the entire amount of liabilities was not at all paid by the assessee and it was settled on payment of lesser amount. On payment of the lesser amount, the entire trading liabilities seized to exist. the entire sales tax deferral liability from the loan liability has been discharged on payment of a lesser amount. Whatever difference is there, it would be the income of the assessee for the assessment year in which the liability is discharged.</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>Pre-deposit - appellants adopted various dilatory methods and present appeal is nothing but an abuse of process of law - Conduct of appellants disentitles them from any relief: Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> factual scenario as noted clearly goes to show that the appellants adopted various dilatory methods and the present appeal is nothing but an abuse of the process of law.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The counsel for the appellant submitted that the case has not been heard on merits, and the effect of Rule 16(a) of the Rules has not been considered. It is also submitted that some time may be granted to make the deposit. Both the pleas are without any substance. The question of applicability of Rule 16(a) could have been gone into the appeal filed before CEGAT. That stage has not arrived at. The CEGAT was only dealing with the application to dispense with the requirement of pre-deposit.</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
Thursday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Wish
U all a very happy Holi.</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>
</body>
</html>