TIOL-DDT 1070 · 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 1070</font><br>
13.03.2009<br>
Friday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refund of service tax paid under notification No. 41/2007-ST Board Clarifications – Q & A</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REMEMBER</strong> the farce when Commerce Minister Kamal Nath announced a grand exemption from Service Tax for services used in exports and when the media in India went on a frenzy reporting that Kamal Nath had exempted Service Tax and we were the only ones to report that Chidambaram had never announced a reduction in Rail fare.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reluctant Revenue finally announced an exemption scheme that works (read delays or denies) through an impossible refund scheme by Notification No. 41/2007 – ST dated 06/10/2007. [Actually there was a Notification No. 40/2007-Service Tax, Dated: September 17, 2007, which seems to be totally forgotten]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Clarifications sans refunds flowed at regular intervals.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here are the latest ones:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <strong>Claim for March-June 08, could be filed till 31st December 2008: </strong>Consequent to the revision of limitation period from 60 days to six months, refund claims of service tax on specified taxable services used for exports of goods made in the quarter Mar-Jun 08 could be filed till 31st Dec 08. [<font color="#FF6600">But isn't it a little late? They could have given this clarification before 31.12.2008</font>]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <strong>Deductions made by banks not to be deducted from refunds: </strong>Refund is admissible on the basis of gross amount received for the exports and deductions made by the banks from export remittances, in lieu of services provided by bank, should not be deducted while granting refund.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. <strong>When foreign exchange remittance certificates (FIRC) are made on running account basis by the banks: </strong> In such cases where FIRCs are issued on consolidated basis, the exporters should submit self-certified statement alongwith FIRC showing the details of export in respect of which the FIRC pertains. Refunds should be allowed on such certified statements. However, exporters should maintain a register showing running account which should be reconciled between the export and the remittance periodically. [<font color="#FF6600">How is ‘ <strong>foreign exchange remittance certificates' – FIRC ? It is actually Foreign Exchange Inward Remittance Certificate</strong></font><strong>]</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. <strong>Where payments are received by cheque, banks do not issue FIRC and refunds are denied </strong>: Refund may be allowed on the basis of duly certified bank statement.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. <strong>Limitation to apply from date of export </strong> not from the date of receipt of remittances.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. <strong>Notification is prospective </strong> and refund is not admissible on such services received prior to the date they are notified in the said notification, even if the goods, in relation to which these services are used, are exported after the date when such services are notified.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. <strong>Certified copies of documents will be accepted </strong>: Only in case of in-depth enquiry original documents can be verified.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. <strong>No verification of registration certificate of the supplier of service.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. <strong>Refund not eligible for the quarter ending September 2007.</strong></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All pending refund claims are to be decided accordingly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board once again <strong><em>reiterates </em></strong>that refund claims be sanctioned expeditiously within the time prescribed by the Board.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the Board find out how many claims have been received and how many sanctioned?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I know a service provider who has a peculiar relation with his client who is an exporter. The client pays the Service Tax but collects back half of it on the understanding that he would give it back as and when and if the Department gives him refund. So now the service provider is doing the rounds of Service Tax offices to get that refund for his client. There is an agent who is ready to buy the refund claim at a discount of forty percent or get the refund for a commission of twenty percent – and the government would get service tax on this commission – see the tremendous business opportunities the lawmakers can unwittingly create. <strong>Refund </strong> is a multi Crore industry indeed! Government should seriously think of starting a Service Tax Refund Procurement Facilitator Scheme.</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=41&filename=notification/servicetax/2009/sercir112.htm" target="_blank">CBEC Circular No. 112/06/2009 – ST Dated: March 12, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NCCD on Imported Mobile Phones on the Basis of MRP - CBEC Clarifies</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has clarified that telephone sets for cellular networks or for other wireless networks are covered under the description ‘Telephone sets' under Sl.No.87 of Notification No.49 /2008-CE(NT) dated 24.12.2008 and therefore they would continue to be assessed for additional duties of customs on the basis of MRP/RSP. Consequently, NCCD, being a duty of excise, is also required to be collected on the basis of MRP/RSP, in the same manner as applicable to the levy of additional duty under section 3 (2) of the Customs Tariff Act, 1975.</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=25&filename=notification/custom/2009/cuscir09_012.htm" target="_blank">CBEC Circular No. 12/2009 – Customs Dated: March 12, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The world's richest are now far too poorer</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are only 793 billionaires this year compared to 1125 in 2008 according to Forbes annual super rich list. The combined net worth of the rich has come down by 2 trillion dollars in one year.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">29 Indian billionaires lost their status while Mukesh Ambani's worth shrank from 43 Billion to 19.5 billion, though he managed to keep ahead of Lakshmi Mittal whose worth is 19.3 billion. Mukesh may still build his dream house for his wife without much difficulty.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India has also lost the status as the Asian country with the largest number of billionaires – China has taken that place.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In all this recession, there were gainers too like Ranbaxy's Malvinder and Shivinder Singh who added $100 million to their combined net worth.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anil Ambani experienced the biggest reversal of fortunes, slipping to number 34 on the list from number six last year, as his net worth sank by 31.9bn to 10.1bn – dollars of course. How does it feel to lose One Lakh Sixty Thousand Crores of rupees?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">New York is the city of the richest with 55 tycoons. While you think America is crushed under the economic crisis, today they have 10 of the top 20 richest men in the world.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems India's Wind Power giant Tulsi of Suzlon lost 90% of his fortune.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But Micro Soft is again Macro Hard – Bill Gates is again No.1.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Philips Software case: Karnataka HC grants stay and admits many substantial questions of law</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR </strong>the Transfer Pricing provisions in the Income Tax Act, it has been a long journey of seven years to reach the High Court stage in the normal course of legal proceedings. True, a couple of writs were filed after the first appellate orders and a few points relating to power of TPO and validity of Board's instruction have been decided in the past but TP cases have now begun to reach the High Courts after the Tribunal deciding about a dozen cases. Netizens may recall what the Tribunal had held in the case of Philips Software Centre case - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=39&filename=legal/itat/2008/2008-TIOL-471-ITAT-BANG.htm" target="_blank">2008-TIOL-471-ITAT-BANG</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> in
the last quarter of last calendar year and TIOL had reported the same as
the basic premise of the TP provisions is to prevent the flight of profit
outside India, and since the assessee in this case was happily availing Sec
10A benefits, it was not a fit case for application of TP laws.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you the <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8736" target="_blank">High Court order today</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">–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>Payment of 8% amount under Rule 57 CC of the Central Excise Rules, 1944 on exempted by-products – CESTAT differs with the Larger Bench ruling in Rallies India case.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DOES</strong> the Larger Bench decision have binding effect though the same is conflict with the Supreme Court decision in case of M/s Swadeshi Polytex Limited? (Wherein it was held that set off cannot be denied against inputs used on the ground that methanol, a by-product is non excisable). This question came up before the CESTAT earlier in case of M/s Sterlite Industries Ltd </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/2007/2007-TIOL-1589-CESTAT-MAD.htm" target="_blank">2007-TIOL-1589-CESTAT-MAD</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> and
the matter was referred to the Larger Bench.</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>India-USA DTAA - supply contract for hardware and software to Indian GSM operator - transfer of right to use of software loaded on equipment without consent to duplicate or adapt or use in public is mere sale of copyrighted article - payments cannot be treated as royalty either under I-T Act or under DTAA : ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> the Revenue, taxing software-related income has literally become a waterloo. Every time it gets an opportunity to tax an income arising out of transfer of customised software by a non-resident to an Indian company it does not lose heart in fighting another waterloo. But as long as the Tribunal's Special Bench decision in the case of Motorola Inc (</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=53&filename=legal/itat/2005/2005-TIOL-103-ITAT-DEL-SB.htm"><strong>2005-TIOL-103-ITAT-DEL-SB</strong></a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">)
stands or the law remains the same, the final outcome of such waterloos is
the same - payments arising out of transfer of right to use of software alone
or loaded on any equipment is not royalty income taxable either under the
Income Tax Act or the Indo-USA tax treaty. Reason: such transfer is a mere
sale of a copyrighted article and not transfer of copyright. Unless the transfer
grants a right to the user to duplicate the same or adapt the same or use
the same in public, it cannot be treated as transfer of copyright. And any
income emanating from such an exercise cannot become royalty income taxable
u/s 9(1)(vi) or under Article 12 of the DTAA.</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>Department's appeal in a case where party's appeal already decided – Doctrine of Merger not applicable if the issues are different: matter remanded to reconsider in view of the Court's decision in </strong></font><font color="#FF6600" size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2009/2009-TIOL-10-HC-MUM-CX.htm">2009-TIOL-10-HC-MUM- CX</a></strong></font><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> - Bombay
HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EVEN</strong> if the Appeal preferred under Section 35B has been disposed of, an appeal can still be preferred pursuant to direction issued under Section 35-E, if in the appeal disposed of, the entire order was not the subject matter of the Appeal.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements</strong></font></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
</body>
</html>