TIOL-DDT 1135 · 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 1135</font><br>
18.06.2009<br>
Thursday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Clearance of scrap at job worker's end - Practice of assessment- CBEC calls for report</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the erstwhile Central Excise Rules, 1944, there existed a provision under Rule 57F whereby the liability to pay duty on the waste and scrap arising during the processing of goods at the job worker's end was on the principal manufacturer. However, while switching over from Modvat scheme to the CENVAT credit scheme, this specific provision has been removed. The new CENVAT Credit Rules, 2004 also does not have any such provision.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
the case of <em>M/s. Rocket Engineers Corp. Ltd</em>. [</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2006/2006-TIOL-443-HC-MUM-CX.htm" target="_blank">2006-TIOL-443-HC-MUM-CX</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">],
the High Court has held that “No liability on principal manufacturer after
31.3.2000 in view of amended Rule 57AC of erstwhile Central Excise Rules,
1944.”Further,
in the case of <em>Preetam Enterprises, </em> it has been held by CESTAT,
that “Cenvat Credit Rules are silent on disposal of such wastage and scrap”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Collecting duty from job worker is also legally questionable in view of Rule 2(h) of CENVAT Credit Rules, 2004 which puts the onus to pay duty solely on the manufacturer. Further, monitoring payment of duty from numerous small job workers would be an uphill task for a Central Excise Officer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter is under consideration of the Board and Board feels that logically duty should be paid on waste/scrap, whether it is generated at the manufacturer's end or at the job worker's end, as input on which credit has been taken has been consumed in production of this waste/scrap.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, Board wants the Chief Commissioners to report the practice followed in their jurisdiction.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whenever the Board faces a tricky issue, the practice followed is to ask for report from the Chief Commissioners about the practice followed in the field. When the Rules themselves are not clear, what is the Board going to do with the practice followed? Say if 90% of the CCs report that they are collecting the duty on scrap from the job workers, will they ratify the action, though the same does not have any legal basis? If no duty is collected from any of the two, (principal manufacturer as well as job workers ---- provided if any such report is honestly forwarded to the Board) will they issue Sec 11 C notification?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board will come out with a solution soon.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>For every complex problem, there is a solution that is simple, neat, and <font color="#FF0000">wrong</font></strong></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/File267_28.htm" target="_blank">CBEC Letter F.No.267 /28/2008- CX 8 ( Pt.I ) - Dated: May 05, 2009</a></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Import and Export allowed through Bagdogra Airport</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Bagdogra is a Military airport which allows civilian flights. It is about 16 kms from Siliiguri in the Darjeeling District of northern West Bengal. It has been declared as a Customs airport for the purpose of “Unloading of baggage brought in tourist chartered flights and the loading of baggage in tourist chartered flights.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now it is made a Customs Airport for “Unloading of imported goods and the loading
of export goods or any class of such goods.”</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_067.htm" target="_blank">Notification NO. 67/2009- Cus ., (NT), Dated: June 15, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prohibition on import of milk and milk products – Extended</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The prohibition on import of milk and milk products including chocolates and chocolate products and candies/confectionary/food preparations with milk or milk solids as an ingredient from China was extended by Notification No. 67(RE-2008)/2004-2009 dated 1st December, 2008 till 23.6.2009.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is further extended for a <font color="#FF6600">period of six months from 24th June, 2009 </font>and<font color="#FF6600"> until further orders</font>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What does this mean? Is the extension till 23rd December 2009 or till further orders? Can it be extended beyond six months?</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=45&filename=notification/dgft/2008/dgft08not111.htm" target="_blank">DGFT Notification NO. 111(RE-2008)/2004-2009, Dated: June 16, 2009</a></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Import of Mobile Handsets - Prohibited</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DGFT has prohibited with immediate effect, the import of ‘Mobile Handsets' (classified under EXIM Code ‘8517') without International Mobile Equipment Identify (IMEI) No. or with all Zeroes IMEI.</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=45&filename=notification/dgft/2008/dgft08not112.htm" target="_blank">DGFT Notification NO. 112(RE-2008)/2004-2009, Dated: June 16, 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">–Friday's cases</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Central Excise</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Parts of Boiler cleared together merits classification as complete boiler in unassembled state – CESTAT upholds dropping of Rs 39 crore demand of Central Excise duty against BHEL </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AROUND</strong> 23 show cause notices were issued to M/s BHEL Trichy demanding Central Excise duty of nearly 39 crores. The issue is whether the parts of Boiler cleared by the unit are classifiable as complete Boiler as contended by the assessee or as separate parts of Boiler. After initial ritual of confirmation of the demand, the matter was remanded by the Tribunal as the assessments were provisional. In the remand order, the Commissioner was bold enough to drop the demand by classifying the goods as complete Boilers. However, as usual, the Revenue took the matter to the Tribunal again.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Income Tax </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Indo-French DTAA - non-resident company gets contract - execution is over - another contract obtained after few years - earns interest income on I-T refund during lull period - assessee not entitled to claim deduction for expenses nor set off of business loss u/s 71 when there is no PE in India - PE cannot be equated to business connection: High Court</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INDIA</strong> attracts hordes of non-resident companies to do business with domestic enterprises. There are cases where a non-resident company gets contracts for a few years and then there is a lull when no business is obtained from any company. After a gap of few years the non-resident company gets business again. Now the bone of contention is whether the non-resident company can claim set off for expenses against interest income accruing in the form of income tax refund when there is no PE in India? And the answer coming from the High Court is that when the assessee is not in any business in India nor has any PE in India, it cannot be allowed to claim deduction of expenses nor any set off of business loss under Sec 71 of the I-T Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">FERA</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Not taking adequate steps to recover the money from a foreign buyer – penalty rightly imposed – High Court</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant failed to take reasonable steps to realize the outstanding export dues rather it settled the matter directly with the overseas buyer without permission of RBI which resulted in the loss of foreign exchange equivalent to Rs.67,200 /- to the country. Having considered the facts, evidence and circumstances of the case, appellant has rightly been held guilty by the Adjudicating Officer.</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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