TIOL-DDT 1152 · 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 1152</font><br>
13.07.2009<br>
Monday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Transparency in Budget Making - A Tale of Foreseeable Amendments</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GONE</strong> are the days when the contents of the Budget were considered as top secret. The tax officials used to be constantly alert to assess the requisite changes and come out with tax proposals and statutory amendments in the Budget. Things have changed dramatically in the recent past and the balance of convenience has slowly but steadily tilted in favour of revenue due to Apex Court's benevolence for retrospective legislations and the Government's penchant for revenue friendly statutes.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A close look at the changes proposed in the Finance (No 2) Bill, 2009 makes an interesting revelation. Many of these changes, some prospective and some retrospective had their origin in disputes resolved at various judicial levels, obviously in assessees' favour and the amendments are on predicable lines. Just have a look at these instances:</font></p>
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<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cause</strong></font></p></td>
<td valign="top" width="288"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Effect</strong></font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Commissioner Of Customs and Central Excise Vs M/S Hongo India (P) Ltd </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2009/2009-TIOL-48-SC-CX-LB.htm" target="_blank"><font size="1">2009-TIOL-48-SC- CX -LB</font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Held: High Court had no power to condone the delay under Section 35 H(1) of the CE Act, 1944</font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sections 35G and 35H have been proposed to be amended retrospectively so as to empower High Courts to condone delay in the filing of appeals, applications as well as the memorandum of cross objections where it is satisfied that there was sufficient cause for delay.</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>M/S Crane Betel Nut Powder Works Vs </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Commissioner Of Customs & Central Excise, Tirupathi And Another </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2007/2007-TIOL-37-SC-CX.htm" target="_blank"><font size="1">2007-TIOL-37-SC- CX </font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Held: Process of making Betel Nut powder and adding menthol, sweetening agent etc does not amount to manufacture </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First schedule to the Central Excise Tariff Act has been amended by inserting Note 6 in Chapter 21 so as to declare the process of adding or mixing certain ingredients to betel nut as amounting to manufacture with immediate effect.</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>M/S Copier Force India Ltd And Others Vs Commissioner Of Customs (Imports), Chennai </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2009/2009-TIOL-75-CESTAT-MAD.htm" target="_blank"><font size="1">2009-TIOL-75-CESTAT-MAD </font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Held: Though the officers of various ranks in the DGCEI were invested with powers of the officers of customs of comparable rank, under Notification No.31/2000- Cus. (NT) dated 9.5.2000 the CBEC had not assigned territories in which these officers would exercise the powers of the officer of customs. </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Validation clause has been taken in the Finance (No.2) Bill, 2009 to validate appointment of officers of customs under sub-section (1) of section 4 read with sub-section (1) of section 5 of Customs Act, 1962 and specifying their jurisdiction vide notification No.27/2009-Customs (N.T.) dated 17.3.2009 and to validate action taken by such officer of customs on and from 9th May, 2000 as if their area of jurisdiction as specified in the said notification was in force at all material times (Clause 91 of the Finance (No.2) bill, 2009).</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Som Distilleries Pvt Ltd & Ors Vs UOI & Ors </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2009/2009-TIOL-292-HC-MP-ST-LB.htm" target="_blank"><font size="1">2009-TIOL-292-HC-MP-ST-LB</font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Held: packaging and bottling of liquor come within the ambit and sweep of manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 – not</font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of Business auxiliary service under Section 65 (19) is proposed to be amended so as to provide that only those processes which result in the manufacture of excisable goods as defined in the Central Excise Act are excluded from the purview of Business auxiliary service, resulting in bringing into tax net the process of manufacture of goods such as alcoholic beverages.</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>CCE & Cus , Vadodara -I Vs M/S New Look Cosmetic Laser Center </em><strong>2008-<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2008/2008-TIOL-2021-CESTAT-AHM.htm" target="_blank">TIOL-2021-CESTAT- AHM</a></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Held: Cosmetic Surgery to remove unwanted hair is not taxable as Beauty Parlour Service</font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A new sub-clause (zzzzk) is proposed to be inserted in Section 65 (105) to tax the services in relation to cosmetic surgery or plastic surgery.</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Confusion prevailing on the words “omission and repeal” – Omission of Section 3A leading to many disputes.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No recovery can be made under Section 3A of the Central Excise Act, 1944 which was rescinded on 12.5.2001 - <em>Mitra Steel & Alloys Pvt. Ltd vs. CCE , Raigad </em><strong><a href="http://../Program+Files/Taxindiaonline%27s+XCuSE/2005-TIOL-824-CESTAT-MUM.htm"><font size="1">2005-TIOL-824-CESTAT-MUM</font> </a></strong>Karnataka Ginning & Pressing Factory vs. CCE , Thane - <strong><a href="http://../Program+Files/Taxindiaonline%27s+XCuSE/2008-TIOL-603-CESTAT-MUM.htm"><font size="1">2008-TIOL-603-CESTAT-MUM</font></a></strong>, <em>Commissioner Of Central Excise, Mumbai-V Vs Khanna Dyeing & Printing Works </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2008/2008-TIOL-1067-CESTAT-MUM.htm" target="_blank"><font size="1">2008-TIOL-1067-CESTAT-MUM</font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Surana Metals & Steels (I) Ltd. Vs. CCE , Chennai - </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2007/2007-TIOL-1373-CESTAT-MAD-LB.htm" target="_blank"><font size="1">2007-TIOL-1373-CESTAT-MAD-LB</font></a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was a decision in favour of Revenue, but is under appeal in High Court–so Government could not take the risk.</font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification Nos. 33/97-CE (NT) dated 01.08.1997, 44/97-CE (NT) dated 30.08.1997 and 7/98-CE (NT) dated 10.03.1998, which relate to erstwhile compounded levy scheme for steel induction furnace units and re-rolling mills, are proposed to be amended with retrospective effect from the date of issue of the respective notifications so as to regularise fixation of rates of duty under these notifications.</font></p></td>
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<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>M/S Century Laminating Co Ltd Vs Commissioner Of Customs, Kandla </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2006/2006-TIOL-1420-CESTAT-MUM.htm" target="_blank"><font size="1">2006-TIOL-1420-CESTAT-MUM</font></a> </strong>Prima facie no provisions exist for recovery of Safeguard duty.</font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sections 8B, 8C and 9 of the Customs Tariff Act, 1975 have been proposed to be amended retrospectively to insert machinery provisions.</font></p></td>
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Now, you don't have to be smart and super intelligent to guess what Finance Bill 2010 will look like and what the Ministry will propose in the coming budget, which is only eight months away. All you have to do is keep track of the recent judicial pronouncements which have far reaching consequences on revenue and come out with your predictions (Hints …Renting of immovable property service, Work Contract service etc).</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Alert Netizens catch CBEC on the wrong foot</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An alert netizen brought to our attention the lethargic approach of CBEC in drafting the Explanatory Notes on Excise.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that Notification 15/2009-CE dated July 7, 2009 seeks to amend Notification 5/2006-CE dated March 1, 2006 whereby the effective rate of duty for articles of jewellery on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself is proposed as NIL. The entry in Column No. 4 at S. No. 26 of Notification 5/2006-CE is substituted with ‘Nil' by the amending notification.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in the Explanatory Notes on Excise, this proposed amendment is explained as follows:</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>71.1. Excise duty on articles of jewellery, on which brand name or trade name is indelibly affixed or embossed on the article of jewellery itself, has been reduced from 2% to ‘nil' [S. No. 26 of notification No. 10/2006- Central Excise has been amended vide notification No. 17/2009-Central Excise].</em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sl. No. 26 of Notification No. 10/2006 is “medical Equipments” and the duty is 8%. And Notification 17/2009- CX ., Dated: July 7, 2009 does amend Notification No. 10/2006, but not Sl. No. 26.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Explanatory Note should have read as, <font color="#663399">“(Sl. No. 26 of Notification No. 5/2006- Central Excise has been amended vide Notification No. 15/2009- Central Excise)"</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Both the amended notification and the amending notification were wrongly mentioned in the relevant paragraph of the Explanatory Notes. This cannot be brushed aside as typographical error because it involves mention of two notifications. The apparent error has no consequence on the effective rate of duty on the articles of jewellery because there is no mistake in the relevant notifications. Even we would have missed this, but for an alert netizen pointing out this anomaly. The netizen requested TIOL to bring this to the notice of the trade and the authorities concerned. DDT thanks the alert netizen for bringing this error to our notice.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This once again highlights the sluggishness with which our expert draftsmen work in the Government. What if the wrong notification was quoted in the amending notification itself? Will it not lead to confusion in the trade and industry? Why can't they employ some smart proof readers who have some knowledge of taxing statutes to curb such mistakes? After all, this was a document presented to Parliament and the Babus should not relax under the knowledge that no MP would read all this.</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Amending the First Schedule to the Central Excise Act?</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Explanatory Notes in the Budget, for Central Excise states,</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“<strong>LEGISLATIVE AMENDMENTS</strong></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Amendments in First Schedule to the Central Excise Act, 1944: -“</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The First Schedule to the Central Excise Act was omitted with effect from 28.02.1986 and now after 20 years Board says, it is being amended. Incidentally do you know what this First Schedule to the Central Excise was? We will tell you tomorrow.</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">–Tuesday'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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></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">Amount payable in terms of Rule 57CC of CER , 1944 not recoverable under Rule 12 of CENVAT Credit Rules, 2002 – Revenue Appeal Dismissed</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> main issue is whether an amount of Rs.1 ,33,700/- being 8% of the total price of the exempted product cleared by the assessee during the period December 1997 to March 1998 could be allowed to be recovered from the assessee under Rule 12 of the CENVAT Credit Rules, 2002 by the department.</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">Dividend income - exemption u/s 10(33) - disallowance of expenditure as per Rule 8D - disallowance turns out to be more than dividend income - Can it be intention of law makers? - Plea for Larger Bench dismissed as appeal against Daga Capital Management case admitted by Bombay HC: ITAT</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DIVIDEND</strong> income is fully exempt u/s 10(33) of the Income Tax Act. Normally an exemption should be a cosy affair for both the Revenue as well as the assessee. But this particular exemption has become unpopular for mothering too many litigations. And this is despite a Special Bench decision. And the reason for the same is the 'absurd' scenario which arises with retrospective application of sub-section (2) and (3) of Sec 14A and Rule 8D and disallowance of expenditure attributable to dividend income works out to be several times the sum of dividend itself?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Customs</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Moser Baer loses Rs 20 Crores Case - EOUs liable to pay SAD for DTA Clearances, if exempted from Sales Tax/VAT: CESTAT Larger Bench</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>question of law to be decided by the larger Bench:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Whether in respect of a 100% EOU availing Sales tax exemption, for determining the excise duty payable based on aggregate value of Customs duty, the element of SAD should be taken into account or not?"</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant is a 100% EOU having their unit in the area specified by the State Government of Uttar Pradesh for the purposes of concession from payment of Sales Tax/VAT; they are engaged in the manufacture of CDR, CD ROM, DVDR. DVD ROM falling under Chapter Heading 8523 of the Central Excise Tariff.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns Tomorrow for the judgements</font></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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