TIOL-DDT 1191 · the untouched capture
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<!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> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1191 </font><br> 07.09.2009 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Subramanyam, IAS who died with YSR was an IRS officer – RADHA ARUN pays a Tribute </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DR. P. SUBRAMANYAM</strong>, a 1983 batch IAS officer – Principal Secretary in the AP Chief Minister's office was one of the officers who died along with Dr YS Rajasekhara Reddy in that unfortunate air crash tragedy. Subramanyam spurned a permanent UN job to work for the people of his state. Subramanyam always remained committed to the cause of the underprivileged. Subramanyam also worked for people suffering from disabilities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Radha Arun, his batch mate in the 1982 IRS batch pays a tribute. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">It is not widely known that P. Subramanyam, the Principal Secretary to the government of Andhra Pradesh who perished with YSR, was an IRS officer of the 1982 batch of the Customs & Excise Service before he joined the IAS in the 1983 batch. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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">‘Subra', as some of us fondly called him during the brief months in which he was our colleague, was with us in Sibsagar in February 1983 to conduct the violently disputed elections in Assam. In that month, plane-loads of probationers of all the civil services had been flown to various parts of Assam for the purpose, as state government personnel had boycotted the elections but Mrs Gandhi was determined to carry out the polls. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The atmosphere of tension and danger in which we found ourselves brought out the true nature of most of us. Subramanyam was seen to be a man of few words, cool and level-headed, quite removed from the boyish boisterousness of many of our batch mates. He kept his own counsel, but was unfailingly helpful, understanding and empathetic. We were friends for that brief time. I lost touch with him after he left our department, each of us being preoccupied with the minutiae of our own lives; but I always thought of him with warmth and friendship. Recently, for some unaccountable reason, I had felt the urge to renew contact and had asked a friend with secretariat contacts to find out his numbers for me. It was too late. I am filled with regret and sorrow as his photographs look out at me from the newspapers. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rest in peace, friend. You did good in this world and are now in a better one. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Radha an IRS officer who quit the Department is now a consultant and an occasional columnist with us. </em></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Misuse of circular No.74/2002-Cus - Board instructions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Board's circular No.74/2002-Cus dated 8.11.2002, if the buyer and the seller have contracted goods on f.o.b. basis and the same is reflected in the contract and the Letter of Credit (LC), it is immaterial that the exporter has actually shipped the goods by air. The circular further stated that if the freight is on collect basis and the exporter is paying more as air freight due to the exigency of the situation without affecting the f.o.b., it would not be justified to rework the drawback amount by deducting freight element from the contracted FOB value. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The circular was issued when it was brought to the notice of the Board by some field formations in 2002 that a few exporters had claimed drawback on export value which included air freight. This happened because although the exporters were required to send their goods by sea as per contract and the freight was to be borne by the buyer, they actually sent the goods by air and incurred the air freight. The exporters later claimed drawback on the entire FOB value which included the freight element also. The Apparel Export Promotion Council (AEPC), however, represented to the Board that the exporters were compelled to ship the goods by air in order to meet the delivery deadlines lest the buyers should cancel the export orders. Such delivery of cargo by air did not affect the FOB value which was a constant in terms of the contract between the exporters and the foreign buyers. The Board accepted this reasoning and issued the circular. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board was recently informed by a field formation that as per intelligence received by them some exporters have claimed benefit of the aforementioned circular in as much as 44% of their total consignments in a year. These exporters had paid freight charges even though the contract was on FOB basis. It was, therefore, decided to review the circular. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The AEPC has again represented that the operations involved in garment export trade are complex and involve lot of manual work. In the process, delays take place forcing exporters to agree to the conditions dictated by buyers to bear air freight. Such instances occur occasionally but in not more than 2-3% of shipments of any exporter. While action may be taken against exporters who misuse provisions of law, all exporters should not be measured with the same yardstick. AEPC has requested that the field formations may be advised to grant drawback to the exporters in such exigencies and circular No. 74/2002-Cus re-clarified to them by the Board. The Ministry of Textiles has also supported the view of AEPC. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue has been re-examined by the Board and it is clarified that in situations where the buyer and the exporter have contracted the goods on f.o.b. basis and the same is reflected in the contract and the LC, but the exporter is forced to send the goods by air at his own expense due to an exigency such as contractual obligation to deliver the goods within a certain period of time, it would not be justified to rework the drawback amount by deducting freight element from the contracted FOB value. However, in order to obviate misuse and as informed by the AEPC the benefit of this circular shall be limited to only 3% of the shipments in a financial year. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">The procedure:</font> </strong>The exporters should declare the fact of exigency upfront to Assistant Commissioner / Deputy Commissioner (Drawback), before filing the Shipping Bills. Such declarations should, inter alia, give the details regarding the nature of exigency, number of consignments exported during the year from all the ports and the number of consignments in which the benefit of this Circular has been claimed. The Assistant Commissioner / Deputy Commissioner will <strong><font color="#FF6633">satisfy</font> </strong> himself about the <em>bona fides </em> of the case and take a decision in the matter. In the meantime, however, the Shipping Bill will be permitted to be filed, processed and the export shipment cleared like any other drawback shipment. It may be noted that the export shipment will, in no case, be stopped. The Assistant Commissioner/Deputy Commissioner will take a decision in the matter keeping in mind the upper limit of 3% prescribed for such cases of exigency and as far as possible, before the shipping bill comes to the Drawback queue so that the drawback can be sanctioned without delay. In case of any dispute, the drawback shall be released after deducting airfreight element from the contracted FOB value. The bonafides of the exigent situation shall be examined later and the decision on the balance drawback i.e. drawback on the amount deducted from the FOB value shall be communicated through a speaking order. The exporters shall not be required to file supplementary claims for the differential amount in such cases. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The pending cases pertaining to exports under circular No.74/2002-Cus dated 08.11.2002 may be finalized keeping in view the above guidelines. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How will you <strong><em><font color="#FF6633">satisfy</font> </em></strong> the Assistant Commissioner? </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_024.htm" target="_blank">CBEC Circular No. 24/2009-Cus., Dated: September 3, 2009</a> </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax – 'club or association' service - Exemption to Export Promotion Councils </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Exemption from service tax (leviable under “club or association” service) has been provided, to the Federation of Indian Export Organizations (FIEO) and specified Export Promotion Councils, on the membership or any other fee collected by them by Notification No.16/2009-ST dated 07.07.2009. Now it has been extended to some more councils like </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Electronics and Computer Software Export Promotion Council, PHD House, 3rd Floor, Ramakrishna Dalmia Wing, New Delhi-110 016. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Indian Oilseeds & Produce Export Association Export Promotion Council, 62, Mittal Chambers, Nariman Point, Mumbai-400 021. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Jute Manufacturers Development Council, 3A, Park Plaza,71, Park Street, Kolkata-700016. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Services Export Promotion Council, #1206, Chiranjiv Tower, 43, Nehru Place, New Delhi- 110 019. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Wool Industry Export Promotion Council, Churchgate Chamber, 7 th Floor, 5, New Marine Lines, Mumbai-400 020. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This exemption is valid up to 31.03.2010 </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_035.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 35/2009– Service Tax, Dated: September 03, 2009 </strong></font></a></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></p> <p><font color="#660099" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, 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color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Provisions under Section 9-D, which are <em>pari materia </em> with provisions under Section 32 of Evidence Act, cannot be held as <em> ultra </em> vires of Constitution: Delhi High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong>many cases, it is routine for the revenue officers to raise demands based on a number of statements recorded from various persons and these statements are relied upon in the show cause notices. The assessees in the adjudication proceedings seek cross examination of the witnesses from whom such statements are recorded, which if denied would amount to violation of principles of natural justice. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sec 40A(2) - assessee offers higher trade discount - AO finds it excessive and disallows it - Since giving trade discount is not an expenditure incurred, question of applicability of Sec 40A(2) does not arise: Delhi High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> are certain Sections in the I-T Act which are only for making disallowances. One of them is Sec 40A(2). But the larger question here in this dispute is whether it applies to trade discounts offered by the assessee? And the answer is that it does not apply to trading discount as it is applicable only in a case where a sum is actually spent by the assessee as an expenditure. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Over-invoicing of exports for higher DEPB claim - Allegation based on comparative domestic prices not sustainable – Confessional statements recorded under continued threat of arrest and freezing of bank accounts have no evidentiary value - No authority under Customs Act to recover excess DEPB when exporter had not utilized DEPB scrips for duty free imports: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> appellants were alleged to have exported articles of non alloy steel by over invoicing them for claim of excess DEPB. The DEPB scrips were subsequently sold. Directorate of Revenue Intelligence initiated investigation against the appellants. Samples were obtained from the goods lying in ICD for export and they were found to be of non alloy steel only. Confessional statements were recorded from the partners under s. 108 of Customs Act, 1962. A show cause notice was issued to the appellants, their partners and the firms which purchased DEPB. A demand of Rs. 47 lakhs alleged to be the excess DEPB claim was confirmed. Penalties were imposed on the firms and the individuals. Goods meant for export and goods already exported were held liable for confiscation. </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="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p> <p align="justify"><font color="#FF6666" 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>