TIOL-DDT 1252 · 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 1252 </font><br> 07.12.2009 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prospective Disobedience of Appellate Orders - Board Clarifies Draconian 2006 Circular </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2006/excircular824.htm" target="_blank"><strong>Circular No. No. 824/1/2006-CX dated 16th January, 2006</strong></a></em>, Board had clarified that the pre-deposit waiver orders given by Commissioner (Appeals) or CESTAT are only in respect of the Demand confirmed and not for the future period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3169" target="_blank">DDT 284 - 17 01 2006</a> </strong>we had reported, “Board wants the field to respect the stay orders of the appellate authorities only for the past period but to implement the impugned order prospectively. In simple terms this means if the central excise Commissioner passes an order that the mangoes grown in the factory premises are dutiable and demands duty and the assessee goes to the Tribunal and gets a stay and waiver of pre deposit, Board will honour the Tribunal's order only for the past period and for future clearances you may have to pay excise duty on those mangoes, unless the Tribunal specifically mentions that the stay applies for future too.” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now nearly after three years, Board is informed that some Commissioners have actually seized those mangoes. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board's latest circular states, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Attention is invited to Board's <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2006/excircular824.htm" target="_blank">Circular No. 824/1/2006-CX dated 16th January, 2006</a></strong> on the aforesaid subject. It has been reported that some of the Commissionerates have taken a view that once an order has been passed on issues like classification/valuation etc., in that case, all subsequent removals must follow the said order even though appeal of the assessee against the said order is pending. It has further been reported that in case of removal without conforming to the said order, <strong><font color="#FF6633">the goods have been seized on the ground that these have been cleared in violation of the order passed by the Adjudicating Authority</font> </strong>. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Board has now clarified that, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>the said circular nowhere provided for seizure of goods, which are cleared not in conformity with the adjudication order when the appeal against the said order is pending. Therefore, in such cases protective show cause notices should be issued to safeguard the revenue, and <strong><font color="#663399">seizure of goods only for the aforesaid reason should not be effected</font></strong>. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the Board gives a beneficial circular, the clever commissioners are quick to find holes and deny the benefit to the assessees and if Board gives a circular that is not favourable to the assessees, the Commissioners go that extra mile to add a few more whips! The best option would be for the Board not to clarify any issue – whatever you do, the assessee has to suffer! </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also please a related article - <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3168" target="_blank">CODE OF HAMMURABI – THE CBEC'S WAY. </a></strong></font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular906.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. 906/26/2009-CX., Dated: December 3, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs Exemption to Goods for Manufacture of Fertilizers </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per sl. No. 4 of <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2006/ctariff06_020.htm" target="_blank">notification No. 20/2006-Customs, dated the 1st March, 2006</a></em></strong>, Fertilizers and all goods for manufacture of fertilizers attract ‘nil' rate of Additional Customs Duty </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is changed to Fertilizers and all inputs/ raw materials for use in the manufacture of fertilizers . </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is the big difference? </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_130.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 130/2009-Cus., Dated: December 3, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Micro Irrigation System and Service Tax </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MICRO</strong> Irrigation System (MIS) is a modern agricultural technology aimed at conservation of water, saving of power and other agro inputs apart from increase in productivity. Many states are encouraging farmers to adopt this technology as a government policy. Micro irrigation system is tailor made to suit individual farms and crops grown and the system is installed by recognized MIS suppliers. The maintenance of system is taken care of by the MIS suppliers. The implementation of the system involves supply of pipes, nozzles, and other accessories, transportation of the goods, installation and commissioning. Some MIS suppliers charge administration cost from farmers as a percentage of cost of MIS system to defray the cost and expenses incurred for implementing the scheme. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And service tax sleuths are after such MIS suppliers and want them to pay service tax on commissioning an installation service and also on GTA and BAS service. We have received many enquiries as to whether this supply and installation of MIS is liable to service tax under the said services. The suppliers are under the belief that government being conscious about protecting the interest of the farmers would not resort to burdening them with service tax and it is only the field officers' interpretation to bring them under the tax net. They also argue that if service tax is levied on the MIS suppliers it would ultimately burden to State governments as some States take up MIS as a state sponsored activity. However, the government being revenue conscious think otherwise. It is already clarified by the Government in reply to such references received from State governments that such supply and installation of MIS would be liable to service tax – see CBEC Letter <em>F.No. 137/144/2008-CX.4 Dated August 04, 2008 </em>, issued more than a year ago, in which Board had clarified that <em>“There is no exemption of service tax on installation or transportation of such equipment. It may accordingly be ensured that service tax levy is applied correctly in such cases”. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But a doubt does arise as to why the farmer friendly government can't spare the farmers from this levy. After all, the revenue that may accrue from this service would be very meagre and much less compared to the Hotel bills paid to our Hon'ble Ministers staying in Five Star hotels instead of government accommodation. The exemption would not only serve the interest of farmers and but also encourage them to adopt modern agrarian practices. The government is magnanimous in sparing agriculture activity from service tax levy - <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2004/stnot04_014.htm" target="_blank"><strong>Notification No. 14/2004-ST dt. 10/09/2004</strong></a></em> exempting Business Auxiliary Services provided in relation to agriculture and Notification No. 10/2002 ST dt. 1/08/2002 exempts cargo handling services provided to agricultural produce. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact <strong><font color="#FF6633">Drip and Micro irrigation systems</font></strong>, fall under the category <strong><font color="#FF6633">of Default authorized operations</font> </strong> under the SEZ scheme. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further the National Taskforce on micro-irrigation headed by the then AP chief minister Chandrababu Naidu, had way back in 2004 suggested abolition of service tax on various services the farmer is expected to utilise when he takes up the micro-irrigation route including agronomic practices, soil testing, market support etc. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is time the Government has a relook on this issue and maybe such issues should be taken up through Congress Chief Ministers or the All India Motor Transport Congress! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Happy New Year - but no gifts to Babus by PSUs please </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Vigilance Commission – CVC had been repeatedly instructing that the practice by PSUs etc. of sending gifts to Government servants on the occasion of festival and new year be discouraged. All CVOs were requested to bring this to the notice of all concerned. They should furnish report on the expenditure incurred by them on festival gifts during this year in their Monthly and Annual reports to the Commission. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Of course this does not include mementoes, diary & calendar, etc. brought out by PSUs etc. for publicity and business promotion. </font></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"><font color="#663399">Central Excise</font> </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Job work – CENVAT Credit - It is settled law that even in case of job work, CENVAT credit can be availed. High Court at pains to understand approach of Tribunal; Judicial Discipline – failure would result in judicial mayhem – pre – deposit waived – High Court </strong></font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> are at pains to understand the approach of the learned Tribunal. Judgments of higher Courts considering judicial discipline have to be followed by the Courts subordinate to the higher court. Failure to do so would result in judicial mayhem. Subordinate courts are bound to follow the judgments unless there be a subsequent judgment of a Higher Court which has taken a view different from the view earlier expressed. </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 32(1)(ii) - assessee acquires licence for oil exploration abroad - purchase of right is not deferred revenue expenditure; it is commercial right, eligible for depreciation; Expenses incurred for purchase of seismic data of foreign oil blocks is revenue expenditure as it is incurred during normal course of business: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ONGC </strong>Videsh is a subsidiary of ONGC and is engaged in exploration of oil and gas in fields outside India. The income earned from such activities are governed by profit sharing contracts that are entered into by the company with the foreign governments. In so far as India is concerned, the same is governed by section 42 read with section 293A of the Income-tax Act. ONGC videsh, in the case under review had entered into a contract with other consortium members and the Russian Government for acquiring a 20% participating interest in Sakhalin islands belonging to Russia for a consideration of Rs.15,590.96 corres.By acquiring the participating interest, it acquired proportionate share in rights and licence granted by the Russian State for the Sakhalin Block and became entitled to carry on hydrocarbon operations in the Block. The contention of assessee before the Assessing officer was that the rights and licences, being intangible assets, were entitled to depreciation @ 25% in view of the amended provisions of section 32 of the Act. The claim was negatived by the A.O. </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>If the case of prosecution is based solely on statement of accused, which is retracted, there can be no conviction; when two views are possible, accused should get benefit – High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IF</strong> the case of the prosecution whether launched by Custom Authorities, FERA Authorities or by Directorate of Revenue Intelligence is solely based upon the statement of the accused recorded by the Department pursuant to issuance of a notice given by them only, which stands retracted and there is no corroboration of the same, then the said statement cannot be the basis of conviction of the accused whether it is a statement recorded under Section 40 of the Foreign Exchange Regulation Act or under Section 67 of the NDPS Act or under Section 108 of the Customs Act. In the present case, no recovery has been affected from the respondents. The car from where some seizure of contraband has taken place does not belong to either of the respondents. The case of the petitioners is solely rest upon the statement of the accused recorded under Section 108 of the Customs Act which stands retracted and which is not supported by any other evidence led by the prosecution. </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>