TIOL-DDT 1260 · 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 1260 </font><br> 17.12.2009 <br> Thursday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Labelling and repacking etc. amounting to manufacture - tankers cannot be termed as bulk packs - CBEC Clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> has been brought to the notice of Board that certain dealers are receiving liquid chemicals in bulk in containers and offloading the same at the dealers' premises or godown into drums of 200 ltrs for subsequent marketing of these materials to customers. Doubts have been raised as to whether such activity would amount to manufacture in terms of Chapter Note 10 to Chapter 29. As the said Chapter Note has been amended in 2008 budget, it has been contested that the said activity is covered by the present wordings of the Chapter note. The relevant portions of the chapter note reads as under: </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Before Amendment (1.03.2008) </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>10. In relation to products of this Chapter, labelling or relabelling of containers </em><strong><em>and </em></strong><em>repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to ‘manufacture'. </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>After amendment (1.03.2008) </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>10. In relation to products of this Chapter, labelling or relabelling of containers </em><strong><em>or </em></strong><em>repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to ‘manufacture'. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has clarified that before examining the implication of the substitution of word ‘and' by ‘or', it is necessary to examine whether the activity itself is covered by term repacking from bulk packs to retail packs. Hence the first issue which needs to be decided is whether the “container/ lorry tanker” can be considered as bulk pack. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT had in the case of <em>Ammonia Supply Co</em>. - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong>(</strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2002/2002-TIOL-179-CESTAT-DEL.htm"><strong>2002-TIOL-179-CESTAT-DEL</strong></a><strong>)</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">, held that <em>labelling or re-labelling of the container should take place at a time when the goods are packed from bulk packs to retail packs. The assessee was not getting Ammonia in bulk packs. They were getting it in tankers. Ammonia gas brought in tankers can never be termed as brought in bulk packs. So the assessee was not repacking the goods from bulk packs to retail packs. Accordingly the activity undertaken by the assessee in filling the smaller container from bulk container namely tankers can never fall within the fiction of manufacture as envisaged by Note 10. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore Board clarifies that the tankers cannot be termed as bulk packs and therefore the activity of transferring the goods from tankers into smaller drums cannot be said to be covered by the said chapter note 10. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a rare gesture, the Board has accepted the logic of the CESTAT and let us hope the benign Commissioners in the field will generously accept the Board Circular and drop cases pending with them. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular910.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. </strong> <strong>910/30/09-CX, Dated : December 16, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Definitive Anti Dumping Duty on Phosphoric Acid - Just In Time </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Provisional anti dumping duty on Phosphoric Acid of all grades and all concentration (excluding Agriculture or Fertiliser grade) originating in, or exported from, Korea RP was imposed by <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_074.htm" target="_blank">Notification No. 74/2009-Cus., dated 22-6-2009</a></strong></em>. This is to expire on 21.12.2009. But this time around the Government woke up well in time and imposed definitive anti dumping duty, a week before the provisional duty expired. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As this definitive duty is with effect from the date of imposition of Provisional imposition that is <em>22.06.2009, Notification No. 74/2009</em> is rescinded. </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=23&filename=notification/custom/2009/ctariff09_140.htm" target="_blank">NOTIFICATION NO. 140/2009-CUSTOMS Dated: December 15, 2009</a> </strong>and <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_141.htm" target="_blank">NOTIFICATION NO. 141/2009-CUSTOMS Dated: December 15, 2009 </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Renting of Buses - What Service? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> AG Audit has made out an Audit objection pointing out loss of huge service tax revenue on account of inaction by the departmental officers. The Audit objection is about non-payment of service tax by persons renting/hiring buses to the State Road Transport Corporations (like APSRTC). As the Audit considers itself the ultimate authority on law, makes strange interpretation of statutes. It is no guess that most of the pending departmental cases in various Commissionerates are as a result of Audit objections and their non settlement by Audit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming to the issue, this time the Audit has taken a stand that the activity of renting buses to State Road Transport Corporations would fall under Business Auxilliary Service- under the category of promotion or marketing of service provided by the client. The interpretation of the Audit is that by renting their buses, such persons are promoting the service of Road Transport Corporation! As usual without studying the nature of contract and terms of contract the Audit has categorized the activity under BAS, and obtained a list of such persons from APSRTC; then made an audit point from 1.07.2003 onwards involving huge loss of revenue and the ball is thrown into the department's court. The department without going into the merits of the audit objection and without bothering to analyse the issue properly started issuing notices left right and centre. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the victims of such mindless notices brought us a copy of the agreement he entered with APSRTC and sought for our advice. Some of the terms of the agreement are as under: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall give Vehicle No._________ , Model _________ having seating capacity of 49+2 </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall make available the vehicle on all days except two days in a calendar month for maintenance of the vehicle. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Corporation assures operation of KMs equal to at least to the daily KMs offered for the route assigned multiplied by 27 days in a month……… </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is mutually agreed that the guaranteed kilomiterage will be proportionately reduced when the vehicle is not made available on any day or days. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is mutually agreed that distance operated for making payment will be reckoned from the appointed place of plying the vehicle. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Corporation shall pay the owner at agreed rate of Rs.________ per operated kilometer towards hire charges. The hire rate will remain unchanged till the tenure of agreement period provided the above rate shall be subject to revision depending on the increase or decrease of HSD Oil price. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall keep the bus road worthy…………. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Corporation shall not be responsible for any damage of loss caused to the vehicle hired during the period of agitations, accidents etc. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall provide a driver/drivers with valid driving license……. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall pay PF and other statutory contribution for the driver engaged by him. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall ensure payment of wages to the drivers engaged by him as per the statutory rates. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The owner shall submit the claim twice in a month …………………………………duly certified by Traffic Supervisor of the Depot with regard to the distance operated during the period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Corporation shall provide a conductor for the operation of service with necessary equipment for issuing tickets to the passengers as well as luggage. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is agreed that it shall be the right of the Corporation to collect fare or luggage or freight charges……………. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the terms of agreement are examined, it is clear that the private persons are giving buses on hire along with driver and get hire charges on kilometer basis. The activity is akin to renting of cabs. It is not known on what basis, Audit has concluded that these services as falling under BAS. The departmental officers who deal in the service tax subject every day also failed to appreciate the issue properly and proceeded on to issue notices thereby burdening service providers with unsustainable demands and forcing them to spend money on hiring consultants. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The learned departmental officers would have confirmed that demands, but fortunately the CBEC has already given a clarification way back in 2007 - vide <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/renting_buses.htm" target="_blank"> <strong>letter F.No. 137/155/2007-CX.4 dt. 2.08.2007</strong></a><strong> </strong>- that activity of giving buses on hire on a fixed rate per kilometer travel, would be covered under renting of cab (bus) service and liable for payment of tax from 1.06.2007. This clarification was issued in reply to reference made on similar issue in connection with hiring of buses by Himachal Road Transport Corporation under kilometer scheme. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And in some places this was sought to be classified under “<em>Tour Operators Service</em>” - the CESTAT in <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2009/2009-TIOL-1726-CESTAT-MUM.htm" target="_blank"><font size="1">2009-TIOL-1726-CESTAT-MUM</font></a> </strong> had granted stay. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issuance of this sort of demands despite the existence of clarification from government is nothing but harassing the trade forcing them to spend huge amounts on litigation. Ultimately all the demands issued under BAS have to be dropped for mis-classification in view of the Board circular wasting tones of paper, valuable time of departmental officers and of course the service providers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The gainer is of course the consultant who will make some fast buck, thanks to Audit.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No SC Secretary in the Government of India! </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is not a single Scheduled Caste Secretary to the GOI. There are however four ST Secretaries. There is just one SC and one ST Additional Secretary. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Of course these posts are not promotion posts and are mostly filled by officers borrowed from State cadres. There is no provision of reservation for SCs/STs in these posts. However at the time of empanelment, every effort is made to empanel officers belonging to SC/ST, if necessary by adopting liberal benchmarks as compared to officers from General Category. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This information was given by the Minister of State in the Ministry of Personnel, Public Grievances & Pensions, Prithviraj Chavan in a written reply to a question in Lok Sabha yesterday. </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"> – Friday's cases</font></strong></font></strong></font></p> <p><font color="#663399" 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">Central Excise</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Duty and interest paid before issuance of Show Cause notice – if appellant pays penalty within thirty days of CESTAT order, then amount payable would be only 25% of duty amount – CESTAT. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> purpose of the Section and the proviso is to give a benefit to the assessee if he pays the duty demanded within 30 days of the adjudication order. In that event, the assessee would be liable to pay only 25% of the duty amount by way of penalty; otherwise he would be liable to pay 100% of the duty amount. In the present case also, it is an admitted fact by the appellant that they have short paid the duty and on pointing out by the Department they admitted their fault and paid the duty demand, hence the appellant is liable to pay the penalty @100% of the duty. But, if the appellant pays the penalty within 30 days of the receipt of this order, then the appellant would be liable to pay only 25% of duty amount as penalty, as the appellant has already reversed the CENVAT credit availed and paid the interest thereon before issuance of show cause notice. </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>Income by way of maintenance charges, club subscription, electricity charges, Misc. income, refund charges, transfer charges and interest on FDRs; by no stretch of imagination can be treated to have been derived from business of developing and building housing projects. – not eligible for deduction under section 80-IB - ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong> perusal of sub-section (5) of section 80-IA it is seen that it provides for the manner of computation of profits of an eligible business. As per provisions of 80-IA(5) of the Act the profits are to be computed as if such eligible business is the only source of income of the assessee. The assessee had earned income by way of maintenance charges, club subscription, electricity charges, Misc. income, refund charges, transfer charges and interest on FDRs. The income received under these heads by no stretch of imagination can be treated to have been derived from the business of developing and building housing projects approved by the local authority. </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>Gold chain with 12 diamonds worth Rs.1.20 Crores mounted on a gold pendant – whether personal effect – When Delta Airlines flight from New York landed at Mumbai International Airport at 22.04 hours, how could panchanama be drawn at 22.00 hours at Exit gate – matter remanded - CESTAT. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ACCORDING</strong> to the panchanama dated 7.5.07, the appellant was intercepted at the exit gate of the Arrival Terminal of the International Airport at 10 p.m. on 6.5.07. This interception took place immediately after the appellant passed out of the Green Channel. The appellant produced a letter from the same Airlines to the effect that the flight actually landed at 22.04 hours (10.04 p.m.) The question arises as to how, if the evidence adduced by the party has to be believed, the appellant came to be intercepted at the exit gate of the Arrival Terminal at 10 p.m. This question of fact has been clearly raised in this case. Purportedly, to have this issue settled in his favour, the appellant proposed to cross-examine all the parties to the panchanama proceedings including officers of Customs and panch witnesses. It appears, certain reasons were stated by him as to why he should be permitted to cross-examine the above persons, in his reply to the show- cause notice. </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="left"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></p> <div 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> </div> </body> </html>