TIOL-DDT 1265 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1265 </font><br>
24.12.2009 <br>
Thursday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Clarification regarding peripheral activities for Area Based Exemption notification Nos. 49 & 50/2003-CE as amended - Board Clarifies or is it a slip? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> virtue of Notification No. 1/2008-CX dated January 18, 2008, Notifications 49/2003-CE and 50/2003-CE both dated June 10, 2003 were amended to include paragraph 4 which reads as follows: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“4. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes , namely, preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labeling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the States of Uttarakhand or Himachal Pradesh.” (emphasis supplied) </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The effect of this insertion was clarified by Circular No. 864/2/2008-CX., dated January 18, 2008 wherein it was stated that this new paragraph has been inserted in both the notifications to exclude certain peripheral activities from the operation of these notifications. It was clarified that the benefit of the said notifications will not be available to goods which have been subjected to only one or more of the following processes such as packing or re-packing of such goods in a unit container or labelling or re-labelling of containers, declaration or alteration of retail sale price, etc. In other words, units carrying out only such processes would not be eligible for exemption benefit and would be required to pay duty as per normal procedure . <em>(emphasis supplied) </em></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>It may be noted that processes like preservation during storage, cleaning operations which were mentioned in paragraph 4 was left out in Circular No. 864 dated 18.01.2008. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, references were received from the field formations seeking further clarification as to whether the benefit of area based exemption notifications would be applicable if both the activities viz., manufacture of main product for e.g. hair oil in bulk and peripheral activities for e.g. repacking into bottles are carried out in the specified areas. To elaborate further, if in a situation, hair oil is manufactured in bulk in a unit situated in the specified area and such hair oil is sent to a job worker in specified areas who repacks the bulk oil in retail packs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This issue was discussed in the Chief Commissioner's Conference held at Shillong on 30 th and 31 st October, 2009. In that Conference it was viewed that the benefit of exemption has to be allowed in cases where both the activity of manufacture and the peripheral activities mentioned in the notifications are undertaken in the specified areas i.e. Uttarakhand or Himachal Pradesh. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Agreeing with this decision of the Chief Commissioner's Conference, Board in its latest Circular clarifies that the benefit of Notifications 49/2003-CE and 50/2003-CE as amended should be available to such goods where both the activities of manufacture of the main product and the peripheral activities are undertaken in the specified areas in the States of Uttarakhand or Himachal Pradesh <strong><font color="#FF6633">even if peripheral activity alone is undertaken by job workers in the specified areas</font></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that the last sentence in paragraph 4 of the latest Circular as highlighted above says ‘<strong><font color="#FF6633">even if peripheral activity alone is undertaken by job workers in the specified areas</font></strong>'. This last sentence which was included in the latest Circular is clearly contradictory to the view adopted by the Chief Commissioner's Conference as highlighted in the latest Circular as well as paragraph 4 of Notifications 49/2003-CE and 50/2003-CE as amended by <em>Notification 1/2008-CE dated 18.01.2008</em> and also the earlier clarification issued by Circular 864 as emphasised by underlining the respective sentences of paragraph 4 (extracted above) and paragraph 2 of Circular No. 864 (extracted above). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the whole idea is to allow exemption to job workers who undertake only peripheral activity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, in the latest Circular, Board has referred to the earlier TRU <em>Circular dated 18.01.2008 as Circular No. 863/1/2008-CX</em> whereas this Circular was re-numbered as <em>Circular No. 864/2/2008-CX</em>., vide <em>Circular No. 866/4/2008-CX., Dated: February 28, 2008</em>. Has the Board forgotten that Circular No. 863/2008 pertains to the issue of filing appeals, not the peripherals in Uttarakhand and Himachal Pradesh? At least they should get their numbers right! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last but not the least, this latest Circular is numbered as 908 which is dated December 23, 2008 whereas <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular909.htm" target="_blank">Circulars 909</a></strong></em> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular910.htm" target="_blank"><strong><em>910</em></strong></a> are dated 11.12.2009 and 16.12.2009 respectively. How could this happen? The Board's numbering system needs an overhaul. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular908.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Circular No.908/28/ 2009-CX Dated: December 23, 2009 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Anti-Dumping Duty on Sodium Nitrite Revised </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BASED</strong> on recommendations of the designated authority, Central Government has modified the rates of definitive anti-dumping duty imposed on sodium nitrate originating in, or exporting from People's Republic of China . This will be applicable upto and inclusive of January 16, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier Central Government had issued a Notification No. 3/2006-Cus dated January 17, 2006 in pursuance of final findings of sunset review undertaken by the designated authority to extend the definitive anti-dumping duty for further period of five years which was supposed to expire on 16.01.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By virtue of this latest Notification, Notification No. 3/2006-Cus dated January 17, 2006 stands superseded. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_143.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION NO. 143/2009-CUS Dated: December 22, 2009 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Clearances
to SEZ Developers from DTA need not suffer 10% payment in terms of Rule
6(3)(b) of CCRs, 2004 – Commissioner</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee cleared M.S Pipes and tubes without payment of central excise duly to SEZ Developers from 29.09.2006 to 31.12.2008 on the basis of procurement certificates issued to the SEZ Developers by the Assistant Development commissioner, Ministry of commerce. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The jurisdictional central excise authorities alleged that the assessee cleared goods without payment of duty to SEZ Developers and not to a unit in a Special Economic Zone as specifically mentioned under Rule 6(6)(i) of CENVAT Credit Rules, 2004 (before the amendment on 31.12.2008). It was alleged that they were not entitled for the exclusion under the Rule 6(6)(i) of the said Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The goods cleared without payment of duty were thus construed as exempted goods. Since the assessee manufactured both dutiable as well as aforesaid exempted goods and failed to maintain separate accounts for receipt, consumption and inventory of inputs used in the manufacture of both dutiable and exempted goods, they were issued a show cause notice for recovering an amount equal to ten percent on such exempted goods in terms of Rule 6 (3) (b) of the said Rules . The demand worked out to Rs. 3.69 crores. Along with this, interest liable to be paid was also demanded and penalties were proposed to be imposed on the assessee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After considering the submissions of the assessee and the provisions of Section 2(m) of SEZ Act, 2005 and Rule 30 of the SEZ Rules, 2006 read with Board <em>Circular 29/2006 dated 27.12.2006</em>, the Commissioner held that the goods supplied by the assessee without payment of duty to SEZ Developers falls under the purview of Rule (6)(6)(v) of CENVAT Credit Rules, 2004 and therefore the provisions of Rules 6(1), 6(2), 6(3) and 6(4) are not applicable in this case. The demand and penalty was set aside. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is common knowledge that adjudicating authorities in the field formations always adopt a pro-revenue stand and religiously confirm demands against the assessees without going into the merits of the case. Contrary to this popular perception, here is a Commissioner who did not choose to follow the beaten track and issued an order upholding the correct position of law. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/sez_order.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commissioner's Order</strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income tax - The interest component will partake of character of the 'amount due' under Section 244A – Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> income tax matters, it is well settled that if the question is not properly framed, then, at times, confusion arises resulting in wrong answers. The present batch of Civil Appeals is an illustration of the proposition mentioned herein-above, said the Supreme Court in the case we are reporting today. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court further noted, “The Department contends that the words "any amount" will not include the Interest which accrued to the respondent for not refunding Rs.45,73,528/- for 57 months. We see no merit in this argument. The interest component will partake of the character of the "amount due" under Section 244A. It becomes an integral part of Rs.45,73,528/- which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under Section 244A of the Income Tax Act. Therefore, on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs.45,73,528/-.” </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this short but sharp order of the Supreme Court today – See <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10136">Breaking News.</a> </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chief Commissioner Promotions - Give that flash </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AROUND</strong> 6.30 pm yesterday, I received a call from a frustrated Central Excise officer – “we are all waiting outside the Commissioner's room with bouquets – please give that flash and we will go inside and give the bouquets and go home”. I asked, “why should I give a flash that you are waiting outside the Commissioner's room to give him the bouquets”. He said, “that's not the point – our Commissioner is getting the promotion and if you give the flash confirming the promotion, we will go inside and give the bouquets!” We are extremely sorry, we were not able to give that flash yesterday – we hope to do it today and if your bouquets are still fresh, you can give them today. </font></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Jurispruden</font><font color="#FF6633" size="2">tiol</font><font color="#006600" size="2"> – 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>Valuation – jobwork by related person – Rule 8 (110% of the cost) read with Rule 11 applicable – assessee paid more duty, agrees to forfeit consequential benefit as they only want to get rid of this duty demand. - CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> this lengthy order of about 12500 words, 12,000 words are the synopsis of the Counsel for the appellant. The Department's brief is contained in 77 words in the following para. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the other hand, learned SDR reiterated the impugned order and submitted that the Commissioner has rightly invoked the Rule 11 for arriving at the decision regarding valuation in this case. He further submitted that there is no doubt that the job workers and principle both are related persons, but the manner in which they have dealt with each, Rule 11 of Valuation Rules is the appropriate rule under which the assessable value is to be determined. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal's findings and order have taken up about 500 words. </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 119(2)(b) - condonation of delay - NRI assessee files refund claim - Revenue rejects on limitation ground - Word 'genuine' in phrase 'genuine hardship' should be construed liberally; if substantive justice is pitted against technicalities, substantive justice must be preferred: Bombay HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DELAY</strong> in filing return or claiming refund is a common thread that runs through all forms of taxation. Condonation of delay in such cases becomes a major bone of contention. Revenue feels its hands are tied with rules and procedures, and it cannot condone delay beyond certain period. There are also instances where Revenue fails to take note of genuine hardship of applicants and often ignores the larger objective of law that is to do justice. This is what happened even in this case where the refund claim of the Hong Kong-based NRI was rejected for 18 months delay. However, the High Court has remitted the issue by observing that the substantive justice should not be sacrificed in favour technicalities of procedures and departmental instructions. The word 'genuine' in 'Genuine hardship' used in Sec 119(2)(b) should be construed liberally. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services provided by one constituent of a HUF to other constituents of HUF not taxable – Service tax authorities having issued a single registration to HUF cannot regard constituents of HUF as separate entities and levy tax – CESTAT decision in <em>Precot Mills Ltd </em></strong></font><font color="#FF6633" size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2006/2006-TIOL-818-CESTAT-BANG.htm">2006-TIOL-818-CESTAT-BANG</a></strong></font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> followed – CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> appellant is a constituent of a HUF viz., Ramoji Rao – HUF based at Ramoji Film City , Hyderabad . Service tax authorities proposed to levy tax on the appellant on the ground that they are engaged in providing manpower recruitment or supply agency service to other constituents of the HUF. The lower authority confirmed the service tax demand and imposed penalties. </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000">M E R R Y</font> C H R I S T <font color="#666666">M A S </font></strong></font></em></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Monday is Muharram. See our columns Tuesday for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tuesday with more <strong>DDT</strong> </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice [extended] weekend. </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>
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