TIOL-DDT 1304 · 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 1304 </font><br> 22.02.2010 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Valuation of Free Samples of the products covered under MRP - Board Clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> may be situations when goods are not sold at all. They may be cleared for free distribution or cleared as free samples. As excise duty is not on sale, the fact that goods are not sold is immaterial for payment of duty. But as duty is collected on the value when they are sold, what is the value when there is no sale? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Transaction value is when goods are sold. Rule 8 of the new Valuation Rules covers a situation when the goods are not sold but used for consumption in the manufacture of other goods. The law is silent on cases where goods are not sold and not consumed for further manufacture. This was the position in the old rules also. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then is the only solution to go to Rule 11, i.e. Determination by using reasonable means (the old best judgment)? It appears so. But not quite! Somewhere an opinion got fortified that valuation has to be done under Rule 4. To add to the confusion, came MRP based valuation. Now, how do you determine the value of free samples of a product covered under MRP? Is the MRP the basis for assessment of samples which are not sold and which are not required to show the MRP? Well, that seems to be the judicial as well as Revenue Opinion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board had in<strong><em> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2005/excircular813.htm" target="_blank">circular No. 813/10/2005-CX dated 25.4.2005</a></em></strong>, clarified that in the case of free samples, the value should be determined under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. And this Circular was upheld by the Bombay High Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT in a majority decision had held that even after the pharmaceutical products have been notified for MRP assessment under Section 4A of the Central Excise Act, the assessment of free physician samples of these products, is appropriately required to be done under Rule 4 of the valuation rules by taking into consideration the deemed value under Section 4A(1) notwithstanding the non availability of normal price under Section 4(1)(a) of the Act, ibid. Accordingly, the value for payment of excise duty for physician sample would be the value determined under Section 4A for the similar goods (subject to adjustment for size & pack etc.). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board now reiterates its stand and clarifies that the CESTAT decision will apply mutatis mutandis, in respect of free samples of other products which are under MRP assessment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A colleague asks me, “In today's competitive market there are many items which are being given free when consumers buy certain products. For e.g. coconut oil pouch comes free if you buy a tooth paste. Soap goes free with detergent powder etc. In such instances if coconut oil or soap which are assessable under s. 4A are regarded as free samples then how will they assess the value of such goods given free. Is the Circular suggesting that such goods have to be assessed under Rule 4? What if the assessee is not manufacturing such goods but is procuring them in packed condition from the actual manufacturer? Does he have to pay duty on the purchase price i.e. landed cost? We can go on endlessly.” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another colleague remarked, “It is like marriage of Sec 4A with Sec 4 with Rule 4 as purohit” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today we carry an article on this issue – <strong><font color="#FF6633">PHARMAPHOBIA </font></strong>- please see <strong>Guest Column. </strong></font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular915.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. 915/05/2010-CX, Dated : February 19, 2010 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>SAL STEEL LIMITED </em>– </strong></font><font color="#006600" size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2010/2010-TIOL-112-HC-AHM-CX.htm" target="_blank">2010-TIOL-112-HC-AHM-CX</a></strong></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> referred to Third Member </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> we had carried the above case in our portal. We had been informed by some very concerned and vigilant netizens that the order we carried was not the final one and was the judgement of only one of the judges. As the other Judge had differed the matter was referred to the Third Member. On further enquiries we have found that the matter was indeed referred to a third Member, though the copy of the judgement with us did not mention anything about the difference of opinion between the two members of the Bench. And the order of the dissenting Member does not seem to be in public domain. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway the position now is that the matter is with the Third Member and we will have to wait for the final outcome. We regret the confusion caused inadvertently and we profusely thank the Netizens who brought the matter to our notice. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs exemption for Commonwealth Games </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Government has exempted from Customs Duty a large number of products imported by the Organising Committee of the Common Wealth Games , 2010, National sports federations in relation to Games, 2010; Common Wealth Games Federation Members or Common Wealth Games Associations or participating athletes in relation to Games, 2010; Imported by Prasar Bharti or broad casting right holders as per Agreement between the Organising Committee of Games, 2010 and Prasar Bharti in relation to Games, 2010; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The products include, sports goods, sports equipment and sports requisites; fitness equipments; team uniform/clothing; spares, accessories and consumables of the same including ammunition for shooting events; Doping control equipment, Satellite phones/GPS, paging communication systems and other communication equipments; video/plasma screen, electronic score board for display; time control devices, stop watches; Furniture and fixtures/ fittings, power generation and distribution systems, air conditioning equipment; Food stuff, energy drinks, isotonic, tonic water(including <strong><font color="#663399">alcoholic drinks</font> </strong>), Broad casting equipment; Specified Arms and Ammunition. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_013.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 13/2010 – Cus Dated: February 19, 2010 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pay Duty and File Return Electronically </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>COME</strong> April 1, 2010, the Central Excise Department will become more electronic. If you have paid more than Rs. Ten lakhs as excise duty in the preceding financial year [and this included duty paid from CENVAT Credit account], you will have to mandatorily pay the duty electronically by internet banking and file the monthly or quarterly return electronically. Rule 8 and Rule 12 of the Central Excise Rules have been amended. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope this does not become an April Fool joke and the department is fully ready to accept electronic returns and the assessees are assisted in filing their returns. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_04.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION NO. 04/2010-CX., (N.T.), Dated: February 19, 2010. </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 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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellate authority misunderstood purport of order of adjudication and created havoc by modifying it - Imposition of penalty beyond scope of show cause notice is not permissible in law – Appeal allowed : CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants cleared a consignment of electrical goods to be delivered to the UP State Power Corporation Ltd on payment of duty. Unfortunately, en-route the truck met with an accident; the goods were damaged and had to be brought back to the factory. The damaged goods were repaired by the appellant by making use of additional inputs and the repaired goods were re-despatched to the consumer. While clearing the goods, duty was paid only on the cost of repairs. Later, the appellants realized their mistake and paid the differential amount of duty along with interest. </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 tax - TDS - Assessee is cellular service provider - appoints prepaid marketing associates for distribution of SIM Cards - provides SIM cards on discounted price - SIM card is merely a linking device and it is not a 'sale' - Legal relationship between assessee and distributors is not that of 'principal and principal' - liable to TDS u/s 194H: Delhi High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AO</strong> finds from the conditions of the agreement that the distributors were required to display the SIM Cards and Recharge Coupons in such a manner that they appeared to be owned by the assessee and the PMAs were not allowed to sell competitors' products, to file monthly sales return and the assessee had the right to terminate the agreement. AO concludes that it is a case of 'principal and Agent' relationship and the commission was offered in the form of 'discount' on prepaid SIM Cards and the assessee was liable to TDS u/s 194H. CIT(A) agrees with the AO but the assessee succeeds before the Tribunal . </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>Fine and penalty reduced by appellate authority – since higher amounts paid after adjudication, refund claims filed – Claim not hit by unjust enrichment as fine and penalty are not duty or tax that can passed on to customers : CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AFTER</strong> extracting portions from the said decision where it was held that the principles of unjust enrichment are not applicable to fine or penalty as the same are basically imposed for a wrong done and are unlike duty, tax, cess, fees which could be passed on to a consumer, the CESTAT directed the original authority to effect cash refund of the amounts to the appellant as early as possible, at any rate within a period of 30 days from the date of receipt of a certified copy of the order. </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>