TIOL-DDT 1322 · 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 1322 </font><br>
19.03.2010 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Ships & Moveable Capital Goods under SFIS Scheme - DGFT clarifies to clear confusion of Customs Authorities </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> appears that the Customs authorities, particularly those at Mumbai and Kakinada Sea Ports have some confusion in their minds regarding import of ships as capital goods (a moveable capital asset) under SFIS scheme. They were insisting that the importers have to furnish ‘installation certificate' for the imported ships, failing which the benefits of the SFIS scheme were being disallowed for such imports. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">How on earth can a ship be installed? And where on earth are they expecting a ship to be installed – in the Custom House? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade and industry represented to the DGFT to resolve this confusion in the minds of the Customs. After examining the matter DGFT has clarified as follows: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) The provision relating to disallowing import of ‘vehicle' was introduced in FTP RE 2006 (Updated as on 7.4.2006) and applies to SFIS duty credits scrips issued on foreign exchange earned during 2005-0 6 and thereafter, implying that there is no such stipulation for SFIS duty credits scrips issued for foreign exchange earned prior to 2005-06 period under the FTP. The intention of this provision is to protect the domestic sector industry of ‘ motor cars, s ports utility vehicles and the likes' and thereby disallows such imports only under SFIS Scheme. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) Ships cannot be treated as a ‘vehicle'. Hence, it is clarified that the import of ships, a capital good for Shipping Sector, is permitted under the scheme. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) Upon imports, ships are registered with the Director General of Shipping (or Mercantile Marine Board, as the case may be) and only then these vessels are treated as ‘ Indian Flag vessels'. Ships are moveable capital assets; hence these cannot be installe d at one particular location. Thus, the requirement of ‘installation certificate' cannot be insisted upon, for such moveable capital assets/goods. Customs Authorities are accordingly requested not to insist on furnishing ‘installation certificate' for moveable capital ass ets / goods, if imported under the SFIS scheme. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT further clarifies that this clarification regarding non-requirement of installation certificate shall also apply to EPCG for Service Providers wherein import of moveable capital goods is permitted. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2009/dgft09cir026.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 26 /2009-2014, Dated: March 17, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mandatory e-payment and e-filing of returns for Central Excise and Service Tax - Hyderabad CC's Press Note </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Chief Commissioner of Central Excise and Service Tax, Hyderabad Zone has issued a press note advising all manufacturers, dealers and service providers to avail ACES and EASIEST, e-Governance facilities of the Government of India to file their returns and deposit duty payments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The press note refers to the two recent notifications issued by the Government of India viz., <em>Notification No. 04/2010-CE(NT) and 01/2010-ST</em> both dated 19.02.2010 as per which, all the assessees who have paid excise duty/service tax of Rs. 10 lakhs or more including the amount paid by utilization of CENVAT credit in the preceding financial year, shall file their returns electronically and deposit the excise duty/service tax electronically. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Press Note warns that <font color="#663399"><strong>Non compliance would invite penal action</strong></font>. What if the Department is not able to comply in accepting the returns electronically? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The press note further mentions that the e-payment of excise duty and service tax can be made through twenty eight designated banks and the list of such designated banks is available at the departmental website <strong>(<a href="http://aces.gov.in/">http://aces.gov.in</a>)</strong>. The returns could also be filed electronically on this website. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Only the other day, in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10597" target="_blank"><font size="1">TIOL-DDT 1320 17.03.2010</font></a></strong>, we reported about a letter issued by an anxious DGS & DM to all the field formations, calling their bluff on 100% implementation of ACES and exhorting them to clean up their act and ensure a smooth functioning of ACES so that the department can successfully transit into the new GST regime. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We hope that All izz well with ACES and wish the department all the very best in their e-ndeavour. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/central_excise_press_note.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Press Note from Chief Commissioner, Hyderabad Zone, Dated: 17.03.2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">How is ACES working? </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Noida assessee tells us: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise Noida has been caught un - aware. Here in Noida Range offices, even the basic infrastructure is absent. Some are waiting for the computers and peripherals to be installed, some for the connection (internet or ACES or both). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The elementary step of allotting login ID and password has not been completed (We have not received till now for Excise or service tax). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The range Superintendent lamented that he is not aware who will do what. His immediate boss (the divisional AC/DC) is not aware whom to approach and assessees who want to login to the ACES are not able to enter in to the system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If immediate steps are not taken then it is certain that the failure will start from Noida (which incidentally is nearest to Delhi, what would happen to the remote areas too far from power (Delhi) or electricity or both). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I wonder, what will happen to those assessees who are definitely going to miss the electronic filing of service tax and excise return on 25th and 10th of April 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I tried to login and found a dumb screen with no option for doing anything. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Give the Department its due: </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In sharp contrast to Noida, in dusty Bhiwadi (Jaipur) it is working perfectly since November last year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We sincerely hope ACES don't make asses out of assessees. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Advance Ruling - DTAA with USA - provision of Architectural design services - not sale – liable to tax in India - AAR </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> an order delivered yesterday, the Authority for Advance Ruling held, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Agreement cannot be read in isolation and the components of the contract cannot be placed in water-tight components. The agreement shall be read as a whole. The approach should be to ascertain what is the true scope and dominant object of the contract. One should take stock of the predominant features of the contract. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By taking the view that the essence of the transaction is the sale of designs, models and plans and everything else is incidental thereto is to distort and stultify the true nature and dominant purpose of the contract. The Agreement is in reality nothing different from what is described in the opening sentence i.e. “design and consultancy services”. The Architect while performing such services, will participate with and assist the owner in developing and refining the general project concept. The architect will develop the detailed programme for the project based on in depth interviews with the Owner and others. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Basic(design) services which include preparation of Master Plan, concept design, schematic design, design development and construction documents, assistance in bidding and contractors' selection process and consultancy during construction phase are all part of architectural services undertaken the HOK as per the Agreement and the payment received by HOK for furnishing all these documents and services to the applicant fall appropriately within the meaning of ‘fees for included services' under Article 12.4(b) of the India-US Treaty. They cannot be disintegrated and viewed in water-tight compartments. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this order today. See Breaking News . </font></strong></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"> – Monday's cases</font></strong></font></strong></font></p>
<p><font 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"><strong><font color="#663399">Customs</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">EXIM – Writ - disbursement of Cash Compensatory Support and Replenishment Licenses – Petitioner directed to submit copies of all documents and Revenue directed to examine claims and pass speaking order - Petitioner entitled to ventilate grievances against such order in accordance with law: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> terms of EXIM Policy of 1988, the Chief Controller of Import & Export announced a scheme giving Cash Compensatory Support (CCS) and replenishment licences (REP licences) to registered exporters against export performance. The said exporter accordingly submitted applications for grant of CCS, REP licences and traditional licences against the export of ready made garments, textile products and handicrafts, which were summarily rejected by the authorities. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently, the exporter filed a writ petition seeking a direction to the authorities to disburse the 45 per cent premium in lieu of the replenishment licences (REP) and to release the Cash Compensatory Support (CCS) against export documents received by them. The Petitioner also sought compensation for non-release of the incentives in terms of the prevalent EXIM policy which resulted in losses in their export business. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no condition under Rule 173H that defective goods received back should be kept in segregated manner with separate accounts – such condition is stipulated only under Rule 173L: CESTAT. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant had received back defective goods under Rule 173 H of the Central Excise Rules, 1944 for repair, remaking etc., on which duty was initially paid. They have maintained records wherever the impugned goods have been remade amounting to manufacture and in respect of such goods the appellants have again paid duty. In respect of the remaining goods only minor repairs have been done and the same have been cleared without payment of duty as permitted under Rule 173H. They have filed necessary intimation under D3 and they were not asked to follow any procedures nor any additional documents were required to be maintained by them either under the Rules or under the instructions of the Commissioner. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Indo-US
DTAA - PSU enters into contract for supply of hardware, software and related
services for installation - since software is a part of package for upgrading
automation system at IGI Airport, it has no value unless technical knowledge
is made available - payments are fees for included services but payments
made for hardware are not taxable in India: Advance Ruling</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Applicant is a PSU. It enters into
contract with non-resident company for 'automation upgrade for third runway
at IGI Airport, New Delhi'. The US-based non-resident supplies hardware,
software and providing services relating to installation - whether payments
made to non-resident are royalty or fees for included services. In the
absence of a PE whether the payments received by the non-resident are business
income. Whether the payments made for hardware are outright purchase and
not taxable in India.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong> </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice 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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