TIOL-DDT 1330 · 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 1330 </font><br>
01.04.2010 <br>
Thursday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Levy of Service Tax on Railways postponed by three months – Tussle between FM and RM continues </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> eagerness with which the Finance Ministry decided to bring Railways into the ambit of Service Tax net last year fizzled out with strong opposition to such levy from the Railway Ministry. With the result, the levy was restricted only to ‘transport of goods in containers by rail' (Please refer to Service Tax <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_033.htm" target="_blank">Notifications 33/2009-ST </a>and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_034.htm" target="_blank">34/2009-ST</a>)</strong></em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notwithstanding this reversal, in this year's Budget as well the Finance Ministry made an attempt to bring the entire Railways into the Service Tax net (with some exemption to transport of certain categories of goods) and not just the ‘transport of goods in containers by rail'. <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_007.htm" target="_blank">Notifications 7/2010-ST</a>, <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_008.htm" target="_blank">8/2010-ST</a> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_009.htm" target="_blank">9/2010-ST</a></em></strong> were issued to meet this objective and these notifications were to come into effect from today. Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10481">What
Dada did not tell Didi in Parliament – Exemption
given last year to Transport of Goods by Rail withdrawn</a><em><strong>)</strong></em> Now it appears that the Finance Ministry has backtracked and postponed the effective date of the said Notifications to 1 st of July, 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact last year in <strong><a href="http://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9607" target="_blank"><em>TIOL-DDT 1188 02.09.2009</em></a></strong> while summing up the tussle between the Finance Ministry and the Railway Ministry on this proposed levy, we said, </font></p>
<blockquote>
<p align="justify"><strong><em><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“Anyway, finally the Rail Babus had the last laugh – they did not make any arrangements to collect this tax – they knew all through that it will never be implemented. We mistook their confidence for arrogance. We regret that we mistakenly thought that a law passed by Parliament is supreme – we never really understood that a Department/ministry of the Government of India will show such scant respect for the Parliament and get away with it. It is not easy to get mighty organisations to be tax compliant. The Indian Railways have won over the Indian Revenue and Parliament. There will be no service tax on transport of goods by Rail – at least as of now. The elusive notification which we could not get yesterday is now available. The Train has arrived. We had reported about the late arrival of the train, early in the morning.” </font></em></strong></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last year it was Round One and it was won by the Railways hands down. This year, it is Round Two and with postponement of the effective date, there is a clear indication that the bout will go in favour of the Railways, though on the face of it, it would only seem to be a temporary retreat from the Finance Ministry. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But we can never predict which way the wind blows, because politics is definitely intertwined with the economics of this levy. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_020.htm" target="_blank">Notification Nos. 20/2010-ST</a>, <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_021.htm" target="_blank">21,</a> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_021.htm" target="_blank">22/2010-ST, Dated : March 30, 2010</a> </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Area based Exemption for Uttarakhand and Himachal Pradesh lapses </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALL</strong> industrialists who were enthusiastic about setting up new units or expanding existing units in Uttarakhand and Himachal Pradesh in anticipation of excise benefits may have to shelve their plans forever.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today is April 1, 2010 and the Government of India in its wisdom has thought fit not to extend the area based exemption to new industrial units which could not commence commercial production on or before March 31, 2010 or existing industrial units which existed before January 7, 2003, but which have undertaken substantial expansion as specified in the relevant notifications but could not commence commercial production from such expanded capacity on or before March 31, 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With the result, excise benefits under <em>Notifications 49/2003-CE and 50/2003-CE </em>will not be applicable to new industrial units which could not commence commercial production on or before March 31, 2010 or existing industrial units which existed before January 7, 2003, but which have undertaken substantial expansion as specified in the relevant notifications but could not commence commercial production from such expanded capacity on or before March 31, 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If any industry ventured into these States and commenced setting up of their new units or set in motion expansion of their existing units in anticipation of excise benefits for ten years under these two Notifications, but could not beat the March 31st deadline due to any operational reasons, then it should only be regarded as their misfortune for not meeting the deadline. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope that the Government will consider extending the benefits to those industries which started construction of their new units or set in motion expansion of their existing units but could not complete such construction or expansion and commence commercial production, provided they are able to at least commence commercial production within a certain reasonable time. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">More Duty Exemption Notifications Lapse from today </font></strong></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">CLUB or Association Service provided by the Export Promotion Councils / Export Organisations is taxable from today </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_016.htm" target="_blank">Notification 16/2009 ST dated 7.7.2009</a></em></strong> exempted the service of Club or Association provided by different Export Organisations/ Export Promotion Councils to their members. This Notification was effective till 31st March 2010. From today, for the services provided by these Organisations, there is no exemption and they have to pay service tax. One fails to understand the rationale behind such sunset clauses, especially when the objective of giving such exemption is to encourage the exports. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">From today Import of Goods meant for Information Technology Sector leviable to CVD and Import of pulses to be subjected to appropriate customs duties </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The exemption from levy of additional duty of customs (‘CVD') under Section 3(1) of Customs Tariff Act, 1975 allowed under <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_090.htm" target="_blank">Notification No. 90/2007-Cus dated 26.07.2007</a></em></strong> to import of certain specified goods (capital goods, spares/components thereof, mould & dies, pollution control equipment etc) meant for usage in the information technology sector also lapses with effect from today. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, exemption from levy of customs duty on import of pulses falling under Chapter 0713 <em>(S. No. 11A of Notification 21/2002-Cus)</em> also lapses today. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Exchange Rates for Conversion of Foreign Currency into Indian Rupees announced </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Government has announced the exchange rates for conversion of specified foreign currency into Indian Rupees and which would be applicable for the exports/imports with effect from April 1, 2010. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_026.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification Nos. 26/2010-Cus(NT), Dated : March 29, 2010</font></strong></a></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="3">tiol</font><font color="#006600" size="2"> – 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">Income Tax</font></strong> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transfer Pricing - Assessee applies cost plus method - Revenue for TNMM - Adjustment can be made only by working out average net profit - matter remanded: Tribunal </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is engaged in the business of sale of finished jewellery to its AEs and non-AEs. It is located in a SEZ and enjoys 100% tax holiday u/s 10A. It applies Cost Plus Method and claims GP margin of 19.37% with AEs. Revenue issues notice u/s 92CA(2). The TPO observes the assessee has not provided adequate data for proper calculation of the margin and applies TNMM method to compute arm's length price. </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">SEZ Unit - Refund of duty on inputs - SEZ status to be accorded from date of application, not date of approval; eligible for refund even if unit is not in SEZ: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> objectives of setting SEZ unit is to promote exports and the Government gives refund on the duty paid on inputs in respect of goods notified not only in respect of SEZ unit but also in respect of domestic units. SEZ unit can obtain goods without payment of duty but in the absence of status as SEZ approved unit they could not have got the same and hence they have obtained goods on payment of duty. Therefore, even if the refund is not strictly admissible on the ground that procedure was not followed, it is required to examine whether appellants were eligible in the normal course for the refund if the goods have been exported. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transferee cannot be called upon to fulfil condition(v)(a) of<em> Notification No. 203/92-Cus</em>. - It is original licencee who has to satisfy above referred condition – Appeal allowed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> facts are that the Appellants had imported in 1994 certain goods and availed the DEEC notification exemption (203/92-Cus) from payment of duty since they held a valid DEEC Import Licence as transferee . In 1999 a show cause notice was issued proposing to deny the benefit of exemption availed and granted on the grounds of an allegation made in the show cause notice that an incorrect declaration was made as regards MODVAT availment on inputs used in the manufacture of products exported while in fact such benefit was availed (condition v(a) of notification 203/92-Cus refers). </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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