TIOL-DDT 1346 · 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 1346 </font><br>
27.04.2010 <br>
Tuesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Decentralization of Fixation of Brand Rate of Duty Drawback - Board Clarifies issues regarding Old Claims </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD's</strong> <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2003/cuscir014.htm" target="_blank">Circular No. 14/2003-Cus dated 06.03.2003</a></strong></em> explained the decentralization of the work related to fixation of Brand rates of Duty Drawback. In Para 5 of the said Circular it was stated that the Ministry would continue to consider and dispose off all residual pendency relating to the Brand rate applications. More than seven years passed since the issue of this Circular, but still at times request is received in the Board relating to brand applications filed by the exporters prior to the decentralization of this work in 2003 . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board advises the field formations to inform the trade through suitable Trade/Public Notices that it is no longer handling cases relating to fixation of Brand rates of Duty Drawback. Hence all references in this regard should henceforth be made to the jurisdictional Commissionerate of Central Excise with complete set of documents, who shall deal with such references on the basis of the facts available on record. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/cuscir10_010.htm" target="_blank">CBEC Circular No. 10/2010-Cus, Dated: April 26, 2010</a> </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Brand Rate of Duty Drawback - Pre/Post Audit Not to be Conducted By Board – Board Clarifies</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD's</strong> <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2004/cuscir04_013.htm" target="_blank">Circular No. 13/2004- Cus dated 12.2.04</a></strong></em> stipulated that one set of complete documents relating to fixation of Brand Rate of Duty Drawback should be sent to the Directorate General of Export Promotion (DGEP) for post audit. Thereafter the work relating to Post Audit of the Brand Rate claims was transferred from DGEP to the Drawback Division of the Board vide <em>Circular No. 1/2008-Customs dated 9.1.08</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board handled the work relating to the Post Audit of Brand Rate claims so far, as it was felt that the field formations would take some time to develop expertise in this work. As more than seven years have passed since the work relating to fixation of Brand Rates of Duty Drawback was transferred to the field formations, the matter has been reviewed by the Board. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The field formations are advised by the Board not to send the brand rate letters/applications etc to the Board for post audit anymore. However, they may continue to get the letters post/ pre-audited as per para 3 (ix) of the Board's Circular No. 14/03- Cus dated 6.3.03. They may also maintain all records pertaining to brand rate fixation for subsequent reference and auditing by Internal Audit and C&AG Audit as per para 3(x) of the said circular. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/instruction10_002.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Instruction F. No. 609/46/2010 - DBK , Dated: April 26, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Sunset
Clause Extended belatedly for Imports related to Integrated Guided Missile
Development Programme </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Government has extended the time limit for allowing the benefit of customs duty exemption to materials and equipment required for “integrated guided missile development program of the Ministry of Defence” till 31st December, 2010 by amending Notification No. 39/96- Cus dated July 23, 1996. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Hitherto, this exemption was available only till 31st December, 2009. The Board woke up from its slumber after four months to extend this sunset clause. What about imports during the intervening period? Obviously, they cannot be cleared without payment of applicable customs duties unless the customs authorities are ignorant of the expiry of this sunset clause. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">If, by any chance, the importers haven't paid the duties on such imports or the customs authorities allow the imports against the documentation produced by authorized work centres of IGMDP , then CAG will make merry by putting the Board in the dock in its Annual Report to the Parliament. In such instances the Board has to explore the option of issuing a notification under Section 28A of Customs Act. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">But why can't the Board monitor the sunset clauses in exemption notifications and decide on their extension or otherwise well within time and avoid such embarrassing situations? </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_051.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 51/2010-Customs, Dated: April 16, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax returns - Forms ITR -1 and ITR - V changed</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> new ITR - 1 [saral - II] is for Individuals having Income from Salary / Pension / Income from One House Property (excluding loss brought forward from previous years)/Income from Other Sources (Excluding Winning from Lottery and Income from Race Horses). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the new ITR – V is for instances where the data of the Return of Income in Form SARAL -II (ITR -1), ITR -2, ITR -3, ITR -4, ITR -5, ITR -6 & ITR -8 transmitted electronically without digital signature. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/it10not029.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Notification No 29/2010, dated April 23, 2010</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Liberalization of Import of sports weapons by ‘Renowned Shooters' </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> its Policy Circular No. 2/2009-2014 dated 27.8.2009 DGFT stipulated that the authorization for import of sports weapons by ‘Renowned Shooters' will be issued by the concerned RAs on the recommendation of Ministry of Youth Affairs & Sports. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier, through O.M. No. 52-37/2009-SP-I dated 28th January, 2010, Ministry of Youth Affairs & Sports has recommended that “the present practice of routing import licence applications through MYAS may be dispensed with and renowned shooters may be allowed to approach the Regional Authorities of DGFT directly after obtaining recommendations of National Rifle Association of India”. This has been done with a view to liberalize and rationalize the procedures. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, it has been decided to amend para 2 (ii) (iii) and (iv) of the above Policy Circular as follows: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“(i) On receipt of application, concerned RA shall send a copy of the application to National Rifle Association of India for their comments. After receipt of comments from the National Rifle Association of India, RA shall issue licence to the applicant. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) After issue of licence, RA shall forward a copy of licence to National Rifle Association of India with reference to their written recommendation for information. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) In such cases, there would be no need to seek approval of DGFT Headquarters once written recommendation from National Rifle Association of India has been received.” </font></em></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2009/dgft09cir031.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Policy Circular No. 31/2009-14, Dated: April 26, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">C & AG Reports that Value of service adopted was not based on Sole Consideration</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION</strong> 67(2) of the Finance Act, 1994, read with rule 3(a) of the Service Tax (Determination of Value) Rules, 2006, effective from 19 April 2004, stipulates that where provision of service is for a consideration not wholly or partly consisting of money, the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">M/s Kandla Port Trust (KPT), Vadinar , in Rajkot Commissionerate, provided port services to M/s Essar Oil Ltd ( EOL ), in connection with installation/creation of various new ports, related facilities in the KPT water limits and also in land/road area of KPT at Off-shore Oil Terminal (OOT), Vadinar . M/s EOL paid Rs. 6.68 crore between February 2007 and March 2008 to KPT as wharfage and berthing charges at 51.43 per cent of the scale of rates (SORs) of KPT for the products brought by EOL at the Vadinar Terminal. The assessee also paid service tax of Rs. 82.38 lakh on this amount. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">C & AG observes that payment of service tax of 51.43 per cent of scale of rates was not correct because the assessee and EOL had entered into an agreement by virtue of which KPT had extended its facilities to be used and developed by the EOL and the developed assets were to be repatriated to KPT free of cost on a future date. In consideration thereof, the charges leviable were reduced to 51.43 per cent of the actual scale of rates of KPT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In such cases, the service tax of Rs. 1.60 crore should have been paid on the full service charge of Rs. 12.98 crore which was chargeable by KPT in normal circumstances from any other assessee for providing similar services under rule 3 (a) of the aforesaid Rules. This resulted in short payment of service tax of Rs. 77.87 lakh . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter was pointed out to the department/Ministry in August 2008/October 2009 and it has not replied to the C & AG as on January 2010. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax (Determination of Value) Rules, 2006 is effective from April 19, 2006 while the C & AG states in his report to the Parliament that the said rules are effective from April 19, 2004. Secondly, Section 67(2) of the Finance Act, 1994 explains that where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. This section does not apply to the facts of the case. In fact, the facts of the case would be governed by section 67(1)(ii) of the Finance Act, 1994. Therefore, the report should have referred to Section 67(1)(ii) of the Act instead of Section 67(2) of the Finance Act, 1994. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">These may be typographical errors, but can the Annual Report from C & AG submitted to the Parliament with much fanfare afford to have typographical errors? </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">As for the merits of the issue, we asked an expert for his opinion. This is what he told us, <em>“even assuming that Section 67(1)(ii) read with Rule 3(a) are applicable to the facts of the case, KPT would be liable to pay service tax only on 51.43 per cent scale of rates if EOL pays KPT only that much amount i.e. 51.43 percent of contract value as is done in the instant case. This is irrespective of the fact that KPT raises an invoice for the entire amount of Rs. 12.98 crores . This is also supported by the provisions of Rule 6 of Service Tax Rules, 1994, which stipulates that a service provider is liable to pay service tax only on the value of taxable services received from the client. Therefore, even if KPT raises an invoice treating Rs. 12.98 crores as gross amount charged as contended by C & AG, there is no requirement under law that KPT should pay service tax on that entire amount unless it receives the entire sum of Rs. 12.98 crores from their client viz., EOL .”</em> </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Litigation lurking? </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"> – Wednesday's cases</font></strong></font></strong></font></p>
<p><strong><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"></font><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">CENVAT Credit – Capital Goods - assessee cannot claim depreciation under Income Tax Act in respect of non-utilized Cenvat credit and claiming benefit for relevant assessment year having claimed depreciation under Income Tax Act. Tribunal's order, without application of mind: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> tribunal has committed a serious error in not considering sub-rule (4) of Rule 4 of CENVAT Credit Rules. Without applying its mind, without coming to the conclusion how the assessee would be entitled to avail benefit of depreciation under Sec.32 of the Income Tax Act and also claiming benefit of CENVAT credit in the subsequent year has allowed the appeal wrongly. On account of improper interpretation of sub-rule (4) of Rule 4 of CENVAT credit Rules relief has been granted to the assessee by the tribunal which requires to be set aside. </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">Payment made to Producers, directors, actors for financing film production – Not Contractors – No TDS: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BASICALLY</strong> and
primarily whether a particular contract is a contract for sale of goods or
for work and labour, depends upon the main object of the parties, gathered
from the terms of the contract, the circumstances of the transactions and
the customs of the trade. There can be no gainsaying that there is no standard
formula by which a contract of sale can be distinguished from a contract
for work and labour. There may be many common characteristics in both the
contract, some neutral in a particular contract and yet certain clinching
terms in a given case may fortify the conclusion one way or the other. All
that will depend upon the facts and circumstances of each case.</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">Brine
Shrimp Eggs ( Artemia Cyst) are classifiable as Shrimp Seed under Tariff
Heading 2309.90 and are eligible for exemption – Majority ruling
of CESTAT EZB set aside – High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a DRI case. The dispute involves classification
of Brine Shrimp Eggs. The importer claimed it under Tariff heading 2309.90
as shrimp feed which was completely exempted from duty before 1999 and
after that, subjected to concessional rate of duty of 5%. It is the case
of DRI that the Eggs become prawn feed only after incubation under controlled
temperature and therefore the same merit classification under Tariff Heading
0511.99 attracting higher rate of duty. </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>
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