TIOL-DDT 1348 · the untouched capture
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<p><font size="2"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 1348 </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><br>
29.04.2010 <br>
Thursday</strong></font></font></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Custom
House Agents Licence - An Archaic Relic </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ARE</strong> Customs procedures and rules so complicated that ordinary importers cannot fathom the dangerous depths near the docks that you need an agent to get through the corridors of power in the awed Custom Houses in the country? Why agents at all? In the days of liberalisation and simplification and Electronic Data Interface and all such high sounding words, do we still need agents to clear documents in the Custom Houses? Perhaps Customs is the only Central Government department where you have recognised, approved, authorised, nay licensed agents. The dictionary describes agent as negotiator, manager, mediator, representative. Now what is a Custom House Agent? Is he a negotiator between Customs and the customers, if so what does he negotiate? Though not apparent, obvious? If he is a manager, what does he manage? And whose affairs? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unlike other agents, say a real estate agent or a transport agent where anyone with a little talent or lack of it can join the profession, the Custom House agent is a specialised professional. He has to go through an elaborate selection process which includes a very tough written test followed by a high profile interview. The written test is held on All India basis with question papers being sent to Commissionerates from Delhi with occasional leaks not altogether avoidable. One year the examination had to be postponed because there was a theft of question papers! The standard of the examination is so high that most of the Customs officers would fail in it. Passing the examination is not an automatic gateway to get a licence. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>++ In today's high tech fast track world, does the department need the expertise of the Agent?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Can't the department survive without an agent?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Does the department need the assistance of the agent for clearance? Isn't the department capable of running its own affairs?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Are the procedures so complicated that you need an agent to get through Customs?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ And if the agents are so knowledgeable and competent, why so much litigation?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Why the agents never do legal consultancy? If there is any problem with a customs officer, you have an agent to sort it out, but if you have a problem with the Customs Act, you have to go to a lawyer or consultant. If the Custom House Agent is so well versed with the law and procedures, why is he not able to defend his client in judicial forums?
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ And if the job requires so much skill in procedures and law, why is that you never find a retired Customs officer becoming a Custom House Agent? They prefer to become consultants rather than agents. </font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact is that this job does not need and does not attract all that talent - far from it. The laws are not that complicated that you cannot do your own work. Even if the laws are difficult, the Customs should help the importers and exporters in following the procedure. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Over a period of time, the agents who were supposed to facilitate a fast clearance have become a thorn in the Customs rose. The whole system of Custom House Agents is embroiled in controversy and troubles for all concerned. Middlemen don't exactly help in a transaction; they have a tendency of projecting a negative image of both sides. Thus the party is told that the department is awfully corrupt and harmful while the department is told that the party is a big party and “for your own safety, don't act smart”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The trouble starts with the licence itself. Those who already have the licence do not want to allow others to enter, while those waiting in the wings, believing there is big pie for everyone to share, want to enter at any cost. And here starts the first stage of conflict and of course the much dreaded discretion and discretion in India is said to breed corruption. Officers are accused of corruption and it must be fairly conceded, not always without any basis, in granting and renewing licences. The examination is another great trouble maker. The examination is normally taken by ordinary graduates with no idea of law or procedures and they are expected to answer questions which are difficult even for seasoned departmental officers. Natural corollary is tendency for malpractices, at least the scope for alleging malpractices. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And what do the agents do in the Custom Houses? Do all kinds of sundry jobs for the department. Even files are carried by these agents to various officers. There is an interesting reported case. A case was to be decided by a Deputy Commissioner. The file went to the Commissioner who made some noting and returned to the Deputy Commissioner's office <strong><font color="#FF6633">through the agent</font> </strong>, yes through the agent. On the way our good agent made a photo copy of the file and later that noting of the Commissioner of which the agent had a photocopy became the basis of an appeal! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Because officers get transferred and agents don't, over a period of time the agents become super powers in the Custom Houses. Because of too much familiarity with the lower staff, they naturally develop, what familiarity breeds - contempt. The agents interfere in the administration of the Custom Houses and even influence transfers. There are powerful agents who are dreaded by officers and who command terrific influence in the Custom Houses. The machine has now become a dreaded Frankenstein. Look at any Custom House scam, you find the role of a Custom House Agent prominent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is there any need to continue with such an archaic and troublesome institution? <strong><font color="#FF6633">DDT</font> </strong> suggests that the Custom House Agents licensing should be abolished. We should be mature enough to handle our job ourselves. I know this suggestion will meet with stiff opposition especially from the agents who have a bloated opinion about their role in the system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If it cannot be altogether abolished, <strong>DDT</strong> suggests:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remove the MRTP in the system of Custom House Agents. Let there be no discretion in selection and the number of agents that can be allowed. Every person who is eligible and qualified should be given a licence. At least competition will drive away many evils. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And why there is no Central Excise or Service Tax Agents Licence? </font></p>
<p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_29july.gif" alt="Legal Corner Icon" width="438" height="118" hspace="5" border="0" align="center"></font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Telephone Tapping – CBDT Clarifies </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> section of the media has reported communication between the Income Tax department and the Central Bureau of Investigation regarding records of telephonic conversations between a person by the name of Nira Radia and others. It is also reported, citing sources in the CBI, that in addition to Radia, telephone lines of several other influential business-men, politicians and advertising professionals were tapped. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Board of Direct Taxes (CBDT) has clarified that the Income Tax department has not recorded any telephone conversation of influential businessmen, politicians and advertising professionals as alleged. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is further clarified that the Income Tax department does not intercept telephonic conversations <strong><font color="#FF6633">except as authorised under the law</font> </strong>[which means they do]. The provision is used in rare and exceptional cases of suspected tax fraud / evasion involving security of the state. The procedure, as prescribed under the law, is strictly followed in all such cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">My editorial colleagues believe that Income Tax Department does not have the power to tap telephones, but obviously they do. We are told that CBI, DRI, EIB, ED and IT departments are authorised to tap telephones. But now with mobile phones where every call is recorded, is there any need for special powers for specialised agencies to tap any telephones? </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>C & AG puts Municipal Corporations and CISF in Dock </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>C & AG</strong> has reported that forty seven municipalities and twelve other assessees including Municipal Corporations, Urban Development Authorities, South Central Railways, State Road Transport Corporation etc., in Hyderabad I, II, III, Guntur, Tirupathi, Visakhapatnam I and II Commissionerates, rented/leased out its immovable properties like shops, godowns, sheds, show rooms, slaughter houses etc., in the course of its business during the period between June 2007 and May 2009. The C & AG states that these assessees rendered such services without getting registered and collected Rs. 129.76 crore during the said period but did not pay service tax of Rs. 15.76 crore along with interest and penalty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">C & AG further reports that CISF units at Coimbatore and Kalpakkam, coming under Coimbatore and Chennai III Commissionerates, provided security services to the Airport Authority of India, Coimbatore and Madras Atomic Power Station (MAPS), Kalpakkam and collected service charges totalling Rs. 34.90 crore between April 2006 and February 2009. CISF did not register with the department and did not pay service tax of Rs. 4.30 crore payable on the value of taxable service provided. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With regard to renting of immovable property belonging to municipalities, municipal corporations and urban development authorities, the issue could be relevant in many more municipalities and municipal corporations across the country. Likewise, CISF is engaged in providing security for many PSUs and even large private sector enterprises which may be liable to service tax. For once, we believe that the C & AG hit the bull's eye.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT amends SION</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has amended the SION as contained in Handbook of Procedures (Vol.II), 2009-2014 to add a new SCION ‘C 2047' in the Product Group: Engineering Product with the input-output ratio as follows: </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SION Entry C-2047</font></strong></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Export item </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Quantity </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Import items </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Quantity </font></strong></p></td>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pre Sensitized Negative Offset Aluminium Plates </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 kg. </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Litho Aluminium Sheet in Coils form </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.05 kg ./ kg. content in the export product </font></strong></p></td>
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<td valign="top"> </td>
<td valign="top"> </td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Chemicals :- </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Diazoester Ste 1428 </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) 2 Methoxy - 1 Methyl ethyl acetate </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Renol Blue 2BG-HW 30 </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) 4 (phenyl azo ) diphenyl amine </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) Butyral 1 actone </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) N- Butanel </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Item No. 2 is allowed within 2% of FOB value of exports </font></p></td>
</tr>
</table>
<h1><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn058.htm" target="_parent"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Public Notice No. 58/2009-2014, Dated: April 27, 2010 </font></a></h1>
<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"> – Friday's cases</font></strong></font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" 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>Central Excise/Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Construction of compound wall is an input service as it is an integral part of factory – compound wall is necessary to run factory as any goods lying outside factory beyond compound wall will be deemed as removed without paying Central Excise duty: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondents are engaged in manufacturing of cotton fabrics and were availing facility of CENVAT credit of duty paid on ‘input service' as well as on capital goods. They availed credit of Service Tax of Rs.9,78,547/- on the basis of construction of ‘compound wall'. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue took a view that construction of compound wall was not falling under the definition of ‘input service' as the respondents have not used the service for providing any output service. So also, the said service is not used by the respondents directly or indirectly in or in relation to the manufacture of final products and for the clearances of final products, the department alleged in the show-cause notice. </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 35(2AB) - it is a beneficial provision but limited only to capital expenditure - Assessee's writ dismissed: Delhi High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FROM</strong> the guidelines and the provisions of the Act, it is clear that the approval to in-house research and development center would, as a normal rule, be considered from the first of April of the year in which the application was made in Form 3CK. In the present case, the application in Form 3CK was made on 21.08.2008 and, therefore, in terms of these guidelines, the approval would normally have been granted from 01.04.2008. However, in view of the guideline prescribed in clause (vi) of para 6, a beneficial provision has been made so as to extend the approval of an in-house research and development centre to the previous year, but limited only to capital expenditure (excluding any capital expenditure on land and buildings) </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>Confusion in notification 40/2006-Cus and paragraph 4.55.3 of the FTP – matter arguable – appellant should be allowed to get their goods released provisionally -at same time revenue has to be safeguarded – appellant directed to execute a Bank Guarantee for duty amount leviable and Bond for same amount – early hearing allowed: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants imported various types of ball bearings and filed Bill of Entry on 27.4.2009. The appellants claimed benefit of duty free clearance of the goods under <em>Customs Notification no. 40/2006-Cus dated 1.5.2006 </em> under Duty Free Import Authorization scheme. The appellants also produced 2 DFIA licences in this regard. The claim for exemption under Notification has been denied by the lower authorities on the ground that the imported materials have to be of the same quality, technical characteristics and specification as materials used in the resultant products specified in para 4.55.3 of the Handbook of procedures of the Foreign Trade Policy. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tomorrow for the judgements </strong></font></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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