TIOL-DDT 1357 · 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 1357 </font><br> 12.05.2010 <br> Wednesday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Act 2010 is in place – consequential changes </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ELECTRICAL </strong>energy removed from a Special Economic Zone to the Domestic Tariff Area and non - processing areas of SEZ will now attract duty of 16% ad valorem + Nil Special CVD. This change is made retrospectively with effect from 26th June, 2009. Exemption on supplies or imports of electrical energy, other than the above, will continue to be exempted. Import of electrical energy is also fully exempted from 4% Special CVD. While the increase in duty came into effect immediately under the provisions of Provisional Collection of Taxes Act, the exemptions were to come into force only on the date of enactment of the Finance Bill, 2010. Consequently, exemption from basic customs duty and from 4% Special CVD was provided for the intervening period through notifications. (<strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_025.htm" target="_blank">Notification Nos. 25/2010- customs</a> </em></strong>and<strong><em> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_026.htm" target="_blank">26/2010-Customs both dated 27.2.2010</a></em></strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_026.htm">. </a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now that the Finance Bill is enacted, these two notifications are rescinded. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_060.htm" target="_blank">Notification No. 60/2010- Cus ., Dated: May 10, 2010</a> </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">and<strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_061.htm" target="_blank">Notification No. 61/2010- Cus ., Dated: May 10, 2010</a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Export Duty on Raw Cotton retained at Rs. 2500 per tonne</font></strong>. The Finance Act 2010 has fixed a rate of Rs. 10,000/0 PMT as export duty for raw cotton. However the effective rate continues to be Rs. 2500/-. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2010/ctariff10_059.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 59/2010- Cus ., Dated: May 10, 2010 </font></strong></a></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Excise – Cigarette Notification rescinded</font></strong>: <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_18.htm" target="_blank">Notification No.18/2010-Cx., Dated: February 27, 2010</a></strong></em> fixes an effective rate of Rs. 509 per thousand cigarettes. Now this having become a part of the Tariff, the notification is no more relevant and so rescinded. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_26.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 26/2010- CX ., Dated: May 10, 2010 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax on Container Detention Charges - CBEC clarifies – missing circular found </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10805" target="_blank">DDT 1352 05.05.2010</a></strong>, we had observed, </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has issued Circular No. 120 clarifying certain issues related to refund of excess credit by exporters on January 19, 2010 and Circular 122 i.e. the current one covered above is issued on April 30, 2010. But where is Circular No. 121 and what does it pertain to? Why is it not placed in the public domain? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the missing Circular is available with us. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Generally marine containers are temporarily brought into a customs territory and have to be re-exported within a specified period. Normally, a Full Container Load is taken out of the port and the activity of stuffing or de-stuffing takes place at the premises of the exporter/importer. The shipping companies / steamer agent provide a pre-determined period within which the container (that has gone out of the port) is to be returned. This is called as ‘pre-holding period' and the duration of the same is mentioned in the contract. In case there is any delay on the part of the customer in returning the container, the charges known as ‘detention charges' are collected over and above the contracted amount by the shipping line. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Representations have been received in the Board that service tax has been demanded on such ‘detention charges' under the ‘Business Support Service (BSS)' or ‘Business Auxiliary Service (BAS)'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has examined the issue and clarifies that “To retain the container beyond the pre-holding period is neither a service provided on behalf of the client (Business Auxiliary Service) nor is it an infrastructural support in the business of either the shipping lines or the customer (Business Support Service). Such charges can at best be called as ‘penal rent' for retaining the containers beyond the pre-determined period. Therefore, the amount collected as ‘detention charges' is not chargeable to service tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board desires that pending cases, if any, on this issue may be decided in line with the above clarification. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/sercir121.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 121/3/2010-ST Dated: April 26, 2010 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax on re-insurance commission – CBEC Clarifies </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOW</strong> it appears that when we pointed out that <em>Circular No. 121 of 2010</em> is missing there was actually yet another missing circular and the Board had numbered it as 120a ! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This circular deals with re-insurance. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Section 101A (Part IV-A) of the Insurance Act, 1938, every insurer dealing in insurance business is required to re-insure a specified percentage of sum assured with another insurance company. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The insurance company pays premium to the reinsuring company for this service. However, a part of such premium is deducted and kept by the insurance company for meeting the administrative expenditure. In other words, the insurance company and the re-insurance company jointly bear the expenses for running the insurance/reinsurance business. This shared expense is commonly known as ‘commission' though strictly it is not in the nature of a commission. It may be pertinent to mention that the customer/beneficiary deals only with the insurance company and may not even be aware of the role of re-insurer and the backroom operations between the insurance company and the reinsurer. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has received representations that notices have been issued demanding service tax on the amounts deducted by the insurance company (in other words paid by the reinsurance company) on the ground that it is the consideration for the insurance company providing business auxiliary service (BAS) to the re-insuring company. The notices alleged that the insurance companies are promoting the business of re-insurers thereby providing them the BAS. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board Clarifies: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the policy holder may not even be aware of the operations of the re-insurer, it cannot be said that the payment made by the re-insurer to the insurance company is for its business promotion or a service on behalf of the re-insuring company (i.e. Business Auxiliary Service). In fact, it is the reinsurer which provides insurance service to the insurance company. As both the insurance company and reinsurer pay service tax on the entire amount of premium charged by them, the question of charging service tax under any other taxable service does not arise. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants pending cases on this subject to be decided accordingly. We thank God and Board for making these circulars available. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/sercir120_a.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 120(a)/2/2010 -ST Dated: April 16, 2010 </font></strong></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"> – Thursday'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"><font color="#663399"><strong>Central Excise </strong></font></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit – Validly taken credit need not be reversed if final products are subsequently exempted: High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the instant case, it is not a matter of dispute that the assessee has paid the duty on inputs used in the indicated manufacturing of final goods, the assessee has maintained separate accounts/record, duly entered credit of duty-paid on the inputs in manufacture of final goods and validly availed the <em>CENVAT credit</em>. Therefore, the same cannot be reversed on the ground that the final product (i.e. agricultural Tractors) was subsequently exempted from tax. </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">Powers under Sec 263 cannot be invoked to correct each and every type of mistake committed by AO: ITAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessment u/s 143(3) was completed, after setting off of unabsorbed depreciation while computing the book profits for the purpose of section 115JB as the same was lower than accumulated book loss. The CIT called for the records and show caused the Assessee. The Assessee's claim of set off against unabsorbed book depreciation in the A.Y 02-03 for computing bock profits, was found to be erroneous and prejudicial to the interest of revenue calling for an action u/s 263. Assessee submits that the method proposed to be adopted for the purpose of assuming jurisdiction u/ s.263 has no express sanction under the statute. The method adopted by the assessee derives support from Sec.115JB itself read with Sec.72 . </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">Job worker reversing CENVAT Credit of duty paid on Furnace oil at Revenue's insistence – refund claim filed allowed by Commissioner(A) holding that rule 6(2) of CCR does not come into play in case of fuel – in view of LB decision in Sterlite Industries respondent entitled to take re-credit - Revenue appeal dismissed: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> departmental officers successfully goaded the job worker to reverse this credit on the argument that the job worked goods were exempted and hence there was no question of availment of <em>CENVAT credit</em> on the furnace oil. The amount involved was Rs.12.52 lakhs . Later, the job worker came to know from industry sources that the reversal was unwarranted. So, they filed a refund claim equivalent to the amount reversed. </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>