TIOL-DDT 1364 · the untouched capture
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<p><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 1364 </font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
21.05.2010 <br>
Friday </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rebate on Chewing Tobacco exported - D/Q confusion - When Mathematicians became stingy</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DUTY</strong> payable by the manufacturers of Chewing Tobacco and Unmanufactured Tobacco is governed by the capacity determination rules notified by Notification No 11/2010 CE( NT) Dated 27 th Feb 2010 read with Notification 16/2010 CE Dated 27 th February 2010. While the former Notification fixed the deemed capacity of the packing machines, the later fixed the duty payable per machine. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_22.htm" target="_blank">18th May 2010, Notification 22/2010 CE( NT)</a></em></strong> was issued to provide for rebate of duty paid on the Chewing Tobacco and Unmanufactured Tobacco exported under rule 18 of the Central Excise Rules, 2002 (please see yesterday's <strong>DDT</strong>). Unlike the other excisable goods, it is not possible to identify the exact amount of duty paid on the goods exported when the mode of payment is based on the capacity determination. The only possible way to find out the duty element per pouch is by dividing the duty payable per machine (fixed under Notification 16/2010 CE – say Rs X) by the number of pouches fixed per machine (fixed under Notification 11/2010 CE(NT) – say Y ( Nos ) and grant rebate. Let us say the rebate under this method per pouch, R = X/Y. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, those who actually produced more pouches than the fixed capacity would get more rebate as <strong>X / actual production</strong> would be less than “R”. To get over this, if the rebate is linked to the <em><strong>actual production</strong></em>, then wherever the actual production is less than the capacity fixed, the rebate will be higher than the “R”. So, the businessman in Bureaucrat woke up. They wanted to ensure the rebate should be linked to the actual production and at the same time wanted to ensure it should not be more than the “R” and it resulted in limiting the rebate to ‘ monthly average rate of rebate per pouch' subject to a ‘ maximum amount of rebate per pouch' . An extraordinary effort to avert a possible audit para by CAG! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assuming an assessee has two packing machines one dedicated to pouches of MRP Rs 1.50/ and the other of MRP Rs 3.00/-, and if the assessee is exporting pouches from both these machines, as per the <em>Notification 22/2010 CE</em>, the rebate per pouch would be as under: </font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr valign="top">
<td width="81"> </td>
<td width="30"><div align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MRP</font></strong></div></td>
<td width="72"><div align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Duty payable in Lakhs (D)</font></strong></div></td>
<td width="112"><div align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total pouches actually produced (Q) </font></strong></div></td>
<td width="113"><div align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Monthly average rate of Rebate or (D/Q) </font></strong></div></td>
</tr>
<tr valign="top">
<td><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Machine 1 </font></strong></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.5 </font></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">850000 </font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2000000</font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">0.425 </font></div></td>
</tr>
<tr valign="top">
<td><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Machine 2 </font></strong></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3</font></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1525000 </font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2200000 </font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">0.693 </font></div></td>
</tr>
</table>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maximum amount of rebate per pouch</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(Duty payable per machine per month as provided in Notification No 16/2010 – CE dated 27 th February, 2010 <strong>divided by</strong> Total number of pouches deemed to be produced per machine as per rule 5 of the said rules) </font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Machine 1 </font></strong></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(850000/2246400) </font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">0.378 </font></div></td>
</tr>
<tr>
<td><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Machine 2 </font></strong></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1525000/2021760) </font></div></td>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">0.754 </font></div></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the rebate for pouches from Machine 1 would be Rs 0.378/- per pouch whereas for pouches from Machine 2, it would be Rs 0.693/- per pouch.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is what the Board wanted, but when it comes to drafting the Notification, it seems some confusion has been created while defining D and Q. As per the Notification, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>D =</strong> Total duty paid for a month for the packing machines used for manufacture of Chewing Tobacco or Unmanufactured Tobacco of the Retail Sale Price which has been exported </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Q =</strong> Total quantity of pouches manufactured from said machines in the month </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If
the assessee has more than one packing machine, like in the above example,
the question is whether the total duty paid and the total quantity of pouches
should be taken together for both the machines or it should be computed for
different MRPs. From the explanation 1 to the notification it appears that
the duty / quantity for all the machines of the same MRP should be taken
for arriving D/Q even if there are no exports from a particular machine. While
issuing such complicated formulae, it would be helpful if some illustrations
are also given. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Garments are covered under textiles - DGFT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TEXTILES</strong> is one of the sectors entitled to Status Holders Incentive Scrip @ 1% of FOB value of exports made during 2009-10 and 2010-11. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Apparel Export Promotion Council has informed that some garment exporters are facing difficulty in submitting their applications for availing Status Holders Incentive Scrip benefit as some Regional Authorities are insisting upon a clarification from the DGFT Head Quarters to the effect that garments are covered under the Textile Sector under Para 3.16.4 of the FTP 2009-14 . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the DGFT has clarified that under Para 3.16.4 of the FTP 2009- 14 , Textile Sector covers textile garments as well. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The ingenuity of the babu in denying benefits, is simply remarkable. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2009/dgft09cir033.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 33 (RE- 2010)/ 2009-2014 Dated: May 19, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of worn clothing – Policy Restrictions. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per the Schedule - 1 to the ITC( HS) Classification, import of Worn clothing and other worn articles under Exim Code 6309 00 00 was ‘restricted' subject to Import Licencing Note 1 to the chapter which read as, <font color="#663399">Units in the Special Economic zone will be allowed to sell worn clothing in the Domestic Tariff Area to the extent of 15% of the cif value of imports made in the previous year.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this note is removed. What does it mean? DGFT will clarify, hopefully soon. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2009/dgft09not043.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 43 /2009-2014, Dated: May 19, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Fuel – DGFT amends the “General Note for Fuel” </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> “General Note for Fuel” in the Handbook of Procedures, Vol.2 , 2009 -201 now reads as, </font></p>
<blockquote>
<p align="justify"><em><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">For the purpose of import of fuel under Actual User Advance Licence , the applicant shall indicate the name of the specific fuel sought for import in their application. Import of fuel however shall not be permitted against DFRC or under Para 4.7 of Handbook of Procedures or against Ad hoc Norms. Also, for the calculation of DEPB rates, the cost of the fuel shall not be taken into account. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is now amended to read as, </font></p>
<blockquote>
<p align="justify"><em><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">For the purpose of import of fuel under Advance Authorisation , the applicant shall indicate the name of the specific fuel sought for import in their application. Import of fuel shall also be permitted under Paragraph 4.7 of Handbook of Procedures, v1 , related to Adhoc Norms, as per the entitlement under “General Note for Fuel”. In case of DFIA , import entitlement for fuel as per SION , may be transferred only to companies, which have been granted licences to market fuel by the Ministry of Petroleum and Natural Gas. </font></em></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn066.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 66/2009-14, Dated: May 19, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">SEZ - Instruction No. 34/2009 - withdrawn </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Commerce Ministry has withdrawn SEZ Instruction No. 34/2009 dated 31st August , 2009, by which it was clarified that that no agencies can carry out inspection, search, seizure or investigation without approval of the DC of the Zone concerned. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Notification dated 13th January ,2010 , Sections 20, 21 and 22 of SEZ Act, 2005 have been operationalised . And so the Instruction No. 34 has been withdrawn. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=260&filename=sez/sez_instructions/2006/sez09ins057.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department of Commerce Instruction No. 57/2010, Dated: May 20, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Renting of immovable Property - Home Solutions Order </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> yesterday's DDT, we had carried a story that “we are informed that once again Home Solution Retail (I) Ltd has obtained stay from the High Court of Delhi…..” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A very alert advocate asked us, “ Since you have used the word 'we are informed' I do not whether it is your journalist language or you do not have the copy.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, we have the High Court order for you today. Please click here for the order. </font></p>
<p align="center"><strong><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></strong></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Service Tax </strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Manpower supply service <em>vis-à-vis</em> Information Technology Services - services rendered by appellants in relation to Data Management and Biostatistics and Reporting are in nature of Information Technology Service and hence not taxable during impugned period – demand under Manpower Supply service set aside: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CLASSIFICATION </strong>is an important factor, which determines the tax liability of the service providers. Since different services have different effective dates, in many cases, revenue is often tempted to “extend” the liability of the assessee by classifying the service under the “oldest” service category or just to deny the benefit of an exemption notification, alleges a different classification. If you are supplying a few technicians for maintenance or repair of an equipment and charge the client on the basis of number of man-hours spent, are you providing manpower supply service or repair or maintenance service? Well, it depends on which service the tax was levied first. </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">Capital gain or business income - Whether assessee whose substantial income from capital gain comprises long term capital gain and who has shown substantial dividend income, can be said to be a trader of shares and doing share trading business: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Tribunal is that whether the assessee whose substantial income from capital gain comprises long term capital gain and who has shown substantial dividend income, can be said to be a trader of shares and doing share trading business. </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">CHA Licensing Regulations – Allegations against CHA for preparation of fake rubber stamps of Customs officials and fabricating documents for claiming higher DEPB benefits by exporters being serious, immediate suspension of CHA licence justified – Correctness of allegations against CHA cannot be adjudicated by High Court exercising its extraordinary jurisdiction under Article 226 of Constitution - Authorities directed to expedite proceedings by following principles of natural justice: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Writ Petition was filed against the Customs Commissioner's order suspending the licence of CHA issued in terms of Regulation 20(2) of CHA Licensing Regulations, 2004. The suspension was in pursuance of an investigation by DRI wherein it was alleged that exporters in connivance of the representatives of the CHA were preparing duplicate set of export documents, one for submission of Indian Customs and another for Bangladesh Customs for claiming higher DEPB benefits by exporters. </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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