TIOL-DDT 1369 · 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 1369 </font><br>
31.05.2010 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export of exempted goods - Cenvat Credit or refund of credit - CBEC strikes exporters through a long winded amendment </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN</strong> dutiable goods are exported, the exporter (manufacturer) can export the goods without payment of excise duty under a bond/ LUT. There is no bar on taking Cenvat Credit on the inputs used in the manufacture of these goods and if the credit cannot be used for payment of duty on other goods, there is also a provision for getting refund of the unused credit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what happens if the exported goods are exempted from excise duty? There is no need for any bond or LUT for exporting these goods as there is no duty any way. But what about Cenvat Credit? Can Credit be taken and will refund be allowed? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department was of the view that no credit or refund can be allowed. We had covered this issue in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9406" target="_blank">DDT 1158 21.07.2009</a></strong> and <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9443" target="_blank">DDT 1164 - 29.07.2009</a></strong> wherein it was observed, </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It is another matter that the High Court or the CESTAT was also not impressed with this idea of the department subjecting export of exempted goods to Rule 6(1) read with Rule 6(3) of CCR [See <em>Repro India Ltd vs. Union of India & Anr</em><strong> <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2007/2007-TIOL-795-HC-MUM-CX.htm" target="_blank"><font size="1">2007-TIOL-795-HC-MUM- CX</font></a></em></strong> and <em>Neo Foods Pvt Ltd vs. CC</em> (Appeals) <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2009/2009-TIOL-976-CESTAT-BANG.htm" target="_blank"><font size="1">2009-TIOL-976- CESTAT -BANG</font></a></strong></em>]. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In spite of such clear mandate from the High Court / <em>CESTAT</em>, it appears that these officers while issuing show cause notices to deny refunds claimed under Rule 5 of CCR , are also resorting to issue of show cause notices for recovering the amount payable in terms of Rule 6(3)(ii) of CCR for having availed <em>CENVAT credit</em> on such inputs/input services used in the manufacture of exempted goods cleared for export. This approach goes against the grain of the CENVAT scheme and the judicial pronouncements on the subject. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Just last week, we reported a case of the HP High Court, <strong>Exempted goods exported – <em>CENVAT Credit</em> entitled on inputs:</strong> -<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2010/2010-TIOL-350-HC-HP-CX.htm" target="_blank"> <strong><em>2010-TIOL-350-HC-HP-CX</em></strong></a></font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While we were eagerly waiting for a favourable clarification from the Board, what we actually got was a draconian amendment to <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2001/exnt01_42.htm" target="_blank">Notification No. 42/2001-Central Excise (N.T.), dated the 26th June 2001</a></strong></em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Export without payment of duty is allowed under Rule 19 of the Central Excise Rules, subject to the conditions, safeguards and procedure set out in <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2001/exnt01_42.htm"><em>Notification No. 42/2001-Central Excise (N.T.)</em></a></strong>, The first condition is that the exporter shall execute a bond and the manufacturer-exporter may furnish a letter of undertaking. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this notification is amended to include a condition that “<strong><em><font color="#663399">export of excisable goods which are chargeable to nil rate of duty or are wholly exempted from payment of duty, other than goods cleared by a hundred per cent export-oriented undertaking, shall not be allowed under this notification</font></em></strong>;”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What the Board probably wants to achieve by this amendment is to deny Credit and/or refund under the <em>CENVAT Credit</em> Rules and undo judgements of High Courts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board seems to have forgotten the fact that the policy of the government is to export goods and not taxes. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_24.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 24 /2010-CX., (N.T.), Dated: May 26, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Procedure for electronic filing of Central Excise returns - CBEC clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>APART</strong> from assessees who have paid more than ten lakhs rupees as excise duty, the following categories are also required to file electronic returns from 1.6.2010. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Annual Financial Information Statement (ER4) for Manufacturers who have paid Central Excise duty of Rs . 10 Lakh or more. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. ER 2 returns by EOU manufacturers who have paid Central Excise duty of Rs . 10 Lakh or more. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Quarterly returns by registered dealers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Annual Declaration relating to principal inputs (ER5) by Manufacturers who have paid Central Excise duty of Rs. 10 Lakh or more. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Monthly Return of information relating to principal inputs (ER6 ). </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Board wants the field officers to provide all assistance to the assessees and dealers so as to help them in adopting the new procedure. Board also wants the CCs and Commissioners to sensitise concerned officers and the trade regarding the instructions. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular926.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 926/16/ 2010 - CX., Dated: May 28, 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"> – Tuesday's cases</font></strong></font></strong></font></p>
<p><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">Service Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service rendered from abroad – Bombay High Court judgement in Indian National Shipowners - <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2008/2008-TIOL-633-HC-MUM-ST.htm" target="_blank">2008-TIOL -633-HC-MUM-ST</a></font> – followed: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOMBAY</strong> High Court, in detail has considered the relevant amendments and notifications, which has been affirmed by the Hon'ble Supreme Court after hearing the counsel for the parties. Following the judgment of the Bombay High Court which has been affirmed by the Hon'ble Supreme Court, the substantial question of law arises in this appeal is required to be answered against the revenue and in favour of the assessee. </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">Can expenses incurred on software development for running business be equated with expenses incurred for software purchase - NO, says ITAT.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SOFTWARE</strong> expenses have for long been a bone of serious contention between the Revenue and the industry. When the Special Bench decision in the case of Amway India Enterprises came, it was expected that most of the issues may get settled down. But here is a new dimension to the issue - Whether expenses incurred in the development of software for the smooth running of business, and as per customer specification, can be equated with incurring of expenses for purchase of software. And the answer is NO. </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">When Export Obligation Discharge Certificate (EODC) was withdrawn for any reasons whatsoever, importer was reverted to original position in which he was liable to take steps for discharge of export obligation in respect of imported capital goods - condition of Notification was apparently violated – Pre-deposit ordered : CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Commissioner
of Customs (EP), Nhava Sheva demanded duty of over Rs 17 lakhs from M/s Hotel
Bissau Palace in respect of a Toyota Land Cruiser Prado Car which was imported
by the Hotel in May, 2001 under EPCG scheme. The Commissioner also imposed
penalties of Rs.1.5 lakhs each on the Hotel, its Managing Partner (Sanjay
Singh) and one Shri Dilip Singh Rathore . </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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