TIOL-DDT 1390 · the untouched capture
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<font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1390</font><br>
29.06.2010 <br>
Tuesday </strong></font>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export of Exempted Goods - Complication Compounded </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_24.htm" target="_blank">Notification No. 24/2010 – CE(NT) dated 26.05.2010</a></em></strong>, Government brought in a draconian change in <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>, by which export of exempted goods were not allowed under the notification. While reporting this amendment in<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10922" target="_blank">DDT 1369? 31.05.2010</a></strong>, we observed, </font></p>
<p align="justify"><strong><font color="#FF6633" 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. Board seems to have forgotten the fact that the policy of the government is to export goods and not taxes. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board has issued a Circular clarifying the notification. </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“It has been brought to the notice of the Board that some of the manufacturers of exempted goods are exporting such goods under bond. Subsequently, they claim refund of accumulated input credit under Rule 5 of the CENVAT Credit Rules, 2004. The department had objected to this procedure on the ground that if the goods are exempted from payment of excise duty, in that case the goods cannot be exported under bond for the reason that bond is executed only when goods are liable for payment of excise duty and if there is no excise duty, there is no question of exporting under bond. However, it has been observed that in some cases, the judicial pronouncements on the issue have been against the department.” </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Obviously the Board doesn't like these judicial pronouncements and are bent on overruling the irresponsible and ignorant judiciary. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board further clarifies:- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“<strong>The
policy of the govt. is not to tax the exports.</strong> There are different
methodologies and procedures for refund in different situations. If
the goods are exempted, <strong>then the department has prescribed
a detailed procedure for refund of input taxes through <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2004/exnt04_21.htm" target="_blank">Notification
No. 21/2004-CE (NT) dated 06.09.2004</a>,</strong> wherein a detailed
procedure requiring verification of details like manufacturing process,
input-output ratio, wastages etc., by the departmental officer is prescribed.
The reason for the same is that in case of exempted goods, the department
does not exercise control. It appears that the exporters are exporting
the exempted goods under bond to avoid detailed verification and scrutiny
by the department for claiming of refund of input taxes. Accordingly,
it was felt necessary to correct the <font color="#FF6633"><strong>anamoly</strong></font>. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of above, an amendment to the conditions for exporting under bond under the <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-CE (NT) dated 26.06.01</a></strong>, has been notified through <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_24.htm" target="_blank">Notification No. 24/2010-CE (NT) dated 26.05.10</a></strong>, wherein, goods which are exempted from payment of duty or chargeable to nil rate of duty, have been disallowed to be exported under bond. Since, 100% EOU's are also required to export the goods under bond, in terms of Customs and Excise notifications, the exports from 100% EOU's have been specifically excluded from the purview of this amendment.” </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board seems to be unaware of all its notifications. Board says that a detailed procedure has been prescribed for refund of input taxes through <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2004/exnt04_21.htm" target="_blank"><em><strong>Notification No. 21/2004-CE (NT) dated 06.09.2004</strong></em></a>. Now as per Condition 5 of this <em>Notification 21/2004</em>, <font color="#FF6633"><strong>The goods shall be exported on the application in Form A.R.E. 2 specified in the Annexure to this notification and the procedures specified in Ministry of Finance (Department of Revenue) <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2004/exnt04_19.htm" target="_blank">notification No.19/2004-Central Excise (N.T.), dated the 6th September, 2004</a></em> or in <em><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, 200</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2001/exnt01_42.htm">1</a></em> shall be followed.</strong></font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2004/exnt04_19.htm" target="_blank"><em><strong>Notification No. 19/2004</strong></em></a> is for rebate on goods cleared on payment of duty – hence not applicable for exempted goods and Notification 42/2001 requires a bond and as per the recent amendment, exempted goods are not allowed to be exported under this notification. So both the notifications are out! In spite of the proclaimed lofty policy of the government not to export taxes, Board seems to be bent upon exporting taxes contained in the export of exempted goods! There is no way the exporter of exempted goods can get back the duty paid on his inputs – all because Board is fussy about some some export procedure. What is wrong with the existing practice as upheld by the Judiciary? What is wrong in allowing refund of <em>CENVAT Credit</em> on inputs used in the manufacture of exempted goods? Now the Board has put such exporters in an impossible situation. It is really unfortunate that the Board while preaching lofty goals, actually causes impediments to exports. Board should have a little more respect for judicial decisions and government policy. If you are exporting exempted goods, the Board now wants you to export the duty on inputs also!!! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reason cited for this amendment is in case of exempted goods, the department does not exercise control. What is this control? The other exporters are “controlled” by the department? In any case, the department can always verify the admissibility of credit under Rule 5 and may even prescribe a special procedure for refund of <em>CENVAT Credit</em> in cases where exempted goods are exported. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And <strong>DDT</strong> is never tired of suggesting that the Board should immediately appoint an English Teacher to correct their great law making adventures; if there is no provision for appointing an English teacher, they should at least use the Spell Check provided by Microsoft Word. They want to correct the <strong>anamoly</strong>. Sir, if you had a little respect for your word processor, it would have corrected it to '<font color="#FF6633"><strong>anomaly</strong></font>'</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular928.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 928/ 18 /2010-CX Dated: June 28, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">That's Guy I am After</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN</strong> we reported the amendment in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10922" target="_blank">DDT 1369?31.05.2010</a></strong>, we got a mail from a concerned Netizen, “<font color="#FF6633">it is not clear of the intent of the department in amending <strong>notification no 42/2001</strong> -- so, how should the exporter export their exempted goods -- are we saying that no bond/lut would be required at all -- and if so, how does that stop them availing cenvat credit and seeking refund which the high court has apparently granted ... <strong>DDT</strong> has mentioned that what the Board probably wants to achieve ... is to deny Cenvat .... . But is that coming out sir and if so , how </font>... " </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I replied to him, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"even before the amendment, there was no requirement of bond or LUT for export of exempted goods. All that some exporter - manufacturers were trying to do was give an LUT even when it was not required, to get over the requirement of Rule 6(6)(v) of the <em>Cenvat Credit</em> Rules </font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now let us see the sequence. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Rule 19 of the CE Rules, goods can be exported without payment of duty, subject to conditions and procedure which are notified by Notification No. 42/2001. One of the conditions of Notification 42 is that the exporter shall execute a bond/LUT. The restriction on cenvat credit is not applicable for goods cleared for export under bond. Refund of cenvat credit is allowed under Rule 5 of CCR when goods are cleared for export under bond or LUT. Even the Refund Application requires a certificate that they are not able to utilize the credit on inputs or input services used in the manufacture of final products <font color="#663399"><strong>cleared under bond or LUT</strong></font>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To get the refund, clearance under bond or LUT is a must. Bond and LUT is required under <em>notification No. 42/2001</em> and now exempted goods will not be allowed to be cleared under Notification aNo. 42 and - so no refunds! </font></p>
<p align="justify"><em><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">There was this guy who went to a brothel, and specifically asked for a lady who had the clap. Naturally, nobody offered, but seeing the desperation on the guy's face, and the glitter of the green bucks, an oldy consented. After the act, she asks why? Say he. “I want to get it, so I can give it to my maid, she'll give it to father, he'll give to mother, she'll give to milkman, he'll give to the pastor's girl, she'll give it to the principal, and THAT'S THE GUY I WANT TO FIX FOR GIVING ME LOW GRADES.” </font></strong></em></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Sugar - Export Obligation - Extension </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Board's <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/cuscir10_001.htm" target="_blank">circular No.01/2010-Cus dated 11.1.2010</a></strong></em>, export obligation period for those Advance License Holders who had imported raw sugar between 21.9.2004 and 15.4.2008 but had not yet fulfilled their export obligations had been extended till 31.12.2011. Now the Board says the extension is till 31.03.2011 only. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/cuscir10_014.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 14/2010-Cus, Dated : June 28, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Company Secretaries can now set up CFCs under ACES </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Institute of Company Secretaries of India (ICSI) has entered into a Memorandum of Understanding with the Central Board of Excise and Customs (CBEC). This would enable Company Secretaries in practice to set up Certified Facilitation Centres (CFCs) under the Automation of Central Excise and Service Tax (ACES) Project which will facilitate e-filing of returns and other documents by assessees of Central Excise and Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Certified Facilitation Centre (CFC) is a facility, other than the physical front offices or Facilitation Centres of CBEC, which may be set-up and operated by a practicing Company Secretary (PCS) to whom a certificate is issued under the ACES project, where the assessees of Central Excise and Service Tax can avail the facility to file their returns and other documents electronically along with associated facilitation on payment of specified fees. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong>TIOL - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10680" target="_blank">DDT 1332 06.04.2010</a></strong>, while reporting Board's decision to enter into MOU with ICAI we asked why only CAs and why not provide an equal opportunity for CWAs and CSs as well. Later the Board allowed the CWAs also to set up CFCs for ACES, which we reported in <strong>TIOL</strong> - <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10723" target="_blank">DDT 1339 16.04.2010</a></strong>. And now the CSs get the nod for setting up the CFCs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why can't the Board get it right the first tim e itself? </font></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 align="left"><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"><strong><font color="#663399">Central Excise</font></strong> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refunds - Merely because the assessee has sustained loss, cannot be a ground to hold it is not a case of any unjust enrichment: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> burden was heavy on the assessee to show that while computing the cost of the material it had not included the duty paid by it. By looking into the certificate, we are of the opinion while computing the cost of the product, the assessee has calculated the duty. It is no doubt true that the assessee has sustained loss during relevant assessment year. Merely because the assessee has sustained the loss, cannot be a ground to hold it is not a case of any unjust enrichment as long as the assessee proved before the authorities that assessee has sustained loss on account of non inclusive of the duty. The Chartered Accountant certificate does not depict how the cost of the material is computed. But the document clearly shows that the cost of the duty is also included while computing the cost of production of the material. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Advance tax - Is interest chargeable even in a case where tax liability arises only by applicability of provisions of Sec 115JA and not otherwise? - NO, says High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> are two issues before the High Court. First is - Whether ITAT was right in holding that interest u/s 234A, 234B and 234C is chargeable even in a case where tax liability arises only by applicability of the provisions of section 115JA of the I.T. Act, 1961 and not otherwise. And the answer is NO. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Foreign Consulting Engineer providing service to Indian recipient - Not taxable prior to 18.4.2006</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADMITTEDLY</strong>, assessee is a foreign company. Even if the arguments advanced by Revenue is accepted, sub-section (31) of Sec.65 of the Act would apply to the services rendered by an Indian as a consulting engineer. In the present case, the dispute is in regard to November, 1998 to December, 2000. As on November, 1998, the word 'company' or 'Firm' was not included under the definition of sub-section(31) of Sec.65 of the Act. </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"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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