TIOL-DDT 1397 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1397 </font><font color="#663399"><br>
</font></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>08.07.2010 <br>
Thursday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cross utilisation of CENVAT credit – Myth and Reality </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is a manufacturer who avails CENVAT Credit on the inputs and pays excise duty on the final products. Incidentally, he is also a service provider and is also paying service tax on his output service. Now, he has credit of the excise duty/service tax pertaining to his manufacturing activity and also has the credit on the inputs/input services/capital goods pertaining to his “output service”. The question is whether the assessee is allowed to have a single CENVAT account and cross utilise the credit for payment of excise duty and service tax. In other words, can he discharge the service tax liability from the CENVAT credit of the manufacturing activity and <em>vice versa. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many officers believe this mixing of credit a blasphemy. Strangely, many top executives in trade and Industry are also not sure whether this is allowed and whatever little confidence in their understanding the provisions of law is overpowered by the powerful tax officers who would make them believe that this is not allowed. We were asked this question recently by the Sr. DGM of a top PSU. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit Rules, 2004, in fact, provide for cross utilization of CENVAT credit of excise duty paid on input and/or service tax paid on input services for payment of excise duty on finished excisable goods or taxable output services by a manufacturer or an output service provider or any person who is engaged in both manufacture and provision of output service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 3 (1) read with Rule 3(4) of the Rules unambiguously lays down this principle subject to other conditions stipulated in the Rules and there is no scope for any contrary interpretation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Surprisingly, this also coincides with the view of DG Audit. In a recent letter, he communicated that “The CENVAT credit on inputs, capital goods and input services which are used for manufacture of goods or for provision of services is available in a <strong><em>common pool </em></strong>and can be used for payment of excise duty and/or service tax. Therefore, the amount of CENVAT credit taken during a period, which is shown in ER-1 or ST-3 return, should be same”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unfortunately such important clarifications are confined only to the Commissioners and the trade and Industry, who are eulogised as “Stakeholders” in the flowery language used in the TRU letters, are kept in dark. God only knows how many show cause notices have already been issued on this issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For a change, why can't the Board demystify the doubts and give a clarification? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/dg_audit.htm" target="_blank">click here</a> </strong>the DG (Audit) letter Dated 30.3.2010 </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Holding of Goods by Units in FTWZ </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department of Commerce has clarified that FTWZ units can hold goods on behalf of foreign supplier and buyer and DTA supplier and buyer as well, subject to fulfillment of provisions made in Rule 18(5) of SEZ Rules, 2006. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">FTWZ = Free Trade and Warehousing Zone </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=260&filename=sez/sez_instructions/2006/sez09ins060.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Department of Commerce( SEZ Division) F.No-D.12 /4/2010- SEZ:Dated July 6, 2010 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Reliance and PVR challenge Service Tax on film Distribution </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ONE</strong> of the new services introduced in the Finance Act, 2010, which did not get much publicity, is the service tax on film distribution – zzzzt – transferring temporarily or permitting the use or enjoyment of copyright. A representative of one of the top film producing companies in India attended our Seminar last year and represented to the Chairman, CBEC that the Department was attempting to tax film distribution as Business Auxiliary Service, which is not correct. Maybe this gave the idea to the Board to tax film distribution. Contrary to popular belief, the Film Industry is not a pot of gold – while a few producers make money, most of them lose large amounts of money – after a film is produced, it is very difficult to find a theatre to exhibit the movie and if at all, it is exhibited, it is difficult to get the money back – the poor rich people! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Reliance Big Entertainment and PVR Pictures have filed a writ in the Delhi High Court challenging the Service Tax on the transfer of copyright. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MEA wants IRS Officers – Government @ speed of snail </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOREIGN</strong> Secretary Nirupama Rao wrote a letter to Revenue Secretary Sunil Mitra on 08.06.2010, which stated, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>With the increasing importance of economic diplomacy in the overall foreign policy framework of India, there is a requirement to instill a greater degree of economic and financial expertise at the policy-making level within MEA . </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is felt that officers of the Indian Revenue service and the Indian Customs & Excise Service would fit well into the above roles. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She wanted the Revenue Secretary to send her selected list of meritorious Customs Officers of Deputy Secretary/ Under Secretary level who would like to work under MEA on Deputation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This important letter reached the Revenue Secretary on 10/06/2010. After it travelled though the Finance Ministry's bureaucratic maze, the CBEC addressed a letter to all the CCs on 23 rd June and asked them to send the application of the willing officers by 5 th July 2010. The Board also requested its website manager to carry this communication in its website. The Board's website promptly carried it on 7.7.2010 – two days after the last date for submitting the applications !. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can find the communication along with its travel details:<a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/mea-us.pdf" target="_blank"> <strong>click here</strong></a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Today's cases – TIOL @ speed of light </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IMPORTANT</strong> judgements have been delivered by the Supreme Court which we cannot hold till tomorrow and so we bring them for you today. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Income tax - Sec 10(33) - Revenue disallows loss arising out of dividend-stripping transaction prior to 1.4.2002 on ground that it was artificial transaction - NO, it is genuine and allowable, says Supreme Court:</font> </strong>THE dividend-stripping has been a hot topic in the domain of taxation for a long time. When the ITAT Special Bench decision in the case of M/s Walfort Share & Stock Brokers Pvt Ltd came, many revenue observers felt that it may slow down litigation. But it did not happen, and Revenue went to Bombay High Court. After losing there the Revenue filed an SLP before the Apex Court which has finally ruled against the Revenue and settled the issue in favour of assessee. The issue before the Bench was - Whether the loss arising in the course of dividend stripping transaction taking place prior to 1.4.2002 was disallowable on the ground that such loss was artificial as the dividend stripping transaction was not a business transaction. <font color="#663399">[this judgement was delivered by the Supreme Court on 06/07/2010] </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Central Excise – Appeals – CESTAT dismisses assessee's appeal; Later Revenue come up with an appeal against the same order – Doctrine of Merger not applicable as the issues in the two appeals are different – Supreme Court </font></strong><font color="#FF6633">:</font><font color="#FF3333"> </font>The doctrine would have no application for the plain and simple reason that the subject matter of the appeal filed by the assessee against the adjudicating authority's order in original was limited to disallowance of two out of eight deductions claimed by the assessee. The Tribunal was in that appeal concerned only with the question whether the adjudicating authority was justified in disallowing deductions under the said two heads. It had no occasion to examine the admissibility of the deductions under the remaining six heads obviously because the assessee's appeal did not question the grant of such deductions. Admissibility of the said deductions could have been raised only by the Revenue who had lost its case qua those deductions before the adjudicating authority. Dismissal of the appeal filed by the assessee could consequently bring finality only to the question of admissibility of deductions under the two heads regarding which the appeal was filed. The said order could not be understood to mean that the Tribunal had expressed any opinion regarding the admissibility of deductions under the remaining six heads which were not the subject matter of scrutiny before the Tribunal. That being so, the proceedings instituted by the Commissioner, Central Excise brought up a subject matter which was distinctively different from that which had been examined and determined in the assessee's appeal no matter against the same order, especially when the decision was not rendered on a principle of law that could foreclose the Revenue's case. <font color="#663399">[this judgement was delivered by the Supreme Court on 06/07/2010]</font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Income
Tax – TDS – Payment made to foreign Company for fishing vessels – Liable
to deduct TDS and if not deducted, to be treated as in Default – Supreme
Court </font></strong>: total income of non-resident company shall include
all income from whatever source derived received or deemed to be received
in India. It also includes such income which either accrues, arises or
deem to accrue or arise to a non-resident company in India. The legal
fiction created has to be understood in the light of terms of contract. <font color="#663399">[this
judgement was delivered by the Supreme Court on 07/07/2010 – yesterday
and can be accessed from <a href="http://www.taxindiainternational.com">www.taxindiainternational.com</a>)</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>We bring you all these judgements today in tune with the TIOL Traditions. </em></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"> – Friday's cases</font></strong></font></strong></font></p>
<p align="justify"><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><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Finalisation
of provisional assessment – Assessee taking suo motu credit in PLA
account of excess duty paid proper – Revenue appeal dismissed: CESTAT </strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> is
an epoch-making order. During
the period from April, 1995 to March, 1997, the assessee was paying duty
on their final products on the basis of provisional assessments. The price-lists
filed by them came to be approved eventually by the Assistant Commissioner
as per order dated 17/06/1999, wherein, higher PME (Post-Manufacture Expenses)
deductions than what was claimed was allowed for the periods 1995-96 and
1996-97.</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>Detention
of imported Goods for want of Licence under Drugs And Cosmetics Act- When
licence was not required, detention illegal – quashed: High
Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN </strong>the petitioner is entitled to import Benfotiamine without a licence by reason of exemption granted under the Rules of the Drugs and Cosmetics Rules, the purpose of import being one for manufacturing food supplement, the question of detention by way of confiscation or further proceeding for the purpose of penalty on the ground that the import is not supported by licence in Form 10-A, hence, does not arise. </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 DDT </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>