TIOL-DDT 1439 · the untouched capture
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<strong><font color="#663399" size="3">TIOL-DDT 1439</font><br>
07.09.2010<br>
Tuesday </strong></font> </div>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT
Credit on services used subsequent to manufacture – CESTAT Order Stayed</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REMEMBER</strong> the landmark judgement of the Chennai Bench of the CESTAT in the Chemplast Sanmar
case – </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2010/2010-TIOL-180-CESTAT-MAD.htm" target="_blank">2010-TIOL-180-CESTAT-MAD</a></strong></em>?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CESTAT ruled that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify"><em>There
is no power with the Government to make rules to provide for credit in respect
of service tax paid on input services which is used neither in or in relation
to manufacture of excisable goods nor for providing taxable output service.</em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">The
services which are used by the manufacturer subsequent to completion of the
manufacturing and for sale of the goods cannot, therefore, be considered as
input service in or in relation to manufacture.</font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Madras High Court has stayed this order. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please
see Chemplast v Commissioner of Central Excise - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-618-HC-MAD-ST.htm" target="_blank"><em>2010-TIOL-618-HC-MAD-ST</em></a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Nostro
Accounts by Banks- Service Tax Evasion </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AN </strong>incident Report by the DGCEI states,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“On
the basis of Intelligence to the effect that M/s. Xxx Bank has entered into
agreements with Banks located outside India to maintain Nostro Accounts, this
office took up investigation in March 2010. For maintaining the said Nostro
Accounts, the service charges are remitted in foreign currency. These remittances
are chargeable to service tax under Service Head of “Banking & Other
Financial Services” as per the provisions of Section 65(12)(a)(ix) of
the Finance Act 1994 and is taxable under Section 65(105) (zm) of the Finance
Act 1994. These remittances are essentially meant for operation of Nostro
Bank Accounts which comes under the ambit of sub-head referred to as “OTHER
FINANCIAL SERVICES” and the bank is liable to pay service tax w.e.f
<font color="#FF3333"><strong>16.06.2005 </strong></font>onwards as per the
provisions of law.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
As a sequel to the investigations, the bank has deposited the amount of service
tax amounting to Rs.23,48,882/- and interest thereon of Rs.6,66,619/- in respect
of their FEOs at Delhi, Mumbai, Kolkata, Chennai and Bhadohi.”</font></p>
</blockquote>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
what is the significance of 16.06.2005? Is it not 18.04.2006?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What
is a Nostro Account?:</strong> An account at a foreign bank where a domestic
bank keeps reserves of a foreign currency. A bank keeps a nostro account so
that it does not have to make a currency conversion (which brings with it foreign
exchange risk) should an account holder make a deposit or a withdrawal in that
foreign currency. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/nostro_account.htm" target="_blank">DGCEI Incident Report No.24/Service Tax/2010-11; Dated: July 26, 2010</a></strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">
Service Tax – BAS – Promoting Real Estate Business in the air –
PRE-DEPOSIT reduced to 60 Crores from 100 Crores: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong>
the Jetlite case -</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"> <em><strong>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2010/2010-TIOL-854-CESTAT-DEL.htm" target="_blank">2010-
TIOL-854-CESTAT-DEL</a>)</strong></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
the Tribunal had ordered Jetlite to make a pre-deposit of Rs. 100 Crores in
a Service Tax case demanding over Rs. 128 Crores with an equal amount of penalty.
On a writ petition, the Delhi High Court has modified the Stay Order and directed
the petitioner to deposit Rs. 60 Crores with a bank guarantee for Rs. 10 Crores
by 25th September, 2010. The parties are directed to appear before the Tribunal
on 27th September 2010 and the Tribunal has to fix a date for hearing the appeal
and the appeal is to be decided by November 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last
year JetLite had made a loss of more than 600 Crores – they should now
find 60 Crores in a month!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please
see</strong> JET LITE INDIA LTD AND ANR v UNION OF INDIA AND ORS - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-619-HC-DEL-ST.htm" target="_blank">2010-TIOL-619-HC-DEL-ST</a></strong></em></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>UID
is safe - Nilekani</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ACCORDING</strong> to Unique Identification Authority of India Chairman Nandan Nilekani, “The
Unique Identification System has an inbuilt security and privacy component that
ensured that the data from the data bank could not be accessed except on grounds
like national security”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
project would help in delivery of government's welfare schemes, boost financial
inclusion beside enabling other service providers like banks, insurance, to
tap on the UID for authentication purposes.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He
said the UID could also help in setting up of micro ATMs as part of the government's
objective of bringing in financial inclusion. Through the UID a grocery store
in a village could help a beneficiary of welfare scheme to withdraw cash by
simply providing the UID number.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He
said that the private sector could learn from the rigorousness of the government
sector. </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">
– Wednesday's cases</font></strong></font></strong></font></strong></p>
<p align="justify"><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">Customs</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CASE
reluctantly pursued – Strictures against DRI investigation – Commissioner
equated production of shipping bills to taking bath in Ganga which is supposed
to wash away all sins – Misdeclaration in obtaining advance licence –
Export Obligation not fulfilled – Duty and Penalty upheld : CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RIGHT</strong>
from the investigation of the case till adjudication order was passed, one gets
a feeling that this case was reluctantly pursued.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Commissioner has accepted the export made by the appellant by sourcing the goods
from suppliers who were never provided any of the imported inputs and he has
not bothered to check the exports were logged in the DGCE book and whether DGFT
had accepted the claim of appellant. Fulfillment of the export obligations,
by production of shipping bills, has been equated to taking bath in Ganga which
is supposed to wash away all sins, by the Commissioner.</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">SEC
234C - Can Revenue charge interest on mistakenly overstated income in ITR due
to arithmetical error - NO, interest cannot be levied on non-chargeable tax:
ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Tribunal is - whether mistakenly overstated income in the ITR
attributable to an arithmetical error is to be excluded for charging interest
u/s 234C - Whether the assessee is eligible for interest prior to 6.1.2004 on
the refund granted or the delay up to 6.1.2004 which is attributable to the
assessee as per the provisions of sub-section 2 of section 244A. And the answer
is NO.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service
Tax </strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">HANDLING
Charges or Administrative expenses - not a ‘Business Auxiliary Service': CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RESPONDENTS</strong> have entered into a tripartite agreement with the Bank and the farmers under
a statutory obligation on them and the amount which they have received is only
handling charges or administrative expenses – Activity not covered under
the category of ‘Business Auxiliary Services' – Revenue appeal dismissed:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<font color="#663399"><strong>See our columns Tomorrow for the judgements</strong></font></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">
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