TIOL-DDT 1460 · 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 1460</font><br>
06.10.2010 <br>
Wednesday</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit on in Inputs Written Off - CBEC Clarifies </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CBEC in a letter to the Chief Commissioner, LTU, Bangalore (with copies to all CCs) clarifies:- </font></p>
<blockquote>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">On a harmonious analysis of the issue in the light of the intention behind the insertion of Rule 3(5B) in the CENVAT Credit Rules, and the provisions of the <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2002/excircular645.htm" target="_blank">Circular No.645/36/2002-CX dated 16.07.02</a></em>, it is stated that the reversal of CENVAT credit availed on the unused inputs </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">partially</font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> written off is required, if the inputs are </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">not capable of use</font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> in the manufacture of finished goods. </font></strong></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 3(5B) was inserted in the CENVAT Credit Rules with effect from 7.7.2009 and reads as, </font></p>
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">(5B) If the value of any, </font></strong></font></p>
<blockquote>
<p><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) input, or </font></strong></font></p>
<p><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) capital goods before being put to use, </font></strong></font></p>
</blockquote>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> on which CENVAT credit has been taken is written off </font></strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">fully</font></strong><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> or where any provision to write off </font></strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">fully</font></strong><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> has been made in the books of account, then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods: </font></strong></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Rule says, <font color="#FF6633"><strong>written off </strong></font><strong>fully</strong> and the clarification states <strong>partially</strong> <font color="#FF6633"><strong>written off</strong></font>. And here is yet another clarification issued through a letter to a Chief Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And who will decide that <font color="#FF6633"><strong>the inputs are </strong></font><strong>not capable of use</strong><font color="#FF6633"><strong> in the manufacture of finished goods.?</strong></font></font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/cxinstruct04.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No. 267/141/2009-CX8 Dated: June 24, 2010</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bank Guarantee for Customs purposes - Provision for automatic extension of guarantee period - CBEC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BONDS</strong> are executed before Customs authorities along with Bank Guarantee for various purposes under the provisions of the Customs Act. An issue regarding the inclusion of provision for automatic extension of the guarantee period in the Bank Guarantee given in favour of Customs has been brought to the notice of the Board. While the Custom Houses require auto-extension clause to be incorporated in the Bank Guarantees, some of the banks are not ready to comply with this requirement.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that Reserve Bank of India has issued a Master Circular DBOD. No. Dir. BC 14/13.03.00/2009-10 dated 1st July, 2009 wherein it has been clarified to the Banks that “the Public Notice issued by the Customs Department stipulates, inter alia, that all bank guarantees furnished by an importer should contain a self-renewal clause inbuilt in the guarantee itself. As the stipulation in the Public Notice issued by the Customs Department is akin to the notice in the tender form floated by the DGS&D, the provision for automatic extension of the guarantee period in the bank guarantees issued to DGS&D, as at sub-paragraph (iv), should also be made applicable to the bank guarantees issued favouring the Customs Houses.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
states that the RBI Master Circular can be accessed at<em><strong> </strong></em><strong><em><a href="http:www.rbi.org.in/scripts/BS_ViewMasCir%20culardetails.aspx?Id+5130&Mode=0" target="_blank">http:www.rbi.org.in/scripts/BS_ViewMasCir
culardetails.aspx?Id+5130&Mode=0</a></em></strong> <strong>[<font color="#FF6633">but
you cannot access it at this url – you may try <a href="http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=5130#2.2.7" target="_blank">http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=5130#2.2.7 </a>and
perhaps Board is not aware that Master Circulars of the RBI are valid only up
to 30 th June of every year and on 1st July again a fresh Master Circular is
issued. Fortunately in this case, there is not much difference between the 2009
and 2010 Master Circular</font> ]</strong> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the field to ensure that the provision for automatic extension of the guarantee to be got incorporated in the Bank Guarantees given in favour of Customs authorities. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/instruction10_007.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No.473/04/2009-LC Dated: June 30, 2010</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner (Appeals) Dismissing Genuine Appeals on Frivolous Grounds </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> the CESTAT observed that a Commissioner (Appeals) was dismissing genuine appeals on frivolous grounds. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2010/2010-TIOL-1279-CESTAT-MAD.htm" target="_blank"><font size="1">2010-TIOL-1279-CESTAT-MAD</font></a></strong>, the Tribunal observed, “It is not appreciated that this particular lower appellate authority has been dismissing such genuine appeals on frivolous grounds, of which there are several instances.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2010/2010-TIOL-1280-CESTAT-MAD.htm" target="_blank"><font size="1">2010-TIOL-1280-CESTAT-MAD</font></a></strong>, the Tribunal observed, “I find that the Department had filed a proper appeal before the lower appellate authority with necessary authorization. But the lower appellate authority has rejected the appeal on frivolous ground, as he has done in several other cases, without going into the merits of the case.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Adjudication and appellate machinery has totally failed in the Department. Honest officers religiously pass orders only in favour of Revenue. God knows what they are afraid of. Strange as it may sound but true, corrupt officers do pass reasonable orders. I may hasten to add that the converse is not true – that all reasonable orders are passed ONLY by corrupt officers. There are many honest officers, who pass reasonable orders initially, but soon they are disciplined and they fall in line. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Judges - Accountable? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Union Cabinet yesterday approved the Judicial Standards and Accountability Bill, 2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bill provides a mechanism for enquiring into complaints against the Judges of the Supreme Court and the High Courts; lays down judicial standards and requires the Judges of the Supreme Court and the High Courts to declare their assets and liabilities. <br>
<br>
At present there is no legal provision for dealing with complaints filed by the public against the Judges of the Supreme Court and the High Courts. Also, the judiciary has adopted resolutions for declaration of assets by Judges and “Restatement of values of Judicial Life'. However, there is no law that requires the Judges of the Supreme Court and the High Courts to declare their assets and liabilities and also there is no statutory sanction for judicial standards.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>570 Crores Demand on Mahindra Satyam </strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/mahindra_satyam.jpg" alt="Legal Corner Icon" width="276" height="183" hspace="5" border="0" align="center"></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Income Tax Department is understood to have issued a demand for Rs 570 Crores from Mahindra Satyam for illegally claiming tax credit on fictitious income during the period 2003-04 to 2008-09. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Company had requested the Income Tax Department to ignore the income as it was fictitious. But the Income department finds no provision to write off income.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If an assessee shows income which was simply not there, is Income Tax payable?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Meanwhile the founder of Satyam, Ramalinga Raju was summoned to the CBI office in Hyderabad yesterday.</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"> – Thursday'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"><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">Seizure of cash and drafts from assessee – Interest when money is returned by Department - Writ Petition not maintainable - High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NORMALLY</strong> petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained. The aggrieved party has the right of going to the civil court for claiming the amount and it is open to the State to raise all possible defenses to the claim, defences which cannot, in most cases, be appropriately raised and considered in the exercise of writ jurisdiction.</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">FBT - Sec 115WB - Assessee airlines is liable to Fringe Benefits Tax for free tickets given to employees even if cost was zero to employer: ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Tribunal are - Whether AO is under an obligation to accept what the tax auditor certifies that if a particular item falls within a given head mentioned in section 115WB(2), then it will fall within that head and will attract FBT, otherwise, it will not attract FBT. Whether assessee is liable to FBT in respect of free tickets to the employees even if the cost thereof was zero to the employer. Whether the amounts paid as per diem allowances to the pilots can be termed to be the expenses in the nature of hotel expenses covered u/s 115WB(G)(2) of the Act. And the verdict has gone against the assessee.</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">Transport of Goods through pipeline - not taxable prior to 16.06.2005 - Tax cannot be confirmed on basis of 'ifs and buts' - CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRIBUNAL</strong>, in number of matters, has held that when a new service is introduced, for the purpose of levy of service tax from a specified date, it has to be held that the said service was not liable to tax prior to the date of introduction.</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><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></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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