TIOL-DDT 1471 · the untouched capture
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<!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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1471 </font><br> 21.10.2010 <br> Thursday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Nexus should be established between services rendered and business carried on - Landmark Bombay High Court Judgement. <br> Is Maruti Suzuki </font><font color="#006600" size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2009/2009-TIOL-94-SC-CX.htm">2009-TIOL-94-SC-CX</a></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> being correctly interpreted? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> 'across the board' credit of service tax and excise duty has created enough work for the consultants and hundreds of cases are pending in various stages of adjudication and appeal.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Credit of service tax paid on Mobile phones, Outdoor catering, Gardening and landscaping, Services used in residential colonies belonging to the factory, mediclaim policies - well these are some of the dispute areas and Show Cause Notices are being issued merrily and are being adjudicated this way or that. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The whole confusion starts with the definitions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Inputs</font></strong> are to be used in or in relation to the manufacture of final products. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Input Service</font></strong> includes activities relating to business . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Normally all the commercial activities of a manufacturer will be relating to his business and so he should be allowed Credit. I used to argue that even if you send your receptionist to the beauty parlour, the credit is admissible. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the dispute was going on merrily, last year the Supreme Court delivered a judgement in <em>Maruti Suzuki Ltd. Vs . Commissioner of Central Excise, Delhi</em> - <strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2009/2009-TIOL-94-SC-CX.htm">2009-TIOL-94-SC-CX</a></font></font></strong>, wherein it was held that inputs falling in the inclusive part must have <em><strong>nexus</strong></em> with the manufacture of the final product . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court was dealing only with inputs and not input services – and there is a difference. Now this <em><strong>nexus</strong></em> is being imported to input services . Though the Supreme Court was dealing with inputs and not input services, credit is being denied following <em>Maruti Suzuki</em>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bombay High Court in a judgement delivered last week held <em>establishing a residential colony for the employees and rendering taxable services in that residential colony may be a welfare activity undertaken while carrying on the business and such expenditure may be allowable under the Income Tax Act. However, to qualify as an input service, the activity must have nexus with the business of the assessee. The expression 'relating to business' in rule 2(l) of CENVAT Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this landmark case today. Please see <strong>Breaking News. </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Filing of SLPs in Supreme Court – CBDT Directives – Disobedient Field? <br> Officers have to access mail every day. It is no longer a choice for them</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN</strong> it comes to flouting Board directions, the field officers of CBDT are in no way inferior to their brethren in CBEC. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 14th June 2010, member, CBDT wrote a letter to all the Chief Commissioners and DGs of Income Tax reminding them of the discussions in the Chief Commissioners' Conference. The Member noted that SLP proposals are being sent very late or incomplete. The CBDT views this with high concern and decided to fix personal responsibility on officers concerned. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday, four months after the Member's letter, the DG, Legal & Research has written to the Chief Commissioners that even after the Board's letter there is no improvement in the situation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Deficiencies in the SLP proposals sent by the field: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ They are sent just before the limitation is to expire or already expired. Board's direction to explain delay and to fix responsibility is not being complied with. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Several Columns are left blank. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Limitation is not computed correctly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Annexures and pages are not legible. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Softcopy of the annexure is not being sent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Chief Commissioner's specific comment about the desirability of contesting the High Court Order is not enclosed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ CITs are directly submitting proposals. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Affidavits and rejoinder affidavits are not filed promptly. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DG further informs that important information is being sent by mail. Officers have to access mail every day. It is no longer a choice for officers. The DG wants the Officers to pay attention and avoid any unpleasant situation later. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2010/dgi_letter.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGIT ( L&R ) Letter dated 20 October 2010</strong></font></a></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2010/letter_II.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board's Letter Dated 14 June 2010</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT – Stay – What about Balance of Duty? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a recent case before the CESTAT, the appeal was against a demand of Service Tax of Rs.1 ,29,44,543 /- with interest and penalty. The Tribunal directed the appellant to make a pre-deposit of Rs. 60 Lakhs . Subject to compliance with this pre-deposit, realization of penalty as well as interest shall be stayed during pendency of appeal. Now penalty and interest are waived, but what about the balance of duty? Normally when the Tribunal orders stay, it clearly mentions that the ‘balance of duty' is waived or the ‘Department is barred from recovering the balance of duty'. In this case, there is no such order and technically the Department can recover the balance of duty also! </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this order today. Please see Breaking News </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Excise Exemption to Petrol and diesel to UN or International Organizations </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has exempted</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Additional Duty of Excise on Motor Spirit, leviable thereon under section 111 of Finance (No.2) Act,1998 </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Additional Duty of Excise on HSD Oil, leviable thereon under section 133 of Finance Act,1999 and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Special Additional Duty of Excise on Motor Spirit and HSD Oil, leviable thereon under section 147 of Finance Act, 2002 </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">when supplied to the United Nations or an international organisation for their official use subject to fulfilment of the specified conditions. They are already exempted from basic Excise Duty by <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/excise/post2000/etariff95_108.htm" target="_blank"><em><strong>Notification No. 108/1995-Central Excise, DATED: August 28, 1995</strong></em></a> </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_33.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 33/2010- CX ., Dated : October 19, 2010</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Hyderabad Grievances</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> continue from yesterday on the issues raised in the Hyderabad Open House held on 19.10.2010. We are only giving the gist of the answers given by the Chief Commissioner. The replies given by the Chief Commissioner were long and like an impromptu speech, rather difficult to cover. We are bringing these only to highlight the problems which may be common across the country. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Returns - e filing and manual?</strong> After introduction e-filing by almost all companies, Range Superintendents are asking the 'hard copy' to be filed as well. Please clarify whether it is necessary. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no requirement of filing hard copies after electronic filing of the returns. This must have happened because some superintendent might not be comfortable with electronic filing. Specific cases may be brought to the notice of the senior officers. “If it is due to ignorance of the officer, we will educate him; if there are any mala fide intentions, we will take action” </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Nobody to acknowledge:</strong> when assessee goes to file his return or other papers, the Superintendent is not available. In his absence, nobody is willing to take the papers and give acknowledgement. Please have some system in place so that somebody can give acknowledgement or clarify whether papers can be sent by Registered post. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Complaint/ suggestion boxes</strong> may be put in all Ranges. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Centralised Inward Section</strong> may be opened at Head Quarters, so that people can give papers there. Secondly, sometime on specific issues addressed to the department no response is received from Divisional AC or Commissionerate. As per citizen charter every letter has to be given reply. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will be sorted out, but it is not possible to accept letters meant for the Divisional ACs at the Commissionerate HQrs . </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Certificates by Central Excise Officers:</strong> Sometimes some authorities like Railway/Electricity Boards are asking some certificate from Range Superintendent to certify that duty has been paid on certain goods. Department, sometimes, says that there is no Rule to give such certificate. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">There will not be a rule for everything. As Government servants, the Central Excise officers are bound to serve the citizens and if an officer is satisfied that duty has been paid, he should happily give such a certificate. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs Weights: </strong>XYZ are the regular importer of Industrial bearings from Russia. ALL THE bearings MEET THE INTERNATIONAL STANDARDS and meant for use by big industrial uses like BHEL / NCL etc. As per the valuation guidelines they have accepted to get the bearings valued at 4.7 USD/ Invoice value whichever is higher. They are also submitting the declaration of the weight of the bearing and also supplied catalogue containing the weight of the bearing. They are also indicating the net weight and gross weight of the bearing and the weights are in agreement with the container weight etc. But the Customs authorities at Hyderabad are insisting to get each bearing to be weighed and when the scales are not there <strong>they are asking us to get the weighing scales ourselves</strong>. This process is taking minimum 6 days to get the consignment cleared. As our bearings are of weight ranging from 50 kgs to 450 kgs each- sometimes we are engaging labour to lift the bearings. We request the authorities to clear the goods based on our declaration of weight with reference to the marking on the bearing- if required can test check instead of insisting the first check which takes two days. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">As such weighing is not required for each bearing and when I want to weigh it I must provide the weighing machine. This will be sorted out. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Dealer without godown:</strong> Some of Paper merchants association members want to get EXCISE REGISTRATION done as the end consumers are eligible and insisting for Excise Modvat /Gate Pass. Their members are mainly doing sale in transit and do not have/need a godown . The Excise Officials are insisting for a Godown for Excise Registration and members are finding it difficult to get Excise Registration done as they do not need a godown and the godown is an extra cost and overhead. They request the CHIEF COMMISSIONER OF CENTRAL EXCISE, CUSTOMS to give instructions/ circular to officials advising them to register the traders without insisting for Godown . </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">This is being allowed only for certain liquids like liquid ammonia. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Abnormal delay in receiving the shipping bills online to the DGFT WEBSITE</strong>. It is taking so many months to get the shipping bills online with the DGFT site from the customs website for the goods exported from ICD / CFS . Please find the list of shipping bills which are not yet received through online in the ANNEXURE 1, without which we are unable to claim our export incentives such as DEPB etc. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Long pending regular / supplementary duty drawback claims. Please note that the duty drawback claims are not being settled in time, rather it is pending years together in spite of repeated reminders/ follow up at ICD / CFS . Please find the list of pending duty draw back claims as per the ANNEXURE 2. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Most of the cases are already cleared and the rest will be cleared soon. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Unusable Credit?</strong> XYZ are manufacturers of OTS cans [Open Top Sanitary cans] used as packing material in Food Processing Industry for packing processed fruits, vegetables and food products. We procure raw-material i.e. Tinplate sheets from M/s TATA Steel Limited, Jamshedpur on payment of 10.3% CENVAT applicable on Tinplate under chapter 7210:12:90. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Excise authorities issue CT-2 from, under notification 43/2001 CENT) Dt. 26-6-2001 for procurement of excisable goods without payment of duty to manufacturer cum exporter to procure the duty free goods from DTA manufacturer. All our customers, who are food processors cum exporters avail of this facility from their concerned Excise authorities and issue a CT2 form in our favour for procurement of OTS cans without payment of duty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DTA manufacturer [here he becomes a deemed exporter] has no provision in the Central Excise Rules to get compensation of duty paid on raw materials used for deemed export goods. The duty paid by us on raw-materials gets piled up as unutilized cenvat every year. Our unutilized Cenvat balance as on date is Rs. 125 Lacs and is adding up by every passing month. There is no provision (a) either for refund or (2) corresponding procurement of raw material without duty payment just as in our customers' case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">XYZ request for introduction of provision (a) either for refund of duty paid on raw-materials used for deemed export or (b) provision for procurement of duty free raw-materials for purpose of manufacture of goods for deemed export. </font></p> <p><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Please make a representation to the Board. </font></strong></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><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">Telephone installed at residence of executive - No credit of input service tax - CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SERVICE</strong> tax credit is available for the telephone installed only in the business premises. No input service is available on the telephone installed at the residence of the executive of the appellants. </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">Sec 43A - Can assessee claim loss arising from foreign exchange forward contract entered into to protect purchase of capital assets from effect of fluctuation in foreign currency? - Yes, it is admissible loss: 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 assessee is entitled for claiming loss on account of settlement of the foreign exchange forward contract entered into to safeguard from the effect of fluctuation on foreign currency loan for purchase of plant and machinery or is eligible for depreciation in the nature of expenditure to be added to the cost of the capital asset. </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">Rejection of Refund Claim - When Statutory appeal Remedy is available, writ is not maintainable - High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a case where party was not vigilant and had failed to avail of the statutory remedy he is not justified in invoking the extra ordinary jurisdiction of High Court under Art.226 of the Constitution of India.</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"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p> </body> </html>