TIOL-DDT 1479 · 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 1479</font><br> 02.11.2010<br> Tuesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Construction of Residential Complex - No Tax - holds Commissioner(Appeals)</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant are having a Power plant at Kottayur, Kumbakonam. They had filed a refund claim of Rs.15,65,253/- being Service tax paid by them through a contractor who constructed 46 Nos of residential quarters for them.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The refund claim was filed on the grounds that they awarded a contract for construction of 46 numbers of Residential Quarters for residential/personal used of their employees/workforce, to the contractor; that the contractor paid Service Tax for the said work and collected the same from them; that construction of Residential complex was brought into service tax net with effect from 16.06.2005 that as per the definition of 'Residential Complex' under Section 65(91a) of the Finance Act, 1994, residential complex did not include a complex which was constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex was intended for personal use as residence by such person and that personal use included permitting the complex for use as residence by another person on rent or without consideration; that since the construction of the said buildings was for personal use, it did not attract Service Tax; that the contractor had paid Service Tax on the said construction by mistake of law and had collected the same from them; that they had borne the service tax themselves and had not passed on the same to any other person and hence applied for the refund. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner(Appeals) held:</font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“I find that the appellant's case squarely fits into the exclusion clause of the definition under Section 65(91a) of the Finance Act, 1994. It also noticed that the Board vide Circular F.No.332/16/2010-TRU dated 24th May 2010 has clarified that as per definition, the residential complex (for service tax purposes) does not include a complex which is constructed by a person directly engaging any other person for designing/planning/construction and is intended for personal use as residence by such person. The definition also explains that personal use includes promoting use of such property as residence by another person on rent or even without consideration.” </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Committee of Commissioners will certainly find this order not proper and legal and the matter will reach the Tribunal soon. But we should be happy that there is at least one Commissioner who has respect for the Board and the Law! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/aban_power_company.htm" target="_blank">Click here</a></strong> for the order of the Commissioner(Appeals) </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ACE Troubles</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> woes of those filing central Excise and Service Tax returns and applications electronically are many. Harried assessees have told us about their frustrating experiences. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An assessee informs us, “If I provide more than one service, I am paying two GAR-7 challans or even if I am single service provider and pay twice service tax i.e. two GAR-7 challans in 1 month and filling online Service tax return ,It is not accepting; it says challan details are wrong and not going ahead. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">We are told this problem has been solved. All that is required is to put a comma after one GAR7 number and then another comma after the second GAR7 and so on. Simple? Try it; it may even work! </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another asssessee writes in,</font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Central Excise and Service Tax department has been automated and applications for registrations are being accepted online only. once an application for registration is made online and submitted to the system, Registration number is automatically generated. Registration is formally generated and granted later on.This generated number does not change.Assessee can carry on his or her business without waiting for formal registration to be granted. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the banks are not accepting payments unless the assessee name appears in the NSDL data base.NSDL updates its database from ACES data base.However assessee name is not transferred to NSDL database unless registration is ISSUED by the jurisdictional Authorities(REFER ACES website R.B.I circular).In view of banks not accepting payments assessee has to approach authorities and request for grant of registration.Thus the claim that registration is deemed to be granted if not granted within 7 days is nullified with this RBI circular.I would like to request you to highlight this issue through your portal.” </font></em></p> <p><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will ACES look up? </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tariff Value of Brass Scrap increased</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has increased the Tariff Value of Brass Scrap from US Dollars 4132 to 4194 per MT. There is no change in the tariff value of other items. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_092.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION NO.92/2010-CUSTOMS (N.T.) Dated: October 29, 2010 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export of Edible Oils - Permission Extended </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> export of edible oils in branded consumer packs of up to 5 Kgs . was permitted subject to a limit of 10,000 tons during 01.11.2009 to 31.10.2010 from Customs EDI Ports Vide <em>Notification 18 /2009-2014 dated 02.12.2009</em>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is extended up to 31.10.2011, subject to:-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exports will be permitted from Custom EDI Ports;(No change in ports) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The period of export will be from 01.11.2010 to 31.10.2011; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The total quantity ceiling permitted for exports is 10,000 tons; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ There shall be no change in packing i.e. exports permitted in branded consumer packs of up to 5 Kgs. </font></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2010/dgft10not009.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT NOTIFICATION NO. 09/(RE-2010)/2009-2014, Dated: November 1, 2010 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No OBC Reservation for appointment of ITAT Vice-President - CAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TWO</strong> Hon'ble Members of the Income Tax Appellate Tribunal (ITAT) have approached the Central Administrative Tribunal (CAT) against the selection process for appointment of Vice-President of the ITAT. Grievance of one Member is that he was superseded and his junior is being appointed VP and the grievance of the other Member is that there should be reservation for Other Backward Classes and he belonging to OBC should have been considered. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAT was not impressed with both the pleas. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal held that <font color="#FF6633"><strong>Merit-based promotions would inherently involve the element of supersession</strong></font> and that a <font color="#FF6633"><strong>citizen must have faith in the system rather than crying foul when he has not been able to make it on merits.</strong></font> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently a former CESTAT Member wrote that he was overlooked thrice for the post of Vice-President of CESTAT between 1999 and 2004 – though he was eminently qualified! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the advocates of seniority have a point. When appointments and promotions are strictly by seniority, there is no chance of arbitrariness and in any case, if somebody is good enough to be a Member what prevents him from being good enough to be a Vice- President, a post which carries the same pay as that of the Member? </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=78&filename=pitara/sercaselaw/caselaw/2010/2010-TIOL-01-CAT.htm" target="_blank">Please Click</a></strong> Here for the Judgement of CAT. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Activist Judge Krishna Iyer is 96 – may you live long! </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>54 </strong>Years ago, he was a Minister in the First Communist Government in Kerala. Fate brought him to the the Supreme Court Bench and since then judicial writing has been elevated to a standard hard to reach and impossible to surpass. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Judge is exalted as law giver and Prophet in the Temple of Justice. He must have the wisdom of Solomon, the moral vision of Isiah, the analytic power of Socrates, the intellect creativity of Aristotle, the humanity of Lincoln and Gandhi, and the impartiality of the Almighty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Measured by these expectations every Judge is something of a disappointment. But it seems there are three exceptions. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Late Lord Denning in England </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Late Justice Douglas of the United States Supreme Court </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Justice Krishna Iyer </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He once told the Chief Justice, “one great lesson that appointing authorities must remember is that a person who is not able to weep at the sight of human suffering and respond with quick compassionate action should not be chosen as a Judge". </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Born in a traditional brahmin family, Justice Iyer once held, “Daily trivial differences get dissolved in the course of time and may be treated as the teething trouble of early matrimonial adjustment. While the stream of life, lived in married mutuality may wash away small pebbles what is to happen if intransigent incompatibility of minds breaks up the flow of the stream? In such a situation we have the breakdown of a marriage itself and the only course left open is for law to recognize what is a fact and accord a divorce”. </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“While there is no rose but has a thorn, if what you hold, and no rose, better to throw it away”. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Islamic finance has proven successful in poverty alleviation and promoting sustainable growth in many countries, including the United States, and it is very relevant in our country where 20 million people are starving," </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday at the birthday function, Chief Justice of India Justice Kapadia said he had never dreamt that he would one day be sitting with Justice Iyer! </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DGCEI charges Major TV Channels with Service Tax Evasion</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is learnt that the DGCEI has recently issued notices to major TV Channels alleging evasion to the tune of Rs. 300 Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Charges: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These companies have procured the TV Channel program distribution rights for distributing the TV Channel programs and sale of advertising time slots on such TV Channels on behalf of their foreign parent companies. The TV Channel programs are broadcasted by the foreign broadcasters and signals in encrypted form are disseminated by them in electro-magnetic waves by up-linking to Satellites. The receipt of TV Channel programs by down-linking of TV Channel signals in India tantamount to import of broadcasting service and the money consideration paid by the Indian Companies to their respective foreign broadcasting parents for import of TV Channel signals is liable for payment of Service Tax by the Indian companies on behalf of their parent companies, under reverse charge mechanism, as per the provisions of Finance Act, 1994, Service Tax Rules, 1994 and Taxation of Services (provided from outside India and received in India) Rules. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They were also found evading Service Tax on several other issues including ‘Intellectual Property Right Service' by undervaluation and wrongfully claiming exemption from service tax on 98 % value of the services and paying service tax on only 2 % value of services. Apart from the above, they were also given show cause notice for evasion of Service Tax under ‘Business Auxiliary Service'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They were also found engaged in undervaluation of ‘Business Auxiliary Service' provided by it to various broadcasters while distributing their TV Channel services. They were found to be collecting certain amounts from the broadcasters under the head reimbursement of expenses and not including the amount of such reimbursements in its assessable value, thereby evading Service Tax. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs Complications - Board solutions? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently Member (Cus & EP) of CBEC, SK Goel chaired a meeting of the Customs Consultative Group in Mumbai. We bring you some of the queries raised and the Member's crisp replies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT credit lying accumulated at the time of conversion of DTA unit into EOU unit:</strong> A DTA Unit is permitted to avail of the credit of Excise and CVD paid on the inputs and capital goods and use the same for payment of Excise Duty on the clearance of finished goods. When the DTA unit becomes an EOU, there is no Excise Duty payable on the export clearances. The Excise Duty is however payable on the DTA clearances. It happens that a DTA unit has accumulated Cenvat credit with it at the time of conversion to EOU. It is logical that the accumulated credit lying with it should be allowed to be used for payment of excise duty on DTA clearances. This does not entail any loss of revenue to the Government. However, as is reported, the Central Excise field formations have taken the view that the accumulated CENVAT Credit can not be used by an EOU and that such credit must be reversed and paid back to the Government. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is, suggested that suitable clarification to this effect may be issued with a view to provide relief to the EOUs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><font color="#FF6633">Board has clarified, vide Circular No. 77/99-Customs, dated 18.11.199, that: </font></strong></em></font></p> <blockquote> <p align="justify"><font color="#FF6633"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If the DTA unit has availed of the Cenvat credit on plant, machinery and equipment and also utilised such credit for payment of duty on goods manufactured and cleared before its conversion into EOU / EHTP / STP, the same is not required to be demanded on its conversion into EOU / EHTP / STP. </font></em></strong></font></p> <p align="justify"><font color="#FF6633"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If the Cenvat credit so availed of is lying in balance as unutilized on the date of conversion into EOU / EHTP / STP, it would lapse on conversion of DTA unit into EOU / EHTP / STP unit and can not be utilized after such conversion. </font></em></strong></font></p> </blockquote> <p align="justify"><font color="#FF6633"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the accumulated credit stands lapsed, the same can not be used for payment of duty on DTA clearances. </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Validity of B1 General Bond & Factory stuffing permission:</strong> Currently, only one year validity is given by the Central Excise Department for B1 General Bond under which clearance of excisable items for export is allowed without payment of Duty. Similarly, the validity of Factory Stuffing permission is also given for only one year. Every year, exporters have to do the exercise of filing fresh B1 Bond and Applications for Factory Stuffing permission. This involves unproductive paper work and increase in transaction time and cost.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The RCMCs of Export Promotion Councils are issued for 3 to 5 years. It is, suggested that the facility of B1 Bond and Factory Stuffing should also be given validity till the expiry of the RCMC. </font></p> <p align="justify"><em><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It was informed that the matter would be examined in detail by the Central Excise wing of the Board.</font></strong></em></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><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">Customs</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Penalty – Tribunal sets aside penalty on ground that there was no charge of conspiracy in Notice. Revenue contents there was such a charge - matter remanded - Supreme Court</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> ASG appearing for the Revenue contented that the impugned judgment suffers from serious infirmities. The ASG drew the attention of the Supreme Court to the Show Cause Notice, wherein it was mentioned, “ Shri Balbir Singh Sethi, was actively involved in the entire operation as an authorised signatory of M/s. Meerut Exim, Meerut, and ensured the improper clearance from Customs and subsequent storage of goods” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner's order reproduced the same words of the Show Cause Notice. </font></p> <p><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">Whether provisions of Sec 41(2) can be applied for granting set-off against brought forward losses? - NO, says 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 the provision of section 41(2) can be applied for granting set off against brought forward losses; Whether loss on account of trading in shares constituted speculative loss and Whether depreciation on land can be claimed by the assessee on the argument that the value of land could not be ascertained because of composite purchase deed.</font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Alleged unjust CENVAT ‘enrichment' by vehicle manufacturers - When Section 5A(1A) of CEA, 1944 does not compel appellant to avail exemption notification like 6/2002-CE, it cannot be forced on them by interpreting CCR - CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> demand notice was issued to the assessee contending that the assessee was “enriching” himself by a CENVAT credit factor of Rs.10,000/- per clearance of “Dumper”. It is also alleged that the said act of the assessee was also in contravention of the explanation to the Rule 3 of the CENVAT Credit Rules, which lays down that where the provisions of any other rule or notification provide for grant of whole or part of exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements</font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p><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 size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong> </a></font></p> </body> </html>