TIOL-DDT 1531 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1531 </font><br> 18.01.2011 <br> Tuesday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Availment of Unconditional Exemption Notifications – Board Issues Further Clarification </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BASED</strong> on the opinion of the Law Ministry, Board vide <em>Circular No. 937/27/2010-CX dated 26.11.10</em> clarified that a manufacturer cannot opt to pay excise duty in respect of unconditionally fully exempted goods and also cannot avail the CENVAT credit of the duty paid on inputs in view of the specific bar provided under sub-section (1A) of Section 5A of the Central Excise Act, 1944. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This clarification was issued in the context of assessees availing benefit of Notification No. 29/2004-CE dated 9.7.2004 as amended by Notification No. 58/2008-CE dated 7.12.2008 and Notification No. 59/2008-CE dated 7.12.2008 simultaneously. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the Board further clarifies that:- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) In case the assessee pays any amount as Excise duty on such exempted goods, the same cannot be allowed as “CENVAT Credit” to the downstream units, as the amount paid by the assessee cannot be termed as “duty of excise” under Rule 3 of the CENVAT Credit Rules, 2004. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The amount so paid by the assessee on exempted goods and collected from the buyers by representing it as “duty of excise” will have to be deposited with the Central Government in terms of Section 11D of the Central Excise Act, 1944. Moreover, the CENVAT Credit of such amount utilized by downstream units also needs to be recovered in terms of the Rule 14 of the <em>CENVAT Credit</em> Rules, 2004. </font></p> </blockquote> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">But there are umpteen number of decisions wherein it was held that the buyer of the goods cannot be penalised by denying the CENVAT credit for any irregularities by the supplier of goods, if the goods are received on the strength of an invoice and are used in the manufacture of excisable goods. It seems the Board is in serious business of promoting the business of consultants. They did it with Rule 57 CC which continued till the retrospective amendment in 2010 and they are now doing it with Section 5A. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does the Board exist for complicating matters and making life miserable for the assessees for no good reason? Why should the Board issue contradictory notifications and then issue contradictory circulars to clarify those notifications and then make the assessees liable for penal action if they follow these notifications and circulars? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see<a href="http://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11729" target="_blank"> <strong>DDT 1496 – 29.11.2010</strong></a><strong> </strong>for a detailed analysis of this issue. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/excircular940.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Circular No. 940/01/2011-CX., Dated: January 14, 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Enforcement of penal provisions for non - submission of returns - Board's direction to field formations </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Central Excise Law, an assessee is required to file different types of returns depending on its applicability to them. Some of them are monthly viz., ER-1, ER-2 and ER-6, some are quarterly viz., ER-3 and some others are yearly viz., ER-4, ER-5 and ER-7. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further this law also envisages self-assessment of duty by the assessee and filing of the prescribed returns periodically, so that department is kept informed about the assessment and duty payments by the assessee. The fundamental ingredient of this trust based scheme is the regular filing of returns by the assessee. These returns enable the department to verify the duty payment, CENVAT credit taken and other such parameters related to assessment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board has come to know that many assessees are not filing the returns at all and some others are submitting the same after long delays<strong><font color="#663399"> (is this based on the feedback they have got from ACES – does the Board not realize that there is no enthusiasm in the field for filing of returns using ACES)</font></strong>. This problem has been found to be more pronounced in the case of specialized returns like ER-5, ER-6 and ER-7. Board also observes that the field formations do not identify the defaulters and take necessary follow up action to ensure submission of these returns<strong><font color="#663399"> (this is very strange given the enthusiasm with which range officers usually follow up on the monthly statutory returns for ‘obvious' reasons). </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board states that scrutiny of returns is an essential and basic job of the Central Excise Ranges in the field formations. Scrutiny includes identifying the assessees who have not submitted the prescribed returns, and taking follow-up action to ensure that these returns are filed at prescribed periodicity. In this regard, it is also pointed out that penalty under Rule 27 of Central Excise Rules, 2002 and Rule 15A of CENVAT Credit Rules, 2004 can be invoked against such errant assessees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of this, Board directs that immediate action may be taken by the jurisdictional Commissioners to institute a mechanism to identify such defaulters, and ensure that follow up action including invoking penalty under the provisions of Central Excise law are taken against them. The jurisdictional Chief Commissioners shall also monitor the proper working of this mechanism every quarter. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact, many of the assessees are not filing these returns not because of any wilful violation of law, but because of lack of manpower. A lot of precious time goes into compilation of the data for these returns and these days, manpower is not cheap. An assessee told DDT that he would rather pay the penalty of Rs 5,000/- than spend more money on preparation and filing of these retunrs. </font></strong></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">And what do they do with these returns? These returns are so complicated that the assessee has to spend precious hours preparing these returns which are not at all used for any purpose by the Board. The Board should depute some of its officers, especially the bright ones who drafted these returns, to the offices of the assessees to help the assessees to fill up these forms. Then they will know how difficult these returns are. </font></strong></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/cxinstruct01.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excise Instruction Dated: January 14, 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BCCI loses Customs benefits after de-recognition as National Sports Federation/Apex Body for game of Cricket </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> was informed by the Ministry of Youth Affairs and Sports that the Board of Control for Cricket in India (‘BCCI') has not complied with the mandatory requirements of submitting the necessary documents to the Government of India for annual recognition as a National Sports Federation /Apex Body for the game of cricket in India. Thus it has ceased to be a National Sports Federation/Apex Body for the game of cricket with immediate effect. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of this, Board clarifies that henceforth BCCI would not be eligible to avail itself of duty exemption under Notification No.21/2002- Cus., dated 1.3.2002 or any other Customs notification. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, goods imported by BCCI or certified by BCCI for import are not entitled to any exemption benefit which is available to sports goods/equipment/consumables imported or certified by a National Sports Federation (NSF) or Apex body in terms of any Customs duty exemption notification issued by the Central Government. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">BCCI is the richest Sports Body in the world and they do not really need any exemption, but when an important minister in the Indian Cabinet is the President of ICC, should BCCI get this snubbing? </font></strong></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_005.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Circular No. 5/2011-Cus., Dated: January 17, 2010 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Re-Credit Certificate for Re-export of defective/unfit goods - DGFT issues clarification </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PARAGRAPH </strong>3.11.6 of HBPv1 contains the procedure for issuance of fresh scrip in cases where Re-credit Certificate is issued by Customs on account of re-export of defective/unfit goods. Exporters had to first seek the re-credit certificate from Customs and then come to DGFT for issue of fresh scrip. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The procedure is being simplified by eliminating the requirement to come to DGFT for issue of fresh scrip. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, Para 3.11.6 of HBPv1 will be replaced with immediate effect as under: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“ Para 3.11.6: Re-Credit Certificate for Re-export of defective / unfit goods and/or Re-assessment of Debited Duty and/or re-exports on account of any other reason. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case of re-export of defective or unfit goods or re-assessment of debited duty, Customs issues a Re-credit Certificate containing particulars of scrip used, date of import of re-exported goods and amount debited while importing such goods / re-assessment details. Customs shall permit use of this Re-credit Amount to the extent of 98%, within a period of 6 months from the date of issuance of re-credit certificate. There shall be no need for issue of fresh scrip in such cases by DGFT regional offices.” </font></em></p> </blockquote> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT summarizes the effect of this Public Notice as follows: </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>++ The procedure for utilization of re-credit certificate is simplified; </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The scope is expanded to cover cases of re-assessment of duty cases and re-export for any other reason; </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The validity of Re-credit Certificate shall be 6 months. </font></em></p> </blockquote> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn022.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Public Notice No. 22/2009-2014 (RE 2010), Dated: January 14, 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of Natural Rubber under Tariff Rate Quota (TRQ) Scheme in current financial year 2010-2011 – DGFT clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> view of Customs Notification No. 128/2010-Customs dated 22.12.2010, to allow import of Natural Rubber under exim codes 4001 21, 4001 22 and 4001 29 at concessional duty in the current financial year 2010-11, it has been decided by DGFT to invite applications for allocation of the TRQ of Natural Rubber from Actual users by issuing following guidelines:- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i. EFC in DGFT will evaluate and allot TRQ to the applicants. The allocation of the TRQ will be based on the Natural Rubber consumption during 2009-10, as certified by Rubber Board. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii. Allottees of TRQ shall file application in ANF2B along with prescribed application fee to concerned Regional Authority of DGFT, who will issue the TRQ authorization as per allocation by EFC. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii. Imports of the allocated TRQ must be completed before 31.3.2011. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iv. Applications for allocation of TRQ shall be received from 18.01.2011 (12.00 noon) to 24.01.2011 (till 5.00 pm). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">v. Applications for allocation shall be sent only by e-mail at rubbertrq2011@nic.in in the proforma at Annexure -1 to this Public Notice. </font></p> </blockquote> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn023.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Public Notice No. 23/2009-2014 (RE- 2010), Dated: January 17, 2011</strong></font></a></p> <p align="center"></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Non-requirement of submission of Proforma Invoice - Amendment in ANF 2B </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has made an amendment in the ANF 2B of Handbook of Procedures Vol.I (Appendices and Aayat Niryat Forms) 2009-2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Amendment: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Serial Number 4(b) of Guidelines for Applicants attached to ANF 2B hereby stands deleted. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT explains reason for the amendment: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ANF 2B has been prescribed as the application form for import of restricted items. It has 14 entries & 7 declarations. It also contains a set of guidelines for the applicant towards the end of the form. Guideline 4(b) requires a self certified copy of the proforma invoice from the foreign supplier. It has been decided to dispense with this requirement. Such self certified copy of the proforma invoice from the foreign supplier would no longer be needed to accompany the application form. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Effect of this Public Notice: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Submission of proforma invoice, with application for import authorization, would no longer be required. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn024.htm"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Public Notice No. 24/2009-2014 (RE- 2010), Dated: January 17, 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST Not Totally Given Up? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> every body has written off the GST, it is understood that North Block is seriously working on some GST Model to be announced in this budget. There may be a Central GST with integration of Central Excise and Service Tax with two rates of taxation. Maybe Pranab Da is serious about going down in history as the founder of GST in India – with the consent of the States if possible and without, if necessary. </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"> - Wednesday's cases</font></strong></font></strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"></font>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT Credit - Credit is admissible on inputs used in goods manufactured under job work byavailingexemptionunder Notification No 214/86 CE. - High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REVENUE</strong> was in appeal before the High Court on the following question of law: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i) “Whether goods cleared without payment of duty under notification No.214 /86-CE dated 25.03.86 are not ‘exempted goods' as mentioned in the Rule 6 of theCENVATCredit Rules 2004? </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(ii) Whether provision of Rule 6 of theCENVATCredit Rules 2004 regarding disallowance ofCENVATCredit on the inputs used in the manufacture of final product which are exempt from duty, are not attracted in case of goods cleared without payment of duty under notification No.214 /86-CE dated 25.03.86?” </em></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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sec 80RR - Whether when Salman Khan, film actor, follows cash system of accounting, he can claim Sec 80RR benefits for payment received in advance for stage show to be organised without any evidence of agreement - Whether he can claim deduction for legal expenses not related to his profession - NO, says ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>two issues before the Tribunal are<strong> - </strong>Whether when the assessee, a film actor, follows the cash system of accounting, he can claim Sec 80RR benefits for the payment received in advance for a stage show to be organised without furnishing any evidence of an agreement and whether disallowance is warranted for legal expenses incurred to defend the assessee in criminal proceedings when assessee fails to prove that such expenses were in relation to his profession. And the answers to both the questions are ‘NO'. </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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jungle cutting service is an input service as the appellant is required to keep surroundings of factory bacteria free to ensure that finished goods are not contaminated - Picnic Service does not have any nexus with business activity hence credit denied : CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellants have been denied input service credit on the following services holding that these services have no nexus with the manufacturing activity of the appellant hence they are not entitled to take input service credit, as per rule 2(l) of the <em>CENVAT Credit</em> Rules, 2004. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) Outdoor Catering Services availed in guest house. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) Garden maintenance basis. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) House keeping at Guest House. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d) House keeping at factory </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e) Picnic and jungle cutting. </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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6666">Until Tomorrow with more DDT </font></strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice Day. </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mail your comments to</strong></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>