TIOL-DDT 1561 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL -DDT 1561 </font></strong><strong><br>
04.03.2011 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Bill 2011 Likely To Be Enacted This Month </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH </strong>elections in several States, Parliamentarians would rather like to be more in their constituencies than in the Parliament, this Budget Session of Parliament is likely to be a truncated one. We understand that the Finance Bill will get through both houses by 25 th of this month and will be enacted in a couple of days and the provisions are likely to be effective from 1 st April 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In any case the present day politics does not allow any debate on serious issues and Parliament has to be adjourned often as proceedings are not allowed smoothly. So the Budget will have to be passed amidst the din without any serious debate. So the ritual will be completed and lo and behold, we will have the Finance Act 2011 in place. Some years ago the opposition parties which did not allow any debate in Parliament on the budget met the Prime Minister and gave written suggestions on the budget. The Prime Minister politely but firmly declined to accept it and told them that they should have made their suggestions inside Parliament, not in the PM's Office! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you more incisive analyses on the Finance Bill in the next few days and we hope the government would consider the suggestions of the concerned Netizens before the Finance Bill is enacted. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CVC PJ Thomas Loses His Job – Palmoleine, Harmful For Career Growth</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FROM</strong> among all the bureaucrats in the Country, the Government could not find a single one, without a criminal case against him, to be appointed as the Central Vigilance Commissioner and so a High Power Committee consisting of the Prime Minister, the Home Minister and the Leader of the Opposition, recommended the name of PJ Thomas, Accused No. 8 in criminal case CC 6 of 2003 pending in the Court of Special Judge, Thiruvananthapuram with respect to the offences under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 and under Section 120B of the Indian Penal Code [" Palmolein case"]. Thomas is also alleged to have played a big part in the cover-up of the 2G spectrum allocation . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In spite of the opposition from the Leader of Opposition in Lok Sabha , Thomas got the appointment, which was challenged in the Supreme Court. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A cartoonist Jose Joseph carried a cartoon in his blog with a Palmolein bib carrying a ‘STATUTORY WARNING' –“ Outdated case of Palmolin will be damaging for lifelong. Harmful for Career growth” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court reiterated that the <strong>menace of corruption cannot be permitted to be hidden under the carpet of legal technicalities </strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court quashed the appointment of Thomas and remarked, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Government is not accountable to the courts in respect of policy decisions. However, they are accountable for the legality of such decisions. While deciding this case, we must keep in mind the difference between legality and merit as also between judicial review and merit review. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The system of governance established by the Constitution is based on distribution of powers and functions amongst the three organs of the State, one of them being the Executive whose duty is to enforce the laws made by the Parliament and administer the country through various statutory bodies like CVC which is empowered to perform the function of vigilance administration. Thus, we are concerned with the institution and its integrity including institutional competence and functioning and not the desirability of the candidate alone who is going to be the Central Vigilance Commissioner, though personal integrity is an important quality. It is the independence and impartiality of the institution like CVC which has to be maintained and preserved in larger interest of the rule of law. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In its functions, the CVC is similar to Election Commission, Comptroller and Auditor General, Parliamentary Committees etc. Thus, while making the recommendations, the service conditions of the candidate being a public servant or civil servant in the past is not the sole criteria. The HPC must also take into consideration the question of institutional competency into account. If the selection adversely affects institutional competency and functioning then it shall be the duty of the HPC not to recommend such a candidate. Thus, the institutional integrity is the primary consideration which the HPC is required to consider while making recommendation under Section 4 for appointment of Central Vigilance Commissioner. In the present case, this vital aspect has not been taken into account by the HPC while recommending the name of Shri P.J . Thomas for appointment as Central Vigilance Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appointment to the post of the Central Vigilance Commissioner must satisfy not only the eligibility criteria of the candidate but also the decision making process of the recommendation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But why couldn't Thomas resign and save the Government the embarrassment? Maybe his presence was required to see that his prosecution is not continued! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this landmark judgement of the Supreme Court delivered yesterday. Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12193" target="_blank">Breaking News</a></strong>. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FM Asks IRS Probationers to Develop Creativity, Humility and Willingness to Acquire Knowledge and Skills </strong></font></p>
<p align="center"><font 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_irs_1561.jpg" alt="Legal Corner Icon" width="384" height="182" hspace="5" border="0" align="center"></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Union Finance Minister, Pranab Mukerjee said that three aspects of human element which has guided human progress are <em>leadership, vision and expertise. </em> The Finance Minister said that all momentous changes in the world have come from exercise of decisive leadership by individuals who have either seized opportunity to usher in change, or have enjoyed broad based mandate to undertake change. The FM specifically quoted the case of Late Prime Minister Rajiv Gandhi in this regard, who enjoyed a massive mandate to prepare the country for the 21st Century and his leadership and vision ushered India as an IT powerhouse within a span of a decade. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Union Finance Minister was addressing the 64 th Batch of Indian Revenue Service (IRS) Probationers in Delhi yesterday. The Finance Minister said that creativity is one attribute that enhances the quality of leadership. He said that creative solutions enhance productivity and hence our production frontiers. He asked the IRS probationers to remain consistently creative through out their life in public service. He said that a firm foundation of willingness to learn and humility is imperative for the ready acquisition of effective knowledge and skills. He said that in all transactions with others, humility must be emphasized and traded in return for their strengths and the learning experiences. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM asked the IRS Probationers to steer the process of change that we seek for realizing our vision and goals in the near future. He asked them to take the initiative and make their best contribution to the largest efforts in nation building. He asked the IRS Probationers to constantly adapt themselves to ongoing changes and update, improve and innovate our systems and practices as well as adopt the best from the rest of the world. He told the probationers that success in their careers will depend on how successfully and productively they are able to manage the public-private interface. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He told the probationers, “You need to believe in the idea of India. Your energies, focus and integrity in contributing to this idea must be second to none. Know that the prospects of India as a nation, socio-economically, politically, and culturally, are on the ascendant. Know that one's world is solely a result of one's perception. It is something that we understand from the accumulated wisdom of India's knowledge”. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>'In or in relation' – removed from Rule 2(k) only to be added to Rule 6(1)? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SIX</strong> is the most sought after number in a country gripped by cricket fever. So is number 6 during the Budget Season. Some important changes have been made to Rule 6 of the Service Tax Rules, 1994 and Rule 6 of the CENVAT Credit Rule 2004. Yesterday we discussed about Rule 6 of Service Tax Rules. Now it is time for the other 6. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 2(k) of the CENVAT Credit Rules 2004 has been amended to re-define the input as “all goods used in the factory of the manufacturer of final products or…..”. There is no <strong>in or in relation </strong> in amended rule 2(k). Now, let us see Rule 6(1) before and after amendment: </font></p>
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<td valign="top" width="231"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Before </strong></font></p></td>
<td valign="top" width="231"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>After </strong></font></p></td>
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<td valign="top" width="231"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CENVAT credit shall not be allowed on such quantity of input or input service which is <strong>used in the manufacture </strong> of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). </font></p></td>
<td valign="top" width="231"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CENVAT credit shall not be allowed on such quantity of “input <strong>used in or in relation to the manufacture </strong> of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How to understand the above change? Assuming that the removal of “in or in relation” from Rule 2(k) will enlarge the scope of inputs, then does it mean that the assessee needs to pay only credit on inputs used <strong>in or in relation to the manufacture </strong> of exempted goods? Is the above change intentional? Will the CBEC please clarify? </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">131D or 131BA ? </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>JS ( TRU -I)'s DO Letter dated 28.02.2011 in para 14.7 states, “Section 131D is being inserted to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line with National Litigation Policy retrospectively with effect from 20.10.2010.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Actually the Finance Bill refers to this as Sec 131BA . May be initially they wanted to add as 131 D ( after 131C ), but later shifted to 131BA ). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even the Notes on Clauses attached to the Finance Bill declares that “ <em>Clause 48 of the Bill seeks to insert a new Section 131D in the Customs Act relating to filing of appeal by Commissioner of Customs in certain cases </em>”. But if you go to Clause 48, you will find that it seeks to insert a new Section 131BA . </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">DDT's Blunder </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> yesterday's DDT, under the caption, <em>Authorized Service Station – Tax Base Changes – Definition Remains </em> , we pointed out that the definition of <em>"authorized service station" </em>is retained under Section 65(9) while the concept of service station has been changed under the new clause ( zo ). A keen observer pointed out that the clause 65(9) is proposed to be deleted by Clause 71 (A)(1) of the Finance Bill 2011. So our report is totally wrong. This is highly irresponsible reporting and <strong>DDT </strong> deeply regrets the lapse and tenders its unconditional apology without any excuses. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">TIOL's Budget 2011 XCuSE 6.1.4 Released </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> link for the Budget 2011 update for our XCuSE 6.1.4 had already been sent to our subscribers. If you have not received your update or face any problems, you may please contact our CD division. If you are already a registered subscriber, you can download the update from <a href="http://www.taxindiaonline.com/RC2/patches/updates/XC20110301.exe" target="_blank">http:// www.taxindiaonline.com / RC2 /patches/updates/ XC20110301.exe </a></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Monday's cases</font></strong></strong></font></p>
<p align="justify"><font 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><font color="#663399">Customs</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Imports on the basis of forged import licences - Duty penalty rightly demanded : High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALL</strong> these four appeals are filed by the importers who got the goods cleared on the basis of licences purchased by them through one, Gautam Chaterjee and these licences had ultimately turned out to be forged and fabricated licences purported to be issued in the names of different licence holders. Therefore, the Department initiated the proceedings against Gautam Chaterjee and his other associates including initiation of proceedings of levy of duty with interest and penalty against the appellants. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Income Tax </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income tax - Whether conversion of interest dues into preference share capital is deemed payment of interest, and same is not hit by explanation 3C to Sec 43B - Yes, rules ITAT </font></strong></p>
<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Tribunal is - Whether conversion of interest dues into preference share capital can be deemed as payment of interests, and is thus not hit by the explanation 3C to section 43B of the Act. NO is the Tribunal's answer.
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Central Excise </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise - Export of exempted goods - CENVAT Credit and consequent refund entitled : CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondents M/s Gujarat Ambuja Exports Ltd. are engaged in manufacture of De-oiled cakes of Soya bean, Rapeseed and Castor falling under Chapter 15 of Central Excise Tariff Act, 1985. They filed refund claims for different periods under Rule 5 of CENVAT Credit Rules, 2004 and also under the provisions of Notification No.41 /2007-ST, dt.6.10.07 . </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the Judgements </strong></font></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 Time. </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"><strong> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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