TIOL-DDT 1567 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1567 </font><br>
14.03.2011 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Is CENVAT Credit Admissible on Exempted Services?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH</strong> effect from 1.4.2011, Rule 2(e) of the CENVAT credit has been amended to include taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken, in the definition of exempted services. Similarly Rule 2(d) has also been amended to include the goods on which duty is paid under Notification 1/2011 CE (@1%) in the definition of exempted goods. It has also been clarified by the JS (TRU)-I that no CENVAT credit will be admissible to the buyer of these 1% duty goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the 'partially exempted services' are included in the exempted services, many are of the view that no credit is admissible on these partially exempted services like, mandap keeper, tour operator etc (and other services listed in Notification 1/2006 ST). But actually it is not so. There is no bar in the CENVAT Credit Rules for availing credit ON THE EXEMPTED services. Let us see Rule 6(1). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 6(1) of the CENVAT credit rules 2004 after the amendment reads: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture 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 up to the place of removal or for provision of exempted services except in the circumstances mentioned in sub-rule (2) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A plain reading of the above rule would indicate that while no credit is allowed on the inputs or input services used in or in relation to the manufacture of exempted goods / provision of exempted services, it does not stipulate that no credit is allowed 'on the exempted goods / exempted services.'</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In respect of 1% goods, credit is not admissible to the buyers not because of Rule 6(1), but because of the proviso inserted in Rule 3(1) as: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods in respect of which the benefit of an exemption under notification No. 1/2011- CE, dated the 1st March, 2011 is availed; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The inclusion of 1% goods in the definition of 'exempted goods' ? is only to disallow the CENVAT Credit on inputs/ input services used in the manufacture of these exempted goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore there is a subtle difference between the amendment to the definition of exempted good and exempted services. While no credit is allowed on 1% duty goods to the buyer of these goods ? by virtue of proviso in Rule 3(1), there is no bar on taking credit on the service tax paid on the 'partially exempted services' though these services are exempted services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is also evident from the fact that 40% credit is allowed on erection commissioning, construction services (which are exempted services under Rule 2(e) used in works contract service (Notification 1/2011 ST) and rule 2(l)(A) allowing credit on construction service in respect of the specified services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the assessee will have tough time in explaining all this to auditors of the department who will certainly not believe in 'allowing credit on exempted services'</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Chief
Commissioners on Rampage - The 'Gifted' Officer? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CERTAIN</strong> events in the recent past project a very bad image of some of the Chief Commissioners in the Customs and Central Excise Department. The Chief Commissioner is the highest officer of the Department - in the field and is expected to be a role model for his staff and the trade. Even if they cannot be role models, they should certainly not be embarrassment to their staff, the Board and the Government of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We get reports that recently a Chief Commissioner asked a Superintendent in an ICD to arrange a payment of Rs. 2.5 lakhs per month to him. It seems the Superintendent requested the Board for a clarification on how he should go about arranging this money!. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
another case, a Deputy Commissioner went and asked a Chief Commissioner for
a field posting and there was an altercation (obviously about ...), and the
sixty year old Chief Commissioner caught hold of the Deputy Commissioner
by his collar and lifted him up. In the process, the Chief Commissioner broke
his (own) collar bone and both the Deputy Commissioner and the Chief Commissioner
landed up in a hospital. Apparently the exalted Chief Commissioner had a
very high (obviously wrong) opinion about his physical strength - even at
sixty! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In yet another case, a Chief Commissioner after returning from a tour wrote to the jurisdictional Commissioner that it was the general practice that when the Chief Commissioner visits, he is given a gift, but this gifted Chief Commissioner complained that he did not yet receive any gift. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The best is yet to come! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently
a Chief Commissioner was transferred and a Commissioner working under him
was promoted as Chief Commissioner and posted in his place. The Chief Commissioner
did not like his posting and asked the promoted Chief Commissioner not to
join for some time. The Chief Commissioner then proceeded to try his luck
in getting his transfer order cancelled. Not being lucky, he tried CAT where
also he was not successful. In the meantime the promoted Chief Commissioner,
under instructions from the Board, came to join in his new office but found
the office locked. But with the help of an Inspector and a Commissioner,
he got the room opened and occupied it only to be thrown out by the previous/existing
Chief Commissioner the next day. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
transferred Chief Commissioner is still continuing as the Chief Commissioner
and clearing files merrily while the real Chief Commissioner is sitting in
some other room with no work. The (not so) gifted Chief Commissioner has
promised that he would spoil the confidential reports of the Commissioner
who succeeded him as Chief Commissioner and the Commissioner who helped in
getting his room opened! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What respect will the Sepoys of the Department give to these Chief Commissioners?</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Refunds - CBDT Disheartened with Cavalier Response of CCITs </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALL</strong> the CCITs, including the CCITs (CCA), were advised by the Board on Feb 28 & again on March 05 11 to provide data regarding <strong>paper refund cases not yet entered on the system</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBDT feels anguished that, except CCITs Nagpur, Ranchi, Panaji & Guwahati, no other CCIT has taken care to comply with the Board's appeal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Such a casual & cavalier response of senior-most functionaries in the field is disheartening for the Board, which is doing its best for the welfare of the entire cadre. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"May the CBDT expect that all the CCITs will get the paper refund cases not yet entered on the system uploaded today itself & ensure that all refund cases are processed forthwith without any further delay?", asks the CBDT Chairman in his latest missive to the field. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/desk.htm" target="_blank">From the Desk of the Chairman, CBDT . S. No. 17 Dated: March 11, 2011 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax - Commitment to Issue All Refunds Before March 31 - Laxity Not to Be Tolerated. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> his latest letter, the Chairman, CBDT says, </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"At the moment we are issuing around 30,000 refunds every day. Around 2,000 refunds cases are being approved every day by Jt / Addl CITs. Though there is a definite progress in the issue of refunds, it is still far short of desired output. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All officers are once again requested to immediately enter & process all the refund cases & issue refunds. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the CCITs are advised to daily review the progress of their regions & ensure that timelines given by the CBDT vide Message No. 11 dated March 5 2011 are scrupulously adhered to. No laxity or inertia would be tolerated."</font></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will somebody listen? </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/desk.htm" target="_blank">From the Desk of the Chairman, CBDT . S. No. 18 Dated: March 13, 2011 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Expeditious Disposal of Cases Involving Public Servants Due to Retire Shortly - CVC Is Serious </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CVC</strong> had impressed upon the Ministries/Departments on the need for expeditious completion of disciplinary proceedings against officials likely to retire. But CVC has found that some departments have a marked tendency to refer the vigilance cases to the Commission seeking its advice at the last moment - sometimes even a few days before the retirement of the officers.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CVC takes a serious note of such lax attitude! </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cvc_circular_17.htm" target="_blank">CVC Circular No. 03/03/11 Dated: March 11, 2011 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Incorporation of Companies and establishment of principal place of business in India by Foreign Companies - Procedure simplified</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> order to speed up and simplify the process of incorporation of Companies and establishment of principal place of business in India by Foreign Companies for reduction in time taken by Registrar of Companies, the below mentioned procedure have been recommended : </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Only Form-1 shall be approved by the RoC Office. Form 18 and 32 shall be processed by the system online. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. There shall be one more category, i.e., Incorporation Forms ( Form 1A , Form 37, 39, 44 and 68) which will have the highest priority for approval. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Average time taken for incorporation of company should be reduced to one (1) day only. </font></p>
</blockquote>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/moc_circulars.htm" target="_blank">MOC General Circular No. 6/2011 Dated: March 08, 2011 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Payment of MCA fees - Electronic Mode </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the interest of stakeholders, with a view to improving service delivery time, Ministry has decided to accept payments of value up to Rs. 50,000, for MCA 21 services ,only in electronic mode w.e.f 27th March, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the payments of value above Rs. 50,000, stakeholders would have the option to either make the payment in electronic mode, or paper challan. However such payments would also be made in electronic mode w.e.f .1st October, 2011. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/moc_circulars.htm" target="_blank">MOC No. HQ/9/2002-Computerization Dated: March 08, 2011 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">All India Bandh - Garment Industry </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Readymade Garment and Hosiery Industry in the country will observe an All-India bandh on March 14-15 in a bid to continue their protest against imposition of 10 per cent Excise Duty on readymade garment and hosiery items. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Industry feels that unjustified levy of Excise Duty will have far reaching deleterious impact on readymade garments and hosiery manufacturers, mostly belonging to small and medium sector, at a time when such units are already over burdened by increase in cost of yarn, fabric and other inputs. The cost of cotton yarn and fabrics, principal raw materials of Hosiery and readymade Garment industries witnessed escalation of 100% to 200% during the previous year. This additional burden will further escalate the price of readymade garments as a consequence of which there will be shrinkage in market of these items. This will eventually lead to closure of many units which means job-loss to thousands of workers and part-time jobbers in the country. The garment industry demands continuation of Optional Scheme for excise levy as at present without making the imposition mandatory. </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"> – Tuesday's cases</font></strong></font></strong></font></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Central Excise</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise - CENVAT Credit - Not Entitled on Original Copy of Invoice; Invoice from Manufacturer is a proper document even though goods were cleared through depot - CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Larger Bench of the Tribunal in the case of <em>Avis Electronics Pvt. Ltd, </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2002/2002-TIOL-394-CESTAT-DEL-LB.htm" target="_blank"><font size="1">(2002-TIOL-394-CESTAT-DEL-LB</font></a></strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2002/2002-TIOL-394-CESTAT-DEL-LB.htm">)</a></font> has held that the Tribunal is not to supplement or add words to the Rules and when a particular thing is directed to be performed in a manner prescribed by Rules, it should be performed in that manner itself and not otherwise and accordingly, has held that CENVAT credit cannot be taken on the basis of original copies of the invoices unless the loss of duplicate copy is reported to the jurisdictional Assistant Commissioner and the necessary permission has been taken for taking CENVAT credit on the basis of the original copies of the invoices. </font></p>
<p align="justify"><font color="#663366" 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 principal amount written off on account of loan waiver by bank is exigible to tax as revenue receipt - Yes, it depends on purpose for which loan was taken: Delhi HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether the principal amount written off on account of loan waiver is exigible to tax as revenue receipt and Whether taxability of loan waiver depends on the purpose for which the loan was taken. And the verdict goes against the assessee as it had taken the loan for the business purpose. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - No writ Petition when there is an adequate or suitable alternative remedy. The remedy however should not be a mirage, futile exercise or an appeal from - Caesor to Caesor's wife: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>petitioner companies/concerns are engaged in ship broking and other activities. It is submitted that as a ship broker the petitioners assists, guides and supports the ship owner and the ship charterer to negotiate a deal and conclude a fixture. Brokerage is paid by the ship owner and sometimes through a charterer. The petitioners also undertake distinct activities like ship agency, services to clients for loading/unloading of cargo, act as port agents, facilitate and procure berth hiring, etc. The petitioners are registered with the Service Tax Department under the category of 'Steamer Agent Service' and have been filing returns and paying service tax.' Steamer Agent Service' was brought into the service tax net by the Finance Act, 1997 with amendment and enactment in form of Clause (i) to Section 65(105) read with Section 65(100).</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 Time.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to </font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></strong></p>
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