TIOL-DDT 1572 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 1572</font><br>
21.03.2011 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">It Happens Only In India -
Revenue Officers answering questions from the Trade - TIOL Workshop in Mumbai </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AMERICAN</strong> born,
China-based International Taxation Expert Laurence E Larry Lipsher who was
a speaker in our Mumbai workshop on Friday was amazed that the Indian Customs
Chief and his officers were facing a volley of questions from the trade and
industry. The much travelled Larry said that he has not seen this kind of
interaction anywhere in the world and this was the best example of participatory
democracy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was the first time that we were organising a workshop in Mumbai and it was a huge success, with the captains of the Industry and trade interacting with the Chairman of the CBEC and his officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Undoubtedly
the Chairman, CBEC, S Dutt Mazumder was the star of the show. Here was a
Chairman who after giving a scintillating speech, defending every clause
of the Budget, sat through to answer the questions from the assessees and
each question was followed by a couple of supplementary questions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chairman said that he was already aware of several issues as he had been interacting with the trade and he promised to look into several issues raised by the participants. He had even asked TIOL to prepare a list of issues raised and suggestions made and submit them to him by Saturday, which we have done. Let us hope that many of the problems would be sorted out. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are indeed
thankful to CBEC and its dynamic Chairman. </font></p>
<table width="450" border="0" align="center" cellpadding="5" cellspacing="0">
<tr>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/IMG_6108.JPG" alt="Legal Corner Icon" width="400" height="266" hspace="5" border="0" align="center" /></font></div></td>
</tr>
<tr>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/IMG_6226.JPG" alt="Legal Corner Icon" width="400" height="266" hspace="5" border="0" align="center" /></font></div></td>
</tr>
<tr>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/IMG_6164.JPG" alt="Legal Corner Icon" width="400" height="266" hspace="5" border="0" align="center" /></font></div></td>
</tr>
<tr>
<td><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/IMG_6263.JPG" alt="Legal Corner Icon" width="400" height="266" hspace="5" border="0" align="center" /></font></div></td>
</tr>
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/mumbai_event_budget_01.jpg" alt="Legal Corner Icon" width="450" height="212" hspace="5" border="0" align="center" /></font></td>
</tr>
</table>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Some Issues Raised in Our Workshop </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">1. Definition of capital goods:</font></strong> As per the definition of Rule 2(a)(A) of CENVAT Credit Rules 2004, credit is allowed only if the capital goods are used “in the factory of the manufacturer of final products”. If the capital goods are used outside the factory premises, credit is not admissible. Some relaxation has been provided in this year's budget and credit is admissible for goods used outside the factory only in case of capital goods used for generation of electricity. However, there are many other cases like, credit on storage tanks located outside the factory, but used for receipt of raw materials/ storage of finished goods. Therefore an amendment is required to allow credit on storage tanks used outside the factory. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">2. Trading:</font></strong> An explanation has been inserted in the definition of exempted service under <em>CENVAT Credit</em> Rules 2004 [Rule 2(e)] as under: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Explanation.-</em> For the removal of doubts, it is hereby clarified that "exempted services" includes trading” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The important word “goods” is missing in the above explanation. Though in Rule 6 is has been specified that “in case of trading, shall be the difference between the sale price and the purchase price of the<strong> goods traded</strong>”, it is requested that the word “goods” may be inserted in the explanation under Rule 2(e) to clear the confusion. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Whether explanation is prospective only?</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Whether the explanation inserted in Rule 2(e) of CENVAT Credit Rules, 2004 which clarifies that ‘exempted services' includes trading, effective retrospectively? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">4. Components of Trading:</font></strong> What are the components of expenses incurred in the course of ‘trading' that have to be included/excluded from the ‘value' of ‘trading' as explained in Explanation I (c) under sub-rule 3D of Rule 6 of <em>CENVAT Credit</em> Rules, 2004? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>5. 1% duty on imported goods:</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> A number of goods which hitherto attracted Nil rate of duty have been notified under Notification 1/2011 CE dated 1.3.2011 with an effective rate of 1% subject to the condition that no CENVAT Credit shall be availed on the inputs/input services. When these goods are imported, the CVD is levied at 5% as the condition of non-availment of CENVAT Credit is non-verifiable for imported goods. This is leading to disparity and to cite an example, fertilisers attract 5% CVD when imported and when manufactured within India, it attracts only 1%. It is suggested that an unconditional exemption notification under Section 3 of the Customs Tariff Act, 1975 may be issued for these goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">6. Point Of Taxation</font></strong> – effective date: The Point of Taxation Rules 2011 are to come into effect from 1.4.2011 and the rules are complex and it is difficult to understand and implement the same by the taxpayers from 1.4.2011. Therefore it is submitted that the rules may be reviewed to make them simple and the migration to these rules may be deferred till the trade and industry prepare themselves for the new concept. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Point about Point of Taxation:</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> When Point of Taxation Rules, 2011 stipulates ‘Point of Taxation' for service providers as the time when service is provided or to be provided, or as the time when service provider issues an invoice or receives payment, or as the time when advance is received for provision of service, and when such services are input services for the recipient, whether it is proper to allow CENVAT credit on such ‘input services' on or after the day on which payment is made for such input service? To put it simply, whether sub-rule (7) of Rule 4 of CENVAT Credit Rules, 2004 is in tune with the provisions of Point of Taxation Rules, 2011? </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Input Service:</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The definition of input service includes services used in relation to modernisation, renovation or repairs of a factory, but at the same time excludes “construction service under (zzq) and works contract under (zzzza). This a clear anomaly and needs to be looked into. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Fertilisers Exempted or Not? </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“All goods, other than those which are clearly not to be used as fertilisers”</em> are exempted. The language of the Notification appears to be unnecessarily complicated and it is really not clear as to whether the Fertilisers still continue to enjoy exemption by virtue of Notification No. 04/2006. The scope of the exemption needs to be clarified. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No drawback on goods exported to Nepal which were imported into India from third countries </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Notification No.13/2011-Customs (N.T.) dated 24.02.2011, no drawback shall be allowed on the goods exported to Nepal if such goods were imported into India from third countries. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now CBEC directs that to comply with the above provision, the exporter shall declare on the body of the shipping bill under claim of drawback that the goods being exported to Nepal have not been imported into India from third countries. The field formations shall conduct random checking to ensure the genuineness of the exporter's declaration. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_014.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 14/2011-Customs, Dated: March 15, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Applicability of indirect taxes on packaged software - Board Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REPRESENTATIONS</strong> have been received from some industry association on behalf of software dealers about difficulties being expressed in the assessment to customs duty of documents of title for IT software or documents that enable the transfer of the right to use such software at the time of its sale. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been reported that there are frequent imports of such documents without any accompanying software. Such packages do not contain software but consist of paper licenses or PUK (Personal Unlocking Key, usually in the form of a scratch card of paper board or plastic) that are used to convey the right to use such IT software. The software in these cases could be freely downloadable or loaded by the OEM supplier under an arrangement with the software company as pre-loaded trial version of software on the computer system requiring the customer to purchase license or PUK after the trial period. Typically these licenses are used either to authorize additional uses against a sale of IT software that has already taken place in the past or to service transactions where the connected software is downloaded electronically by the customer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been pointed out that some of the field formations are insisting on the classification of such documents, even when imported without the packaged software, under CTH 8523 i.e. the heading applicable to IT software. It has also been represented that in certain cases the entire value of the license representing the right to use such IT software is sought to be loaded to the value of past imports of IT software by the importer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that paper licenses or PUKs merit classification as per their individual character under heading 4907 in case of paper license and heading 4911 in case of PUK card, the same being other printed matter. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All packaged/ canned software imported in shrink wrapped packages, will attract Excise duty/CVD on such retail sale price declared being the combined value of the software and the licenses (right to use). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Such software will, however, be exempt from payment of service tax under the category ITSS (as provided in Notification No. 53/2010-ST dated 21st December 2010). On the other hand, such packaged/ canned software, on which affixation of retail sale price is not required under the relevant provisions for the packaged commodities, and the assessment is based therefore, on the value determined under section 4 of the central excise act, 1944, the excise duty/ CVD will be charged only on the value, excluding the value representing consideration for transfer of right to use such packaged/ canned software. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, service tax under the category ITSS would be levied on such portion subsequently. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All pending assessments of software, paper licenses and PUK cards may be finalized accordingly.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_015.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 15/2011-Customs, Dated: March 18, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> CAG Points out Mistakes in Hassan Ali's IT Assessment </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> its latest report to Parliament, the CAG states, “ We had pointed out in Para 1.8 of Audit Report no. 4 of 2009-10 that in 2008-09 out of Rs 2 lakh crore that had remained uncollected, one group namely Hassan Ali alone accounted for Rs 71,874 crore of uncollected demand. We found mistakes in assessments of the same group of high risk assessees. There were two cases of short levy of tax of Rs. 3,369.6 crore and three cases of overcharge of tax of Rs. 304.9 crore. The Department has taken remedial action in all the five cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hassan Ali Khan filed returns in February 2007 consequent to search action initiated against him. While computing his tax liability for the assessment years, the Department levied interest of Rs. 706.1 crore instead of Rs. 4,056 crore for default in furnishing of returns and of Rs. 10,033.3 crore instead of Rs. 9,756.9 crore for default in payment of advance tax. Further, while computing tax liability for the AY 2001-02, Rs. 69.5 crore was added back instead of Rs. 69.5 lakh on account of commission income and consulting fees earned by assessee. These mistakes resulted in short levy of interest of Rs. 3,349.9 crore under section 234A; excess levy of interest of Rs. 276.4 crore under section 234B and excess levy of tax ofRs. 24.1 crore respectively”. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax - Commitment to issue all refunds - CBDT Chairman confident that the Field does not want CBDT fail! </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALL</strong> the appeals of the CBDT Chairman to the CCITs have not produced any great results. Now the Chairman has advised all the officers “ to necessarily issue all pending refunds of AYs 09-10&10-11 by March 28 2011. This is going to be one of the significant criterions in judging the performance of the CCITs&CITs during the FY 10-11”. </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 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"><strong><font color="#663399">Rajasthan Sales Tax Act </font></strong></font></p>
<p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jaljira is masala - Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DIFFERENT</strong> ingredients are used in preparation of Masala after grinding and mixing several ingredients and when they are so grinded they lose their own identity and character and a new product separately known to the commercial world comes into existence. Sales tax is levied on sale of commercial commodities, therefore, individual spices could be termed as different commercial commodities. When they are grinded and mixed they give rise to a separate commercial commodity altogether which could be taxed separately. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to the residuary entry. If from the records it is established that the product in question could be brought under a specific entry then there is no reason to take resort to the residuary entry. </font></p>
<p align="justify"><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">Sec 28(va) - Whether payment received under negative covenant is capital receipt - YES, rules Supreme Court Larger Bench </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>issue before the Apex Court is - Whether non-compete fee received prior to 1/04/2003 is capital receipt or revenue receipt. And the verdict goes in favour of the assessee. </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">Income declared to Income Tax Department cannot be treated as proceeds of service provided - High Court: it was for department to show evasion of service tax and that money found with the assessee represented proceeds of services provided by it.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>LEAST</strong> expected from the counsel for the department is to know the status of the order followed in the impugned order: the Commissioner and the Tribunal have followed an earlier order of the Tribunal. On being asked, counsel for the revenue states that he has no knowledge about the status of the order. When an appeal is filed by the department, the least expected from the counsel for the department is to know the status of the order followed in the impugned order. In absence thereof, the representation by the department can hardly be responsible representation. It is hoped that the department and its counsel will take appropriate measures in this regard. </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><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>