TIOL-DDT 1586 · 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 1586 </font><br>
08.04.2011 <br>
Friday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excise Duty on Jute Bags – Agitated Industry – No Answers </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>JUTE</strong> Industry veterans are worried about what they think is an inadvertent levy of 10% excise duty on jute bags and sacks. They believe that there was no mention of this duty in the budget and suddenly the duty was imposed by a notification dated March 24, 2011. Worried industrialists are frantically calling up consultants and for that matter anybody who could help. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What happened </strong>? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Controversial jute bags fall under tariff heading 6305 and were exempted vide Sl. No. 16 to the table of Notification No. 30/2004-C.E. dated 09.07.2004. This was the position till 28.02.2011. By Notification No. 12/2011 – C.E dated 01.03.2011, this Sl. No. 16 was amended to provide this exemption to only goods other than those bearing a brand name or sold under a brand name. That means branded bags became dutiable. It seems the Jute Commissioner wrote to the Finance Ministry that branding in jute items was required for various reasons of 'marking' and thus the levy should be withdrawn. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government
must have bestowed serious consideration on this issue and by Notification
30/2011 –C.E dated 24.03.2011, amended the Sl. No. 16 of the table to Notification
No. 30/2004-C.E. dated 09.07.2004. This time around they changed the entry
as “ 61,62 and 63 (except <strong>6305</strong>, 6309 00 00 and 6310,)”,
that is jute bags falling under heading 6305 is totally taken out of the
exemption, which means both branded and unbranded jute bags became dutiable!
If you complain to the King, you are bound to get a few more lashes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Even the 1% duty not applicable </strong>: It is not as if the exemption is withdrawn and the 1% duty is imposed on jute bags. The 1% notification – No. 1/2011 dated 01.03.2011 of course has an entry for 6305, but the exemption is limited to Laminated jute Bags. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>So, now the position is that there is no exemption for jute bags and they are liable to a duty of 10% as per the Tariff. Is it a mistake or a conscious decision? If it is a mistake, the Board should correct it immediately; if it is a conscious decision, the Congress is sure to lose a few seats in the FM's Home State, which is also the hub for Jute. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a big blow to the Jute Industry and the poor businessmen have stopped even export of the jute products fearing that they would have to pay 10% excise duty, not understanding that duty is not payable on the export goods! <strong> </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India – A Tax Haven? US IRS wants to seek information from HSBC India </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>United States is seeking an order from a federal court in San Francisco authorizing the Internal Revenue Service (IRS) to request information from HSBC Bank USA, N.A. about U.S. residents who may be using accounts at The Hong Kong and Shanghai Banking Corporation in India (HSBC India) to evade federal income taxes, the US Justice Department announced yesterday. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The government filed a petition with the court to allow the IRS to serve what is known as a “John Doe” summons on the bank. The IRS uses a <em>John Doe </em>summons to obtain information about possible tax fraud by people whose identities are unknown. If approved, the <em>John Doe </em> summons would direct HSBC USA to produce records identifying U.S. taxpayers with accounts at HSBC India, many of whom are believed by the government to have hidden their accounts from the IRS. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to documents filed with the government's petition, on Jan. 26, 2011, a grand jury in Newark, N.J., indicted VaibhavDahake of Somerset, N.J., charging him with conspiracy to defraud the United States by using undeclared accounts in the British Virgin Islands and at HSBC India to evade his income taxes. According to those documents, employees of HSBC Holdings plc and its affiliates operating in the United States assured Dahake that accounts maintained in India would not be reported to the IRS. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The government alleges that, according to HSBC's website, in 2002 HSBC India opened a “representative office” at an HSBC USA office in New York City to enable “Non-Resident Indians” (NRIs) living in the United States to open accounts in India. In 2007, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, Calif., purportedly “to make banking transactions more convenient for the NRI community based in California.” Although HSBC India closed those offices in June 2010, the government alleges that NRI clients may still access their accounts at HSBC India from the United States. According to the petition documents, NRI clients have told IRS investigators that NRI representatives in the United States assured the clients that they could invest in accounts at HSBC India without paying U.S. income tax on interest earned on the accounts and that HSBC would not report the income earned on the HSBC India accounts to the IRS. </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“The Department of Justice is committed to ensuring that all U.S. taxpayers meet their obligations to declare and pay taxes on foreign bank accounts,” said John A. DiCicco, Principal Deputy Assistant Attorney General [<strong><font color="#FF6633">an interesting designation , worthy of emulation for our stagnated cadres</font></strong>] for the Justice Department's Tax Division. “The ability to hide accounts in foreign countries is rapidly dwindling. We will continue working hand-in-hand with the IRS to enforce the tax laws against those who are using offshore accounts – wherever they are located – to evade taxes.” </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“The IRS continues to focus its attention on international tax evasion,” said IRS Commissioner Douglas Shulman. “This summons request is focused on obtaining more information to help us determine if additional actions are needed. As I've said all along, our international efforts are not about just one country or one bank – it's about our wider effort to ensure compliance with the nation's tax laws.” </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Federal law requires U.S. taxpayers to pay federal income taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. A willful failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation. <strong> </strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">World Trade - despite 2010 record surge, crisis hangover persists - Lamy </font> </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOLLOWING</strong> the record-breaking 14.5% surge in the volume of exports in 2010 world trade growth should settle to a more modest 6.5% expansion in 2011. The sharp rise in trade volumes last year enabled world trade to recover to its pre-crisis level but not its long-term trend and WTO economists believe the recent series of important events around the world lend a greater degree of uncertainty to any forecast. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WTO Director General, yesterday said, “The figures show how trade has helped the world escape recession in 2010; However, the hangover from the financial crisis is still with us. High unemployment in developed economies and sharp belt-tightening in Europe will keep fuelling protectionist pressures. WTO Members must continue to be vigilant and resist these pressures and to work toward opening markets rather than closing them. “Stability” should be the name of the game for 2011”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 14.5% rise was the largest annual figure in the present data series which began in 1950 and was buoyed by a 3.6% recovery in global output. It was a rebound from the 12% slump in 2009, returning trade to the 2008 peak level and to more normal rates of expansion. Nevertheless, the financial crisis and global recession continue to have an impact. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For 2011, the economists are forecasting a more modest 6.5% increase, but with uncertainty about the impact of a number of recent events, including the earthquake and tsunami in Japan. If achieved, this would be higher than the 6.0% average yearly increase between 1990 and 2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The short-term outlook is clouded by a number of significant risks factors in addition to the catastrophes in Japan. These include rising prices for food and other primary products, and unrest in major oil exporting countries. Adverse developments in any of these areas could potentially set back the economic recovery and limit the expansion of trade in the coming year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The full impact of the Japanese disaster is particularly difficult to gauge since it is complicated by a simultaneous nuclear incident, which is hampering relief and rebuilding efforts. The limited amount of research on the economic consequences of natural disasters suggests, however, that the trade impact should be relatively small, especially in the in the medium-to-long term. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">China's exports increased in 2010 by a massive 28% in volume terms. </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"> – Monday's cases</font></strong></font></strong></font></p>
<p align="justify"><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"></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>UP Trade Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>There is a vast difference between the term "Biology Instruments" and "Biological Instruments" - The term <em>ejusdem generis </em> is a facet of <em>Nositur a Sociis </em>. - Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Classification of any commodity cannot be made on its scientific and technical meaning. It is only the common parlance meaning of the term which should be taken into consideration for the purpose of determining the tax liability. The term Biology Instrument refers to a limited range of instruments confined for their use in study of <em>Jeev Vigyan </em> only. The word Biological Instrument is a general word with its utility where wide scale applications including the goods as manufactured by the assessee/respondent are taken. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p>
<p><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
tax - Whether expenditure incurred by assessee-hotel on account of gifts
given to guests can be allowed when tax audit report itself treats it as
not allowable - Yes, it is allowable </font></strong><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> u/s
37(2) - YES, says HC</font></strong></p>
<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>three issues before the Bench are<strong> - </strong>Whether
the expenditure incurred on account of gifts can be allowed as deduction
when tax audit report of the assessee itself states that the same is disallowable
under Rule 6B; Whether the expenditure incurred on account of gifts is
covered by Section 37(2) of the Act; and Whether for computing deduction
u/s 80HHD of the Act “receivables” are to be included in the
total turnover. And the verdict goes against the Revenue.</font></div>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Expenses were not returned in the service tax returns for the purpose of payment of tax – Prima facie , charges of suppression proved – Pre-deposit ordered: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> appellant paid service tax on “erection, commissioning and installation” services provided to their customers during the period April, 2003 to March, 2006. However, they did not pay any service tax on the ‘reimbursable expenses' incurred by them in connection with providing of the above services to the customers. Incidentally, these expenses were shown separately in the relevant invoices issued.A demand of service tax of Rs.1,11,103/- was raised by the jurisdictional authorities invoking the extended period and confirmed along with imposition of equal penalty and interest. </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 Monday with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend. </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">vijaywrite@taxindiaonline.com </a></font></p>
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