TIOL-DDT 1600 · 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 1600 </font><br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>03.05.2011 <br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tuesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cenvat Credit Rules – CBEC Issues Clarifications </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has issued clarifications on the CENVAT Credit Rules: </font></p>
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<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>S.No. </strong></font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Issue </strong></font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Clarification </strong></font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can credit of capital goods be availed of when used in manufacture of dutiable goods on which benefit under Notification 1/2011- CE is availed or in provision of a service whose part of value is exempted on the condition that no credit of inputs and input services is taken ? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Credit of capital goods used exclusively in manufacture of such goods or in providing such service is not allowed. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the credit of only specified goods and services listed in the definition of inputs and input services not allowed such as goods used in a club, outdoor catering etc, or is the list only illustrative? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The list is only illustrative. The principle is that cenvat credit is not allowed when any goods and services are used primarily for personal use or consumption of employees. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#33CCFF" span="span">How is the “no relationship whatsoever with the manufacture of a final product ” to be determined? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" >Only credit of goods used in the factory but having absolutely no relationship with the manufacture of final product is not allowed. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#33CCFF" span="span">Goods such as furniture and stationary used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of same is allowed. </font></p>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the credit of input services used for repair or renovation of factory or office available? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#33CCFF" span="span">Credit of input services used for repair or renovation of factory or office is allowed. </font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Services used in relation to renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression “activities related to business”? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the credit of input or input services used exclusively in trading, be availed? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trading is an exempted service. Hence the credit of any inputs or input services used exclusively in trading cannot be availed. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What shall be the treatment of credit of input and input services used in trading before 1.4.2008? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trading is an exempted service. Hence credit of any inputs or input services used exclusively in trading cannot be availed. Credit of common inputs and input services could be availed subject to restriction of utilization of credit up to 20% of the total duty liability as provided for in extant Rules. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While calculating the value of trading what principle to follow- FIFO, LIFO or one to one correlation? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The method normally followed by the concern for its accounting purpose as per generally accepted accounting principles should be used. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Are the taxes and year end discounts to be included in the sale price and cost of goods sold while calculating the value of trading? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Generally accepted accounting principles need to be followed in this regard. All taxes for which set off or credit is available or are refundable/ refunded may not be included. Discounts are to be included. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does the expression “in or in relation” used in Rule 6 override the definition of “input” under Rule 2(k) for determining the eligibility of Cenvat credit? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of “input” is given in Rule 2(k) and Rule 6 only intends to segregate the credits of inputs used towards dutiable goods and exempted goods. While applying Rule 6, the expression “in or in relation” must be read harmoniously with the definition of “inputs”. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sub-rules 3B and 3C of rule 6 apply to whole entity or independently in respect of each registration? </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The sub-rules 6(3B) and 6(3C) impose obligation on the entities providing banking and financial services (in case of a bank and a financial institution including a non-banking financial company) or life insurance services or management of investment under ULIP service. The obligation is applicable independently in respect of each registration. When such a concern is exclusively rendering any other service from a registered premises, the said rules do not apply. In addition to BoFS and life insurance services if any other service is rendered from the same registered premises, the said rules will apply and due reversals need to be done. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12 </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the credit available on services received before 1.4.11 on which credit is not allowed now? e.g. rent-a-cab service </font></p></td>
<td valign="top"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The credit on such service shall be available if its provision had been completed before 1.4.2011. </font></p></td>
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<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/excircular943.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. 943/04/2011-CX, Dated : April 29, 2011 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TDS Mismatch - CBDT Chairman appreciates polite letter from CCIT, Delhi </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong>some cases, tax demand has been created just because of TDS mismatch. CBDT appreciates CCIT (CCA), Delhi & his colleagues for incorporating following sentences in the demand notices issued in such cases: </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“ <em>The demand is arising as the pre-paid taxes claimed by you are not matching with the data available in the system. You may, kindly, write to AO giving proof in support of your claim. <strong>You need not come to the office and the rectification will be done </strong>. </em>” </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Statement Recorded under Customs Act not automatically applicable in Departmental Disciplinary proceedings - CBEC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has observed that in a number of cases the statements of witnesses recorded in the preliminary enquiry or under the Customs Act, 1962 have been relied upon by the Inquiry officer/Disciplinary Authority even when the witnesses did not appear before the Inquiry officer and affirmed the said statement. In some cases, where the witnesses appeared in the regular oral inquiry but did not affirm the earlier statement, the earlier statement was still relied upon on the consideration that it is permissible in law to rely on retracted statement. Board has also observed that statements recorded by a Customs officer under Customs Act, 1962 is routinely relied upon without the witness/complainant appearing before the inquiry officer and facing the cross examination, on the plea such a statement has an evidentiary value. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that proceedings under the CCS(CCA) Rules, 1965 are to be conducted strictly in accordance with the procedure laid down under the said Rule. Proceedings under the Customs Act and under CCS(CCA) Rules are totally of a different and distinct nature. <strong>A statement recorded by an officer of Customs are admissible as evidence insofar as they pertain to proceedings under the Customs Act are concerned but the same can not be said to apply to the proceedings under the CCS(CCA) Rules, 1965 </strong>. Under these proceedings, any statement which is not recorded/affirmed in the course of the regular inquiry and in respect of which full opportunity of cross examination has not been given to charged officer has no evidentiary value, and can not be relied upon by the Inquiry officer/Disciplinary authority.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/oms/ccs_rules.htm" target="_blank"><font size="2"><strong><font face="Verdana, Arial, Helvetica, sans-serif">CBEC F No. C-14010/5/2011 -Ad.V, Dated : February 24, 2011</font></strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Over Sixty Thousand Cases Pending in CESTAT </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> on 1.4.2011, 60951 cases (give or take a few hundreds) are pending in the various benches of the CESTAT. Strange as it may sound, Delhi Bench has more cases pending than Mumbai and Bangalore has more than Chennai. The total pendency position is like this. </font></p>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Delhi </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>19670 </strong></font></p></td>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mumbai </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>16198 </strong></font></p></td>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Kolkata </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>3966 </strong></font></p></td>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chennai </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>6732 </strong></font></p></td>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Bangalore </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>7560 </strong></font></p></td>
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<td width="103" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ahmedabad </strong></font></p></td>
<td width="86" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>6825 </strong></font></p></td>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When will they ever clear all these cases? </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 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>Income Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether revisionary powers can be invoked on issue which was subject matter of proceedings u/s 154 - YES, rules ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Tribunal are - Whether revisionary powers can be invoked on an issue which was subject matter of proceedings u/s 154 and whether assessment order allowing income being offered to tax in the subsequent year and not in the year of lump sum receipt can be said to be prejudicial to interest of revenue, inviting invocation of powers u/s 263. And the verdict goes against the assessee. </font></p>
<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>Advertising - Claim that main contractor paid the Service Tax - Matter remanded to verify whether the main contractor paid the tax: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> matter needs examination at the end of the original authority to verify whether the main contractor has discharged the service tax liability or not. The appellant shall provide the copies of invoice to the adjudicating authority to verify whether the main contractor has discharged the service tax liability or not. With these directions, after setting aside the impugned order, the matter remanded to the original authority to verify whether the main contractor has discharged their service tax liability and to pass appropriate order after giving a reasonable opportunity to the appellants to present their case. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of car kits - Charges for technology transfer on which Service Tax paid - whether includible in value – Tribunal' s order for pre-deposit of 30 Crores upheld: High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> petitioner during the course of investigation has deposited about Rs.42 crores. After taking into consideration the amount of Rs.11.54 crores paid as service tax, the balance amount recoverable comes to Rs.43.63 crores. When service tax is collected on the amount of USD 45 million, whether the Commissioner was justified in treating the said amount of USD 45 million as part of the value of car kits imported by the petitioner is a question to be decided at the final hearing of the appeal. In the present case, it is the case of the Revenue that the amount of US$ 45 million paid to Skoda under the Technology Transfer Agreement was in fact part of the value of 45,000 car kits supplied by Skoda to the petitioner from time-to-time and that amount has been recovered from the customers by adopting different accounting methods. </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 color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day. </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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