TIOL-DDT 1638 · the untouched capture
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<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1638
</font><br>
27.06.2011 <br>
Monday</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></div>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Price Hike on Petroleum products and reduction of Excise and Customs Duties? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENTRAL</strong> Government has inserted S. No. 72B in Notification No. 21/02-Cus dated March 1, 2002 wherein all goods falling under Chapters 2710, 2711, 2712, 2713, 2714 or 2715 other than goods mentioned at S. Nos. 72 A, 73, 74A,74B, 75 E, 76, 77A, 488A and 488B shall attract a concessional basic customs duty of 5%. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In addition to this, the basis customs duty on motor spirit commonly known as petrol and high speed diesel oil is reduced from 7.5% to 2.5%. Further, all goods falling under Chapter 2709 00 00 i.e. crude oil are completely exempted from basic customs duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the prevailing confusion, it appears that the Government has inadvertently imposed 5% basic customs duty on Aviation Turbine Fuel falling under Chapter 2710 19 20. In fact, goods falling under Chapter 2710 19 20 are notified at S. No. 77C of Notification No. 21/02-Cus. Since, the newly inserted S. No. 72B does not make any mention of excluding goods falling under 2710 19 20 notified at S. No. 77C, by virtue of the newly inserted S. No. 72B, Aviation Turbine Fuel falling under Chapter 2710 19 20 shall henceforth attract basic customs duty of 5%. Not exactly! ATF will now have two rates of duty – one is nil as per Sl. No 77C and one at 5 percent as per the newly inserted Sl. No. 72B. The importer can choose what rate he wants to pay! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, India does not import ATF or petrol – Why then a Customs Duty? While deciding the domestic price of ATF, the Customs duty component is also taken into consideration and thus India sells the world's costliest ATF and petrol. The higher the Customs Duty, the higher the profits for the Oil Companies. So they may not want a nil rate and would be happy to have a 5 percent duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, the Central Government has also exempted High Speed Diesel Oil falling under Chapter 2710 19 30 and listed at S. No. 19 of Notification No. 4/2006-CE dated 01.03.2006 from levy of excise duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In addition to this, the Government has also exempted ‘c olour positive unexposed cinematographic film in rolls of any size and length' and ‘colour negative unexposed cinematographic film in rolls of 400 feet and 1000 feet' from levy of excise duty by inserting S. No. 73A in Notification No. 4/2006-CE dated 01.03.2006. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While Government has reduced basic customs duty on motor spirit commonly known as petrol, there was no effort to reduce basic excise duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2011/etariff11_33.htm" target="_blank">NOTIFICATION NO. 33/2011-CX, Dated: June 25, 2011</a> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2011/ctariff11_052.htm" target="_blank">NOTIFICATION NO. 52/2011-Cus., Dated: June 25, 2011</a> </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Requirement of import permit/registration for import of certain substances for non-insecticidal use</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REFERENCES</strong> were received by the Board from trade and industry highlighting difficulties being faced in clearance of imported substances listed in Schedule 3 of the Insecticides Act, 1968 that are meant for non-insecticidal purposes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears that on account of varying interpretations of the relevant legal provisions, the Custom Houses are adopting different practices which are adversely impacting smooth clearances of such items being imported for non-insecticidal use. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has examined the matter in the context of Section 38 of the Insecticides Act, 1968, the relevant extract of which is reproduced below for sake of clarity: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>‘Section 38. Exemption </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Nothing in this Act shall apply to- </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the use of any insecticide by any person for his own household purposes or for kitchen, garden or in respect of any land under his cultivation; </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) any substance specified or included in the Schedule or any preparation containing any one or more such substances, if such substance or preparation is intended for purposes other than preventing, destroying, repelling or mitigating any insects, rodents, fungi, weeds and other forms of plant or animal life not useful to human beings'. </font></em></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board's Clarification:</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As may be seen, the aforementioned provisions of section 38 of the Insecticides Act, 1968 are unambiguous and leave no scope for interpretation. Essentially, the exemption from the provisions of the said Act would apply to those insecticides that are used for household purposes etc or for other than insecticidal purposes. Thus, import of items listed under schedule 3 of the said Act that are intended to be used for these purposes that are specified in the said section 38 would be outside the ambit of the provisions contained in Insecticides Act, 1968. <strong>The implication is that the clearance of such imported items would not be subject to the requirement of registration / import permit from CIB & RC</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board desires that for the sake of uniformity, Custom Houses shall immediately align their local procedures in line with this clarification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is however clarified that import of Boric Acid would continue to be governed by the specific instructions on the item that are currently in force. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/instruction11_017.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter F.No.401/101/2011-Cus.lll ., Dated: June 22, 2011 </font></strong></a></p>
<p align="center"><strong align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Desert - Next Shift Arrives </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is the title of the winning photo in the <strong>2011 WCO Photo Competition </strong>that pays tribute to Algerian Customs officers who fight tirelessly against smuggling, in addition to honouring those who have been killed while fighting this crime </font></p>
<p align="center"><img src="http://www.taxindiaonline.com/RC2/image/stories/cus_pix.jpg" alt="Legal Corner Icon" width="432" height="287" hspace="5" border="0" align="center"></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Special Drive to clear pendency of e-forms filed with ROC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is noticed that a large number of e-forms filed by the companies with the ROCs prior to implementation of revised Regulation 17 of the Companies Regulations, 1956 are still pending in folders like RESUB, PUCL etc for want of action on the part of stakeholders. Unless companies respond to this, ROC's are unable to process the said forms. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the existing process, the companies have to resubmit or furnish their clarification in Form 67 within the stipulated period of 30 days failing which such forms, filed prior to 15.02.2009, will lie pending in MCA 21. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to reduce the pendency of such e-forms, Ministry has decided to re-open all such pending forms and the same have been placed in the category ‘Held in Abeyance' (HIAB) so that ROCs can review the same. Therefore, all ROCs are advised by the Ministry to review such pending work items with them and dispose it of by July 7, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the stakeholders are requested to track the work items in MCA 21 Portal and contact the concerned ROCs to help them clear the pendency. Ministry states that this is the last opportunity provided to clear the pendency. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfmca/pdf2011/mca_cir_40_2011.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Circular No. 40/2011., Dated: June 23, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax paid on Outward Transportation allowed as CENVAT Credit - LB judgment valid till 31.03.2008 - Karnataka High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NETIZENS</strong> may
recall that CESTAT Larger Bench in <em>ABB Ltd & Ors </em></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2009/2009-TIOL-830-CESTAT-BANG-LB.htm" target="_blank">2009-TIOL-830-CESTAT-BANG-LB</a></strong></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> allowed <em>CENVAT
Credit </em>of service tax paid on outward transportation from the place
of removal to customer's premises by holding that it is an activity related
to business. Aggrieved by this reversal, Revenue went in appeal to the High
Court of Karnataka. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The long and desperate wait of all the stakeholders for more than two years ended on Friday when the Karnataka High Court released copy of its judgment delivered on March 23, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Referring
to a host of provisions in<em> CENVAT Credit</em> Rules, 2004, Central Excise
Valuation (Determination of Price of Excisable Goods), Rules, 2000, section
4 of Central Excise Act, 1944 and the judgment of Punjab and Haryana High
Court in <em>Ambuja Cements Ltd </em></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2009/2009-TIOL-110-HC-P-H-ST.htm" target="_blank">2009-TIOL-110-HC-P&H-ST</a></strong></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
the Karnataka High Court held that service tax paid on outward transportation
from the place of removal is allowable as CENVAT Credit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though, it upheld the final outcome of the Larger Bench decision in ABB Ltd & Ors, the interpretation of the Larger Bench that outward transportation of finished goods as an ‘activity related to business' was held as not sustainable. The High Court observed that ‘input service' per se is not confined to pre-manufacturing stage but also refers to post manufacturing stages. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court, while interpreting the definition of ‘input service' in Rule 2(l) of CENVAT Credit Rules, 2004 as it existed prior to 01.04.2008, observed that the exhaustive portion of the definition of ‘input service' (the ‘means' portion of the definition) deals with services used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and also includes clearance of final products from the place of removal. All the services rendered by the manufacturer which ensures proper delivery of the finished product upto the customer are included in the definition of ‘input service'. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court further observed that the services that a manufacturer would normally render to a customer from the place of removal are packing, loading, unloading, transportation, delivery, etc. Though the word ‘transportation' is not specifically used in the said provision, in the context in which the phrase 'clearance of final products from the place of removal' is used, it includes ‘transportation charges' also. Therefore, services received or rendered by the manufacturer from the place of removal till it reaches its destination falls within the definition of ‘input service'. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>For further analysis of this landmark judgment please see ‘<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12692" target="_blank">Breaking News</a>'. </strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We had covered this issue extensively in the last six years. Some of the stories are: </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax on Goods Transport - yet another hornet's nest - no credit on outward transport? - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2870" target="_blank">TIOL-DDT 239 - 11 11 2005 </a></font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax on Goods Transport “Clearance to depot “eligible for credit. - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3296" target="_blank">TIOL-DDT 304 - 16 02 2006 </a></font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3789">Cenvat Credit on GTA service </a>- The myths and mysteries - By S R Dixit, Advocate </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5373">Revenue wins big case </a>; Service tax on outward freight - no CENVAT credit; says CESTAT </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No credit of Service Tax on outward freight - landmark order from Tribunal - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5374" target="_blank">TIOL-DDT 599 - 24.04.2007 </a></font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Credit of Service Tax on outward freight “landmark order from Tribunal“-There is still hope - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5384" target="_blank">TIOL-DDT 601 - 26.04.2007 </a></font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax on outward freight - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5578">a doomed credit </a>? </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5871" target="_blank">The flutter over cenvat credit on outward freight </a>- By Joseph Prabakar, Advocate </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5991" target="_blank">Credit on input service </a>- Outward freight - Gujarat Ambuja disagreed with - referred to Larger Bench </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6913" target="_blank">Cenvat on Outward Transportation </a>– Amendment puts an end to controversy - Joseph Prabakar, Advocate </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ST - Cenvat Credit on Outward Freight - Revenue disallows - held, <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8695" target="_blank">Assessee eligible for Credit </a>: High Court </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cenvat Credit on input services - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7020" target="_blank">The certainty of uncertainty </a>! </font></strong></p>
</blockquote>
<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 align="justify"><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">Income Tax</font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income
tax - Whether when property in SIM cards even after transfer to franchisee
remains with telecom Co and franchisee has no free choice to sell them
at own price, discount offered is liable to TDS as commission - YES: HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>issue before the High Court is - Whether when
the property in the SIM Cards even after transfer to the franchisee remains
with the assessee and the franchisee has no free choice to sell them at
its own price, the relationship between the assessee and the franchisee
is principal to agent and the assessee is liable to deduct tax on discount
offered. And the High Court says YES.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Shunt
(electrical) is correctly classifiable under CETH 9030 of the CETA, 1985
and not under CETH 8533.00 as resistor - Unit of measurement of shunts
is ampere/millivolt while the unit of measurement of resistors is Ohms:
CESTAT </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> dispute
in this case is relating to the classification of the product “Shunt”.
The appellants claimed classification under CETH 9030.00 whereas the department
took a stand that the same should be classified under CETH 8533.00 of the
Tariff.</font></p>
<p align="justify"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6633" size="2">No
legal basis for assuming that since equipment has been leased out by Praxair
and they operate and maintain the facility they have to be deemed as ‘manufacturers' – transactions
are on principal to principal basis - in the absence of any evidence indicating
that the transactions were not at arms length and there was additional
consideration flowing, valuation cannot be doubted:</font><font size="2"> <font color="#FF6633">CESTAT</font></font></font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> facts
of the case are - M/s Praxair entered into an agreement with M/s Vikram Ispat
to manufacture pure/refined carbon dioxide out of the impure carbon dioxide
arising in the manufacture of sponge iron by the latter. To enable Vikram
Ispat to purify carbon dioxide in their factory, Praxair supplied plant and
equipment on lease basis and also supplied personnel at the premises of Vikram
Ispat. Vikram Ispat sold the entire carbon dioxide to Praxair at a contract
price of Rs. 4.31 per kg. whereas M/s. Praxair sold the goods subsequently
at a higher price. The department was of the view that <strong>Praxair are
the real manufacturers</strong> of the pure carbon dioxide and hence they
were liable to pay duty at the price at which they have sold the goods and
accordingly two show-cause notices were issued, one demanding differential
duty of Rs.43.35 lakhs and another demanding a differential duty of Rs.50.26
lakhs for the period from May to December 2000 and from January 2001 to June
2001 respectively. </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 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"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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