TIOL-DDT 1668 · 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 1668 </font><br>
08.08.2011 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs Audit At the premises of Importer/Exporter – Will CAG Lag Behind? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> Customs, unlike in Central Excise and Service Tax, audit by Departmental officers is not done in the premises of the importers or exporters. This is past tense. Finance Act 2011 substituted Section 17 of the Customs Act to provide for ‘self assessment'. The newly inserted Section 17(6) stipulates, “<em>Where re-assessment has not been done or a speaking order has not been passed on re-assessment, the proper officer may audit the assessment of duty of the imported goods or export goods at his office or at the premises of the importer or exporter, as may be expedient, in such manner as may be prescribed</em>”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you thought ‘self assessment' was a benefit, please change your thoughts. Now with self-assessment comes AUDIT by the Department in your premises. All these days, you had to bear with the Customs officers only in their offices, but now they will come to your offices to audit your self assessed import and export documents. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board proposes to bring in the ‘On-site Post Clearance Audit at the Premises of Importers and Exporters Regulations, 2011'. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per these regulations, the Importers and Exporters are obliged to: </font></p>
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<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Maintain such documents and records of transaction including electronic data relating to assessment of duty of imported or export goods, as the case may be, as prescribed by the Board for a period of five years from the date of import or export, as the case may be;
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Make available in a timely manner such books of account, records of transaction and other relevant documents relating to imported or export goods, as the case may be, as required by the auditor;
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Provide true and correct information to the auditor;
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Render assistance to the auditor in the discharge of his official duty and shall in no case refuse or obstruct the auditor. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Auditor will conduct the audit in the premises of the importer or exporter and can: </font></p>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Obtain from the importer or exporter, as the case may be, prior information relating to imported or export goods, as the case may be, before conducting audit.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Take a tour of the premises to gather relevant information relating to imported or export goods
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In the course of audit, inspect the imported or export goods, if available
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Take samples of imported or export goods and copy of relevant documents to verify the correctness of assessment of duty. </font></p>
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</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where the importer or exporter is in agreement with the audit findings, in part or in full, he may make voluntary payments of duty due, if any, and the auditor shall take the same on record in the Audit Report; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The auditor shall before finalizing the Audit Report discuss with the importer or exporter, as the case may be, steps, if any, to improve compliance; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Penalty</strong>: An importer or exporter, who contravenes any provision of these Regulations or abets such contravention or fails to comply with any provisions of these Regulations with which it was his duty to comply, shall be liable to a penalty, which may extend to fifty thousand rupees. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>‘Auditor'</strong> is an officer of customs who is assigned the function of audit by the Commissioner of Customs; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>‘Audit'</strong> is defined as <em>examination of bills of entry, shipping bills, invoices, packing lists, import licences, books of account, and other records of transaction relating to imported and export goods, so as to check the accuracy and correctness of assessment of duty thereof and may include inspection of goods at the premises, if available</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit by the Department means – a group of officers swarming your premises (actually you have to arrange transport, food etc., for them) and disturbing your work for three to four days with all their silly questions and despicable demands. You heave a sigh of relief when they leave, but you are in for periodic pestering. Who wants such a kind of ‘self assessment'? Is it a benefit or a punishment? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now that Customs Officers are being empowered to enter the premises of importers and exporters, the Audit teams from the CAG's Office will not be far behind. They would also love to audit the importers, especially in their (importers') offices, instead of in the dusty Custom Houses. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any way, the Regulations are not yet LAW and the Board wants your suggestions and comments latest by 16th August 2011, which can be mailed at <a href="mailto:dircus@nic.in"><strong>dircus@nic.in </strong></a></font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/daft_circular.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter F.No.450/1/2010-Dir (Cus): Dated August 01 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Online transmission of DES (Advance Authorization), EPCG and DEPB at Air Cargo Complex, Cochin from Today </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has added Cochin Air cargo Complex as one new location for on-line transmission of DES (Advance Authorization), EPCG and DEPB Authorization: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, </font></p>
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<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ DEPB application in respect of shipping bills issued on or after 8.8. 2011 from this port has to be filed in EDI mode.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ All authorizations for DES (Advance authorization), EPCG, and DEPB in respect of this port issued on or after 8.8. 2011 by Regional Authorities would be communicated to Customs on-line.</font></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2010/dgft10cir036.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Policy Circular No. 36 (RE-2010)/2009-14 , Dated : August 05 2011 </strong></font></a></p>
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<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Company Law Settlement Scheme, 2011 - Relief to Defaulting Companies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> large number of companies are not filing due statutory documents (i.e. Balance Sheets and Annual Returns) timely with the Registrar of Companies. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Due to this, the records available in the electronic registry are not updated and thereby are not available to the stakeholders for inspection. Further, due to not filing the documents on time, companies are burdened with additional fee, facing the prosecutions and being debarred from filing other documents electronically. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The ministry has decided to introduce the "Company Law Settlement Scheme, 2011" condoning the delay in filing documents with the Registrar, granting immunity from prosecution and charging additional fee of 25 percent of actual additional fee payable for filing belated documents under the Companies Act, 1956 and the rules made there under. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Scheme will come into force on 12th August 2011 and will remain in force until 31 October 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After granting immunity, the Registrar will withdraw pending prosecutions. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfmca/pdf2011/Circular_59-2011_05aug2011.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MOC General Circular No. 59/2011-Cus, Dated: August 05, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Taxability in respect of International Private Leased Circuit (IPCL) </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> clarification has been sought from the Board on taxability of IPCL charges incurred in foreign currency by BPO/MNCs against receipt of services from the service provider situated outside India/group companies under reverse charge mechanism [Section 66A of the Finance Act, 1994 read with Rule 2 (1) (d) (iv) of the Service Tax Rules 1994]. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board explains:- </font></p>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The activities are in the nature of Leased Circuit services <em><strong>presently</strong></em> covered under Telecommunication service. However, for getting classified under Telecommunication service, Section 65 (105 (zzzx) of the Finance Act, 1994 provides that the service should be provided by a Telegraph authority. Telecommunication service as defined under Section 65 (109a) covers services, which are provided by a person who has been granted a licence under the first proviso to sub-section (I) of section 4 of the Indian Telegraph Act, 1885. In this situation in the instant case since the service provider is located abroad, he is not covered under the definition given in Section 65 (109a). Thus the service provided by foreign vendors cannot be taxed under Telecommunication service.
</font>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Section 65 (105) (zzzq) read with Section 65 (104c) of the Finance Act, 1994, defines<em> Business</em> <em>Support Service</em> as services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. </font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Board clarifies:- </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The activity of receiving IPCL service from abroad is chargeable to Service Tax under Business Support Service [Section 65 (105)(zzzq) ibid] at the hands of recipients situated in India in terms of Section 66A of the Finance Act, 1994, read with Rule 2 (1) (d) (iv) of the Service Tax Rules. 1994 and provisions of Taxation of Services (Provided) From Outside India and Received in India, Rules 2006 apply. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants pending issues to be decided accordingly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But…… </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems DGCEI has booked a good number of cases and also recovered huge amount of service tax under reverse charge under " Banking and other Financial Services" on the commission paid to the foreign banks on ECBs (External Commercial Borrowings). It seems an officer in Bangalore just went through the information available with RBI and recovered around 500 crores and is considered a Hero. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, as per Section 65( 11),</font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(11) "banking company" has the meaning assigned to it in clause (a) of section 45 A of the Reserve Bank of India Act, 1934 (2 of 1934); </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">45A(a) of the RBI Act reads: </font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) ‘‘banking company'' means a banking company as defined in section 5 of the Banking Regulation Act, 1949], and includes the State Bank of India, </font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 5 of the Banking Regulation Act, 1949 reads: </font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) "banking company" means any company which transacts the business of banking [in<strong> India</strong>]; </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Applying the ratio of this latest clarification by the Board, a foreign bank cannot be called as banking company under 65(11). What will happen to those demands? can they claim refunds? </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2011/circular_circuit.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter F.No. 137/21/2011-Service Tax: Dated July 15 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FACES - A Bright Face of Customs </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>artistic officers and the staff of Hyderabad Zone of Central Excise Customs and Service Tax recently started an organization called "FACES" (Forum of artists of Customs, Excise and Service Tax), under the aegis of which a gala cultural programme was arranged at the prestigious Thyagaraya Gaan Sabha in Hyderabad on Saturday. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_0057.jpg" alt="Legal Corner Icon" width="450" height="274" hspace="5" border="0" align="center"></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">[R. Manohar, Additional Commissioner on Flute. On the Keyboard is Sitaramiah, Superintendent who is an accomplished performer at home and in International events in Dubai, USA etc.] </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Retired CESTAT Member Moheb Ali was the Chief Guest. The Organizers explained that this was a sincere effort on their part to relieve the stress and indulge in a healthy hobby to satiate the passions of the departmental artists (some of whom are established names in the Cinema Industry, TV Channels and All India Radio) while entertaining the masses. Moheb Ali, is himself a renowned theatre artiste of Hyderabad and had acted in a few movies. A visibly proud, Customs Commissioner PN Rao was all praise for his staff, who, he said gave a hypnotizing performance. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the organisers told<strong> DDT</strong>, “you criticize the Department for all our mistakes and misdeeds – do talk about a good thing we are doing” </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 case</font></strong></font></strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a></a><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">Service Tax </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Sub contractor collecting toll charges on Delhi-Noida toll bridge - Not liable to Service Tax before or after 10/09/2004: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NO tax for the past on a new service:</strong> The activity of the appellant would be covered under the 'Management, Maintenance and Repair of immovable property services'. Such services are liable to be taxed from 16/06/2005. “A category which specifically covered under the Service Tax liability from a specific date cannot be taxed under any other headings prior to that date”, is the law which has been settled by the High Court of P&H. </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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income
tax - Whether when donor has capacity to borrow funds, not based only on
annual income but also total assets owned, genuineness of gift cannot be
doubted - HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> AO, on perusal of the return, found that during the year under consideration, the assessee had received gifts from the certain persons vide cheques and also received immovable assets from Ashok Jain and Veena who were husband and wife. Pankaj Jain, from whom the assessee received the cheque of Rs. 200000/- was nephew of Ashok Jain. Ashok Jain was an Advocate by profession and Pankaj was a practicing Chartered Accountant and a partner of M/s P.Jain & Co. The AO wanted to examine the genuineness of the aforesaid gifts. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Seeking Adjournment on false grounds - Matter referred to HC for contempt proceedings: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is charged with seeking adjournments on false ground with the malice intention and interference in the administration of the justice of the Tribunal. The matter to be referred to the High Court of Bombay for contempt proceedings against the appellants. </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><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day. </font></p>
<p><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"><strong> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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