TIOL-DDT 1673 · 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 1673 </font><br>
16.08.2011 <br>
TUESDAY </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bank Guarantee by EOUs - Board Amends Circular No. 54/2004 - Cus, but did they forget Circular No. 12/2008 – Cus? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per CBEC Circular No. 54/2004-Customs dated 13.10.2004, units, which are in existence for last three years with <strong>unblemished track record</strong> and have export turnover of Rs 5 Crore or above, were exempted <em>from furnishing bank guarantee or surety along with B-17 Bond or for sending goods for job work [refer para 6.12(f) of the FTP]. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is brought to the notice of the Board that field formations are denying the benefit to EOUs on the ground that Show Cause Notices have been issued to them, thereby such units are unable to fulfil the condition of ‘<strong>unblemished track record</strong>'. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is <strong>unblemished track record </strong>and will issue of a Show Cause Notice mar the unblemished track record? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board notes that one of the conditions prescribed as per the Foreign Trade Policy is that the '<em>the unit has not been issued a show cause notice or a confirmed demand, during the preceding 3 years, on grounds other than procedural violations.”</em> The FTP has been amended to make this provision in 2008, but the Customs field officers continued to deny the benefit based on Board's Circular No. 54/2004–Cus. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Board clarifies that “<em>in simple cases of issue of show cause notices for procedural violation against such units, the entitlement of exemption from furnishing bank guarantee to EOU/EHTP/STP/BTP units need not be denied.</em>” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board also states that Circular No. 54/2004-Customs dated 13.10.2004 stands modified to the above extent and Board wants this to be given wide publicity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the Board reacting to the changes in Foreign Trade Policy made in 2008 – after three years and should the EOUs express their gratitude to the Board for this very belated clarification? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not exactly! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Circular No. 12/2008 –Cus dated 24.07.2008, Board had clarified: </font></p>
<p align="justify"><em><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Parameter for ‘<font color="#FF6633">unblemished track record</font>' to be observed for EOU/STP/EHTP/BTP unit: </font></strong></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many facilities like waiver of Bank guarantee, permission for self bonding, issue of pre-authenticated procurement certificate/CT-3, etc. have been extended to units who have <font color="#FF6633"><strong>unblemished track record</strong></font>. It has been brought to the notice of the Board that different parameters have been adopted by the field formations in determining whether a unit has an unblemished track record. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to adopt a uniform practice in this regard, following parameters are being laid down to determine whether a unit has an<font color="#FF6633"> <strong>unblemished track record</strong></font>. </font></em></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The unit should have: </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ achieved NFE/ export obligation wherever applicable; </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ not been issued a show cause notice or a demand confirmed, during the preceding 3 years, on grounds other than procedural violations, invoking penal provision and/or on account of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Customs Act,1962, the Central Excise Act, 1944, the Finance Act, 1994 covering Service Tax, the Foreign Trade (Development & Regulation) Act, 1992, the Foreign Exchange Management Act,1999 or any allied Acts or the rules made thereunder. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above parameters have also been incorporated under para 6.12(f) (iii) of the FTP. </font></em></p>
</blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Has the Board forgotten about this Circular? And is the field not aware of it? </font></strong></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_036.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 36/2011 -Cus: Dated August 12 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum Export Price of Onions Increased </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended (i) Notification No 46(RE – 2010)/2009-2014 dated 16.05.2011 and (ii) Notification No 59(RE – 2010)/2009-2014 dated 15.07.2011 both read with Notification No 24(RE – 2010)/2009-2014 dated 18.02.2011, whereby:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum Export Price (MEP) of Bangalore Rose Onions and Krishnapuram onions will be US$ 400 per Metric Ton F.O.B. It was US$ 350 per Metric Ton as notified on 16.05.2011. Minimum Export Price (MEP) of onions other than Bangalore Rose Onions and Krishnapuram onions will be US$ 275 per Metric Ton F.O.B. It was US$ 230 per Metric Ton as notified on 15.07.2011. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2010/dgft10not066.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 66 (RE-2010)/2009-14 , Dated: August 12 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Authorising EIC for issuing Certificate of Origin under India-Japan CEPA </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has amended the heading of Form Appendix 4D. Now, <strong>EIC </strong>would also be the authorized agency to issue Certificate of Origin under India-Japan <strong>CEPA</strong> with immediate effect. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EIC</strong> = Export Inspection Council </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CEPA</strong> = Comprehensive Economic Partnership Agreement </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn070.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 70 (RE-2010)/2009-14 , Dated: August 12 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum Export Price of Rice Decreased </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT </strong>has reduced the Minimum Export Price (MEP) of Sona Masuri, Ponni Samba and Matta varieties of rice to USD 600 per MT. It was USD 850 per MT as notified on 31.03.2011. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn072.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 72 (RE-2010)/2009-14 , Dated: August 12 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Filing of Appeals to ITAT - CBDT Instructions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT</strong> has issued instructions on filing appeals before the ITAT by the Department. </font></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Jurisdictional CIT shall be the authority to decide whether to contest an order of the CIT(A). Once the CIT communicates his decision to contest a particular order of CIT(A), it shall be the responsibility of the Range Head to ensure timely and proper filing of appeal in the ITAT and consequential follow up actions.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Time lines, indicating clearly the responsibilities of each level involved in the process, for filing appeals to ITAT have been laid down.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The CsIT shall ensure that appeals to ITAT are filed only where there is proper justification. Orders of CIT(A) on factual issues should be accepted unless the findings are<strong> perverse</strong>.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The grounds of appeal arising out of the order of CIT(A) should be carefully drafted to clearly spell out the grievance of the department and the relief sought.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In case of mixed question of facts and law, the grounds of appeal should clearly bring out specific legal and factual issues to be contested.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The grounds should be precise and not argumentative.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The CIT shall put in place proper mechanism with defined responsibility of different levels of officials in his charge to ensure that appeals are properly filed.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The CIT shall put in place proper mechanism to ensure timely and due compliance to the directions of the ITAT.</font></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2011/instruct1108.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Instruction No. 08/2011 CBDT., Dated: August 11, 2011 </font></strong></a></p>
</div>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">What is a Perverse Order?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AN</strong> order or finding is perverse on facts, if it falls under any of the following: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) The finding is without any evidence. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) The finding is contrary to the evidence. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) There is no direct nexus between the conclusion of fact and primary fact upon which that conclusion is based. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d) When an authority draws a conclusion, which cannot be drawn by any reasonable person or authority on the material and facts placed before it. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBDT clarified this in the Instruction mentioned above referring to the Supreme Court decision in <em>Sudarshan Silk & Sarees v. CIT</em> -<strong> <font size="1"><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2008/2008-TIOL-75-SC-IT.htm" target="_blank">(2008-TIOL-75-SC-IT</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2008/2008-TIOL-75-SC-IT.htm">)</a></em></font></strong></font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2011/instruct1108.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Instruction No. 08/2011 CBDT., Dated: August 11, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Stop Coddling Super Rich - Warren Buffet </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WRITING</strong> in the Op-Ed page of the New York Times, yesterday, Billionaire investor and one of the world's Super Rich, said that he and his rich friends have been coddled long enough by a billionaire-friendly Congress. He said that while the poor and middle class fight in Afghanistan, and while most Americans struggle to make ends meet, the mega-rich continue to get extraordinary tax breaks. He said that legislators in Washington have showered upon the rich blessings, as if they were spotted owls or some other endangered species. It's nice to have friends in high places. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Warren paid nearly 7 Million dollars as taxes last year. Though this may sound like a lot of money, surprisingly what he paid was only 17.4 percent of his taxable income. And that is a lower percentage than what was paid by 20 of his employees, who paid an average of 36 percent taxes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He said, “If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does higher tax scare away the investors? Warren doesn't think so. He says, <em>“I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation”. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">President Obama was quick to react. He said in a Town Hall Meeting in Cannon Falls, Minnesota, ”<em>Warren Buffett said that he pays a lower tax rate than anybody in his office, including the secretary. He figured out that his tax bill, he paid about 17 percent. And the reason is because most of his wealth comes from capital gains. You don't get those tax breaks. You're paying more than that. And -- now, I may be wrong, but I think you're a little less wealthy than Warren Buffett. That's just a guess”</em>. The Americans there just laughed. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does this apply to India?</font></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2"> Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600" size="2"> – Wednesday's
cases</font></strong></font></strong></font></p>
<p><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">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Deterrent Action - Rule 12 AA of CCR and Rule 12CC of CER and Notification No. 32/2006-CENT not valid before 08.05.2010: HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FINANCE</strong> Act, 2010 introduced an amendment to Section 37 of the Central Excise Act authorizing to make Rules to provide for withdrawal of facilities or imposition of restrictions in case of evasion of duty or misuse of Cenvat Credit. Central Government has made the Rules 12CC of the CE Rules, 2002 and Rule 12AA of the CC Rules, 2004 in the year 2006 without any authority of law which power was vested in the Central Government in the year 2010 by inserting clause (xiiia) in sub-section 2 of Section 37 and therefore, the two Rules are ultra vires the Central Excise Act, 1944. Consequently, Notification No.32/2006-CE (NT) dated 30.12.2006 issued in pursuance of Rule 12CC of the CE Rules, 2002 and Rule 12AA of the CC Rules, 2004 is not sustainable in law. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether disallowance is warranted for deduction of tax @ 1% on subcontract where subcontract is entered into to fulfill conditions of main contract - NO, rules ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> questions before the Tribunal are - Whether when the assessee earns dividend income, disallowance of administrative expenditure incurred, directly or indirectly, can be made even without rule 8 provided AO is able to link the same to earning of the income - Whether disallowance u/s 40(a)(ia) is warranted for deduction of tax @ 1% on subcontract where the sub-contract is entered into to fulfill the conditions of the main contract and the same is not independent to the main contract ------</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">Repairs
and maintenance Service of Wind mills used for producing Electricity situated
away from the factory are also Input Services – there is no mandate
in law that Services should be used in the factory unlike inputs - no reason
for denial of Cenvat Credit: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BRIEFLY</strong> stated
facts of the case are that the assessee is engaged in the manufacture of
excisable goods viz. motor vehicle parts falling under Chapter 87 of CETA,
1985 at their factory at Waluj, Aurangabad. The assessee availed CENVAT credit
of Service Tax paid on repairs and maintenance service of their wind mills
situated at Supa and Satara. </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><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"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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