TIOL-DDT 1741 · 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 1741 </font><br>
28.11.2011 <br>
Monday</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Reference
to non-existent section 11AB of the CEA, 1944 in CER, 2002 and CCR, 2004
- Is CBEC not aware? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received this mail from a netizen - </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“By the Finance Act, 2011, effective from 8th April, 2011, a new section 11AA titled “<strong>Interest on delayed payment of duty</strong>” has been enacted substituting the earlier sections 11AA and 11AB of the Central Excise Act, 1944. Incidentally, the notifications issued under the earlier sections 11AA and 11AB of the CEA, 1944 continue to remain in existence and for obvious reasons. These notifications are amending Notifications 05/2011-CE(N.T) dated 01.03.2011 and 06/2011-CE(N.T) dated 01.03.2011 prescribing rate of interest at eighteen percent per annum and both of them have come into force on 01.04.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, under the new Section 11AA of the CEA, 1944, no notification has been issued till date by the Central Government, thereby giving an impression that the old section 11AA notification continues to govern in the current scenario too – and which certainly is a fallacy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So also, Rule 8(3) of the Central Excise Rules, 2002 and Rule 14 of the CENVAT Credit Rules, 2004 still owe allegiance to the earlier section 11AB of the CEA, 1944 whereas it should be the new section 11AA of the CEA, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A small non-tariff notification can do the needful but it appears that the CBEC wants to pay a heavy price for this lapse. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board can search for all the Budget suggestions in their backyard but probably feel that the Trade should point these… <font color="#FF6633"><strong>but why should they?</strong></font> ” </font></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=13732" target="_blank">Please also see our Guest Column</a> </font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India Nepal DTAA Signed</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/nepal_dtaa.JPG" alt="Legal Corner Icon" width="274" height="178" hspace="5" border="0" align="left"><strong>INDIA</strong> and Nepal have signed the revised Double Taxation Avoidance Agreement, yesterday. The revised DTAA will provide tax stability to the residents of India and Nepal and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Nepal. In the revised DTAA the threshold withholding tax rates on dividends, interest, etc., are rationalised to reflect the present day situation and developments in the area of international taxation. Finance Minister Pranab Mukherjee said after signing the agreement, “<em>India has 81 such DTAAs. In line with the best practices followed, we have incorporated in this DTAA also, the provisions for effective exchange of information, assistance in collection of taxes between tax authorities and the anti-abuse provisions to ensure that the benefits of the Agreement are availed of by the genuine residents and not misused by third country residents. In the area of exchange of information, the revised DTAA provides for internationally accepted standards including sharing of bank information and sharing of information without domestic tax interest. Further, the information received can be shared with other law enforcement agencies with the consent of the information supplying country.</em>” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nepal's <em><strong>Republica</strong></em> reported, “<em>The Double Tax Avoidance Agreement with India signed on Sunday in Kathmandu is the outcome of almost three years of protracted negotiations. The formal process of negotiation started when Baburam Bhattarai was the finance minister and now has been formally signed when he is the prime minister. It is sheer coincidence! …….. the new agreement reduces the number aggregate of days in a year to 90 only (from earlier 183) for a consulting or service business set up to be termed as “resident” for the purpose of taxation. This certainly increases Nepal´s tax base as there are more Indian consulting companies working in Nepal than our companies working in India. The new agreement reduces the rate of tax dividends paid by the resident company of Nepal to the resident company of India to five percent if the Indian company is holding at least 10 percent of the shares of the Nepali resident company. ……… The most significant feature of the new agreement is that anyone living a cozy life in India by defaulting on Nepali taxes in the past can now be brought to book. Nepali tax authorities can obtain assistance of Indian authorities to collect any revenue claims, not just income tax, from a person living in India whose taxes are due in Nepal.</em>” </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Land
for Customs Office - Gujarat HC directs State Government to consider application </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Customs and Central Excise Department's urge for litigation but lack of commitment to pursue litigation properly can be clearly seen from the following story. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Excise Department had a plot of 4047 sq mtrs in Ranpur near Ahmedabad earmarked for construction of its office. The District Collector, Ahmedabad allotted this land to the Mamlatdar office of Ranpur for its office construction.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Excise Department made an appeal, after three years, against the order of the Collector to the Secretary (Appeals), Revenue Department, State of Gujarat, which came to be dismissed mainly on the ground of delay and latches. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One dismissal on ground of delay did not stop the Central Excise Department from filing a Special Civil Application in the High Court - again with a further delay of one year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court could have remanded the matter condoning the delay in both the appeals, but by the time the case reached the High Court, the construction of the Mamlatdar's office was completed and it was running since long. So, no purpose would be served by remanding the matter. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court dismissed the petition but directed, “<em>it will be open for the petitioner to approach State Government for the land in question, which has been allotted to Mamlatdar office, Ranpur as they were claiming ownership over the land in question and as and when such application is made, the same may be decided considering the fact that the petitioner is also Department of Central Government. It is to be noted that as such the land in question is treated as Government Padtar land by the Collector, which has been allotted in the year 2001 for construction of Mamlatdar's Office at Ranpu</em>r”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Aggrieved by the order of the High Court, which was by a Single Judge, the Central Excise Department appealed to a Division Bench. And now they have succeeded. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Division Bench directed the State Authorities to consider the request of the appellant for grant of land for construction of office of Customs and Central Excise Department, as directed by the Single Judge. The decision would be taken expeditiously but not later than 31st March, 2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court clarified that it has not examined the merits of the case and it expected that the decision would be taken without being influenced by the fact that this appeal is not examined or entertained on merits. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If they don't procrastinate further, maybe the Customs and Central Excise Department can have a plot for building their office by March 2012. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2011/2011-TIOL-746-HC-AHM-CX .htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court Order </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refresh Your Customs Tariff - Changes from New Year </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> World
Customs Organization issues amendments to the Harmonised Tariff System every
five years. The latest amendments will come into force from 01.01.2012. The
Indian Customs and Excise Tariffs have also been amended in tune with the
WCO HSN 2012, in the Finance Act 2011 to be effective from January 1, 2012.
There are changes in most of the chapters. New items like high value pens,
sanitary napkins and tampons are added. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is very important for the trade, especially the importers and exporters to understand the changes in the tariff and file documents accordingly to avoid hassles and litigation. Even the Departmental officers should start reading the new tariff changes to be ready by the New Year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We hope the DG, Systems is ready with the changes in the electronic data interface. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see the Fifth Schedule and the Eleventh Schedule to the Finance Act 2011. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Services received from abroad - Tax can be paid from CENVAT Credit? HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>OUR</strong> <strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600"> Jurispruden</font><font color="#FF6633">tiol</font></strong></font></strong> on Friday raised many eyebrows. The High Court had held,<em> “In the instant case, though he is the recipient of service tax, the service provider is outside the country. In law, he is treated as a service provider and is levied tax. In other words, the liability to pay tax on the service, which he has received, is foisted on him under law. It is to discharge the liability he is entitled to use the Cenvat credit, which was available with him, and therefore the Tribunal was justified in interfering with the order passed by the Commissioner.</em>” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, as per Rule 5 of the <strong>Taxation of Services (Provided from Outside India and Received in India) Rules, 2006</strong>, <em>“The taxable services provided from outside India and received in India shall not be treated as output services for the purpose of availing credit of duty of excise paid on any input or service tax paid on any input services under CENVAT Credit Rules, 2004.”</em> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does it mean that imported services will not be treated as output service for </font></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Availing credit on inputs or input services? </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Payment of Service Tax from CENVAT Credit? </font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, the issue covered in the High Court order was for the period prior to 19.04.2006, when the imported services were not taxable at all. But that was not an issue before the High Court. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=13731" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see Breaking News.</font></strong></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Social Justice? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBI </strong>reports that it has registered a case of disproportionate assets to the tune of Rs 3.15 crore against a lady IAS officer who is working as a Director in the Ministry of Social Justice and Empowerment, Govt. of India. This lady is a 2000 batch UP cadre IAS officer from Karnataka who was earlier Secretary to the Minister of External Affairs, SM Krishna. What is 3 crores for an IAS officer in these days and don't they also need social justice and empowerment? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBI has also registered a Preliminary Enquiry against the hi-tech former Chief Minister of Andhra Pradesh, Chandra Babu Naidu. And this involves thousands of Crores! Social Justice for a Chief Minister is certainly a little higher than that for an IAS officer! </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 cases</font></strong></font></strong></font></p>
<p><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"><strong><font color="#663399">Central Excise</font></strong></font></p>
<p><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633" size="2">Central Excise - Summons - Each Non-attendance is a separate offence - Giving false evidence also an offence: HC</font></strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the case before the High Court, the petitioner challenges the prosecution initiated against him by criminal complaint by the Central Excise Department under Sections 174 and 193 of the Indian Penal Code. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He had not appeared before the Central Excise Authority in response to the first three summons , but he did on the fourth summons. </font></p>
<p><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">Income tax - Whether, even if assessee incures interest expenditure on borrowed funds utilised not to earn dividends but to gain controlling stake, such expenditure is subject to disallowance u/s 14A - YES, rules Delhi HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether, even if assessee incures interest expenditure on borrowed funds utilised not to earn dividend income but to gain controlling stake in a company, the same is liable to disallowance u/s 14A; Whether Rule 8D is retrospective in nature and whether the disallowance is required to be made only if the expenditure is actually incurred in relation to earning dividends. And the verdict partly goes against the assessee. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellant providing Outdoor catering services and receiving payments but not discharging service tax liability - since liability accepted, pre-deposit ordered and matter remanded - cum-tax benefits and small scale exemption to be considered by adjudicating authority: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>M/s. SWAMI</strong> Samarth Catering Service , rendered outdoor catering services to M/s. Kinetic Engineering Limited and received payments amounting to Rs. 28,17,482/- during the year 2006-07, 2007-08 and 2008-09. However, they did not get themselves registered with the department nor did they discharge service tax liability. </font></p>
<p><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"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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