TIOL-DDT 1782 · 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 1782</font><br>
25.01.2012<br>
Wednesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Reduces CRR </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Reserve Bank of India has reduced the cash reserve ratio (CRR) of scheduled banks by 50 basis points from 6.0 per cent to 5.5 per cent of their net demand and time liabilities (NDTL) effective from January 28, 2012. As a result of the reduction in the CRR, around Rs. 320 billion of primary liquidity will be injected into the banking system.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Repo Rate:</strong> The policy repo rate under the liquidity adjustment facility (LAF) has been retained at 8.5 per cent.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Reverse Repo Rate:</strong> The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands at 7.5 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Marginal Standing Facility (MSF) Rate:</strong> The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, stands at 9.5 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Bank Rate:</strong> The Bank Rate has been retained at 6.0 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In reducing the CRR, the Reserve Bank has attempted to address the structural pressures on liquidity in a way that is not inconsistent with the prevailing monetary stance. Earlier, it was indicated that the cycle of rate increases had peaked and further actions were likely to reverse the cycle. Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing the policy rate. The reduction in the policy rate will be conditioned by signs of sustainable moderation in inflation. However, the persistence of tight liquidity conditions could disrupt credit flow and further exacerbate growth risks. In this context, the CRR is the most effective instrument for permanent liquidity injections over a sustained period of time. The reduction can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The timing and magnitude of future rate actions is contingent on a number of factors. Policy and administrative actions, which induce investment that will help alleviate supply constraints in food and infrastructure, are critical. Initiatives to narrow skill mismatches in labour markets will help ease the pressure on wages. The anticipated fiscal slippage, which is caused largely by high levels of consumption spending by the government, poses a significant threat to both inflation management and, more broadly, to macroeconomic stability. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Strong signs of fiscal consolidation, which will shift the balance of aggregate demand from public to private and from consumption to capital formation, are critical to create the space for lowering the policy rate without the imminent risk of resurgent inflation. In the absence of credible fiscal consolidation, the Reserve Bank will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Expected Outcomes</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The policy actions and the guidance are expected to: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) Ease liquidity conditions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii) Mitigate downside risks to growth. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii) Continue to anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation. </font></p>
</blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And What Do These Mean? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Bank Rate:</strong> Bank rate is the rate of interest which RBI charges on the loans and advances that it extends to banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Repo Rate:</strong> The rate at which the RBI lends money to commercial banks is called repo rate, a short term for repurchase agreement. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Reverse Repo Rate:</strong> The rate at which banks park their money with Reserve Bank is called the reverse repo rate. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Marginal Standing Facility (MSF) Rate:</strong> The Marginal Standing Facility (MSF) Scheme is operational on the lines of the existing Liquidity Adjustment Facility – Repo Scheme (LAF – Repo) i.e. commercial banks can borrow money from RBI. The basic difference between Repo and MSF scheme is that in MSF banks can use the securities under SLR to get loans from RBI and hence MSF rate is 1% more than repo rate. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CRR: </strong>Cash Reserve Ratio is the cash parked by the banks in their specified current account maintained with RBI. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SLR: </strong>Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities. Apart from CRR, every bank is required to maintain in India at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and unencumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). Present SLR is 24%. An increase in SLR also restricts the bank's leverage position to pump more money into the economy. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Presidential Awards - CESTAT ARs again Ignored! </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has announced its Presidential Appreciation Certificate Awards for 2012 for a record number of 35 officers for outstanding record of service. It is surprising that not even a single Authorised Representative in the CESTAT figures in the list of 35 awardees. The ARs in the CESTAT do so much of thankless work for the Department – always unheard and unsung. It is unfortunate that their work goes unrecognized. While officers routinely posted to NACEN get a 30 percent allowance, even if they cannot take a single class, the ARs in CESTAT who have to face brilliant lawyers and more brilliant judges with the badly drafted notices and pathetically written orders, are not given any incentive. Hard work, sincerity, passion, loyalty and erudition – all are discerningly visible when you see an AR arguing a case – often a bad one. Officers from the investigating agencies like DRI and CEI often corner many of the awards – but their cases are cases only when effectively defended by the DRs in the Tribunal Benches. Almost all the ARs richly deserve the Presidential award, but hardly anyone ever gets it. An AR once told me that she prays before appearing for a major case and one day she asked her daughter also to pray for her. “Mummy, what will you get if you win the case?”, asked the daughter. “Nothing, but satisfaction”, was the answer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chief Commissioner (AR) should prevail upon the Board to grant a few awards to the ARs every year. Even the DRI and CEI chiefs should recommend some ARs for the award. This is the least you can do to your most dedicated officers slogging it out in the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this year's awards to 35 officers, more than 22 are from the Investigating Agencies and many more might be former officers of DRI, DGCEI and the like. A Private Secretary to a Commissioner is a proud awardee – I have no doubts that she might be the BEST Private Secretary in the world, but certainly the Department's representatives arguing tough cases in the Tribunal Benches richly deserve a major share of the awards. </font></p>
<p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">BE THE BEST OF WHATEVER YOU ARE </font></strong></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you can't be a pine on the top of the hill, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be a scrub in the valley – but be <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The best little scrub by the side of the rill; <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be a bush if you can't be a tree. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you can't be a bush, be a bit of the grass, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And some highway happier make; <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you can't be a muskie, then just be a bass - <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the liveliest bass in the lake! </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We can't all be captains, we've got to be crew, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There's something for all of us here, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There's big work to do, and there's lesser to do, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the task you must do is the near. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you can't be a highway then just be a trail, <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you can't be the sun, be a star; <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It isn't by size that you win or you fail - <br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be the best of whatever you are! </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TIOL congratulates all the award winners. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2012/cnt12_007.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 7/2012 - Cus(NT), Dated: January 24, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">VAT on Textiles - AP Traders shut down shops </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Textile traders in Andhra Pradesh are up in arms against the 5% VAT on textiles imposed by the Andhra Pradesh Government. It seems Andhra Pradesh is the only State in India collecting VAT on textiles – other States are sure to follow soon. Incidentally Tamil Nadu withdrew in July 2011, the VAT it introduced on textiles. With cloth shops closed in AP, the tremors are felt in Surat. About 10% of Surat textile industry's production goes to AP. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the cash starved and politically disturbed Government of Andhra Pradesh, on a distribution spree of money it does not have, is in no mood to sacrifice the 2000 Crore revenue from textiles. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is also said that VAT is not the only thing that worries the textile trade – once they pay VAT, other taxes like Income Tax will follow and the thoroughly unorganised trade where hard cash and hardly any cheques are the hard realities, will find their accounts open for scrutiny. </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"> – Friday'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">Taking credit of CVD paid on chassis and paying duty on vehicle by treating same as ‘manufacturing activity' objected to by Dept – No cause for denial of CENVAT Credit - Stay granted: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Revenue wants to deny the credit of Central Excise duty in respect of chassis imported by the applicants on the ground that the process undertaken by the applicants does not amount to manufacture. As the applicants have paid the duty by reversal of the credit at the time of clearance of motor vehicles, prima facie, the applicants have strong case in their favour… </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 when charitable body pledges FDRs to enable two other registered Societies to obtain loan from bank, such activity results in violation of Sec 13(1)(c) - NO, rules Delhi HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondent is a society, which is registered u/s 12A and Section 80G. It undertakes activities relating to research, development and dissemination of (i) Technologies for fulfillment of basic needs of rural households (ii) Solutions for regeneration of natural resources and the environment and (iii) Community based institution strengthening methods to improve access to for the poor. These activities include projects on development of alternatives like low cost building material, smoke free cook stoves, water supply and purification, sanitation, organic farming, adaptation to climate change and issue based awareness creation programmes. The assessee had FDRs of Rs.12,00,000/-, which were placed as collateral security for allowing credit facility to two societies. These two societies were also carrying on charitable work. As per the findings recorded by the tribunal, some members of the management committee of the respondent society and these two societies were common. </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">If there were divergent views necessitating need for an issue of 37B Circular, prima facie , appellant have made out case to show that they were under bona fide belief that services rendered by them were not taxable – Stay granted: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>very purpose of issue of Circular under section 37B is to ensure that there is uniformity in the classification of excisable goods in this case service tax. If there was divergent views and, therefore, there was a need for an issue of Circular, prima facie, the appellant have made out a case to show that the appellants had a bona fide belief that the services rendered by them were not taxable prior to 16.07.2001. Since this would also require a detailed consideration of law and facts to examine whether this prima facie view is correct or not, in the interest of justice, pre-deposit is required to be waived and stay against recovery of the dues during the pendency has to be granted. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Friday for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Friday 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><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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