TIOL-DDT 1801 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font><font color="#663399" size="3">TIOL-DDT 1801 </font><br> 23.02.2012<br> Thursday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Supreme Court drops a Bombshell - Board Circulars not binding! </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is now almost settled law that the Circulars and Instructions of the Board are binding on the subordinate officers of the Board, but in a recent judgement, the Supreme Court observed, "In our view, <font color="#FF6633"><strong>the departmental circulars are not binding on assessee or quasi judicial authorities or courts.</strong></font>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, is this an obiter dictum or a binding decision? If the Departmental Circulars are not binding on anyone, what would be the purpose of those circulars? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Commissioner of Central Excise vs Ratan Melting & Wire Industries</em> - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2008/2008-TIOL-194-SC-CX-CB.htm" target="_blank">2008-TIOL-194-SC-CX-CB</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">, a Constitutional Bench of the Supreme Court held, <em>"Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Certainly, that decision of the five-judge bench of the Supreme Court will prevail over the present two-judge bench decision. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14344" target="_blank">Breaking News</a></strong> for the latest Supreme Court Judgement. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Toll in nature of ‘user charge' or ‘access fee' paid by roads users - No Service Tax </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>clarification was sought from the Board regarding leviability of service tax on toll fee paid by users, for using the roads. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Service tax is not leviable on toll paid by the users of roads, including those roads constructed by a Special Purpose Vehicle (SPV) created under an agreement between National Highway Authority of India (NHAI) or a State Authority and the concessionaire (Public Private Partnership Model, Build-Own/Operate-Transfer arrangement). ‘Tolls' is a matter enumerated (serial number 59) in List-II (State List), in the Seventh Schedule of the Constitution of India and the same is not covered by any of the taxable services at present. Tolls collected under the PPP model by the SPV are collection on own account and not on behalf of the person who has made the land available for construction of the road. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ However, if the SPV engages an independent entity to collect toll from users on its behalf and a part of toll collection is retained by that independent entity as commission or is compensated in any other manner, service tax liability arises on such commission or charges, under the Business Auxiliary Service </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ An SPV formed as a result of agreement between NHAI or State Authority and the concessionaire under the BOT arrangement, cannot be considered as an agent of the NHAI. Renting, leasing or licensing of vacant land by the NHAI or State Authority to an SPV for construction of road and such construction do not attract service tax. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, in the revised negative list circulated by the Board, Sl. No. 20 is “ Tolls except services in relation to collection of tolls ”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are several cases pending at various stages on this issue. Board should instruct the field to get all those cases closed – if the instructions can be implemented. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2012/sercir152.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 152/3 /2012-ST, Dated: February 22, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Health Warning on Tobacco Products - Hookah Included </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> clarifies that imported Molasses used in Hookah containing tobacco have to bear the new specified health warnings as prescribed in the Notification G.S.R. No. 417 (E) dated 27th May 2011.</font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2012/instruction12_003.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No. 528/133/2011-STO (TU), Dated: February 22, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Foreign Lawyers cannot practice Law in India - Madras High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a landmark decision delivered on 21.2.2012, the Madras High Court ruled, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfil the requirement of the Advocates Act, 1961 and the Bar Council of India Rules. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ However, there is no bar either in the Act or the Rules for the foreign law firms or foreign lawyers to visit India for a temporary period on a "fly in and fly out" basis, for the purpose of giving legal advise to their clients in India regarding foreign law or their own system of law and on diverse international legal issues. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Moreover, having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The B.P.O. Companies providing wide range of customised and integrated services and functions to its customers like word-processing, secretarial support, transcription services, proofreading services, travel desk support services, etc. do not come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules. However, in the event of any complaint made against these B.P.O. Companies violating the provisions of the Act, the Bar Council of India may take appropriate action against such erring companies. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indian Lawyers and Journalists are perhaps afraid of foreign competition. (I am both a lawyer and a journalist) </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10104">DDT 1261 – 18.12.2009</a></strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10104"> </a>and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11715"><strong>DDT 1494 – 25.11.2010 </strong></a></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2012/2012-TIOL-140-HC-MAD-MISC.htm" target="_blank">click here</a></strong> for the Madras High Court Judgement. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Cadre Review - Central Excise Staff on Agitation Path </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY</strong>, in the CBEC Presidential awards function at New Delhi, the Finance Secretary RS Gujral stated that cadre review in CBEC is expected to be through within a period of one month. Of course, he did not mention through what . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the employees are not convinced – they have been hearing such promises for the last two years. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, now they are on an agitational path. Some associations have declared that they will be boycotting the Central Excise Day Celebrations on 24th February and walk out for two hours on Budget Day. There will be a full day walk out on 30th March 2012. Emulating the legislators? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In letters to the Ministers and Secretaries of Revenue, Expenditure, Personnel etc, the employees have<strong> kindly</strong> requested them to intervene and resolve the problem. </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">Classification of add-on cards and motherboards - Tribunal is expected to understand the factual scenario – Matter Remanded: SC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Tribunal is expected to understand the factual scenario with regard to the goods whose classification has fallen for their consideration and decision, before applying the law on the issue. This exercise has not been undertaken by the Tribunal. The nature and character of the products in question (namely, add-on cards and motherboards) and their functions with regard to Automatic Data Processing Machine and other machines has not been scrutinized. Therefore, no other alternative but to remand the matter to the Tribunal to decide the issue after considering the nature and the functions of add-on cards and motherboards in the functioning of Automatic Data Processing Machines. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Classification of 'Tikki Exjo Filler' - Revenue has not challenged the order of the Commissioner (Appeals) setting aside the Order In Original - Further SCNs not valid: SC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SINCE</strong> the revenue has not questioned the correctness or otherwise of the findings on the conclusion reached by the first appellate authority vide its order dated 16.5.1997 in GS/132/B.III/97, it may not be open for the revenue to contend that the adjudicating authority was justified in issuing the impugned show cause notices and also the further confirmation of said notices vide orders passed by the adjudicating authority, the appellate authority and the Tribunal. Without questioning the orders passed by the appellate authority, the revenue would not be entitled for any relief, whatsoever. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Valuation - manipulation of price between group companies - No error in findings of Commissioner (Appeals) and Tribunal - Revenue Appeal Dismissed: SC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRIBUNAL</strong> and the First Appellate Authority have not committed any error whatsoever; the findings and the conclusions reached by those Authorities cannot be characterized as perverse. In that view of the matter, no ground to interfere with the order passed by the Tribunal and accordingly, the appeals deserves to be dismissed. </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 assessee sells undertaking as going concern alongwith employees and various licences and cost of assets cannot be determined separately, no capital gain tax can be levied on sum received in excess of written down value of assets transferred - YES: Bombay HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> was engaged in the business of manufacture and sale of liquor. An agreement was entered into by the assessee with IDPL by which the assessee agreed to sell to the purchaser the undertaking / business together with its assets and liabilities as a running business / going concern on as is where is basis. AO noted that in the notes to account, it was mentioned that the written down value of the assets transferred was shown as a deduction for the purpose of computing depreciation from the block of assets. The excess of the cost of IMFL business was stated as not taxable and was not deducted from the respective block of assets. AO while framing the assessment deducted from the total sale price the written down value of the fixed assets and the value of the stores, raw materials and finished goods and observing that the difference was held to be chargeable under the head of capital gains. </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><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> </body> </html>