TIOL-DDT 1863 · 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 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></strong></font><font color="#663399" size="3">TIOL-DDT 1863 </font><br> 23.05.2012 <br> Wednesday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Boiler Credit - CBEC Responds</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Circular No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2012/excircular964.htm" target="_blank">964/07/2012-CX dated 02.04.2012</a></strong>, Board made some very important clarifications. </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"structural components which are to be used essentially as a part of Boiler System would be <strong>classifiable</strong> as parts of Boiler only under Heading 8402 of the Tariff. It is further clarified that since these structural components are nothing but the parts and accessories of the Boiler, they would be covered by the definition of inputs under Rule 2(k)(iii) of the CENVAT Credit rules, 2004 (i.e. all goods for generation of electricity & steam)."</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> did not make any adverse comments on this circular, when it was carried in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14707" target="_blank">DDT 1830 – 04.04.2012</a></strong>; in fact, we mentioned, "<em>This is a beneficial clarification and let us hope the pending disputes would be settled"</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14727" target="_blank">DDT 1831 - 09.04.2012</a></strong>, we asked a question whether this clarification would apply to goods '<em>other than</em>' boilers? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board issued another Circular - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2012/excircular966.htm" target="_blank">966/09/ 2012-CX, Dated: May 18, 2012</a></strong>, in which it was clarified that <strong>while CENVAT Credit is available in respect of parts of Boiler, the same is not admissible in respect of the structural components used for laying of foundation or making of structures for support of capital goods/ Boiler. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While reporting this in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15045" target="_blank">DDT 1861 - 21.05.2012</a></strong>, <strong>DDT</strong> observed, <em>"It is beyond reason, why the Board should create so much confusion by issuing circulars. Can't they just be satisfied with their confusing rules and notifications? Should they complicate matters further by issuing clarifications on which further clarifications have to be issued within less than two months ?"</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC responded pretty fast. Member (CX) in CBEC, Sreela Ghosh, spoke to <strong>DDT</strong> expressing her anguish at the harsh criticism, but patiently explained the need for the second circular. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Director (CX) in the Board clarified the position as: </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The relevant facts leading to the issuance of the circular no <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2012/excircular964.htm" target="_blank">964/07/2012-CX </a></strong>dated 2nd April 2012 are as follows: </font></p> <blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The manufacturer of Boiler, clears the Boiler and it components/ parts/accessories after classifying them under tariff heading 8402 and pays the duty accordingly. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Amongst the parts cleared there are certain components which are used for construction of support to the Boiler. These too are classified by the Boiler manufacturer under the same heading. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The jurisdictional officers from where the Boiler and its parts/ components are being cleared are in agreement with the classification made. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">++ However the officers in the jurisdiction where the CENVAT credit is being taken by the recipient of the Boiler and its parts, have been raising the issue with regard to the admissibility of CENVAT credit in respect of the certain components. The argument advanced by these officers is that since these structural components are not contributing to the functioning of the Boiler but are used for manufacture of supporting structure in respect of the Boiler, therefore they will be hit by the exclusion clause in the definition of input, read along with the decision of the tribunal in case of the Vandana Global <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-624-CESTAT-DEL-LB.htm" target="_blank"><font size="1">[2010 –TIOL-624-CESTAT-DEL-LB]</font></a></strong></font></p> </blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">After examination of the issue in consultation with the jurisdictional officers, the Board clarified that only those structural components which are essential for manufacture of the Boiler and are necessary for its operation shall merit classification under heading 8402. It was also clarified that since these structural components are essential to the functioning of the Boiler they shall be eligible for CENVAT Credit. The natural corollary to the assertion made is that those structural components which only provide support to the boiler (e.g. those used for laying foundation) will not be classifiable under heading 8402. Further as these structural components are used for construction of support to the Boiler the CENVAT credit shall not be admissible in respect of these items. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">After issue of the Board circular dated 2 nd April 2012, certain doubts were expressed with regard to the scope of the clarification issued in the said circular. Accordingly a second circular vide <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2012/excircular966.htm" target="_blank">966/09/2012-CX</a></strong> dated 18th May 2012 was issued reiterating the position and indicating that admissibility of CENVAT credit on structural components used for construction of support to the Boiler are in accordance with the judicial pronouncements on the subject. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">With regard to the issue of jurisdiction mentioned in the Article, it may be mentioned that it is a well settled law that goods are to be classified in the jurisdiction where they are manufactured and cleared and the jurisdiction in which they are received cannot alter the classification of the goods. The circulars in question do not attempt to clarify issue of the jurisdiction. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are grateful to the Board for its prompt response and clarification. So, the position now is that structural components essential to the functioning of the Boiler are eligible for CENVAT Credit and classification of the product is not to be done at the receiving end. There can be absolutely no dispute with this view of the Board. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A responsive tax administration commands respect and confidence. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on White Cement – Resurrected! </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ANTI </strong>Dumping Duty on white cement originating in, or exported from, UAE and Iran, was imposed by Notification No. 56/2007 – Cus dated 12.04.2007. Para 2 of the Notification clearly stipulated that the <em>anti-dumping duty imposed under this notification shall be effective for a period of five years (unless revoked, superseded or amended earlier)</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, this notification expired on 11.04.2012. Now the Government has extended its validity till 11.04.2013 – after more than a month of its expiry. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where does the Board get its authority to retrospectively validate dead notifications? Is it the arrogance that they are not answerable to anyone? </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=337&filename=notification/custom/2012/ctariffadd12_028.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 28/2012-Cus.,(ADD), Dated: May 21, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">What is a Public Financial Institution? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SUB-SECTION</strong> (2) of Section 4A of the Companies Act empowers the Central Government, subject to the provision of sub-section (1) of section 4A of the Act, to notify in the official Gazette such other institution as it may think fit to be Public Financial Institutions (PFI). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has now decided that a Financial Institution applying for declaration as PFI shall fulfil the following criteria:- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) A company or corporation should be established under a special Act or the Companies Act, 1956 being a Central Act; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Main business of the company should be industrial/infrastructural financing; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) The company must be in existence for at least 3 years and its financial statements should show that its income from industrial/infrastructural financing activities exceeds 50% of its total income. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) The net-worth of the company should be minimum of Rs. 1000 (Rs. One Thousand) crore. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) Company is registered as a Infrastructure Finance Company (IFC) with RBI or as a Housing Finance Company (HFC) with National Housing Bank; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) NOC from RBI/NHB, in the case of IFC/HFC, with regard to supervisory concerns, if any, must be obtained and enclosed with the application. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) Such IFCs/HFCs, after being declared as PFIs are required to disclose in their audited Financial Statements that they are complying with the directions and conditions laid down by the Ministry. </font></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_10_2012.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MCA F. No. 3/2/2011-CL V: Dated; May 21, 2012 </font></strong></a></p> <p align="center"><strong><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"> – Thursday's cases</font></strong></font></strong></font></strong></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">Short payment is not default - Payments made through CENVAT credit during defaulting period also becomes good payment once default is made good by paying the defaulted amount along with interest: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HERE </strong> is good news for central excise assessees. If a manufacturer fails to pay duty by the due date and the extended grace period of 30 days, then according to Rule 8(3A) of the Central Excise Rules, the assessee is barred from utilising the CENVAT Credit for payment of duty during the default period and the duty has to be paid on each consignment. Further, till the dues are cleared, the goods cleared will be treated as cleared without payment of duty and the consequences and penalties will follow. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, even in cases where the assessee pays duty by due date and default only part of the duty, department has been treating such short payment also as default of duty and is pressing the provisions of Rule 8(3A) by denying the CENVAT Credit during the default period. This view is also supported by the decision in<strong> <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2011/2011-TIOL-65-CESTAT-DEL.htm">(2011-TIOL-65-CESTAT-DEL) </a></font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the Tribunal has taken a different view and held that the short payment and default are not one and the same. </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 income from running ICDs and CFSs qualifies for deduction u/s 80IA(4)(i) of the Act - YES: Delhi HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is a public sector undertaking, registered as a company u/s 617 of the Companies Act, 1956 and is functioning under the direct administrative control of the Ministry of Railways. It was engaged in the business of handling and transportation of containarised cargo. The activity of the assessee was carried out mainly on its Inland Container Depots (ICDs), Central Freight Stations(CFSs) and Port Container Terminals (PCTs) which were spread all over the country. The assessee has a total of 45 ICDs. The question in the instant case was whether the income from ICDs qualify for the deduction u/s 80IA(4)(i) of the Act read with the Explanation (d). Out of the total of 45 ICDs operated by the assessee, except two ICDs, all others were notified by the CBDT vide notification No.S.O.744(E) issued on 1st September, 1998 for the purpose of Section 80IA(12)(ca). The power to notify infrastructure facilities for the purpose of the Section was taken away from the CBDT with effect from 1.4.2002. </font></p> <p align="justify"><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">In U.K, registration of motor vehicles bought for export is a requirement mandated under law - Findings of facts by Settlement Commission that car was a new vehicle cannot be faulted: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Commissioner of Customs (Import), Mumbai is before the Bombay High Court with a Writ Petition against an order passed u/s 127C(5) of the Customs Act, 1962 by the Settlement Commission. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Respondent imported a Ferrari and claimed the benefit of exemption notification 21/2002-CUS dated 1 March 2002 on the basis that it was a brand “new” vehicle. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DRI commenced an investigation and it was revealed that the vehicle was second-hand as it was registered with the Driver and Vehicle Licensing Agency (DVLA) in the United Kingdom prior to its importation. </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>