TIOL-DDT 1957 · 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 1957</font><br> 08.10.2012<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">Credit to Indian Railway </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EFFECTIVE</strong> from 1st October, 2012 Indian Railways has become the biggest Service Tax assesse in terms of area and network of operations. Though it is not known whether the Indian Railways would choose for centralized registration or localized registration, it would be interesting to examine the position of this biggest assesse vis-a-vis CENVAT Credit Rules. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rakes (rail coaches and locomotives) and Tracks constitute the principal capital assets (goods) through which Indian Railways renders its output services of transport of passengers or goods. These rolling stock of railways are classifiable under Ch.hd 86 of CETA and it is interesting to note that Ch.Hd 86 is not one of the Tariff Headings specified under the definition of Capital goods given under Rule 2(a) of CENVAT Credit Rules (as it covers only the Headings 82,84,85,90 and certain motor vehicles falling under Ch.Hd87 ). Hence, IR are not eligible to take credit on duty paid on coaches or locomotives. Nor are they eligible to take credit as inputs, as the definition of inputs specifically excludes any capital goods under its purview. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming to the railway tracks / signalling system, they being attached to earth are like civil structure, and as such Railways are also not eligible to take credit on service portion of works contract as input services, because the definition of input service at clause (A) excludes service portion in the execution of a works contract and construction services in so far as they are used for - </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) construction or execution of works contract of a building or a civil structure or a part thereof; or </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unless rail coaches, locomotives, tracks are declared as capital goods, by amending the CCR, Railways may not be eligible to take credit on these items (as capital goods) and also not eligible to take credit on a host of various inputs or input services purchased towards maintenance of rail coaches or tracks. This is because, the exclusion clause (BA) of input service definition (which reads as follows), may be interpreted by the department to state that the maintenance or repair service is eligible as input service only if it relates maintenance of capital goods </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, Indian Railways engage many input services (through outsourcing) towards maintenance of its Railway Stations. It has to be seen how the department would treat these services when it comes to extending the benefit of CENVAT credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This apart, the operations of IR also attract the provisions of Rule 6 of CCR as the services rendered by IR other than First/ AC class are services on which no service tax is being levied. It is practically impossible for the railways to follow the mandates of Rule 6 of CCR. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the definition of capital goods under CCR covers both motor vehicles used for transport of goods and passengers under its purview and allows taking of credit on these goods, it is imperative for the government to amend CCR to include Chapter 86 also (in which railway coaches/locomotives are classifiable) under its purview which would make IR entitled to take credit on these items as capital goods. This apart, the Government should consider making special provisions under CCR (as has been specified in the case of Banking and Financial services) for railways to overcome the difficulty of maintaining separate accounts required under Rule 6 of CCR. Otherwise, the Railways would end up paying an amount at 2% on exempted services in terms of proviso to Rule 6(3) of CCR. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, will the Railways get credit for the Service Tax paid on catering in the Rajadhani and other trains? </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Government Notifies AIR of Duty Drawback </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has notified the new All Industry Rates (AIR) of Duty Drawback for the year 2012-13. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The tariff items and descriptions of goods are aligned with the tariff items and descriptions of goods in the First Schedule to the Customs Tariff Act, at the four-digit level only. The descriptions of goods given at the six digit or eight digit or modified six or eight or ten digits are in several cases not aligned with the descriptions of goods given in the said First Schedule to the Customs Tariff Act, 1975. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where the export product is not specifically covered by the description of goods, the rate of drawback may be fixed, on an application by an individual manufacturer or exporter in accordance with the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Notification will come into force on 10.10.2012 </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2012/cnt12_092.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 92/2012 - Customs (NT.), Dated: October 4, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Drawback Rates - CBEC Explains </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has issued a circular explaining the salient features of the new Drawback Rates. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. As in previous years, the drawback rates have been determined on the basis of certain broad parameters including, inter alia, prevailing prices of inputs, Standard Input Output Norms, share of imports in the total consumption of inputs, FOB value of export goods, the applied rates of central excise and customs duties, the factoring of incidence of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods, factoring incidence of duty on HSD/Furnace Oil. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Most, but not all, of the items that were already covered under the duty drawback schedule prior to 1.10.2011 [that is, before last year's (2011-12) duty drawback schedule was issued] will see an increase from the existing AIR. Some of the items that will see a reduction in AIR include leather trunks and handbags, wool yarn and fabric, gaskets (84.84), lawn tennis balls, cricket balls, felt tipped/porous tipped pens and markers, goods of heading 90.02 to 90.05. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In continuation of a transitory arrangement, most of the items incorporated in last year's (2011-12) duty drawback schedule, from the erstwhile DEPB scheme, will see a reduction in the AIR rates. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The existing residuary rate of 1% ad valorem (all customs) will now be either 1% composite rate with 0.3% customs component, or it will see an increase to 1.5% (customs component) or 2% (customs component). </font></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2012/cuscir12_027.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 27/2012-Customs, Dated: October 5, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP - Import of Poppy Seeds Allowed from 5 More Countries </font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended the import Policy Conditions (3) of Chapter 12, Schedule - I (Imports) of the ITC(HS) Classifications of Export and Import Items, 2009-14. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Import of Poppy Seeds (HS Code: 120791 00) shall be allowed only from Australia, Austria, France, China, Hungary, the Netherlands, Poland, <strong>Slovakia</strong>, Spain, Turkey and Czech Republic, <strong>United Kingdom, Democratic Peoples Republic of Korea, Macedonia, Germany and Ukraine;</strong></em> (the last five countries are the new additions); Slovakia replaces Slovenia. They are two different countries. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2012/dgft12not019.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No.19/(RE-2012)/2009-2014, Dated: October 5, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transfer of Unutilised Credit - ACES Not Responding</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>harried assessee informs us: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In the Budget 2012-13, the CENVAT Credit Rules was amended to transfer the un-utilized Additional duty credit from one unit to another unit which are registered with a common PAN vide notification 18/2012 C.E.(N.T.) and the corresponding notification for changes in the ER-1 was also made vide notification 12/2012 C.E. (N.T.) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But till date the ER-1 returns format in ACES does not have this change done and we want to transfer some credit lying un-utilized. We wrote a mail to ACES helpdesk; they gave us call ticket number and there is no reply from them for past one month.” </font></p> <p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will somebody in ACES help?</font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">US Customs Officer Sentenced for Groping Women at Airport </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Customs and Border Protection Officer of USA, Paulo Morales was sentenced to 33 months in jail for groping the breasts of three women <em><strong>without their consent</strong></em> while they were in the custody of CBP, a Department of Justice Press Release says. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The US Attorney said, "<em>In this case, the harm to the victims and the general public cut deep because it came at the very hands of someone who was sworn to serve and protect the public, and instead breached that trust.</em>"</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><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">SAFEMA</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, ‘SAFEMA'- Sale of property affected after notice of forfeiture but before order - Sale is void: SC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant purchased a property against which notice of forfeiture was already given by Enforcement Directorate. It is true that the appellants had obtained encumbrance certificates from the Sub-Registrar prior to purchase, which show that there were no encumbrances to the subject flat. It is also true that the appellants had obtained loan from Vijaya Bank, Brigade Road Branch, Bangalore for purchase of the said flat. It is a fact that sale consideration to the tune of Rs. 26 lakhs was paid directly by the Bank to the vendors after the Bank was satisfied about the title of the vendors. The appellants had also mortgaged the flat with the Vijaya Bank as a security towards loan. But unfortunately these facts are of no help to the appellants as the sale in their favour was effected after notices under Section 6(1) were issued to the vendors. Such sale has no legal sanction. The sale is null and void on the face of Section 11. </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 lessee and lessor design lease deed in such a manner that it amounts to sale of property, Revenue is right in disallowing advance rental as revenue expenditure and also disallowing depreciation merely because deed was not registered - NO: HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> lease deed was executed between the assessee (“the lessees”) and one Prataprai N. Kothari (“the lessor”) under which the lessor leased a factory shed to the assessee on the terms and conditions mentioned therein, for a term of thirty years, commencing from 1s March, 1982, at a rent of Rs.28,500/- payable half-yearly. The first payment of rent was to be made on 25th March, 1982 and subsequent payments were to be made on or before the 10th day of January and July each year. The issue before the Bench is - Whether when the lessee and the lessor design the lease deed in such a manner that it amounts to sale of property, Revenue is right in disallowing advance rental as revenue expenditure and also disallowing depreciation merely because the sale deed was not registered. NO is the HC's answer. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service of orders of Tribunal - When an order is passed by Tribunal in presence of counsel of appellant, order shall be deemed to be communicated on same date - HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION </strong>37C of the Central Excise Act, 1944 read with Rules 13 and 35 of Customs Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 clearly indicate that communication of the order to authorised agent of a person is sufficient communication. Thus when the order passed by the Tribunal in presence of counsel of the assessee, the order shall also be deemed to be communicated on the same date and the submission of the assessee that unless the order is received by the assessee in person, the order shall not be treated to be communicated to the assessee, cannot be accepted. </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>