TIOL-DDT 1984 · the untouched capture
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<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 1984 </font><br>
16.11.2012 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue Fiat Runs unabated in SC - Alert Mangalore Customs wins pre-deposit</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SHREE</strong> Renuka Sugars Ltd, the appellants had filed before the Supreme Court, an ex-parte Stay application along with Civil Appeal No.7283 of 2012 against the operation of Final Order No 266-273/2012 dated 26.04.2012 <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2012/2012-TIOL-1542-CESTAT-BANG.htm" target="_blank"><font size="1">(2012-TIOL-1542-CESTAT-BANG)</font></a></strong> of the CESTAT, Bangalore, in terms of which, the appellant were liable to pay duty of Rs.14.41crore with applicable interest and equal penalty under section 114A of the Customs Act, 1962. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The preliminary hearing in the matter was initially posted for 19.10.2012. The vigilant legal section of the Mangalore Customs, keeping an eye on the status of its Supreme Court cases, spotted this party's ex-parte stay application cited in the advance list and initiated immediate action to oppose the same. The Commissioner immediately rushed one of his Assistant Commissioners,Krishna Kumar Prasad, to New Delhi on 16.10.2012 and with the support of the Directorate of Legal Affairs, ensured that a caveat was filed on 17.10.2012 so that the case of the department would be heard in the matter by the Court. They managed to get the Solicitor General to represent the Department. However, the hearing was adjourned for two weeks on the request of the appellants and was posted for next hearing on 09.11.2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On coming to know that the Solicitor General would not be available on 09.11.2012, the Assistant Commissioner again visited New Delhi and ensured that a senior counsel is nominated to argue for the department. The case was also briefed in detail to the counsels. The stay application was strongly opposed, as a result of which the Court ordered deposit of entire duty liability and 50% of penalty within six weeks that is by 21.12.2012. The Supreme Court Order reads as: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>There shall be interim stay of the impugned order, subject to the appellant depositing the entire duty liability and also 50% of the penalty demanded within a period of six weeks' from today. If such deposit is not made within the stipulated time, the interim order, granted by this Court, shall stand vacated without reference to this Court. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Call the matter after six weeks </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Delhi is very far off for a remote place like Mangalore, but apparently the Customs officers there are a dedicated lot and they could manage to realize over 21 Crores of rupees at the Stay stage. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> had carried a similar story on how the Bangalore Customs salvaged more than 200 Crores in the Bharti Airtel case. <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTU4NTA="><strong>TIOL-DDT 1939</strong></a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Partial Reverse Charge and Small scale exemption</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH</strong> the introduction of partial reverse charge in service tax for the services like manpower supply, security services, works contract service etc, it appears many assessees are under some confusion with regard to the benefit of Small scale exemption. The first question is whether the service recipient is liable to pay service tax under Partial reverse charge mechanism. The answer is yes, because as per the second proviso to Notification No 33/2012 ST dated 20.06.2012, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided that nothing contained in this notification shall apply to,- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, it is clear that for persons liable to pay service tax under partial reverse charge under Section 68(2), small scale exemption does not apply. Hence they are liable to pay service tax even if value to service provider falls below Rs 10 lakhs in a Financial Year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>According Para 10.1.3 of the Education Guide,</strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10.1.3 If the service provider is exempted being a SSI (turnover less than Rs 10 lakhs), how will the reverse charge mechanism work? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The liability of the service provider and service recipient are different and independent of each other. Thus in case the service provider is availing exemption owing to turnover being less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Second issue is , how to compute the exemption limit for a Small scale service provider. For example, if the value of services rendered by service provider is Rs 8 lakhs in a Financial year and on Rs 4 lakhs (50%) the service recipient has paid service tax, the turnover for small scale exemption should be computed as 8 lakhs or 4 lakhs? Para 10.1.3 above does not explain this important issue. Apparently, since service tax has been paid on Rs 4 lakhs by the recipient of the service, the remaining amount only should be taken as taxable value for the purpose of computing the 10 lakhs exemption limit. However, unfortunately para 3 of the Notification 33/2012 ST allows this benefit only to the GTA service under reverse charge. The relevant part of the Notification is as under: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. For the purposes of determining aggregate value not exceeding ten lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 of the said Finance Act for which the person liable for paying service tax is as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above para needs an amendment to include other services on which Partial reverse charge mechanism is made applicable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some assessees are under the impression that after paying service tax under Partial reverse charge, they can claim refund if the service provider is under Small Scale exemption. This is not correct as no such provisions exist and the assessment of liability at service receiver is independent of status of the service provider. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA) - RBI Instructions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BASED</strong> on several representations received from Full Fledged Money Changers (FFMCs), regarding difficulties in obtaining documents other than passport, and taking into account the procedure followed for money changing in other countries, it has been decided to amend certain instructions: </font></p>
<p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Customer Identification Procedure Features to be verified and documents that may be obtained from customers </font></strong></p>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Extant Guidelines </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revised Guidelines </font></strong></p></td>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Features </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Documents </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Documents </font></strong></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- Legal name and any other names used </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- Correct permanent address </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(any one of the documents, which provides customer information to the satisfaction of the AP will suffice). </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(any one of the documents, which provides customer information to the satisfaction of the AP will suffice). </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, where neither passports contain any address nor foreign tourists are able to produce any address proof, APs may obtain and keep on record, a copy of passport </font></p></td>
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<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir051.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI A.P. (DIR Series) Circular No. 51, Dated: November 15 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT Cartoon </font></strong></p>
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<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"> - Monday'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">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Security service at pump house for pumping water from Kundalika river, which is required as coolant in manufacturing operations is an Input service - CENVAT credit allowed: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> short issue in the present case is whether the appellant is eligible for CENVAT credit on the security service availed by them at their pump house for pumping water from the Kundalika river, which is required as a coolant in their manufacturing operations or not. It is the stand of the Revenue that since ‘security service' has been consumed outside the factory premises they are not eligible for CENVAT credit. </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 insurance, banking and electricity generation and distribution companies are treated as special class as per Sec 211 of Companies Act, they can be treated like any other assessees for purpose of Sec 115JB - NO: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether at the time of computing the taxable income of the company engaged in the business of general insurance, once the profit on sale of investment is included in the P&L account prepared as per the Insurance Act, then no adjustment is required to be made as per the provisions of sec. 44 r.w. First Schedule of Income Tax Act and Whether when insurance, banking and electricity generation and distribution companies are treated as a special class as per Sec 211 of Companies Act, they can be treated like any other assessees for the purpose of Sec 115JB. And the verdict goes in favour of the assessee. </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">Excisability - Samples in the form of un-packed tablets drawn from bulk prior to packing stage for analytical analysis and cleared outside factory are excisable goods liable to Central Excise duty - Appeal dismissed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants are engaged in the manufacture of medicaments falling under Chapter 30 of the Central Excise Tariff. During the period February 2000 to December 2002, they cleared certain samples without payment of duty. Before the CESTAT, in the grounds of appeal, the appellant submitted that the analytical samples, which were cleared from the factory, are not excisable as the same were cleared without any package. Inasmuch as since the goods are not marketable, the demand is not sustainable, contended the appellant. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more<strong> DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend. </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"><strong><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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