TIOL-DDT 2003 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><font color="#663399"><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></strong><font color="#663399" size="3">TIOL-DDT 2003 </font><br> 14.12.2012 <br> Friday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rule 16 of CER, 2002 - Why this Kolaveri Di? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>Netizen writes in - </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Sir, I am a small scale unit engaged in manufacture of Construction equipment namely, Shuttering/Scaffolding/formwork/falsework [Tariff Item 7308] and pay Central Excise duty by availing CENVAT. Our clients are Construction companies. Some of these equipments are of standard dimensions and some are made to order as per the contract executed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These clients purchase the construction equipment, in most cases on outright basis, and instruct us to deliver the same at the project site. We clear the goods under the cover of Invoice and pay appropriate duty. As and when the projects are completed, which period is from some months to years, they return the equipment manufactured by us and <strong>we pay them scrap value. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, since the items can be reused after remaking & reconditioning, we follow the provisions of Rule 16 of CER, 2002 and take CENVAT credit of duty already paid. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This process of remaking/reconditioning of the equipments requires us to scrub away the concrete stuck to it, welding and fabrication of damaged portion, painting/oiling the same so as to make it fit for re-use as ‘construction equipment'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Needless to mention, since CENVATTED items have also been used in this process of ‘manufacture' of the ‘construction equipment', which has been given a new lease of life, we reverse the credit on the same the moment they are issued from our materials division. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since a market exists for these remade/reconditioned equipments, as and when we get buyers we sell them for a value, which is around 50% less than the original price. While clearing this from our factory, we pay Central Excise duty on the value at which it is sold to the buyer, as these are ‘manufactured' goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If there is no buyer forthcoming, the remade/reconditioned equipments remain in our factory. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department recently conducted an Audit and has objected to the manner of our duty payment/CENVAT reversal when the remade/reconditioned construction equipments were cleared from the factory and has instructed us to reverse the CENVAT credit availed when the equipments were returned by the original buyer. In respect of the construction equipment, which have been remade/reconditioned but are still lying in our factory awaiting buyers, the department has sought a similar reversal of CENVAT. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are of the view that there is nothing in Rule 16, which mandates the above view of the department. The rule 16(2) which applies to our case is worded thus - </font></p> <blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be."</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is clear that the rule does not mention that if the goods are cleared after undergoing the process of manufacture the duty to be paid should not be less than the CENVAT credit availed when the goods were returned/brought to the factory. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In our case the construction equipments are "products"of heading 7208 inasmuch as they are manufactured out of flat rolled products of iron or non-alloy steel. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is to be noted that Chapter note 6 to Chapter 72 reads -</font></p> <blockquote> <p align="justify"><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">"6. In relation to the products of heading 7208, the process of oiling and pickling shall amount to "manufacture".</font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We request the Board to issue clarifications in the matter."</font></em></p> </blockquote> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT - Oldest Cases to be Listed on a Daily Basis</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> President of CESTAT has noticed that a number of old appeals and stay applications are pending disposal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The President has directed that at least 10 oldest appeals and 15 oldest stay applications are listed before various benches including Regional Benches on daily basis. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any deviation from these instructions shall be viewed seriously. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Circular was issued on 11.12.2012 and the President, Justice Ajit Bharihoke quit his job on 12.12.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the new President, as and when and if appointed, required to take any deviation from the instructions seriously? </font></p> <p align="justify"> </p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cestat_circular_01_12.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT Circular in F. No. 01(01)/R(Judl.)/CESTAT/2012 Pt, Dated: December 11 2012</strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tax Evasion Possibility of Insurance Companies of Private Sector </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Central Government has given notices in view of the possibility of tax evasion by some insurance companies of private sector. The names of the companies which, have been served upon Show Cause Notices in 2012-13 (upto October 2012) are: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. M/s Bharat Reinsurance Co.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. M/s IFFCOTOKIO General Insurance Services Ltd.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. M/s Apollo DKV Insurance Co. Ltd.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. M/s DLF Premierico Life Insurance Co.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. M/s AVIVA Life Insurance Co. India Ltd.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. M/s Sri Ram Life Insurance; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. M/s Sahara India Life Insurance Corporation; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. M/s Reliance Life Insurance Co. Ltd. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Out of the 8 companies mentioned above, the following four companies have submitted their reply to Government: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. M/s Bharat Reinsurance Co.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. M/s IFFCOTOKIO General Insurance Services Ltd.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. M/s DLF Premierico Life Insurance Co.; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Reliance Life Insurance Co. Ltd. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In cases where the companies have submitted the reply, a personal hearing will be held and adjudication orders passed. In cases where the reply is yet to be submitted, personal hearings will be conducted after receipt of the replies of the companies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was stated by the Minister of State for Finance S.S. Palanimanickam in a written reply to a question in the Rajya Sabha yesterday. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Plastic Currency - 10 rupee notes to be introduced</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH</strong> a view to elongating the life of banknotes, particularly in lower denominations, the Reserve Bank of India (RBI), in consultation with the Government of India has been considering various options including printing of banknotes on polymer substrate. A decision had accordingly been taken to introduce one billion pieces of Rs. 10 banknotes on polymer substrate on a field trial basis in five cities. The primary objective of introduction of polymer/plastic notes is to increase its life and not to combat counterfeiting. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The polymer banknotes are made from a non-fibrous and non-porous polymer. The Indian Banknote paper is made from long fibres obtained from cotton comber and linter. There is thus no direct relation between paper based currency and cutting of trees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The RBI has informed that the Energy and Resources Institute was commissioned by them to estimate the environmental impacts and carbon footprints of plastic currency vis-a-vis paper currency. Their study has found that polymer notes would be more environment friendly than paper based currency. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was stated by the Finance Minister Chidambaram in a written reply to a question in the Rajya Sabha yesterday. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DTAAs with 12 More Countries Under Process</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INDIA</strong> has entered into Double Taxation Avoidance agreements (DTAAs) with 84 countries. In addition, DTAAs have been signed with 3 countries, viz. Colombia, Uruguay & Ethiopia and will enter into force after completion of necessary formalities in these countries. Proposal to sign DTAAs with 12 more countries/jurisdictions is under process. These countries/jurisdictions are Albania, Bhutan, Chile, Croatia, Fiji, Hong Kong, Iran, Latvia, Senegal, Venezuela, Cuba and Macedonia. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has also identified priority countries/jurisdictions for negotiation of Tax Information Exchange Agreements (TIEAs). At present, India has TIEAs with 9 jurisdictions viz. Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Isle of Man, Jersey, Guernsey, Liberia and Macau which are in force. In addition, three more TIEAs have been signed with Argentina, Bahrain and Monaco which will enter into force after completion of necessary formalities in these countries/jurisdictions. The proposal to sign TIEAs with another 34 countries/jurisdictions is under process. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All these DTAAs and TIEAs contain an Article on Exchange of Information under which Indian tax authorities can seek information about a taxpayer. Information is regularly exchanged with the treaty/agreement partners and is forwarded to the field authorities for taking appropriate action. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was stated by the Minister of State for Finance, S.S. Palanimanickam in written reply to a question in the Rajya Sabha yesterday. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT Cartoon </strong></font></p> <p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_2003.jpg" alt="" width="450" height="400" hspace="5" border="0" align="middle"></font></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> <br> </font><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 align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"></font>Central Excise</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Rebate - appropriation of sanctioned rebate against dues to department - appropriation when stay application is pending before Tribunal is not sustainable in Law: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DEPUTY</strong> Commissioner while sanctioning the rebate appropriated the same under Section 11 of the Central Excise Act, 1944 towards dues pending from the appellant without putting the appellants to notice. The appropriation of the amounts when the appellant's stay application was pending before the Tribunal is not sustainable in law. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether when AO initiates reassessment proceedings after giving notice, AO's jurisdiction is restricted to reassess income only to extent of materials, which were basis for issuance of notice - NO, entire assessment: HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEEIS</STRONG> an NBFC, engaged in the business of sale and purchase of shares and financing. It showed a loss of Rs. 2.01 lakhs in share trading. Its assessment was reopened u/s 147 on the basis of the report of search operations conducted on certain accommodation entry providers. As per the report of Investigation Wing, assessee had received accommodation entry amount of Rs.5,08,687/- in the F.Y. 2000-01 under the garb of share application money/share capital/bogus gifts. Thus, the notice u/s 148 was rightly issued. As a result of reassessment, AO added the sum of Rs.1,10,896/-, being 2% of the total unexplained balance in the bank account, as income in the assessee's hands by way of commission on hawala entries. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of microprocessors intended for retail sale - goods are pre-packed and are required to be affixed with MRP as per DGFT notification 44 (RE-2000) - prima facie benefit of nil rate of Additional Customs duty in terms of notfn. 29/2010-Cus cannot be denied on ground that importer is claiming benefit of notfn. 6/2006-CE - Pre-deposit waived of 16.93 Crores and stay granted: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant made imports of microprocessors meant for fitment inside CPU housing/Laptop body and claimed exemption from payment of additional duty of customs leviable under Section 3(1) of the CTA, 1975 in terms of Notf. no. 6/2006-C.Ex. and also claiming benefit of Notification No. 29/2010-Cus in respect of additional duty of Customs leviable u/s 3(5) of the CTA, 1975. The benefit of Notification No.29/2010-Cusis sought to be denied on the ground that since exemption under Notification No.6/2006-CE at Sr. No. 17 is availed, <strong>it is evident that the goods are not meant for retail sale. </strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more<strong> DDT</strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend </font></p> <p align="justify"><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>