TIOL-DDT 2007 · 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 2007</font><br>
20.12.2012<br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Royalty on Trade Mark - Taxable? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IS </strong>Trademark "Goods"? Is transfer of Trademark taxable under State VAT Acts as sale of goods? The High Court of Kerala had an occasion to decide this issue recently while disposing a Writ Petition. The Petitioner Company had entered into Franchisee Agreements with several companies, situated inside and outside Kerala and also abroad, as per which, on mutually agreed terms and conditions, these companies were allowed to use the Trademark owned by the petitioner. In return, it is receiving royalty, the rate of which is also specified in the agreement. Franchisee Services, being an activity attracting Service Tax under the Finance Act, 1994, the petitioner obtained registration under Section 69 of the Finance Act and is paying service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They were issued notice by the State VAT authorities stating that transfer of right to use any goods is taxable under Section 6(1) of the Act and that, Royalty received by the petitioner from its franchisees for use of its Trade Mark would attract VAT under entry 68 of the third schedule to the Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The company filed Writ Petitions against the demand of VAT on Royalty received. However, the Kerala High Court upheld the demand of VAT by holding that Trade Mark is goods and Royalty received from franchisees for use of its trademark and for sharing business know-how is leviable to VAT. The Court held "As per Article 366 (29A) of the Constitution of India, "tax on the sale or purchase of goods" includes a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration" and as per the definition of Goods under Section 2(xx), the expression would mean all kinds of movable property, including live stock, all materials, commodities and articles other than what are excluded in the section itself. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court was not called upon to decide the legality of the levy of service tax on the royalty received by the petitioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Negative List regime, the definition of Service given under Section 66B reads: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) an activity which constitutes merely,- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) <u><strong>such transfer, delivery or supply of any goods which is deemed to be sale within the meaning of clause (29A) of article 366 of the Constitution</strong></u>; or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) a transaction in money or actionable claim; </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, when permitting to use the Trademark is taxable (to VAT) as deemed sale within the meaning of clause (29A) of article 366 of the Constitution, then the same is excluded from the definition of service. However, "temporary transfer or permitting the use or enjoyment of any intellectual property right" is a declared service under Section 66E. Isn't it contradictory? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen wrote to us "Royalty payments or IPR are taxable under VAT / sales tax as deemed sales, so no Service Tax is applicable as per Service Definition, however it also appears under declared services. When the definition of the service excludes such deemed sale transaction, then why has‘temporary transfer for use of IPR' not been deleted from declared services? This anomaly/ contradiction existing in Act/Rules is creating confusion and will lead to unnecessary litigation". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will CBEC look into this? </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(Please See <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2012/2012-TIOL-1032-HC-KERALA-VAT.htm" target="_blank"><font size="1" face="Verdana, Arial, Helvetica, sans-serif">2012-TIOL-1032-HC-KERALA-VAT</font></a>)</font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tariff Concessions for Singapore Imports</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION</strong> No. 10/2008-Cus dated 15.01.2008 grants tariff concessions to 533 items for goods imported from the Republic of Singapore under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore. Now the notification is amended to further enlarge the tariff concessions. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2012/ctariff12_061.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 61/2012- Cus., Dated: December 18, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Allocation of 10,000 MTs of white sugar for export to EU </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Director General of Foreign Trade has allocated a total quantity of 10,000 MTs (Ten thousand metric tonnes) of white Sugar for export of CXL Concessions Sugar to European Union (EU) for the period October 2012 to September 2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per HS Code 1701 00 00 in the Schedule-2 of ITC(HS) Classification of Export and Import Items, as amended, M/s Indian Sugar Exim Corporation Limited, New Delhi is the designated agency for export of Sugar to EU under Preferential Quota. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Article 10 of European Union Regulation (EC) No. 891/2009 of 25.9.2009 "release for free circulation for the quotas of CXL concession sugar with order no.09.4321 shall be subject to the presentation of a certificate of origin issued by the competent authority of the third country concerned in accordance with articles 55 to 65 of Regulation (EEC) No. 2454/93". Accordingly, the entries to be made in the export authorization document EUR and GSP are as follows:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) CXL Concessions Sugar </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"[Application of Regulation (EC) No. 891/2009 under Schedule CXL (European Communities).CXL Concessions Sugar Serial No. 09.4321]". </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">GSP Certificate and Certificate of Origin as per details given in para (3) above shall be issued by the Additional Director General of Foreign Trade, Mumbai and EUR Form is to be endorsed by Customs at the Port of Shipment. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2012/dgft12pn039.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 39/(RE-2012)/2009-2014, Dated: December 19, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue Departments top in ignoring CVC Advice </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per the Central Vigilance Commission's Annual Report, "any delay in the implementation of the Commission's advice which is tendered after due consideration of all facts before it, reflects poorly on the State of vigilance administration of the organisation concerned" and the CVC noted with concern that several cases are pending for over six months. And our CBEC tops the list, with CBDT not far behind. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Delay in Implementation of the Commission's Advice for over six months </font></p>
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<td valign="top"><p align="center"><font color="#FFFFFF"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S. No </font></strong></font></p></td>
<td valign="top"><p align="center"><font color="#FFFFFF"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Organisation </font></strong></font></p></td>
<td valign="top"><p align="center"><font color="#FFFFFF"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First Stage Advice </font></strong></font></p></td>
<td valign="top"><p align="center"><font color="#FFFFFF"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Second Stage Advice </font></strong></font></p></td>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></strong></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Board of Excise and Customs </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">179 </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">154 </font></p></td>
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<tr bordercolor="#40BBBB">
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></strong></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry of Railways </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">131 </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">60 </font></p></td>
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<tr bordercolor="#40BBBB">
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 </font></strong></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Board of Direct Taxes </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">84 </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">60 </font></p></td>
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<tr bordercolor="#40BBBB">
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4 </font></strong></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department of Telecom </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">58 </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">38 </font></p></td>
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<tr bordercolor="#40BBBB">
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5 </font></strong></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry of home Affairs </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">36 </font></p></td>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">17 </font></p></td>
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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"> - 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">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund of Additional duty - Amending notification 93/2008-Cus has not been implemented retrospectively - time limit of one year is not applicable in case of refund claim filed against duty paid prior to 1.8.2008 - Rejection of refund claim on ground of time bar is not sustainable - appeal allowed with consequential relief: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTFN.</strong> 102/2007-Cus dated 14th September, 2007 grants exemption from the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act by way of the "refund" procedure. The exemption contained in this notification is/was being given effect by the jurisdictional Customs officer by way of sanctioning the refund on satisfying himself that the conditions referred to in paragraph 2 of the notification are fulfilled. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It will be interesting to note that there was no time limit prescribed within which the refund should be claimed by the importer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Board did the unthinkable. It issued a strange circular to fix a time limit of one year and informed that ‘necessary change in the notification is being made...' </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 assessee is entitled to deduction u/s 54EC on investment made in REC bonds in names of minors against their LTCG in case their income is clubbed with assessee u/s 64(1A) - YES: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee's minor children being beneficial owners of shares, earned LTCG on sale of beneficial shares. The assessee and minor children purchased REC Capital Gain Bonds and claimed deduction u/s 54EC. Assessee invested Rs. 50 lacs in REC capital gain bond in his own name and also made investment separately in the two minors' names for Rs. 49 lacs and 39 lacs and claimed deduction u/s 54EC. AO while framing assessment clubbed LTCG for minor children but disallowed deduction claimed by assessee on account of two minors and restricted deduction u/s 54EC of the Act at Rs.50lacs invested by assessee. CIT(A) allowed the appeal of the assessee and deleted the disallowance. </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">CENVAT credit availed on bought out items which allegedly were not required for final product - denial of credit - final product exported along with bought out items on payment of duty - whether rebate admissible on these bought out items - rebate claim to be kept pending till appeal is disposed of in matter of CENVAT credit: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is contention of the Revenue that the show cause notice was issued for denial of credit of Rs.5.91 Crores which the respondents had wrongly taken in respect of the bought out items which were not required for their final product nor the value of such goods were added to the assessable value of the finished goods. Inasmuch as the finding of the adjudicating authority that the respondents are entitled to claim rebate (provided they satisfy the Jurisdictional Central Excise officer that the impugned goods have in fact been exported and also that all other conditions are satisfied) is beyond the scope of show cause notice is the submission of the Revenue and hence the application for Stay. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements</font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day </font></p>
<font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font>
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