TIOL-DDT 2030 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 2030 </font><br>
23.01.2013 <br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Recovery of Demands - Madras HC Stays CBEC's Draconian Circular </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> was expected and eagerly awaited. The petitioner before the High Court prayed for: </font></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Quashing the impugned Circular No<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2013/excircular967.htm" target="_blank">.967/01/2013-CX</a> dated 01.01.2013 in F.No.208/36/2012-CX.6 issued by the CBEC. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Quashing the Notice dated 9.1.2013 issued by the Assistant Commissioner. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Staying the impugned Circular No<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2013/excircular967.htm" target="_blank">.967/01/2013-CX</a> dated 01.01.2013 in F.No.208/36/2012-CX.6 issued by the CBEC. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Staying the operation of the impugned Notice dated 09.01.2013. </font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An appeal was filed to the Commissioner of Customs (Appeals) on 22.12.2011 along with the stay application and no hearing was granted so far. In the meanwhile, recovery notice has been issued on 09.01.2013 based on the impugned Circular dated 01.01.2013. Despite filing of the stay application, the direction for recovery makes it mandatory for the authority to recover the amount within a period of 30 days after the filing of the appeal even if there is a stay application pending and has not been disposed of. The plea taken is that the proviso to section 129-E of the Customs Act does not specify any time limit. In such view of the matter, it was pleaded that the circular overreaches the provisions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court posted the matter for 31.01.2013 and granted stay till then. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Why this Circular</strong>? A lawyer friend writes in, “It is not that the CBEC does not know that the recovery circular is unjust and illegal. But the reason for the issue of the said circular could be - later when the top brass of CBEC are pulled up by FM for any revenue shortfall / not achieving the target, the blame can easily be shifted to the High Courts, about which nobody can complain. CBEC will project that all its earnest attempts to garner revenue were thwarted by various High Courts and they are helpless!!!!” </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See
</font></strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2013/2013-TIOL-55-HC-MAD-CX.htm"><strong><font size="1" face="Verdana, Arial, Helvetica, sans-serif">2013-TIOL-55-HC-MAD-CX </font></strong></a> </p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CX
- Valuation - Job-worked goods consumed by principal manufacturer and not
sold - Rules 10A (i) or (ii) or Rule 8 of Valuation Rules not applicable
- SC dismisses Revenue Appeals </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong><em>Advance Surfactants India Ltd Vs Commissioner of Central Excise</em> - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2011/2011-TIOL-757-CESTAT-BANG.htm" target="_blank"><font size="1">2011-TIOL-757-CESTAT-BANG</font></a></strong>, the facts were: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants were manufacturing chemicals on job work basis for M/s Hindustan Unilever Ltd (HUL). The appellants used to receive Linear Alkyl Benzene (LAB) from M/s. HUL. The appellants used to manufacture Linear Alkyl Benzene Sulphuric Acid (LABSA) in their factory and send the same back to M/s. HUL. M/s. HUL consume the said LABSA in their factory for the manufacture of Soaps and Detergents. The appellants were discharging the Central Excise Duty on LABSA manufactured by them, based on cost of manufacturing, which included cost of raw materials, processing charges and profit margin. M/s. HUL was supplying the LAB and the appellants were consuming other chemicals for the manufacturing of LABSA. The Central Excise authorities were of the view that the appellants being a job worker, w.e.f . 01.04.2007, by virtue of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000, were required to value the goods cleared by them to M/s. HUL under the said rule. The appellants contested the show-cause notices before the adjudicating authority mainly on the ground that Rule 10A will not be applicable in their case and provisions of Rule 8 of the said Rules cannot be brought into play for valuation of LABSA. The adjudicating authority did not accept the contentions raised by the appellant and by the impugned orders, confirmed the demands. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed that provisions of Rule 10A can be brought into play only when there is a situation where excisable goods are produced or manufactured by a job worker on behalf of a person and cleared to the buyer of the principal and/or cleared to a depot or a consignment agent. The intention of the Legislature was to capture the tax on the goods, on the value of the said goods when cleared to the ultimate consumers. Provisions of rule 10A (iii) gets attracted which talks about a situation where 10A (i) or (ii) does not apply. The said provision (iii) very clearly mandates that in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable shall mutatis mutandis apply for determination of value of the excisable goods. This would indicate that the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 has to be gone through serially. It is not the Revenue's case that provisions of Rule 3,4,5,6 and 7 would also apply in this case. Revenue is of the view that provisions of Rule 8 will apply. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>["RULE 8. Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the values shall be [one hundred and ten per cent] of the cost of production or manufacture of such goods."] </em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed, it is undisputed that LABSA is manufactured by job worker and cleared to HUL for further consumption and the said LABSA is the intermediate product required by HUL, which is manufactured or produced by the appellant as a job worker. The key words in Rule 8 that needs to be interpreted are 'consumption by an assessee or on his behalf ' for applying the said Rule for arriving at valuation or determination of goods. In the case in hand, it is very clear and not disputed that the appellant is not consuming the said LABSA nor is it consumed on his behalf by HUL. The provisions of Rule 8 will not get attracted in this case. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tribunal referred to a clarification given by the Board that where the goods manufactured by a job worker are used for captive consumption by the principal manufacturer, in such cases their value would be determined in terms of clause (iii) of Rule 10A read mutatis mutandis with Rule 8 of the Valuation Rules which provides for taking of 110% of the cost of production of the goods and observed, "The views expressed in the Circular are inconsistent with the provisions of Rule 8. The provisions of Rule 8 can be brought into play only if there is consumption of the goods by himself or on behalf of an assessee. Since the said clarification is against the mandate of the said Rule 8 of Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, the said clarification is untenable and has to be held as such." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But then how the value has to be determined? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"By elimination of Rule 2 to 10 as they may not apply in a situation like in this case provisions of Rule 11 will apply and Revenue has to take the recourse to provisions of Rule 11 which talks about using reasonable means consistent with the principles and general provisions of these rules read with sub-section (1) of section 4 of Central Excise Act. 1944. Keeping this in mind, we find that the ratio laid down by the Hon'ble Supreme Court in the case of Ujagar Prints and followed by various other decisions of this Tribunal and accepted by Revenue in their various Circulars will squarely apply i.e. to ascertain the assessable value on the cost of materials plus processing charges. In our view, the appellants have been correctly valuating their products by adopting this method ".</font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A similar order was passed by the CESTAT in <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2012/2012-TIOL-23-CESTAT-AHM.htm" target="_blank"><font size="1">2012-TIOL-23-CESTAT-AHM</font></a></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue went in appeal to the Supreme Court in both the cases (Commissioners think alike) and the Supreme Court last week dismissed both the appeals. The Supreme Court observed, <em>"In these appeals, no substantial question of law arises for our consideration. The same are dismissed accordingly."</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(See
<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2013/2013-TIOL-07-SC-CX.htm" target="_blank"><font size="1">2013-TIOL-07-SC-CX</font></a>) </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT unable to appreciate findings of Commr (A) - holds it as being passed without application of mind </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is the general perception that the post of Commissioner (Appeals) is purely unimportant and non-sensitive. Simply because those Commissioners who cannot be accommodated elsewhere or who have dark clouds hovering around them are almost always found there. Even otherwise, since they are under the administrative control of the Chief Commissioner they do not, strictly speaking, have a voice of their own while handling appeal matters. However, there are exceptions here too. Long ago, there was an incident where the Commissioner (A) had received a communication asking him to order 50% pre-deposit in each and every case that came up before him towards the end of the FY. The matter naturally went to the High Court where it ended. Like, we heard about a Commissioner (A) who conducts hearings only twice a week, not that she is extremely busy with office work, but because she comes to office ONLY on those days. No one bothers these days. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the order, which we are reporting, is a classic example of this lackadaisical attitude. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue had filed an appeal before the Commissioner (A) against an order passed by the adjudicating authority in favour of the assessee. The Commissioner (A) in her findings mentioned that she did not find any reason to interfere with the impugned order. After saying so, she allowed the Department's appeal!!! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally, the assessee is now aggrieved - and is before the CESTAT. All because the Commissioner (A) was not doing her job properly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CESTAT said that it is unable to understand the findings of the Commissioner (A) and, therefore, remanded the matter. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We know for sure that the person who would be in the dock would be...the Superintendent who prepared the order! But what about the Committee which accepted this order! </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See
<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2013/2013-TIOL-145-CESTAT-MUM.htm"><font size="1">2013-TIOL-145-CESTAT-MUM</font> </a> </font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Auto Driver's Daughter is CA Topper </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/prema.jpg" alt="" width="141" height="120" hspace="5" border="0" align="left">PREMA</strong> Jayakumar lives in a one-room chawl in Mumbai's suburb Malad with her parents and younger brother. Her father is an auto-rickshaw driver for more than two decades. Nothing great to write about until yesterday when Prema was declared as the National Topper in the CA examination. It is said that it is very difficult to pass the CA Exam. It seems under a signpost - “JESUS NEVER FAILS”, somebody wrote, “Let him take the CA Exam”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prema became the CA topper in her very first attempt. It was actually a double celebration for Prema's family as her brother also cleared the CA examination, along with her. Now they are sure to get good jobs and move out of the chawl. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT - The Full Bench </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Technical Members have been appointed in the CESTAT. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. PK Jain - Mumbai </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Manmohan Singh - New Delhi </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. HK Thakur - Ahmedabad </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. IP Lal - Kolkata </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">BSV Murthy, Member (Tech.), CESTAT, posted at Ahmedabad has been transferred to Bangalore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With this, all the Benches have members - after a long time, CESTAT will work with Members available in all Benches. Now, we need a President! </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"> – Thursday's cases</font></strong></font></strong></font></p>
<p><font 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 color="#663399"><strong>Service Tax</strong></font></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Activities of "Scientific Research" and “Consulting Engineering Services” are different - Scientific Research not taxable prior to 16.07.2001 under Consulting Engineer Service: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondent M/s. National Ship Design and Research Centre, Visakhapatnam is an autonomous body under the administrative control of Ministry of Surface Transport, Government of India, and is engaged in providing services in the fields of integrated ship design, consultancy, maritime economics, research and development. The services being provided by the respondent include design (tender design to production drawings) of all kinds of floating structures and also providing consultancy in the fields of techno economic evaluation of vessels, model testing etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a suspicion that the respondent was evading payment of Service Tax under the provisions of the Finance Act, 1994 on “Consulting Engineering Services” provided by it to clients, the Head Quarters Preventive Unit of the Central Excise Commissionerate, Visakhapatnam conducted investigations. </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 gains on foreign currency received from service providers for plying of ships is income incidental to tonnage income - YES: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee company is engaged in business of cargo transport and trading. The assessee had u/s 115VA of the Act, opted to pay taxes under Tonnage tax scheme and thus the income from the operation of qualifying ships was computed in accordance with the provisions of Chapter XIIB of the Act. The assessee having opted to be taxed under the aforesaid provision for its shipping division. In the A.Y. under consideration, the AO had completed assessment u/s 143(3) of the Act, based on return of income filed by the assessee by making disallowances on account of unpaid leave encashment liability and depreciation disallowed on revenue expenditure which was treated as capital expenditure. <strong>THE</strong> issues before the Bench are - Whether gain on currency received from service providers for plying of ships is income incidental to tonnage income; Whether the payment to gratuity fund as per the actuarial valuation are allowable as deduction u/s 43B and Whether expenses on issue of Bonds optionally convertible into equity shares are revenue expenses. And the verdict partly 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">SSI Exemption - clearance of goods in the brand name of another person - for part of demand period, there is no assignment deed and even for later period, assignment will take place only when Trade Marks are registered - since Trade Marks are yet to be registered question of appellant owning the brand name by virtue of assignment deed does not arise - Benefit not available - Appeal dismissed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant claimed the benefit of SSI exemption during the period 1.4.1999 to 6.12.2001 in respect of medicaments bearing the brand name of M/s Milichem Laboratories. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department was of the view that since the goods bore the brand name of another person the appellant is not eligible for the SSI exemption in terms of para 4 of the notification. Accordingly, the lower authority confirmed a demand of Rs.45,851/- along with interest and penalty. Since this order was upheld by the Commissioner (A), the appellant is before the CESTAT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE proprietor of the appellant firm appeared before the Bench and submitted that they had a Deed of Assignment dated 10.08.2000 executed by M/s Milichem Laboratories in their favour where under the brand names have been sold to them for a consideration of Rs.2000/- and, therefore, they are rightly entitled for the SSI exemption in respect of goods cleared with the said brand name. It is further submitted that one more Assignment Deed has been executed by M/s Milichem Laboratories in their favour in May, 2003, once again assigning the brand names in their favour, and which they have registered with the Trade Marks Registry on 20.05.2003. </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">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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