TIOL-DDT 212 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#6633CC" size="3">TIOL-DDT 212</font><br> 29 09 2005<br> Thursday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import of Aircraft on Operating Lease - Security Deposits</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI has decided that Authorised Dealer banks (ADs) may permit airline companies (other than a Public Sector company or a Department/Undertaking of the Government of India/State Government/s) to remit up to USD 1,000,000 (US Dollar one million only) per aircraft towards security deposit (for payment of lease rentals) with lessor for import of aircraft / aircraft engine / helicopter on operating lease without a standby letter of credit or a guarantee from a reputed international bank abroad or a guarantee of an AD in India against the counter-guarantee of a reputed international bank abroad. This is of course subject to certain conditions:-<br> <br> (i) The AD is satisfied about the bona fides of the transaction.<br> <br> (ii) The airline company has obtained necessary approval from appropriate authority like Ministry of Civil Aviation/Director General of Civil Aviation, for importing the aircraft/helicopter on operating lease. <br> <br> (iii) Remittance is permitted as per the Policy on Advance Remittances <br> <br> <b>(iv)</b> The final maturity of the security deposit should not be beyond the date of the last instalment towards lease rental or date of return of the aircraft / helicopter to the lessor, whichever is later<br> <br> For a PSU airline, there will be no bank guarantee.<br> <br> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=49&filename=notification/rbi/2005/rbi05cir013.htm">A.P. (DIR Series) CIRCULAR NO 13/ RBI, Dated: September 27, 2005</a></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Export of Sandalwood – DGFT correction.</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has amended Public Notice No. 27/05 to change <b>Antibagar</b> to <b>Ainbagar</b>. This obviously is a variety of sandalwood. Even to change a spelling mistake in a Public Notice, the DGFT is issuing a fresh Public Notice instead of following the CBEC, which amends even a notification by a corrigendum and then keeps the corrigendum under wraps. The corrigendum comes to light only, when in blissful ignorance of the change some bright officers in the field issue show Cause Notices, or when somebody points it out in an article for TIOL.<br> <br> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2005/dgft05pn056.htm">PUBLIC NOTICE NO. 56 (RE-2005)/2004-2009, Dated: September 27, 2005</a></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Clearances of used capital goods – Should the whole credit be reversed?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When inputs and capital goods are procured by the assesses and credit taken, there may be occasions when they have to be cleared (as such). So our visionary lawmakers had planned provisions for clearances of inputs or capital goods, at the time of making the modvat rules. But subsequent wisdom did not match the original vision. There was always confusion on how to get back the credit taken. First it was as if the goods are manufactured in the factory – this involved even filing of classification and price lists. The law was changed many times – but consistently judicial opinion was that whatever be the provisions of your law, in such cases the amount of credit taken should be reversed. <br> <br> Over a period of time that became the accepted law; now the legal position is that whenever capital goods are cleared as such, the amount of credit taken originally has to be paid back. This leads to ridiculous situations. Suppose a machine was bought for Rs. 1 crore in 1994 and a credit of Rs. 20 Lakhs was taken. If the machine is sold for Rs. 5 Lakhs (the book value will be far less or even zero) in 2005, the manufacturer has to pay back the amount of Rs. 20 Lakhs credit he had taken in 1994. <b>He can never sell that machine!</b> Sometime back there was a provision for allowing depreciation on the value of these old machines for reversal of credit. But now it is straight paying back of the whole credit.<br> <br> The Tribunal has come to the aid of such manufacturers who are forced to sell their old machines. In a path breaking order, the Bangalore Bench of the CESTAT has held that these used old machines are not capital goods “ cleared as such” and so they need not pay back the credit. As there is no other provision to collect duty or credit on such used machines, they need to neither reverse credit nor pay duty. <br> <br> As usual TIOL was the first to raise this issue way back in 2003. Please see our archive story and a detailed analysis of the case in today’s TIOL special. <br> <br> But this raises another question. A corollary of the Tribunal’s order!. <br> <br> If a manufacturer gets a machine in March 2005, takes half the credit in March and the other half in April and uses the machine for six months, he sells off the machine in October 2005, can he do it without payment of duty and without reversing any credit? Logically there is nothing wrong in this as the cenvat chain is broken. Nobody is simply going to throw away a machine. If the machine were to be used in another factory, that manufacturer would have got the credit, if duty was paid. Then what happens if that manufacturer is an SSI unit? <b>Laws are really complicated and Lawmen more complicated!</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Transcription of a Transporter</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT has received a funny letter from one of the regular contributors to TIOL. A Transporter wrote this letter to a manufacturer. We are reproducing this letter not just to provide a little humour, but also to highlight the struggle these semi literate people have to undergo to stay in business. Imagine their plight if these transporters were asked to follow the complex service tax laws, rules and asked to file returns.</font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Chidambaram Transport Service<br> </b>(Not real name) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To<br> M/s ABC Ltd<br> <br> Sir,<br> <br> I, for one the <b>Chidambaram Transport Service</b> in the capacity of the Managing Partner, extend my congratulations to you. In constructing factory in our District.<br> <br> With the fond of hope and trust that your factory should be gain a record of your fulfillment.<br> <br> In this connection we opt a little tender in carrying <b>Iron Ore</b> with the following opt.<br> <br> I do here by giving my connect to unload the <b>Iron Ore</b> at …..railway station from Racks.<br> <br> At the cost of me.<br> <br> To dump at your esteemed factory, at the place , with in the premises , of your factory, as suggested by you.<br> <br> Dumping cost will as by me.<br> <b><br> The Rate:</b><br> <br> I am obliged to do the work at the rate of Rs 80/- ( Eighty only ) per metric ton. At your factory.<br> <br> I may be in the fond of hope, that my opt will be accepted. By your esteemed order.<br> <br> Thanking you,<br> <br> Yours faithfully,<br> <br> <font color="#FF6666"><b>Until Tomorrow with more DDT<br> <br> Have a nice day. <br> <br> Mail your comments to</b></font> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>