TIOL-DDT 2154 · 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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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=17063"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="3">TIOL-DDT 2154</font><br>
23.07.2013<br>
Tuesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Gold by Nominated Banks /Agencies/Entities </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per the instructions contained in <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir103.htm" target="_blank">Circulars No. 103</a></strong>, <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir107.htm" target="_blank">107</a></strong> and <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir122.htm" target="_blank">122</a></strong> issued by the RBI, certain restrictions were imposed on the import of various forms of gold by nominated banks/nominated agencies/ premier or star trading houses/SEZ units/EoUs which have been permitted to import gold for use in the domestic sector. None of these restrictions was applicable to import of gold for the purpose of exports or to import of gold by units in SEZ exclusively for the purposes of exports. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Based on a review, it has been decided to rationalize the import of gold in any form/purity including import of gold coins/dore into the country.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, the extant instructions are withdrawn and the following new instructions are issued: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) It shall be incumbent on all nominated banks/nominated agencies to ensure that at least one fifth of every lot of import of gold (in any form/purity including import of gold coins/dore) is exclusively made available for the purpose of export. Such imports shall be linked to financing of exporters by the nominated agencies (i.e. average of last three years or any one year whichever is higher). Further, they shall make available gold in any form for domestic use only to entities engaged in jewellery business/bullion dealers supplying gold to jewellers.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) They will be required to <font color="#006600">retain 20 per cent of the imported quantity in the customs bonded warehouses.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) They are permitted to undertake fresh imports of gold only after the exports have taken place to the extent of at least 75 per cent of gold remaining in the customs bonded warehouse. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d) Any import of gold under any type of scheme, shall follow the 20/80 principle set out at (a) and (b) above. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Entities/units in the SEZ and EoUs, Premier and Star trading houses are permitted to import gold exclusively for the purpose of exports only.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is also informed that the <font color="#006600">Government of India will be issuing separate instructions, if any, to the customs authorities/DGFT</font> to operationalize and monitor these import restrictions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The revised instructions come into force with immediate effect. </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Hope the instructions to the Customs authorities/DGFT are also issued in tandem lest they are caught unaware about the new regulations. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir015.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI/2013-14/148 A.P. (DIR Series) Circular No.15, Dated: July 22, 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service received by foreign Head office of company having branch in India, from service providers abroad. Is branch in India liable to pay ST?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CONCEPT</strong> of export and import of services has been a confusing one for more than a decade. When you export services, the Department would like to classify it as import and levy Service Tax. Take the case of commission for sales promotion of a foreign product. I get a commission for canvassing the goods of a foreign manufacturer - I get the payment in foreign exchange; I actually provide service to a foreigner and get paid in foreign exchange. The department wants me to pay Service Tax as I have provided the service in India. But for the Department the converse is not true. If I pay a foreign company a commission to sell my goods abroad, do I have to pay Service Tax? Many in the department believe that in both the cases, I have to pay Service Tax. For them, export and import are same as far as liability to pay Service Tax is concerned. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Eight years ago, addressing a seminar, I had said, <a href="http://www.thehindubusinessline.in/bline/2005/03/23/stories/2005032301661700.htm"><em>"<strong>If you go abroad and have a hair-cut in Paris or London, you may have to pay service tax for it in India</strong>"</em></a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But suppose a foreign company gets service from some foreign service providers and the service recipient has an office in India, is the Indian office liable to pay Service Tax? This was the issue before the CESTAT recently. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thai Airways International Public Ltd., Bangkok, Thailand has a branch office in India. Thai airways, Bangkok has entered into agreements with several computerized reservation system companies ('CRS' Companies) who will provide linkage to IATA Agents and all the information regarding flight schedules, fares, seat availability on flights etc. in respect of the flights of Thai Airways is transferred to the computer system of CRS Companies, who, in turn, make this information available on real time basis to the IATA Agents and thereby facilitate the booking of air tickets of Thai Airways by the IATA agents. For this service, Thai airways pays the CRS companies a remuneration. There is no dispute that all the CRS Companies are based abroad and do not have any office in India and entire payment for the services being provided by them has been made outside India by Thai Airways, Bangkok. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Service Tax department believes that the Indian branch office of Thai Airways is liable to pay Service Tax on the remuneration received by the CRS companies from Thai Airways headquarters in Bangkok. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner confirmed a demand of over Rs. 16 crores with attendant penalties and interest. There is a similar demand on Austrian Airways. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the CESTAT, the Member (J) upheld the order of the Commissioner, including extended period of limitation, as there was deliberate breach of law to cause evasion. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However the Member (T) held that no Service Tax was payable in India for the service rendered by CRS companies to the Headquarters of the Indian branch. He also held that longer limitation was not available to the department as even if they were required to pay tax, they would have got CENVAT credit and so the entire exercise is revenue neutral. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Learned Commissioner who passed the order is certainly aware of all the facts and law that the Member (T) explained. But being a Commissioner, he thinks his job is to collect Revenue by any means and land the issue in a grand litigation which will run for the next twenty years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Because of the disagreement between the two Members, the matter was referred to a Third Member. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you this case tomorrow. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">GST - J&K Finance Minister 'Abdul Rahim Rather' is Chairman of Empowered Committee </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ar_rather.jpg" alt="Legal Corner Icon" width="200" height="277" hspace="5" border="0" align="left"><strong>THE</strong> Finance Minister of Jammu & Kashmir, Abdul Rahim Rather was unanimously elected Chairman of the Empowered Committee of State Finance Ministers on GST yesterday. The post fell vacant as Sushil Kumar Modi, the former Finance Minister of Bihar resigned on June 17, consequent to his exit from the Bihar cabinet. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rather is a lawyer and the senior-most MLA in J&K, having entered the Assembly for the first time in 1977. He had become the Finance Minister of the State in 1983. He is perhaps the only legislator to win from the same constituency six times in a row. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But it is ironic that the Finance Minister of J&K is the chief of the GST Committee, for the Indian Service Tax is not applicable to J&K. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Addressing the last meeting of the Empowered Committee in Bhubaneswar recently, Abdul Rahim Rather made some interesting comments: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The proposed dual integrated model of GST ‘Dual Control' both by States and Centre is perceived as an impediment in the implementation of GST and it is felt this is not dealer friendly and may not be administratively an efficient tool of recovering the taxes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The position of Jammu and Kashmir State would be entirely different as compared to the other States of the Union. All other States would be surrendering the exclusive authority to tax goods and, in turn, get the additional authority to tax the hitherto out of bound “service sector”. On the contrary, the State of Jammu and Kashmir, being already competent to tax goods as well as services, unlike other States, would not get any additional authority except a share from the Central divisible pool. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. As a matter of fact the division of powers between the Union of India and the State of Jammu and Kashmir is not at the same footing as it is in respect of other States of the Union. The State of Jammu and Kashmir enjoys a special status under the Constitution of India and its Constitutional relationship with the Union of India is governed by Article 370 of the Constitution of India as amended vide Constitution (Application to Jammu and Kashmir) Orders, promulgated from to time by the President of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The matter has been considered by the State Cabinet and it has been decided, vide Cabinet Decision dated 01.08.2012, that after the coming into force of the Goods and Services Tax regime in the country, the State Legislature will consider the enactment of a legislation on the subject in which the State would make provisions in tune with the GST regime, applicable to all the other States. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The components of GST would be levied by the State itself under the proposed legislation, which would be analogous to the statutory framework, proposed by the Union of India for all other States. The State would lay down a mechanism for quantifying the component of CGST and IGST, which the State shall collect for and on behalf of the Union of India and pass on such component to the Union of India, of course, after the deduction of collection charges and subject to the mechanism as may been envisaged under the State legislation. </font></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope Mr Abdul Rahim will be able to bring in the elusive GST. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise Superintendents Association Revives Agitation against apathy </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Excise Superintendents are an agitated lot. The much awaited cadre restructuring has turned out to be elusive. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday the Association's Secretary General in a letter to the Finance Minister submitted: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• Our officers are retiring in PB2 after getting only one promotion in the service career while other common entry counterparts of ours are retiring in PB4 after getting 5-6 promotions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• The employee grievance redressal mechanism has totally failed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• We are forced to work under the extreme juniors of Customs belonging to the same cadre. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• All of our officers are totally demoralised and have nothing to be job-satisfied or motivated. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• If career prospects were disclosed in the recruitment advertisement, these officers would have never joined this job. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• The rights to grow, make progress and live with dignity have been snatched from us. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">• There is no change in the scenario regarding our career prospects despite the repeated representations, pleadings & requests being made by the Association for many decades. All of our grievances have been unredressed for decades despite assurances. </font></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Association has decided to revive the agitation agenda from 4.9.2013. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Stay order passed by Tribunal is on 'wrong' facts, hence order recalled </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VIDE</strong> a Stay order, the applicant was asked to make a pre-deposit of 20% of the penalty confirmed against them. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Against this order, the applicant filed an application for Modification and submitted that it was a mistake on their part in not remaining present at the time of hearing or being represented by a counsel and they had also not sought an adjournment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Inasmuch as it was submitted that the Bench had after hearing the Revenue representative ordered for a pre-deposit by observing that "<em>the applicants have imported the goods under Target Plus Scheme, which was diverted into open market. Therefore, they have violated condition no. 3 of Notification no. 32/2005 dated 28.4.2005</em>" <font color="#FF0000">and that these facts were not correct.</font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench perused the records and observed -</font></p>
<blockquote>
<p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">"</font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">4. …, we find that the applicant is not the importer in this matter. Therefore, the decision taken by the Tribunal is on the basis of wrong facts. Accordingly, we recall our order dated 14.03.2013 and direct the Registry to list the Stay application for re-hearing on 26.07.2013 along with co-noticees."</font></em></p>
</blockquote>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODkxODk=" target="_blank"><font size="1">2013-TIOL-1111 -CESTAT-MUM</font></a></font></strong></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"> – Wednesday'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">Service received by foreign Head office of company having branch in India, from service providers abroad. Is branch in India liable to pay ST? Matter referred to Third Member: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE </strong>is no dispute that:- the service providers i.e. the CRS Companies are located abroad and they do not have any office in India; the agreements for providing service are between the Appellant's head office at Bangkok and the CRS Companies; and the payments for the services rendered by the CRS Companies have been received by them directly from Thai Airways, Bangkok and as such the entire payments for the services, in question, have been made outside India.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The dispute is only on the point as to whether the Appellant- the branch office of Thai Airways, Bangkok in India, can be treated as the recipient of the service provided by the CRS Companies and on this basis subject to service tax under reverse charge mechanism of Section 66A. </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 role of Audit parties is to point out factual mistakes and not to advise AO on legal matters - YES: 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 role of the Audit parties is to point out factual mistakes and not to advise the AO on legal matters and Whether, if an AO, reopens the assessment on the legal advice of the audit party, it cannot be held as the formation of an independent opinion for the purpose of section 147. And the verdict goes against the Revenue. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import under Notfn. 21/2002-Cus: Customs ((Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996: Interest is chargeable because of provisions of Rule 8 and not because of Section 28AB - Rule 8 applies by its own force and on its own strength – Petitioner liable to pay interest – Writ Petition dismissed: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RULE</strong> 8 does not incorporate Section 28AB. Rule 8 also does not make the pre-conditions mentioned in Section 28AB, part and parcel of the said Rule. Levy of interest for short levy of duty is prescribed by Rule 8 itself. Interest is chargeable because of the provisions of Rule 8 and not because of Section 28AB. Pre-conditions or the conditions mentioned in Section 28AB do not get incorporated in Rule 8. Rule 8 applies by its own force and on its own strength. Reference to Section 28AB in Rule 8 is only for the purpose of rate of interest. The rate of interest payable under Rule 8 was/is the rate of interest fixed by the notification issued under Section 28AB. It is to or for this limited extent, reference is made to the notification issued under Section 28AB. Clearly, therefore, the petitioner was liable to pay interest under Rule 8 at the rate as was fixed by the applicable notification under Section 28AB. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Wednesday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Wednesday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </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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