TIOL-DDT 2159 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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><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 2159</font><br> 30.07.2013<br> Tuesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Electricity - Scope of Chapter 27</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong>, we carried the judgement of Allahabad High Court relating to demand of 5%/10% under Rule 6 of the <em>CENVAT Credit</em> Rules, 2004 on Electricity generated from bagasse - <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODkxNjA=" target="_blank"><font size="1">2013-TIOL-568-HC-ALL-CX</font></a></strong>. While holding that Electricity cannot be treated as exempted goods for the purpose of rule 6 of the CENVAT Credit Rules, the High Court observed </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">'<em>Admittedly, none of these conditions are attracted in the instant case insofar as electrical energy, which is mentioned in Chapter 27 of the Central Excise Tariff Act, covers only those electrical energy which are generated from mineral fuels, mineral oils and products of their distillation, bituminous, substances, mineral waxes etc. <strong>The electrical energy generated from Bagasse is not covered under Chapter 27. Similarly, Chapter 27 does not cover electrical energy produced by solar power, hydro power, wind power or from bagasse</strong>. Therefore, we are of the view that electrical energy is not an excisable goods nor it is exempted goods as defined in Rule 2 (d) of the 2004 Rules</em>'. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The highlighted part of the judgement evoked sharp response from our Netizens and a Netizen posted this on our Message Board: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Hon'ble High Court has observed that chapter 27 "covers only those electrical energy which are generated from mineral fuels, mineral oils and products of their distillation, bituminous, substances, mineral waxes etc", and that therefore electricity generated out of bagasse, solar power etc will not be covered thereunder. The court seems to have been guided by the title of chapter 27, and has not been briefed on the existence of the General Rules for interpretation of the tariff. Rule 1 thereof stipulates that the titles of chapters do not provide any legal basis for classification and are for ease of reference only. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Netizen is right. As per Rule 1 of the General Rules for interpretation of the Schedule, </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, electricity even if generated from bagasse or solar power is very much covered under Chapter 27. Though the judgement of the High Court did not solely rely on this and this will not alter the ratio, perhaps if these finer points were explained by the parties to the Bench, the judgement would not have contained such a finding. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Modern society and production methods are inconceivable without electricity. It is a secondary energy source, which results from the conversion of primary sources of energy, such as coal, natural gas, oil, nuclear power, wind and solar energy. Unlike oil and gas it is not a physical substance that can be stored easily. Electricity is a physical process, which takes place throughout the cables that carry it, and it has to be generated more or less at the same time as it is being used. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The invention of the generator capable of producing alternating current is at the heart of the present structure of the power industry - a system that generates electricity in large power stations at remote sites and carries it over long distances to reach its final users. Its value chain consists of four activities: generation which converts energy sources into electricity, transmission which occurs when electricity is transmitted over high voltage networks to major demand centres; distribution which is the process by which transmitted power flows to the final consumers such as factories and homes; and supply - the name given to the metering, billing and other services provided to the final consumers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unlike oil, electricity is not a physical substance that can be stored easily. Electricity is a physical process, which takes place throughout the cables that carry it. WTO rules do not contain any specific provisions on electricity. Given the lack of disciplines on services under GATT 1947, electricity was defined as a good irrespective of its peculiar physical properties, in the Harmonized System (HS) Nomenclature on the codification of commodities. The definition is followed by the WTO tariff schedules. Electrical energy is classified under the code 2716. Accordingly, electrical energy qualifies as a good under WTO law and is, as such, subject to the rules of the GATT 1994. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is another school of thought that Electricity should be defined as a service and should no longer be treated as a good. Electricity is not a physical substance, nor is it a fuel. It cannot be stored and must be consumed as it is produced. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus there was a doubt whether electricity is a good or service and whether it would come under GATT or GATS. So, the WCO has given the optional heading 2716 and the Member Countries are free to include it in their Tariff or not. India has chosen to include it. In India, electricity is treated as a good and in fact there used to be excise duty collected on electricity in the seventies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see <strong>Heads or Tails - Which is More Legal - The Heading of a Section or its Contents in</strong> <strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTEwMDM=" target="_blank">DDT 1382 17.06.2010</a></strong>. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Exports through FPO, New Delhi</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Government has amended Notifications <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_092.htm" target="_blank">92/2009-Cus</a></strong>, <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_093.htm" target="_blank">93/2009-Cus</a></strong>, <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_094.htm" target="_blank">94/2009-Cus</a></strong> & <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_095.htm" target="_blank">95/2009-Cus</a></strong>, all dated 11th September 2009 allowing exports to be also undertaken through the Foreign Post Office at New Delhi. The notifications mentioned pertain to the Focus Product, Focus Market & VKGUY Scheme. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2013/ctariff13_038.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification 38/2013-Cus, Dated: July 26, 2013</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Kattupalli Sea Port is included in FTP</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> exercise of powers conferred under Paragraph 2.4 of the Foreign Trade Policy 2009-2014, the Director General of Foreign Trade has amended para 4.19 of Handbook of Procedures (v1):, 2009-14(RE 2012) and resultantly Kattupalli Sea Port, Tamil Nadu is included as Port of Registration for availing export promotion benefits under Chapter 4 of Foreign Trade Policy. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2013/dgft13pn020.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">PUBLIC NOTICE No. 20 (RE-2013)/2009-2014 dated July, 29, 2013</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Authorised Economic Operator (AEO) Programme to provide security and enhanced facilitation for trade partners in International Trade </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong>, a seminar on the WCO proposed concept of<strong> Authorized Economic Operator</strong> (AEO) Programme was held in the Office of the Commissioner of Customs, Vizag. J.M.Kishore, Appraiser, in his welcome address, explained that in order to create the awareness about the AEO programme among the trade, the seminar is arranged and called for effective use of the same. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Dr. K. Venkat Ram Reddy, Additional Director from the Directorate of Inspection, Customs and Central Excise (DGICCE) explained various provisions relating to the AEO scheme. Several Customs related trade partners such as Importers, Exporters, Custodians, CHAs,warehouse operators, freight forwarders, carriers, liners, stevedores etc. along with the departmental officers attended the seminar. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/AEO.jpg" alt="Legal Corner Icon" width="400" height="300" hspace="5" border="0" align="center"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dr. Reddy being one of the officers involved in the pilot project implementation of AEO Scheme gave a detailed presentation on the scheme. An Authorized Economic Operator (AEO) status is granted by Customs to the trade partners associated with international cargo movement, compliant with the supply chain security standards and are given benefits, such as simplified Customs procedures and reduced Customs intervention. He also explained that at present, category wise facilities are proposed to be extended to the AEOs which included the benefits of reduced Bank Guarantees as well as enhanced facilitation levels while dealing with Customs operations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Reddy, in his presentation explained that it was nearly 8 years back, on 23rd June 2005, safer world trade became a reality when The World Customs Organization with its 166 members adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade that included the concept of an Authorized Economic Operator (AEO).He informed that DGICCE is the nodal agency for the programme and those intending to apply for the status have to fulfil certain norms which are envisaged in the Board Circular <strong><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTI3OTI=" target="_blank">28/2012</a></strong> Dt. 16.11.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Trade partners using Visakhapatnam port may also find the details of the scheme and procedures in applying for the status as a separate Public Notice No.12/2013 Dated 23.07.2013 was issued. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_cartoon2159.jpg" alt="Legal Corner Icon" width="400" height="354" hspace="5" border="0" align="center"></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tribunal has with conscious mind remanded case to Adjudicating authority - no error committed by Bench - ROM application by Revenue dismissed</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> reporting the case <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2012/2012-TIOL-1473-CESTAT-MUM.htm" target="_blank"><font size="1">2012-TIOL-1473-CESTAT-MUM</font></a> </strong>in<strong> <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTYxNDU=" target="_blank">DDT 1968</a></strong>, we had mentioned thus - </font></p> <blockquote> <p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Case for Commissioner(A) to be given power for restoration of appeal </em></font></strong></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CESTAT is clothed with express powers under rule 41 of the CESTAT (Procedure) Rules, 1982 to restore appeals that were dismissed inter alia on ground of non-appearance or on account of non-compliance of the order of pre-deposit. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The said rule 41 is reproduced below - </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>“RULE 41. Orders and directions in certain cases.</strong> - The Tribunal may make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice.” </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the Commissioner(Appeals) does not have this power and hence if an appeal is dismissed by the lower appellate authority on the aforesaid grounds an appellant has to file an appeal before the CESTAT and wait for a decision. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the appellant complied with the Stay order passed by the Commissioner(A) inasmuch as he paid the pre-deposit amount as ordered but the same was not communicated to the Commissioner (Appeals). Resultantly, the lower appellate authority dismissed their appeal. An application moved for restoration of the appeal was also dismissed citing that <font color="#FF0000">there were no powers available to the Commissioner (A)</font>. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before the CESTAT, the appellant cited the aforesaid facts and the Bench set aside the order of the Commissioner (A) dismissing the appeal. However, considering the submission made by the appellant, the matter was remanded to the adjudicating authority for causing verification of the records and passing of an order. </font></em></p> <p align="justify"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If only the Commissioner (A) had the power to restore the appeal, this circuitous remedy could have been avoided."</font></em></strong></p> </blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears that the CCE, Mumbai-III is not keen in seeing this case reach its logical end. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reason - against this order of the CESTAT, he has filed an application for Rectification of Mistake (ROM) and the ground is - that the Tribunal committed an error by making remand to the Adjudicating authority instead of the Commissioner (Appeals). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench was not amused and observed - </font></p> <blockquote> <p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">“3. I find that this Tribunal with conscious mind has remanded back to the Adjudicating authority for verification of various records. Therefore, I do not find any error committed by the Tribunal. Therefore, the application for rectification of mistake filed by the Revenue is dismissed.” </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above incident exhibits the deep love that Revenue has for litigation. The CESTAT had passed the order on 15.06.2012 and had the ‘remand order' been carried out as ordered, by this time, the case would have been decided. But then, <strong>that is the last thing that the Revenue probably wants! </strong></font></p> <p><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2">See<font size="1"> <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODkyNzc=" target="_blank">2013-TIOL-1145-CESTAT-MUM </a></font></font></strong></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"> - 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">Customs</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of GSM Dual SIM Mobile phones having one IMEI number - Customs authorities confiscating consignment on ground that dual SIM phones should have two IMEI numbers as per DGFT Notification - import of same cannot be prohibited: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant filed bills of entry for clearance of 2000 pcs of GSM Dual SIM 2.6” Mobile Phone Model TS-99 and 2000 pcs of additional battery bundled and classified the goods under CTH 85171290. The Customs officers examined the consignment and found that the goods were having only one IMEI no. <font color="#FF0000"><em><strong>instead of two </strong></em></font>despite the goods being “Dual SIM Mobile Phone” with two slots for SIM. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The authorities quickly brought into picture the DGFT Notification 112(RE-2008)/2004-2009 dated 16.06.2009 wherein the import of mobile sets without IMEI/improper IMEI is prohibited. Probably, without bothering to find out what IMEI stands and what it is meant for, the imported goods were confiscated under section 111(d) & (m) of the Customs Act, 1962, but the benevolent adjudicating authority gave an option to redeem the goods on payment of Rs.4 lakhs for re-export and also imposed a penalty of Rs.2 lakhs.</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 if advance received on sale of property prior to its registration is invested in specified assets, Sec 54EC benefits are available on such investment - YES: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHETHER</strong> earnest money or advance money received on sale of property will qualify for exemption u/s 54EC if the assessee invests such earnest money in specified assets before the date of transfer of the asset; Whether the AO can make an addition on the basis of the Stamp duty valuation; Whether value adopted or assessed by any authority of the State Government for the purpose of payment of stamp duty in respect of land or building cannot be taken as sale consideration received for the purpose of section 48 and Whether for the purpose of section 49(i)(ii), where the capital asset became the property of the assessee under a gift or will the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee. And the verdict partly goes in favour of the assessee.</font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2">Service Tax</font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ST - Definition of ‘Vocational Training Institute' in Notfn. 3/2010-ST dated 27/02/2010 cannot be applied retrospectively - It is impermissible for an authority conferred with power to enforce provisions of Act to interpret Act or exemption Notifications issued thereunder by resorting to assumptions impermissible in law - Adjudication order is fallacious, misconceived and unsustainable, hence quashed - Appeal allowed: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> THE </strong>assessee provides commercial training or coaching and administers a school for individuals who wish to pursue a career as actor-performers in the entertainment industry. The assessee conducts full time professional courses for stipulated durations providing intensive specialized training in acting to the students. </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 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>