TIOL-DDT 2228 · the untouched capture
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<!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 align="justify"><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 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></strong></font><font color="#663399" size="3">TIOL-DDT 2228 </font><br> 11.11.2013 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax VCES - Olive Leaves in One hand and Gun in other? </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/olive_gun.jpg" alt="" width="400" height="285" hspace="5" border="0" align="center"></font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <STRONG>WHILE</STRONG> the Government is extending the olive leaves of peace, they are also frequently reminding the delinquents that there is a gun. Choice is yours Olive leaves or Gun. Once the olive leaves are dropped, the Gun is ready for use. But the apprehension of many service providers is whether the gun will also be used after the olive leaves are accepted. Will the declarants be subjected to fishing expeditions and roving inquiries by the Department? Already there are rumours that copies of the declarations are being forwarded to DGCEI and Preventive wings of the department. The other day a Commissioner asked me, <em>"what is your problem if I send the declaration for verification by my Preventive wing?" </em>Absolutely no problem, but a Preventive investigation means summons, statements, harassment, bribes and ……. Recently a Chief Commissioner told me that he has received about three hundred applications. I told him he would get thirty thousand if he could instil a little confidence in the prospective declarants - they are all waiting outside his office watching the situation; a few olive leaves will bring them all inside - and your Scheme will be a success. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And instead of Movie stars advertising the VCES ladoo on TV channels you should have real Commissioners and Chief Commissioners appearing on local TV channels to promote the scheme and you should ask every officer in the department to be brand ambassadors for the Scheme. You should immediately train every officer in the department on the scheme and they should all be able to assist any assesse needing help. I was told that in a Division, from the Assistant Commissioner to the Inspector, nobody knew how to accept a declaration and a declarant had to spend the whole day in that office to file the declaration and finally he got it with some columns like date unfilled. This is a sad state of affairs and needs immediate remedial action. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VCES - The PC Road Show - Ultimately we will reach you - FM warns offenders </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/pc.jpg" alt="" width="400" height="256" hspace="5" border="0" align="center"></font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>THE</strong> Finance Minister Chidambaram kicked off his road shows on VCES at Chennai on Saturday. He said that VCES was a generous package and he wanted service providers to avail the scheme and pay the tax without penalty, interest or worry of penal action. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At the same time he warned the Service Tax evaders that ‘big brother is watching' - "You may get away with it for a week, a month and even a year. Ultimately, we will reach the offenders"</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He said that so far 10 persons, who had collected more than 50 lakh as service tax, failed to remit the amount to the government account, were arrested. "They are keeping the money with them as if the amount was an interest-free loan from the government. Tell me, should such a person be shown any sympathy? The money is not a small amount,"he said. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today the FM is addressing representatives and members of various trade/industry associations and Chambers of Commerce & Industry at 3.00 pm at DRDO Auditorium, New Delhi. Now that the FM himself is on the road show, the VCES is expected to pick up momentum. There is also a rumour that the Scheme is likely to be extended till March 2014. This is a good idea and maybe the cut-off period for the Scheme should also be extended till September 2013. The period of the Scheme should be coterminous with a return period to avoid complications in returns and declarations. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Legality of CBI - Guwahati High Court Order Stayed</strong><em> </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT </STRONG>has acted with extreme alacrity and got the Guwahati High Court Order stayed by the Supreme Court. A Bench of CJI Sathasivam and Justice Ranjana Prakash Desai, sitting at the Residential Office of the Chief Justice on Saturday stayed the order of the Guwahati High Court.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, this issue had been raised by the present I&B Minister Manish Tiwari four years ago in an article for the Observer Research Foundation, wherein he said, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The CBI has no independent standing in law. Simply put, it is a piece of legal fiction whose underpinnings in law are tenuous to say the least. It still draws all its powers of investigation and arrest from the antiquated 1946 Act which essentially being a local Act provides that each state through an executive order under Section 6 of the said Act has to give the Special Police Establishment, what is colloquially called the CBI, permission to investigate particular offences in that state. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Why does the government not enact a straight and simple law empowering the CBI rather than let it function on the basis of a dubious piece of legislation <strong>whose basic legality is open to question </strong>.(<font color="#FF0000">This is exactly what happened in Guwahati</font>)</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is imperative in a democracy that every organization of the government must draw its powers, privileges and authority from clearly defined legal statutes. The legal basis must not be fuzzy but sharply defined to obviate any obfuscation about both the intent of the legislature and the mandate it seeks to bestow. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe he was too low in the hierarchy then for anyone to notice this. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the only solution for the Government is to hope for a favourable decision from the Supreme Court.</font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTA2NTM=" target="_blank"><font size="1">2013-TIOL-61-SC-MISC</font></a></font></strong></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs - Exemption from payment of SAD to parts, components and accessories etc. of Mobile Handsets under Notification No. 21/2012-Cus </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <STRONG>UNDER </STRONG>notification No.21/2012-Cus dated 17.3.2012 (S.No. 1 of the Table), <em>"all goods which are exempt from the whole of the duty of customs leviable thereon or in case of which "Free" or "Nil" rates of duty of customs are specified in column (4) under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and which are also exempt from the whole of additional duty of customs leviable thereon under sub-section (1) of section 3 of the said Act, or on which no amount of the said additional duties of customs is payable for any reason,"</em> are exempt from SAD. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Parts, components and accessories, etc required for the manufacture of mobile handsets are exempt from BCD and CVD under notification No. 12/2012-Cus, dated 17.3.2012 (S.No. 431 of the Table) subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Sl. No. 5 of the Table to notification No.21/2012-Cus dated 17.3.2012 exempted from payment of SAD to parts, components and accessories etc for the manufacture of mobile handsets specified against Sl. No. 431 of Notification No. 12/2012-Cus, dated 17.3.2012. The exemption was valid until 31.3.2013 and was subject to actual user condition , that is to say, the importer was required to follow the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the doubt in the field is whether the same exemption can be availed under Sl. No.1 above after 31.03.2013 that is under Sl. No. 1 of notification No.21/2012-Cus dated 17.3.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC clarifies: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Exemption from SAD under notification No. 21/2012-Customs (S.No. 1 of the Table) may be allowed at the port of import on the basis of registration and the certificate issued by the jurisdictional central excise authorities w.r.t S.No. 431 of notification No. 12/2012-Customs without any requirement of a separate registration/certificate issued under the said Rules w.r.t notification No. 21/2012-Customs, dated 17-3-2012.</em></font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2013/cuscir13_043.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. 43/2013-Customs, Dated: November 08 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FEMA - Third party payments for export/ import transactions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NORMALLY </STRONG>payment for exports has to be received from the overseas buyer named in the Export Declaration Form (EDF) by the exporter and the payment shall be received in a currency appropriate to the place of final destination as mentioned in the EDF irrespective of the country of residence of the buyer. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similarly, the payments for the import should be made to the original overseas seller of the goods and the importer should furnish evidence of import, such as, Exchange Control copy of the Bill of Entry to satisfy that goods equivalent to the value of remittance have been imported. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Taking into account evolving international trade practices and with a view to further liberalising the procedure relating to payments for exports/imports, it has been decided: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>i. EXPORT TRANSACTIONS </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AD banks may allow payments for export of goods / software to be received from a third party (a party other than the buyer) subject to conditions as under: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. Firm irrevocable order backed by a tripartite agreement should be in place; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. Third party payment should come from a Financial Action Task Force (FATF)compliant country and through the banking channel only; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The exporter should declare the third party remittance in the Export Declaration Form; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. It would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. Reporting of outstandings, if any, in the XOS would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realised, the name of the declared third party should appear in the XOS; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">f. In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ii. IMPORT TRANSACTIONS </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AD banks are allowed to make payments to a third party for import of goods, subject to conditions as under: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. Firm irrevocable purchase order/tripartite agreement should be in place; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. Third party payment should be made to a Financial Action Task Force (FATF) compliant country and through the banking channel only; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The Invoice should contain a narration that the related payment has to be made to the (named) third party; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. Importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">f. The amount of an import transaction eligible for third party payment should not exceed USD 100,000. This limit will be revised as and when considered expedient. </font></p> </blockquote> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir070.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI/2013-14/364 A. P. (DIR Series) Circular No.70, Dated: November 08 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Removal of jungle and bushes inside building area <em>prima facie</em> is not liable to Service Tax under category of ‘Site formation and clearance' </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Union Budget 2005-06 saw imposition of Service Tax on a new service titled - 'Site formation and clearance, excavation, earth moving and demolition services'. The TRU letter F.No.B1/ 6 /2005-TRU, dated July 27, 2005mentions that the definition contained in clause (97a) of section 65 of the Finance Act, 1994 of the aforementioned service is an inclusive definition and the activities specifically mentioned are indicative and not exhaustive. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be that as it may, the applicant had received a work order and pursuant thereto undertook the activity of removing the '<em><font color="#FF0000">jungle and bushes</font>'</em> inside the building area for which they received labour charges. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The jurisdictional authorities at <em>CCE, Pune-III </em> were of the opinion that this <font color="#FF0000"><strong><em>'site clearance'</em></strong></font> activity attracts Service Tax under the above category and hence handed over to the applicant a demand notice of Rs.25,02,270/-. The lower authorities confirmed the demand along with interest and penalty and so the applicant is before the CESTAT with a Stay application. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the applicant contended that the activity undertaken by them cannot be considered as ‘site formation and clearance', the Revenue representative emphasized on the word <em><font color="#FF0000"><strong>"clearance"</strong> </font></em>appearing in the definition of the subject service category. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench observed - </font></p> <blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"5. We find that as per the work order the applicants had undertaken the activity of removal of bushes etc. inside the building. Therefore, prima facie, we find that applicant had made out strong case, therefore the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal. Stay petition is allowed."</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>It is a jungle out there!</em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTA2NTI=" target="_blank">2013-TIOL-1680-CESTAT-MUM</a></font>. </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Pay_u.jpg" alt="" width="400" height="308" hspace="5" border="0" align="center"></font></strong><br> <br> </font><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"> - Tuesday's cases</font></strong></font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"></font><font color="#663399">CENTRAL EXCISE </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">CENVAT - MD being paid royalty by appellant for developing certain formulae and processes useful for the manufacture of fragrances- Audit party directing MD to pay ST for the services rendered of IPR - MD registering himself with ST department and paying ST and raising invoices on company - Appellant taking credit of ST so paid -when payment of ST has been accepted by department without dispute, Revenue cannot now take a stand that no Input services were received by the appellant -appeal allowed: CESTAT </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> THE</strong> appellants are manufacturers of fragrances and aroma chemicals (Ch. 29 & 33). The appellant availed service tax credit on Intellectual Property Right (IPR) services provided to them by their Managing Director during September 2007 to July 2008</font>. </p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether when assessee gives prizes, wholly in kind, as part of its sales promotion scheme, any TDS obligation arises u/s 194B - NO: HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is a Company engaged in the business of manufacture and sale of various consumer goods/products. During the previous years, it had conducted certain sales promotion Schemes. The assessee advertised the Schemes wherein coupons were inserted in packs/containers of their products. Some of those coupons indicated that on purchase of the packs/containers, they would get prizes. The prizes that were offered were Santro Car, Maruthi Car, Gold chains, Gold Coins, Gold Tablas, Silver Coins & Emblems. The total amount of prizes distributed valued Rs. 6,51,238/- for the assessment year 2001-02 and Rs. 54,73,643/- for the Assessment Year 2002- 03. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether when the assessee gives prizes wholly in kind as part of its sales promotion schemes, any TDS obligation arises u/s 194B and Whether any responsibility is cast u/s 194B on the assessee before it releases the prizes to winners. And the answers go against the Revenue. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of service - Reverse Charge - The bar of utilising CENVAT Credit does not apply to credit on Capital Goods - Pre-deposit waived: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RULE</strong> 5 of Taxation of Service (provided from outside India and received in India) Rules, 2006, reads as under:- </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"the taxable service provided from outside India and received in India shall not be treated as output services for the purpose of availing credit of duty of excise paid on any input or <strong>service tax paid on any input services </strong> under CENVAT Credit Rules, 2004."</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From the above rule, it is quite clear that the restriction applies for availing credit of duty only in respect of excise duty paid on input or service tax paid on any input services and not capital goods. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Tomorrow for the judgements </strong></font></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">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>