TIOL-DDT 2238 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><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></strong></strong></strong></strong></strong></strong></strong></strong></strong></font><font color="#663399" size="3">TIOL-DDT 2238 </font><br> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>26.11.2013 <br> Tuesday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise Valuation Rules - More Clarity? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</STRONG> has amended the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 as follows:The new Rules shall come into force with effect from the 1st day of December 2013. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rule 8: </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 8 as of now reads as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>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 value 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 amended Rule 8 reads as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> Where whole or part of 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 value of such goods that are consumed 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">What does this really mean? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier the value was <em>one hundred and ten per cent of the cost of production or manufacture of <strong>such </strong> goods.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, <em>the value of <strong>such </strong> goods that are consumed shall be one hundred and ten per cent of the cost of production or manufacture of <strong>such </strong> goods. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the value of the goods in question or <strong>such </strong> goods? Maybe we can litigate on this for another decade or so. The word, 'such' has created massive confusion in Central Excise and is best avoided. But <strong>such </strong>opinion is rarely <strong>valued.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally (and more importantly), the usage of the words 'whole or part' is probably to put to rest the Larger Bench decision in <em>Ispat Industries </em> <font size="1">[ <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2007/2007-TIOL-245-CESTAT-MUM-LB.htm" target="_blank">2007-TIOL-245-CESTAT-MUM-LB</a> </strong>]</font> where after applying the <em>Gunapradhan </em> principle it was held that the provisions of<font color="#FF0000"> Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers.</font></font> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rule 9: </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Rule 9 the words </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in any of the sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall be the normal transaction value" </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">are substituted with </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Where whole or part of the excisable goods are sold by the assessee to or through a person who is related in the manner specified in any of the sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of such goods shall be the normal transaction value" </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar amendment has been made to Rule 10 also. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2007/2007-TIOL-207-CESTAT-MUM.htm" target="_blank"><font size="1">2009-TIOL-207-CESTAT-MUM</font></a></strong>, the Tribunal held, "<em>Rule 10 of the Central Excise Valuation Rules, 2000 can be invoked only when <strong>the entire production </strong> of the goods by a manufacturer is sold to or through an inter-connected undertaking</em>." The Department's appeal is pending in the Supreme Court. This view is now undone at least prospectively. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2013/exnt13_14.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No.14/2013 - CX ( N.T.), Dated: November 22, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - VCES - Board issues further clarifications </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CBEC has issued some more clarifications in the Service Tax Voluntary Compliance Encouragement Scheme (VCES) which came into effect from 10.05.2013 and which if not extended will close on 31.12.2013. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No Declaration to be returned </strong>: the designated authority shall ensure that no declaration is returned. In all cases, declaration should be promptly received and duly acknowledged. Request for clarification should be dealt with promptly. Defects in the application, if any, should be explained to the declarant and possible assistance be provided in rectifying these defects. The effort must be to accept a declaration, as far as possible, and recover the arrears of tax. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the words employed in the VCES provisions are 'tax dues' and not 'arrears of tax'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>When inquiry, investigation, etc is pending </strong>: The <strong>concerned </strong> Commissioner <strong>may </strong>ensure that no declaration is rejected on frivolous grounds or by taking a wider interpretation of the conditions enumerated in section 106(2). If the issue or the period of inquiry, investigation or audit is identifiable from summons or any other document, the declaration in respect of such period or issue alone will be liable for rejection under the said provision. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will usage of 'may' give discretion to the Commissioner <em>concerned </em> is what the coming days will reveal? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>When summons are issued in a routine manner </strong>: The designated authority/ Commissioner concerned may take a view on merit, taking into account the facts and circumstances of each case as to whether the inquiry is of roving nature or whether the provisions of section 106 (2) are attracted in such cases. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">For once, it is the Commissioner <em>concerned </em>! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Amount paid after 10.05.2013 but before declaration is filed </strong>: benefit of the Scheme would be available if such amount is declared under the Scheme subsequently, along with the remaining tax dues, if any, provided that Cenvat credit has not been utilized for payment of such amount. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax along with interest paid before the Scheme came into effect </strong>: As no "tax dues" is pending in such case, declaration cannot be filed under VCES. However, there may be a case for taking a lenient view on the issue of penalties under the provision of the Finance Act, 1994. In this regard attention is invited to section 73 (3) and section 80 of the Finance Act, 1994. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board letter F.No. 137/167/2006-CX.4 dated 3 rd October, 2007 mentions</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> - <em><font color="#009900">Section 73 (1A) of the Finance Act, 1994 provides for conclusion of adjudication proceeding in the cases of willful suppression/fraud/collusion if the taxpayer pays service tax liability along with interest and a penalty equal to 25% of service tax amount, within a period of one month from the date of issue of SCNs. Similarly, section 73 (3) provides conclusion of adjudication proceedings in other cases on payment of service tax and interest</font></em><font color="#009900">. </font></font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case of <em>Automobile Sterling vs. CCE &ST, Noida</em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">, <strong><font size="1">(</font></strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODk3MzI=" target="_blank"><strong>2013-TIOL-1328-CESTAT-DEL</strong></a><strong>)</strong></font><strong> </strong><font color="#FF0000">the CESTAT held that</font> -<font color="#009900"> '<em>Provisions of Section 73(3) are also not available as element of suppression is proved'</em></font><em><font color="#009900">.</font></em><font color="#009900"></font></font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Several questions like whether CENVAT credit is available are not yet answered by the Board - in due course perhaps. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2013/sercir174.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Circular No. 174/9/2013-ST., Dated: November 25, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise - Electronic payment mandatory for those who paid duty of more than one lakh </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AT</strong> present, an assessee who has paid a total duty of Rs. 10 lakhs or more (including CENVAT Credit) is required to make payment of excise duty electronically through Internet banking. Now this limit is reduced to Rs. 1 lakh. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">This will come into force with effect from the 1st day of January 2014. </font></font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2013/exnt13_15.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No.15/2013 - CX ( N.T.), Dated: November 22, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Electronic payment mandatory for those who paid tax of more than one lakh </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AT</strong> present, an assessee who has paid a total Service Tax of Rs. 10 lakhs or more (including CENVAT Credit) is required to make payment of Service Tax electronically through Internet banking. Now this limit is reduced to Rs. 1 lakh. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">This will come into force with effect from the 1st day of January 2014</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">. </font> </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2013/stnot13_016.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No.16/2013 - ST., Dated: November 22, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The TIOL Effect </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> High Court passed an order on 13.11.2013. We carried that order on 19.11.2013. On 19.11.2013 a connected matter was before a Larger Bench of the Tribunal which continued on 20.11.2013 when the Counsels brought to the notice of the Bench the decision of the High Court reported by TIOL the previous day. And this helped in the decision of the Larger Bench. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you the order tomorrow. </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 align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"></strong>Service Tax </font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Whether cost of 'deemed sale' goods to be excluded from value for computing Tax - Larger Bench declines to answer reference in view of High Court order - Matter remanded to Division Bench: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a recent High Court Judgement dated 13.11.2013 reported by TIOL on 19.11.2013 (G.D. Builders & Others Vs. Union of India and Others <em> dated 13.11.2013 - <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTA3NzA=" target="_blank"><font size="1">2013-TIOL-908-HC-DEL-ST</font></a> </strong></em>), the Delhi High Court explained the scope of Section 67 of the Act as being limited to ascertaining value of only the service component, wherever complex transactions involving service and sale elements including deemed sale are presented for valuation of a transaction as a taxable service. </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 purchases shares at a price lower than quoted market price, there is any provision in I-T Act to tax the deemed difference between the two - NO: Delhi High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessees are HCL Employees and Investment Company Limited (HEICL) & Associated Techno Plastics Private Limited (ATPPL). ATPPL had purchased 77929 shares of HCL Limited, which were sold by HEICL. These shares were purportedly purchased at the price of Rs.6.02 per share though the market price on the date of sale, i.e., 16th December, 1988 was Rs.41/- per share, being the quoted price on the recognised stock exchange. The issue before the Bench is - Whether when the assessee purchases shares at a price lower than the quoted market price, there is any provision in the I-T Act to tax the deemed difference between the two. And the ruling partly goes against Revenue. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rule 6 of CCR, 2004 - As per rule 2(d) exempted goods have to be excisable goods - By no stretch of imagination imported goods which are traded can be considered as exempted goods - If that be so, the question of invoking the provisions of Rule 6(2) and 6(3) for payment of a sum @10%/5% on the value of the traded goods would not arise at all - Demand of Rs.298 Crores unsustainable, both on merits as well as on limitation - Appeal allowed: CESTAT </strong></font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ALMOST</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> a year ago when we reported the Stay order passed by the CESTAT in this case we mentioned about the fetish for numbers that the Revenue officers have. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, a demand of Rs.297,77,33,460/- (no mistake here) was confirmed by the CCE, Thane-I against the appellant along with equivalent penalty and interest on the premise that the applicants are not maintaining separate accounts for input services which have been used by them for their manufacturing and trading activities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants are a manufacturer of electronic goods such as colour TVs, LCDs, telephone parts, washing machines, split air-conditioners. The company also undertakes trading activity in goods such as mobile phones, air-conditioners, washing machines, which are imported from abroad. </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"><strong>Have a Nice Day </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"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p> </body> </html>