TIOL-DDT 2241 · 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"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></strong></font><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 2241</font><font face="Verdana, Arial, Helvetica, sans-serif"><br> </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong>29.11.2013 <br> Friday </strong></font></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise Valuation - Liquidated damages not to form part of transaction value : CESTAT (LB) </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a landmark judgement, the Larger Bench of the CESTAT recently held, <font color="#FF0000"><em>"the eventual value payable after factoring in any liquidated damages contractually stipulated for delayed supply would be the transaction value and this value would be the value relevant for levy of duty."</em></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A manufacturer-assessee clears goods to his customer paying duty on the price as per the contract. The contract has a provision that in case of delay in supply of the goods, the assessee is liable to pay liquidated damages to his buyer. Now the question is whether this liquidated damage can be deducted from the price to arrive at the ‘transaction value'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court had in <em>MRF Ltd. Vs CCE Madras </em> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-257-SC-CX-LB.htm"><strong><font size="1">2002-TIOL-257-SC-CX-LB</font></strong></a>, ruled that <em>once the assessee had cleared the goods on the classification and price indicated by him at the time of removal of goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot alter the transaction value and liability to duty thereon". </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The court ruled that <em> subsequent fluctuation in prices of the commodity has no relevance whatsoever so far as the liability to excise duty is concerned </em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But this was prior to the introduction of the concept of ‘transaction value' with effect from 1.7.2000 in Central Excise Valuation. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Transaction value" is defined as <em>"the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods."</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Larger Bench held, <font color="#FF0000"><em>"wherever the <strong><font color="#663399">assessee</font></strong>, as per the terms of the contract and on account of delay in delivery of manufactured goods <strong><font color="#663399">is liable to pay</font> </strong> a lesser amount than the generically agreed price as a result of a clause (in the agreement), stipulating variation in the price, on account a the liability to "liquidated damages", irrespective of whether the clause is titled "penalty" or "liquidated damages", the resultant price would be the "transaction value"; and such value shall be liable to levy of excise duty, at the applicable rate."</em></font></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">Unfortunately an error has crept into the judgement. Please see the highlighted words - the assessee does not pay, he gets paid and this judgement, if strictly interpreted, cannot be implemented. </font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you the judgement on Monday. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CVD On Import of Jute Products from Bangladesh </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Notification No. 8/2011-cus dated 14.2.2011, Government had exempted Jute products when imported from Bangladesh, from the whole of the additional duty of customs leviable under sub-section (1) of section 3 of the Customs Tariff Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These goods were exempted from payment of Central Excise Duty by Notification No. 30/2004 - Central Excise, dated the 09th July, 2004, subject to the condition that no CENVAT credit could be taken. For some strange reason, exemption from CVD was also allowed during the period commencing on the 9th day of July, 2004 and ending with the 13th day of February, 2011 by extending the exemption available under the notification No. 30/2004-CE. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the Government has retrospectively exempted Jute products falling under headings 5310 and 6305 of the First Schedule to the Customs Tariff Act, imported from Bangladesh from the whole of the additional duty of customs, leviable thereon under sub-section (1) of section 3 under the Customs Tariff Act, during the above period. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_113.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 113/2013-CUS (N.T), Dated : November 27, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>R K Singlaappointed as DG, Safeguards </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENTRAL</STRONG> Government has appointed R.K Singla as the Director General (Safeguard) and the Director General (Specific Safeguard) </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_115.htm"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 115/2013-CUS (N.T), Dated : November 27, 2013 </strong></font></a></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_114.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 114/2013-CUS (N.T), Dated : November 27, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Two arrested </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> was just two days ago that the Finance Minister had declared in Kolkata that 13 chronic service tax evaders had already been arrested; the first being in Kolkata. And the latest arrests are also in Kolkata. A cable TV operator Company's MD and a Director were arrested yesterday for alleged evasion of Service Tax of over Rs. 5 Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the VCES road show is on, perhaps the Department wants to send a strong message that while voluntary compliance is encouraged, blatant evasion will not be tolerated. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Safeguarding the building of the bank along with the fixtures, fittings and equipment, cash, other securities etc. - Not security services in relation to safe deposit lockers or security of safe vaults: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION </STRONG>56/98-ST dated 07/10/98 w.e.f 16/10/98 read - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a security agency from the service tax leviable on the gross amount charged from<font color="#FF0000"> a client in relation to the services of providing safe deposit lockers or security or safe vaults, for security of movable property."</font></em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the respondent provided security services to the banks. The respondents are responsible for safeguarding the building of the banks along with fixtures, fittings, equipment, cash etc. as is apparent from the agreement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They claimed the benefit of Notfn. 56/98-ST and which was allowed by the Commissioner(A) and consequently the demand of Rs.3,57,362/- and penalty imposed were set aside. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue is in appeal against this order before the CESTAT and submits that the lower appellate authority has wrongly interpreted the notification and allowed the benefit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench observed - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><font color="#663399">"6. We have gone through the agreement produced by the respondent. As per the agreement, the respondents are responsible for safeguarding the building of the bank along with the fixtures, fittings and equipments, cash, other securities etc. Therefore, it cannot be said that the respondents are providing security services in relation to safe deposit lockers or security of safe vaults. In view of this the benefit of notification is not available to the respondents. </font></em></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>6.1 In respect of the imposition of penalties we find that section 80 of the Finance Act provides that "Notwithstanding anything contained in the provisions of Section 76, section 77 or section 78 no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was a reasonable cause for the said failure". In the present case the respondents are registered with the Revenue authorities as service provider and paying appropriate service tax. The issue involved in the appeal is in respect of interpretation of Notification. In view of the provisions of Section 80 of the Finance Act, we waive the imposition of the penalties."</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appeal was disposed of accordingly. </font></p> <blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>And you thought a set includes a subset! </em></font></p> </blockquote> <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=OTA5MTE=" target="_blank">2013-TIOL-1781-CESTAT-MUM</a></font></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">DDT Cartoon </font></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><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"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/VCES_WOES.jpg" alt="" width="429" height="479" hspace="5" border="0" align="center"></strong></font></strong></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"> - Monday's cases</font></strong></font></strong></font></p> <p align="justify"><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"><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></font></strong></font><font color="#663399">Service Tax </font></strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Drilling and blasting of Mithi River site - 'Dredging service' includes removal of material - As the drilling and blasting essentially result in removal of material, therefore, the applicants have prima facie not made out a case for total waiver of the dues - Pre-deposit ordered: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Service Tax demand of Rs.12,75,866/-, interest and penalty is confirmed against the applicant on the ground that they had undertaken activity of drilling and blasting which is classified under Dredging services under Sec. 65(36a) of the Finance Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before the CESTAT the applicant submitted that they had only undertaken the activity of drilling and blasting as per the direction of the main contractor and this could not be construed as dredging activity. In their support they relied on a letter dated 25/03/2006 to submit that Reliance Michigan (JV) has awarded the work of drilling and blasting of the Mithi River Site. </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 expressions 'renovation' or 'extension' are covered by term 'construction' for purpose of giving Sec 54F benefits - question of law left open but benefit allowed: High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</STRONG>, an individual, had sold property in Ghaziabad for Rs.45lacs. During assessment, AO made two additions. Firstly, benefit u/s 54F was denied and capital gains of Rs.51,71,994/- was brought to tax. The issues before the Bench are - Whether in the context of property, the term "construction" and "maintenance" are identical and Whether renovation or extension are covered by the term "construction"for the purpose of giving benefit u/s 54F. And the verdict goes in favour of the assessee although the question of law left open. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Valuation - Section 4 - Liquidated damages not to form part of transaction value: CESTAT (LB) </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>question before the Larger Bench - "<em>Whether any deduction claimed by the buyer of excisable goods as compensation for the delay in the supply of the goods by its manufacturer (assessee) under the contract between them, during any period after 01.07.2000, is liable to be included in the assessable value of the goods under Section 4 of the Central Excise Act?"</em> And the answer is NO. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Monday (<font color="#FF0000">as we enter the tenth year of DDT </font>) for the judgements </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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 Weekend </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>