TIOL-DDT 2271 · 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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong><strong><img width="115" height="125" border="0" align="right" src="image/ddt/10yearsDDT.jpg" alt="" /></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><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 width="175" hspace="5" height="120" border="0" align="right" src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.jpg" alt="DDT in Limca Book of Records" /></a></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></font><font color="#663399" size="3">TIOL-DDT 2271 </font><br> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>13.01.2014 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT Credit - inputs/services used in non-excisable goods - Board proposes amendments </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC </strong>notes that the issue of reversal of wrongful availment of credit used in manufacture or production of non-excisable goods has been under litigation for a while. During a manufacturing process two kinds of goods may come into existence - excisable and non-excisable. Excisable goods can further be divided into two categories - exempted and non-exempted. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provisions of rule 6 of the CCR, 2004 deals with reversal of credit when a manufacturer manufactures both excisable & dutiable products and excisable & exempted products. Similarly a service provider may provide both taxable and exempted services to which provisions of rule 6 apply. Rule 6 provides machinery provision for quantification of credit needed to be reversed on inputs and input services used in manufacture of exempted goods or in supply of exempted services. However, there is a crucial difference in rule 6 on reversal of credit by a manufacturer <em>vis-a-vis </em> a service provider. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Exempted services have been defined such that the <strong>services on which no service tax is payable are also considered as exempted service.</strong>Thus credit of inputs or input services used in supply of non-taxable services is also required to be reversed under rule 6. However, for a manufacturer, such provision does not exist in rule 6. Any raw material, consumables or services that are used in manufacture of non-excisable goods would not attract provisions of rule 6 as the definition of exempted goods would not cover non-excisable goods. Thus rule 6 seems to have no applicability for reversal or recovery of credit on raw material, consumables and input services used for production or manufacture of non-excisable goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board notes that it can be argued that there is no machinery provision in the CENVAT Credit Rules, 2004 to quantify the input or input services credit used in production of non-excisable goods if a manufacturer manufactures/produces both excisable and non-excisable goods, as rule 6 does not apply in such case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Board's proposed solution:</strong> One possible way to address the situation would be to amend the definition of <em>exempted goods </em> in the CCR, 2004 such that <em>non-excisable goods </em> would be deemed to be exempted goods. Then the rigour of rule 6 would apply for reversal of CENVAT credit on raw material, consumables and services consumed in production of non-excisable goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the views of the Chief Commissioners on the following:- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Whether the amendment suggested above in the definition of exempted goods would enable reversal of credit used in the manufacture of non-excisable goods without any difficulty, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) If there would be difficulties in implementing such an amended rule, please elaborate, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Number of Show Cause Notices issued and amount of Cenvat credit demanded to be reversed for use in manufacture of non-excisable goods in last three years (<strong>20011* </strong>-12, 2012-13 and 2013-14 upto November, 2013 - <font color="#FF0000">*What the Board meant is 2011</font>). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) Any other suggestion in this regard. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board is in no urgent need of a reply from the Chief Commissioner - there is no time limit fixed for that. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/oms/cbec_letter_17_2013.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Letter F. No. 17/1 2012-CX.1, Dated: December 23, 2013 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is <em>exempted service </em>? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>above Board letter states that <strong>services on which no service tax is payable are also considered as exempted service.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember they are only services. As per Rule 2(e)(2) of the CENVAT Credit Rules, '<em>Service, on which no Service Tax is leviable under Section 66B of the Finance Act'</em>, is an exempted service. This means the services in the negative list would also be considered as exempted service. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But there can be a third category - an activity that is not a <em>service </em> at all. Now, Section 65B(44) defines service. As per this provision, sale, employment, transaction in money etc are not SERVICE. This is akin to ‘non-excisable' goods. There are 'non services' and rule 6 of the CCR 2004 does not take care of this situation. Maybe the Board' solution is not the ultimate after all. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP - EPCG - installation of capital goods - extension of time</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para 5.3.1 of the Handbook of Procedure Vol.I, 2009-2014, reads as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Authorization holder shall produce to the concerned RA a certificate from the Jurisdictional Central Excise Authority, confirming installation of Capital Goods at factory/premises of authorization holder or his supporting manufacturer(s)/vendor(s) within six months from date of completion of import. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the DGFT has amended this para to add the following sentence. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>However, extension in time for Installation of Capital Goods upto a maximum period of 18 months from the date of completion of import may be considered by the concerned RA.</em></strong><em></em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus the Regional Authorities are now empowered to extend the time for installation of Capital Goods. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2013/dgft13pn048.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Public Notice No. 48/2009-2014 (RE- 2013), Dated: January10, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cash Management System in Central Government - Restriction during last quarter </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Cash Management Cell of the Department of Economic Affairs, Ministry of Finance has informed all the Departments that the expenditure for 2013-14 should be contained within the Revised Estimates level and under no circumstances, the RE ceilings should be breached. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the last quarter, not more than 33 percent and during March, not more than 15 percent of the Budget Estimates should be spent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the last quarter, especially during the month of March, you would see a spending spree in Government offices - they would buy all kinds of useless things, because they were not able to spend money during the rest of the year. Government wants to put a stop to this lavish and useless spending during the year end. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/oms/Cashmanagement_CGovt.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ministry of Finance, Dept of Economic Affairs, Budget Division, F. No. 21(1)/-PD/2005,Dated: January 10, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>'You Know - we Know' </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Induction Training of the 67th batch of the Indian Revenue Service (Income Tax) was inaugurated by CBDT Chairperson Dr.Sudha Sharma at NADT, Nagpur on Friday. She revealed five mantras to the officer trainees: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Hear your conscience </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Take quick, objective & transparent decision </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) When in doubt go Gandhi way - think about the last man on the street </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) Never have feeling of a karta and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) Control your mind. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She mentioned about the catchy advertisement of the Income Tax department - "You Know - we Know" for encouraging people to file their Income Tax returns. She cautioned the trainees about the <strong>allurements </strong> that they may face in their life. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This batch consists of 177 trainees including 47 women. The average age of the batch is 28.2 years (a little too old?) and 65 percent of them come with previous job experience (bad for the service?). </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"><em>Believe me, I believe you and your potential…I want all of you to be ‘thinking' persons, with ingenuity to think ways and means for the development of the Department and the well-being of the nation - extract from the letter titled ‘A Word from Chairperson, CBDT' addressed to the members of the Aayakar family after taking over as the new Chairperson of CBDT. [See <strong>DDT </strong></em><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTgwMDc="><strong><em>2129 </em></strong></a><em> dated 18.06.2013] </em></font></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 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_2271.jpg" alt="" width="400" height="451" hspace="5" border="0" align="center"></font></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"> – Wednesday'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 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></strong></font></strong></font></strong></font><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>Appellant receiving base oil for storage purpose and taking credit - without using the same, later clearing it to importer upon reversal of credit - Credit not available <em>ab initio </em> as goods were not intended for use in or in relation to manufacture of excisable goods - reversal of CENVAT amounts to discharge of duty hence recovery would amount to double demand - interest payable, penalty not imposable as no mensrea - RF set aside as goods not available for confiscation: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is a manufacturer of lubricating oils and is availing CENVAT credit on various inputs and capital goods. They availed CENVAT credit amounting to Rs.1,61,04,675/- of the CVD paid on imported base oil during July, 2003 to September, 2004. The goods were imported by M/s Valvoline Cummins Ltd. and the entire goods were transferred to the appellant for storage purposes. The B/E was also endorsed in favour of the appellant. The base oil on which credit was taken was returned by the appellant to M/s. VCL and M/s. Ultraplus Lube Pvt. Ltd. and the appellant paid excise duty equivalent to the credit taken on such base oil returned. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department was of the view that taking of credit by the appellant was not permitted under law inasmuch as the goods were not intended for use in the manufacture of excisable goods and, therefore, credit was not admissible under CCR, <em>ab initio.</em></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 when assessee pays excess tax, interest on refund is to be calculated from date of payment of tax till date of grant of refund - YES: AP High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE issues before the Bench are - Whether when the assesse pays excess tax, the refund and the interest thereof arise automatically and no claim is to be filed; Whether interest is to be calculated from the date of an order passed u/s 244 and Whether the assessee is entitled to interest on refund from the date of payment of excess tax till the date of grant of refund. And the answers go against the Revenue. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Renting of vacant land by way of lease or licence for construction of a building or a temporary structure for use at a later stage in furtherance of business or commerce is a taxable service only from 1.7.2010 and not earlier to this date - Matter remanded: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>assessee inter-alia contended that leasing of vacant land was not comprehended within the ambit of the taxable "renting of immovable property" service prior to 1.7.2010, since only by the Finance Act, 2010 and with effect from 1.7.2010 was clause (v) incorporated in Explanation (1) to clause (zzzz) of Section 65(105); that prior to 1.7.2010 renting of a vacant land was outside the purview of the taxable service; that since the assessee as a statutory Development Authority, created by the provisions of the U.P. Industrial Area Development Act, 1976 had entered into long term leases with third parties whereunder vacant lands were leased to such third parties inter alia for business or commercial purposes on long term leases (of 99 years duration), such leases are substantially in the nature of transfer of ownership and consideration received on such transfers would not amount to consideration received for providing the taxable service enumerated in Section 65(105)(zzzz). </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tomorrow is a Holiday - Happy Eid-e-Milad and Sankranti </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our Columns Wednesday for the judgements </font></strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until Wednesday with more 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>