TIOL-DDT 2337 · 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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3"><s><strong><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 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=20079"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2014_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="250" height="123" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font></strong></s>TIOL-DDT 2337</font><br> 22.04.2014<br> Tuesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit on input service of GTA up to Place of Removal - what is place of removal when rate of duty is specific? High Court stays Tribunal Order </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> <em>Ultratech Cement Ltd V Commissioner of Central Excise</em> - <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTI4MTg="><strong><font size="1">2014-TIOL-478-CESTAT-DEL</font></strong></a>, the CESTAT held that when duty is chargeable at specific rates, and not at ad-valorem rates under Section 4 of the Central Excise Act, 1944, the definition of 'place of removal' as given in Section 4(3)(c) of the Central Excise Act is not be applicable and the 'place of removal' will be the factory gate. And in such cases, CENVAT Credit cannot be allowed of service tax paid on GTA Service availed for outward transportation of the goods from the factory to Depot/Dump or the Customers' Premises. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With regard to the CENVAT Credit demand for the period from 01.04.08, in all the appeals, there is no dispute that the definition of 'input service' as given in Rule 2(l) covered GTA Service availed for transportation of finished goods only up to the 'place of removal'. <strong>The main point of dispute for this period is as to what is the 'place of removal', whether the factory gate or depot/dump or customers' premises. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC had in a letter in F.No. 137/3/2006-CX.4 dated 02.02.2006, clarified that <font color="#FF6633"><em>"in case of depot sales of goods, the credit of service tax paid on the transportation of goods up to such depot would be eligible, irrespective of the fact, whether the goods were chargeable to excise duty at specific rates or ad valorem rates on the basis of valuation under section 4 or 4A of the Central Excise Act."</em></font> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Lafarge India Pvt Ltd v Commissioner of Central Excise </em>- <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2012/2012-TIOL-1025-CESTAT-DEL.htm"><strong><font size="1">2012-TIOL-1025-CESTAT-DEL</font></strong></a>, the Tribunal said, the correctness of this circular is doubtful. <strong>DDT</strong> said, <font color="#FF0000"><strong>Board grants a favour but Tribunal says NO</strong></font> - <strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTU2MzU=" target="_blank">DDT 1920-13.08.2012</a></strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the <em>Ultratech</em> case, the AR for the Department argued that this view (of the Board) is not correct as the definition of "place of removal" in section 4(3)(c) of the Central Excise Act, as is clear from the opening words of the sub-section(3) "<em>for purpose of this section" is for the purpose of this section only and this section i.e. section 4, is applicable only when duty on any excisable goods is chargeable with reference to their value and goods are not covered by the provisions of section 3(2) or section 4A and the assessable value is required to be determined under Section 4; since the duty on cement is at specific rate, the definition of 'place of removal' as given in section 4(3)(c) would not be applicable and as such the place of removal will be the factory gate i.e. place on removal from where the duty payable is payable</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal almost agreed with the AR when it observed; </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Therefore, when the duty on the finished goods is chargeable at ad-valorem rate on value determined under section 4, only then the definition of 'place of removal' as given in section 4(3)(c), can be adopted for the purpose of Cenvat Credit Rules, 2004 and in other cases the natural meaning of the expression 'place on removal' i.e. the place on removal from which the duty on the goods is liable to be paid i.e. the factory gate or Bonded Warehouse, which would have to be adopted. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, when the 'place of removal' has been defined under section 4(3)(c) for the purpose of determining value under section 4, in our view the definition of 'place of removal', cannot be adopted for Cenvat Credit Rules, 2004 when the duty on the finished goods is at specific rate or is chargeable at ad-valorem rate on the tariff value fixed under section 3(2) or on value determined under section 4A in which cases the definition of 'place of removal' in Section 4(3)(c) is not relevant. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Tribunal rather emphatically overruled the Board Circular and held the CENVAT credit cannot be allowed on GTA for outward transport in cases where the duty was charged on specific rate or on RSP. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matters were remanded for de-novo adjudication based on this decision. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally the aggrieved assessee took the matter in appeal to the High Court, with a question of law, as to <em>whether in the case, where the rate of duty is specific, the place of removal would be factory gate or the customer premises</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court recently stayed the Order of the Tribunal so far it relates to remand. That is the Commissioner cannot immediately adjudicate the case and pounce upon the assessee to recover the wrongly availed credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In all these legalese are we forgetting the primary basic purpose of CENVAT Credit - <strong>avoiding the cascading effect of taxation</strong>? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What does the Government gain by such trivial and silly legislation and more trivial and silly litigation? </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=OTMyMDU=" target="_blank"><font size="1">2014-TIOL-543-HC-CHHATTISGARH-CX</font></a></font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Notification Expired - CBEC are you aware? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Anti dumping Notification No. 24/2013-Cus(ADD), dated 21.10.2013 had a specific clause - <em>the anti-dumping duty imposed under this notification shall be levied for a <strong>period not exceeding six months</strong> (unless revoked, amended or superseded earlier) from the date of publication of this notification in the Gazette of India -</em> This period expired on 20.04.2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That is from yesterday this notification does not exist. But is it so? Most likely, the Government will come up with a notification extending this dead notification. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can't the Board monitor these notifications? </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Government invites suggestions for 2014-15 Budget </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> exactly a month from now, there will be a new Government in Delhi - who is going to be the political master is immaterial for the sincere and serious babu who is earnestly busy in his budget work. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Ministry has invited suggestions from Industry and Trade Associations for changes in the duty structure, rates and broadening of tax base on both direct and indirect taxes giving economic justification for the same. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry wants the suggestions and views to be supplemented and justified by relevant statistical information about production, prices, revenue implication of the changes suggested and any other information to support the proposal. The request for correction of inverted duty structure, if any for a commodity, should necessarily be supported by value addition at each stage of manufacturing of the commodity. It would not be feasible to examine suggestions that are either not clearly explained or which are not supported by adequate justification/ statistics. As regards direct taxes, the government's policy is to phase out profit linked deductions and minimize exemptions; this may be taken into consideration while forwarding proposals. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Proposals in respect of indirect taxes may be sent to <a href="mailto:budget-cbec@nic.in"><strong>budget-cbec@nic.in</strong> </a>and Direct Tax to <a href="mailto:ustpl3@nic.in"><strong>ustpl3@nic.in</strong> </a>by 5th of May 2014. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/suggestions_general_budget.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MoF Dept of Revenue F.No.334/8/2014-TRU, dated: April 17 2014 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Lame Duck appointments - Principal Economic Adviser appointed in Fin Min </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> outgoing Government almost sure of not returning to Delhi's corridors of power is on an appointment spree. They want to appoint a new Chief of Army, a new Lok Pal and newspapers have reported that they have appointed a new Principal Economic Adviser in the Finance Ministry. How politically or administratively correct it is to make such appointments in the middle of elections, which you are not sure to win? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems a respected lady professor is appointed as Principal Economic Adviser. For what? The new Finance minister can simply remove her. Why should they embarrass her by giving her a lame duck post? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is even heard that the CBEC has finalised the transfer and posting order of the newly promoted Assistant Commissioners and they are waiting for the approval of the MoS, who is of course busy with elections. They waited so long; can't they wait for another forty days or so? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is it not administrative ethics that you don't make appointments when you are about to demit political office and in the midst of an election? But who is bothered about ethics now? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But shouldn't you be bothered about reality? The new Government can simply reverse all these appointments and the poor appointees will have to repack their bags in less than eight weeks. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the Government that runs on our taxes!</font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/strategy.jpg" alt="Legal Corner Icon" width="479" height="471" hspace="5" border="0" align="center"></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><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">Service Tax </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax of more than Rs.5.85crores collected from clients but not deposited in entirety with Central Government - no merit in plea for waiver of SCN in terms of s.73(3) of FA, 1994 as s.73(4) expressly disentitles same - Appeal dismissed: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant is engaged in providing various taxable services viz. Storage and Warehousing Service, Cargo Handling Service, Management, Maintenance and Repair Service, Technical Inspection and Certification Service and took registration on 10.10.2003. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During investigation, it was found that although the appellant had taken registration in October, 2003, they had not filed any returns or deposited the service tax collected from their clients. And on the occasions that they had deposited the ST, the same was far less than their service tax liability. After detection of the case, they started paying arrears of service tax in piecemeal. At the time of recording of the first statement, appellant admitted that there is unpaid service tax for the year 2004-05 amounting to Rs. 92,50,777/-. A part of the amount along with interest was deposited also. In respect of a service for which they were collecting the service tax under the head Business Auxiliary Service the tax was paid in December 2004 and the return was filed only in February 2007. Investigation further yielded that even the service tax returns which were filed after initiation of investigation did not reflect the position correctly relating to value of service tax and payments. Appellant admitted these and also paid service tax thereafter. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A SCN was issued on 24.08.2008 demanding service tax of Rs. 5,85,86,971/-. By this time, appellant had paid an amount of Rs.5,57,22,052/-. It was proposed to appropriate the same. It was also proposed to appropriate the interest of Rs. 70,66,597/-already paid by them. The original authority confirmed the various demands and appropriated the various sums and imposed penalties under Section 76, 77 & 78 of the FA, 1994. </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 holds substantial shares in partnership firm and also company, any trade advance given by company to firm is to be treated as deemed dividend in hands of assessee - NO: ITAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is partner in M/s Shri Ram Gum & Chemicals and also director in a company named M/s Shri India Sino Gum (P). Ltd. He filed his Return of Income [ROI] in Form No. 2D declaring total income of Rs. 1,20,320/-. Subsequently, a notice u/s 148 was issued after recording requisite reasons for reopening. The assessee complied with this notice and also filed objections against the reassessment proceedings. However, assessment was completed on 20.12.2010 u/s 143(3) r.w.s 148 of the Act at a total income of Rs. 63,74,845/-. The A.O. made addition of Rs. 62,54,525/- u/s 2(22)(e) of the Act. The assessee was stated to be the key management personnel holding 2,50,100 shares valued at Rs. 25,01,000/- in the company. Thus, he was holding 50% share of M/s Shree India Sino Gum (P). Ltd. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether when the assessee holds substantial shares in a partnership firm and also a company, any trade advance given by the company to the firm is to be treated as deemed dividend in the hands of the assessee u/s 2(22)(e). And the verdict goes against the Revenue. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund - Amount claimed as refund is not shown as 'receivables' in books of account and same were expensed out in P & L account - if this be so, it signifies that the respondent has adjusted amount in their income while arriving at net profits thereby implying that the incidence of duty has been passed on to third parties - Claim hit by unjust enrichment - Revenue appeals allowed: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a Revenue appeal, and for a change, they have won! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The respondents are manufacturers of blankets, shawls and woolen fabrics from yarn of waste wool. Yarn of waste wool is exempt from duty, if captively consumed vide Notification No. 67/95-CE dated 16/03/1995, subject to the condition that the manufacturer does not avail CENVAT credit of the duty paid on inputs used in the manufacture of such yarn of waste wool. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the period 1/01/2002 to 30/06/2002, the respondent consumed inputs such as rags and synthetic waste apart from polyester tops and took credit of the excise duty paid on synthetic waste and polyester tops. Using such cenvatted material, they manufactured yarn of waste wool which was in-turn consumed in the manufacture of blankets, shawls and woolen fabrics. On the yarn so manufactured, initially they paid duty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Subsequently, they filed a refund claim for the refund of duty of Rs.76,61,460/- being the amount of duty paid on yarn. The claim was filed with the department on 12/08/2012. However, subsequently on 24/08/2002 the respondent claimed to have reversed CENVAT credit taken on inputs used in the manufacture of waste wool amounting to Rs.3,12,569/-. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements </font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p> <p><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>