TIOL-DDT 2615 · the untouched capture
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<p><strong><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 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=23157"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2015_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="300" height="148" hspace="5" border="0" align="right" ></a></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 2615</font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
09 06 2015<br>
Tuesday</font></strong></p>
<p align="justify"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">EOUs - 35 years and not really going strong - CAG finds faults</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CAG recently submitted its Report No. 9 of 2015 on <em>Performance of 100% Export Oriented Unit (EOU) scheme</em>. </font></p>
<p align="justify"><font color="#000033" size="2" face="Verdana, Arial, Helvetica, sans-serif">Some of the important observations of the CAG:</font></p>
<p align="justify"><font color="#000033"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Scheme:</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Export Oriented Unit Scheme (EOU) was launched in December 1980, eighteen years after the first export processing zone (EPZ) was formed in Kandla and twenty years before SEZs came into being. Over the years the scheme has undergone various changes and its scope also expanded substantially. The scheme was introduced with the objective of boosting exports by generating additional production capacity. It was primarily designed for the promotion and growth of manufacture and export of value added products. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The functioning of EOUs is governed by three tier administrative set up. The Board of Approval (BoA) is the apex body and is headed by the Secretary, Department of Commerce. The Unit Approval Committee (UAC) at the Zone level deals with the approval of the units within the jurisdiction of Development Commissioner (DC), who is ex officio chairperson of UAC. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The provisions of the Custom and Central Excise law in respect of the EOUs are administered by the Commissioner of Customs and Central Excise under the control of Central Board of Excise and Custom (CBEC), Ministry of Finance (MoF). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Monitoring achievement of Net Foreign Exchange (NFE) and in cases of default, levy of penalty under section 11(2) of Foreign Trade (Development and Regulation) Act, 1992 (FTD&R Act) are within the jurisdiction of the DC functioning under the Department of Commerce (DoC). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The long-term vision of the DoC is to make India a major player in the world trade by 2020. <em>The aspiration of the Department is to achieve an average annual growth of exports of 25 per cent over the next six years</em>. Working on this aspiration, the Department aims to double its merchandise exports from USD 225 billion in 2010-11 (expected level) to USD 450 Billion in 2013-14 and then to USD 750 Billion. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">EOU/DTA units can be established anywhere in India. EOU units are entitled for DTA sale after payment of applicable duties on the basis of exports made. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the taxation front, EOUs are exempted from payment of any duty on imports and exported goods; however, EoUs are not entitled to claim duty drawback for the exported goods and Chapter 3 (Promotional Measures) benefits under FTP. Service tax is refundable on export of services by EOUs. VAT was leviable to service units in EOU. EOUs are exempted from excise duty on inputs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">EOUs have to bear the apportioned infrastructure cost and cost recovery charges for Custom official posted at EOUs and related warehousing charges. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The EOU is working under supervision of Central Excise and Custom department. The process of de-bonding and exit from the scheme is cumbersome. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Acute Information Deficiency Syndrome (AIDS):</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Neither DGFT nor DCs have put up year wise details in their websites, regarding number of EOUs functioning, number of new entrants, number of units opting out of the scheme, their exports/imports etc; consequently this data is not available in the website of Ministry of Commerce/DGFT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the dedicated website of EOU (eouindia.gov.in) some data is available only up to the financial year 2007-08. DoC in the exit conference stated that (January 2015) website ‘eouindia.gov.in 'become non-functional and the data now being captured in <em>www.epces.in </em>maintained by Export Promotion Council for EOUs and SEZs. Audit observed that only export performance of EOUs upto December 2013 is available in the website. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DCs do not have a database relating to EOUs falling under its jurisdiction. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unable to attract Entrepreneurs:</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The total number of EOUs has gone down from 3109 in 2009-10 to 2608 in 2013-14. While the number of functional units has come down from 2279 to 2095 during the same period, the percentage of functional units to total units has declined from 83 per cent in 2010-11 to 80 per cent in 2013-14 with corresponding increase in percentage of non-functional and deboned units. There has been a gradual reduction in EOUs after the SEZ Act came into force in 2006-07. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The main reason for opting out by the EOUs from the scheme are unavailability of benefits of DEPB, Drawback, DFRC and Target Plus Scheme, etc, discontinuation of income-tax benefits under Section 10B of IT Act effective from assessment year April 1, 2011, (previous year 2010-11) etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government of India had forgone significant customs revenue amounting to Rs. 32,932 crore during 2009-10 to 2013-14 on EOU/EHTP/STP schemes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has fallen short by almost 33 per cent (USD 150 billion) of its export target in 2013-14 <em>vis-a-vis</em> its Strategic Plan (DoC). FTP (2009-14) is being operated beyond its tenure and EOU scheme is neither able to attract Entrepreneurs nor contribute to the growth as envisaged while forgoing substantial duty. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Internal control and monitoring</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No impact assessment was done before implementing EOU scheme by the DoC/DoR. Neither was any midterm evaluation done while implementing the SEZ Act in direct competition to the EOU scheme. Though the EOU Scheme was introduced several years ago and considerable concessions have been extended to the EOUs, there is no structured internal audit mechanism in the MOC&I to assist in oversight of the functioning of EOUs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Annual monitoring of functioning and performance of units are carried out by DCs through the Quarterly/Half yearly/Annual returns furnished by the units. Based on such review, DCs inform/suggest to DoC corrective measures to enable defaulting units to fulfil their obligation. However, cases of irregular monitoring of the performance of EOUs have been noticed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Neither the Controller of Aid, Accounts and Audit (DEA) nor Chief Controller of Accounts (DoC) has audited the EOU scheme. System of regular internal audit of the EOU scheme has not been institutionalized by DoC. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cases of non compliance and policy misrepresentation</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cases of non compliance and policy misinterpretations have been observed which included, DTA sales, short levy of duty at the time of exit from EOU scheme, applicability of central excise exemption notification, incorrect availing of CENVAT credit, non levy of Service tax etc,. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apart from the systemic issues highlighted in the report, specific cases of operational malfunction led to short/non levy of duty of Rs. 317.06 crore. </font></p>
<p align="justify"><strong><font color="#000033" size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG Recommends:</font></strong></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>1. Ministry may initiate necessary corrective measures to arrest the decline with specific timelines and measurable outcomes so that the basic objective for export growth is achieved utilising the uniqueness of the scheme. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. DoC may institutionalise a system of regular internal audit of the EOU scheme and may take steps to collect, clean, collate and communicate updated data on the dedicated website. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. DoC may take steps to ensure that APRs are submitted in time and these reports which are meant for monitoring the performance of EOUs may contain all relevant data not only of exports but also about duty foregone, DTA sale by the government for facilitating the exports. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Department may strengthen the internal control in case of DTA clearances by EOUs, by way of improving the prescribed mechanism of joint monitoring by Development Commissioners and Central Excise authorities as well as by fixing accountability for any serious non compliance as per the FTDR/Customs/Central Excise/Service Tax Act. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Department may consider suitable amendment to remove the ambiguity created due to contradictory provisions of Section 5A and Section 3 of the Central Excise Act, 1944 relating to duty leviable on domestic clearances made by EOUs. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. The department may word the relevant provision of FT (D&R) Act to regulate the process/procedures in EOU linked to the objectives envisaged. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. DoC may consider amendments to the applicable provisions in order to avoid the ambiguity between FTP and the Central Excise notification regarding DTA sales entitlement of EOUs. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are several assessees who are trying to frantically get out of the Scheme, but are stuck because of pending cases. There are really no special benefits for an EOU that a DTA unit does not have and so why should anyone operate under the scheme? And there are several units, which have duped the department of hundreds of crores of rupees. </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">FTP - Import Policy of Areca Nut - CIF Value Increased</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> import policy for areca nuts falling under exim code 0802 80 10, 0802 80 20, 0802 80 30 and 0802 80 90, is free subject to a policy condition that the CIF value is Rs. 110/- and above per Kilogram. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is now increased to Rs. 162/-. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has received representations from various stakeholders of Areca nuts industry against unabated import of Areca nuts from neighbouring countries taking advantage of low import duty provided under SAFTA. It has, therefore, been decided to increase the Minimum Import Price (MIP) on import of Areca nuts from existing Rs. 110/- per kg. toRs.162/- per kg. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Customs Authorities have been advised to check the rules of origin with utmost care so as to ensure that Areca nut grown in other countries is not imported through our neighbouring countries taking advantage of low import duty under SAFTA. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government says that the increase in the existing MIP on import of Areca nuts will be in the interest of the domestic farmers. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgxNjQ=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No.10/2015-2020, Dated: June 08, 2015 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600">FTP - Preferential Treatment for Status Holders - Time Limit </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Para 3.24 of the new Foreign Trade Policy 2015-20 provides for certain privileges and preferential treatment for the Status Holders. As per sub para (g) of Para 3.24 of FTP, status holders would be entitled to preferential treatment and priority in handling of their consignments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has now fixed the following shortened time lines for issue of advance authorisation and its subsequent amendments to the status holders: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr bgcolor="#FFC993">
<td valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S. <br>
No. </font></td>
<td width="19%" valign="top"><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Category of Status Holders </font></div></td>
<td width="56%" valign="top"><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nature of Application <br>
(received through electronic mode) </font></div></td>
<td width="16%" valign="top"><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Timeline for disposal <br>
(in working days) </font></div></td>
</tr>
<tr bgcolor="#FFC993">
<td valign="top"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></strong></td>
<td width="19%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5 Star and 4 Star Status Holders </font></td>
<td width="56%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Advance Authorisation (where input norms are notified) <br>
2. Revalidation of Advance Authorisation <br>
3. Invalidation of Advance Authorisation </font></td>
<td width="16%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 day </font></td>
</tr>
<tr bgcolor="#FFC993">
<td valign="top"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></strong></td>
<td width="19%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 Star, 2 Star and <br>
1 Star Status Holders </font></td>
<td width="56%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Advance Authorisation (where input norms are notified)<br>
2. Revalidation of Advance Authorisation <br>
3. Invalidation of Advance Authorisation </font></td>
<td width="16%" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 days </font></td>
</tr>
</table>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">But how do you determine the Status? </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjM3NzQ=" target="_blank"><strong>DDT 2611 03 06 2015</strong> </a>had asked this question and we are still waiting for a clarification from DGFT. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgxNjU=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Trade Notice No. 04/2015., Dated: June 08, 2015 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Income Tax - Restructuring - New Jurisdiction? </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DO</strong> you know who your Assessing Officer is and where his office is located? With so much cadre restructuring in the tax departments, it is very difficult to find your jurisdictional proper officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Systems Directorate of CBDT had asked all the Principal Chief Commissioners to upload the new post-restructuring jurisdiction of their region on the National Website of the Department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But only two regions have bothered to upload this information. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Directorate impresses upon the Principal Chief Commissioners that, <em>the taxpayers are feeling inconvenienced due to absence of information about their new jurisdiction, leading to the receipt of a large number of grievance petitions in the Board</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Principal Chief Commissioners are requested to upload this information urgently and in any case by 22nd June 2015 positively. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgxNjY=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DIRECTORATE OF INCOME TAX (SYSTEMS), F.No.DGIT(S)/DIT(S)-4/PAN Migration/2014-15/ Dated: June 08, 2015 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600">Former CBDT Chairman KV Chowdary is new CVC </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/KV_Chowdary.jpg" alt="Legal Corner Icon" width="124" height="93" hspace="5" border="0" align="left"><strong>AS </strong>mentioned in DDT 2610 - 02 06 2015, the former CBDT Chairman Mr. KV Chowdary is appointed as the new Central Vigilance Commissioner. He will not only be the first IRS officer, but also the first non-IAS officer to be the CVC. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ram Jethmalani and Prashant Bhushan have opposed the appointment. In a letter to the Prime Minister, Ram Jethmalani said, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"By my letter of 06.06.2015 which you acknowledged I had advised you not to make the appointment of C.V.C. My letter enclosed clinching evidence of the Finance Minister's recommendee's total unfitness for the job It was only the first instalment. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Second, the third and the fourth instalments even more incriminating are ready to be sent to you. I was however shocked to hear the Attorney General announce in the Supreme Court today that the appointment has been made; no use sending them to you </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Now we shall fight out in the Supreme Court and the Court of the people of India. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">My diminishing respect for you ends today."</font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prashant Bhushan is reported to have decided to challenge it in the court. </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">CBDT Clarifies on Prosecution of Tax Evaders</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT </strong>clarifies:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It has been noticed that the certain section of media have referred to the Discussion Paper, circulated during the All India Conference of Chief Commissioners and Director Generals of Income Tax held on 25th-26th May 2015, out of context and stated that the Central Board of Direct Taxes (CBDT) has told its officers to go beyond raids and searches to target tax evaders. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is factually not correct. It may be appreciated that the need of the hour is to provide effective deterrence since the soft action in extreme and big cases of tax evasion affects the behaviour of the compliant tax payers. This has been brought out in the latest study conducted by NIPFP. This is the very aspect that was covered by CBDT in the discussion during the All India Annual Conference of senior officers. Effective and stringent action only in known and big cases of tax evasion would go a long way in demonstrating to the large number of compliant tax payers that the tax laws are just and fair and also encourage voluntary tax compliance. </font></em></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"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></strong></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@tiol.in"><strong>vijaywrite@tiol.in</strong></a></font></p>
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