TIOL-DDT 2795 · the untouched capture
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<p><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 2795</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
26 02 2016<br>
Friday </font></strong></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Credit of Service Tax on Sales Commission - Explanation inserted by Notification No. 2/2016-CE(NT) is declaratory in nature and effective retrospectively </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> reporting the Notification <strong><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkxMjY=" target="_blank">2/2016-CE(NT)</a></strong> dated 03.02.2016, <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=25961" target="_blank"><strong>DDT 2779</strong> </a>had mentioned - </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600" style="background-color:#C1DFE8" span="span">Cenvat credit on sales commission </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span"><strong>ON </strong> the subject matter, it seems the Board had realized that its Circular <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NDA3MQ==" target="_blank"><strong>No. 943/04/2011-CX</strong> </a>dated 29.04.2011 which was intended to give relief to assessees all over India was losing its Midas touch in the State of Gujarat owing to the Gujarat High Court decision in <em>Cadila Healthcare Ltd.</em> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2013/2013-TIOL-12-HC-AHM-ST.htm" target="_blank"><strong>2013-TIOL-12-HC-AHM-ST</strong>. </a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">This is what the Circular clarified - </font></p>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S.No. </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Clarification </font></strong></p></td>
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<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression "activities related to business"? </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">The High Court had in paragraph 5.2 of its order held - </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">"...The term input service as defined in the rules means any service used by a provider of taxable service for providing an output service or used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal and includes services used in relation to various activities of the description provided therein including advertisement or sales promotion. Thus, the portion of the definition of input service insofar as the same is relevant for the present purpose refers to any service used by the manufacturer directly or indirectly in relation to the manufacture of final products and clearance of final products from the place of removal. <font color="#FF0000">Obviously, commission paid to the various agents would not be covered in this expression since it cannot be stated to be a service used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from the place of removal...</font> Under the circumstances, the adjudicating authority was justified in holding that the commission agent is directly concerned with the sales rather than sales promotion and as such the services provided by such commission agent would not fall within the purview of the main or inclusive part of the definition of input service as laid down in rule 2(l) of the Rules." </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">So, the ground reality is that after pronouncement of the judgement of Gujarat High Court in<em> Cadila Healthcare</em>, the position is that Cenvat credit on sales commission agent's service is being denied in Gujarat; whereas in other parts of country it is being allowed based on the P&H High Court's Judgement in <em>Ambica Overseas</em> <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODgxMDg=" target="_blank"><strong>2011-TIOL-951-HC-P&H-ST</strong> </a>and Board's Circular dated 29.04.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">To alleviate the sufferings of the assessees who were wrongly given the short shrift, the Board has used its magic wand and extended its largesse to assessees all over India by amending the CCR, 2004 itself. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">Notification <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkxMjY=" target="_blank"><strong>2/2016-CE(NT)</strong> </a> released yesterday does the following - </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">In the CENVAT Credit Rules, 2004, in rule 2, in clause (l), after sub-clause (C), the following<em> Explanation </em>is inserted:- </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">Explanation. - For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis."</font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">As the amendment introduces an Explanation, assessees, in particular those in Gujarat, may have every right to say that the same is clarificatory and hence retrospective in operation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span"><strong>Please also see</strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=25624" target="_blank"><strong>Cenvat credit on sales commission - Assessees in Gujarat given the short shrift</strong>. </a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">After all, 'tis the season of good times! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the impact of this notification, P G James had written a thoughtful piece <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26029" target="_blank"><strong>When good intentions go bad...</strong></a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be that as it may, this notification 2/2016-CE(NT) was godsend for the appellant who would have otherwise been denied the credit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In an order delivered on the day succeeding the birth of this notification, the Division Bench of the CESTAT, Ahmedabad came to the following conclusion - </font></p>
<p align="justify"><em><font color="#333399" size="2" face="Verdana, Arial, Helvetica, sans-serif">+ The expression in the Explanation as inserted by Notification No. <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkxMjY=" target="_blank"><strong>2/2016-CE (NT)</strong></a>, make it clear that it is for explaining the meaning of clause 'sales promotion' in the context of Rule 2(l) of the Rules, 2004. It is to provide an additional support to the dominant object of the word 'sales promotion' in Rule 2(l) in order to make it meaningful and purposeful. The language of the Explanation is consistent with Board Circular [<strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/excircular943.htm" target="_blank">943/04/2011-CX</a> </strong> dated 29.04.2011] to the benefit of the Assessee and it would be effective retrospectively. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The order denying CENVAT credit was set aside and the appeal was allowed. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26201" target="_blank">Breaking News</a>.</font></strong></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Extension of re-warehousing period of Bonded capital goods - ease of understanding by field formations!</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> is now on an ‘ease' drive - after proactive actions for ease of doing business, it is now ease of <em>understanding by the field formations.</em> The CBEC has simply extracted a para from a Circular issued by the Board 11 years ago for ease of <em>understanding by the field formations</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board letter states, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The STP/EOU/EHTP Units are premises bonded under Section 58 read with Section 65 of the Customs Act, 1962. Capital Goods imported by these units are bonded for the periods provided under Section 61. The License of the Private Bonded Warehouse is granted by the jurisdictional Assistant Commissioner or Deputy Commissioner in terms of Section 58 for a period of five years. Further, the warehousing period in respect of the capital goods lying in the warehouse under the provisions of Section 61 of the Customs Act, 1962 is for a period of 5 years from the date of bonding. Trade has represented that the renewal of the Private Bonded Warehouse License and the extension of warehousing period for the bonded capital goods are not coterminous. This creates difficulties for them, as they have to approach authorities at the different times for extension of period . </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To obviate the difficulty faced by trade, Board has already addressed this issue vide circular No. 7/2005-Cus dated 14.02.2005. For ease of <em>understanding by the field formations</em>, the Board has reproduced the operative part of the said circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The sum and substance of the Board Circular of 2005 is that to <em>obviate the difficulties of the EOU/EHTP/STP units, Board has decided to allow extension of warehousing of all the capital goods installed or put into use, simultaneously at the time of renewal of warehousing licences irrespective of the fact that the capital goods are due for extension or not. The period of extension would be allowed for such a period so that the capital goods need further extension only on the date of renewal of warehousing license</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the field formations could not understand this Circular in 2005, will they suddenly understand it, if it is extracted into a letter by the Board? Some ease of understanding this! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants its instruction to be strictly followed and no inconvenience be caused to the trade especially EOU/STP/EHTP on account of this issue. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjYwMzI=" target="_blank">DDT 2784 11 02 2016</a>.</font></strong></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkyNTA=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter in DGEP/FTP/07/2015., dated: February 15, 2016</font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">EOUs - issuance of Procurement Certificate - Board Reiterates earlier circular for ease of understanding by field formations </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>LETTER from the CBEC to the field states, </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The duty free imports by EOUs are governed by Notification No.52/2003-Cus dated 31.03.2003 as amended. The authority to issue the Procurement certificate (PC), allowing such duty free imports, has been delegated to the Superintendent in charge by the Board, vide Circular No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2001/cuscir84.htm" target="_blank"><strong>84/2001-Cus</strong> </a> dated 21-12-2001 and further relaxed by allowing issue of pre-authenticated PCs by the Superintendents, vide Circular No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2006/cuscir06_17.htm" target="_blank"><strong>17/2006-Cus</strong> </a> dated 1.6.2006 to the units satisfying the criteria specified therein. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. It has been brought to the notice of the Board by EOU/STPI/EHTP units that some field formations are still following the practice of countersignature of PCs by AC/DC, which is at variance with the instructions by the Board. Further, the countersignature by AC/DC is only adding one more level officer to the procedure specified and is adversely affecting ease of doing business. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The said problem has already been addressed vide Circular No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2001/cuscir84.htm" target="_blank"><strong>84/2001-Cus</strong> </a> dated 21-12-2001 and Circular No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2006/cuscir06_17.htm" target="_blank"><strong>17/2006-Cus</strong> </a> dated 1.6.2006 read with DGEP circular no <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgxNzY=" target="_blank"><strong>19/2015-cus</strong> </a> dated 9/6/2015. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F3DBCF">However, for ease of field formations, the Board's instructions on the issue are reiterated . </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board's Circulars stipulate that procurement certificates will be issued by the Superintendent and not by the Assistant Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After more than a decade, Board reiterates the instructions </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F3DBCF">or ease of field formations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board desires that its instructions should be strictly followed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What will the Board do if they are not followed? The Board will view it seriously! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please also see</strong> <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjYwMzI=" target="_blank"><strong>DDT 2784 11 02 2016</strong></a>.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkyNTE=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter in DGEP/FTP/07/2015., dated: February 15, 2016 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Customs - Registration and Updating of AD (Authorised Dealer) Code in EDI 1.5 </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Authorised Dealer Code of the Banks is creating a big problem in Customs Houses. The Registration of AD Code (Authorised Dealer Code) in EDI1.5 System for the purpose of foreign currency remittance in the Exporter's bank account is done by EDI Section. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Problems:</strong> It is noted that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The CHAs/Exporters are giving wrong AD Code of their Bank branch as there is mismatch in the address of the bank issuing letter in favor of the Exporter and that appearing in the system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The AD Code of bank branch is not reflected in ICES System even though the said AD Code is certified by the Bank branch. In some cases, the AD Code given by the Bank branch does not match with that provided by RBI to Customs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Some of the Branches of the Banks do not provide their own branch AD Code even though it was issued to them by RBI and is active. Instead, they provide the AD Code of some other branch. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The JN Customs wants the exporters/CH Brokers to rectify these issues.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkyNTU=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">JN Customs FACILITY NOTICE No.34/2015., Dated: February 24, 2016 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">7th Pay Commission - Headwind Beyond Control - Rail Mantri </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> his Budget speech, the Railway Minister Suresh Prabhu said, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These are challenging times, may be one of the toughest. We are faced with two headwinds, entirely beyond our control; tepid growth of our economy's core sectors due to international slowdown and the looming impact of the 7th Pay Commission. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is pertinent to note that the Ordinary Working Expenses grew by 32.5% in 2008-09 due to the impact of the 6th Pay Commission. </font></em></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more<strong> DDT</strong> and BUDGET 2016 </font></p>
<p><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend.</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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