TIOL-DDT 324 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#663399" size="3">TIOL-DDT
324</font><br>
17 03 2006<br>
Friday</b></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cenvat
Credit Rules amended – Service exporters eligible for refund<br>
but important changes yet to come</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Cenvat Credit
Rules have been amended to bring in certain long overdue changes. As per Rule
5 of the Cenvat Credit Rules, Exporters who cannot use their cenvat credit
are allowed a refund of the credit utilized. This facility is allowed to the
manufacturers and service providers, but somehow the Rule omitted service
providers and the omission continued for nearly two years. Similarly the refund
was not available if rebate was claimed under Central Excise Rules but forgot
to mention rebate under Service Tax. Of course this did not matter, as according
to the rules the service exporters were any way not eligible for refund. This
lapse is now rectified. Any rectification is good any time and Board deserves
all praise.<br>
<br>
But then Board has totally forgotten about the required amendments consequent
to the 2006 budget. There is a formula for taking credit on inputs received
from EOUs. Now the formula is meaningless in view of the changed amount of
duty payable by EOUs. With the budget most likely to be passed next week,
Board can slip in this notification too.<br>
<br>
<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/exnt06_04.htm">NOTIFICATION
NO. 4/2006-Central Excise (N.T.) Dated 14 March, 2006</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Refund
of cenvat credit – procedure and form amended – major backdoor
change – refund linked to export turnover</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
No. 11/2002 prescribed the form and procedure for claiming refund of cenvat
credit for exporters. That was two years before the Cenvat Credit Rules, 2004
came into existence. So there was no procedure for claiming refund of cenvat
credit by service exporters. This is now rectified with Notification No. 11/2002
being superseded with Notification No. 5/2006. But while prescribing the procedure,
the Government has smuggled in a major provision to restrict the refund.
Hitherto there was no limit on the amount of refund available. Now the Government
has introduced a limit.<br>
<br>
Now the maximum refund allowed is limited to the extent of the ratio of export
turnover to the total turnover for the given period to which the claim relates.<br>
<br>
Maximum refund = Total CENVAT credit taken on input services during the given
period * export turnover ÷ Total turnover<br>
<br>
Illustration: If total credit taken on input services for a quarter = Rs.
100<br>
<br>
Export turnover during the quarter = Rs 250<br>
<br>
Total Turnover during the quarter = Rs 500<br>
<br>
Refund of input service credit under Rule 5 of the CENVAT Credit Rule, during
the quarter = 100 x 250/500 i.e. Rs 50<br>
<br>
But why this complicated formula? BOK (Board Only knows)</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/exnt06_05.htm">NOTIFICATION
NO. 5/2006-Central Excise (N.T.) Dated 14 March, 2006</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central
Excise valuation – Return fare – Includible?</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A manufacturer
sends his goods to a dealer in his own transport and collects transport charges.
Now the transport can be used only for a particular type of goods, say autos
or cars. In the return journey, the vehicle has to come back empty as it cannot
be used for transporting anything else. Now the manufacturer collects charges
for the return journey also. Is this return fare includible in the assessable
value?<br>
<br>
Board in letter <b>No.6/39/2000-CX.I dated 1.7.2002</b> clarified that</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> As per Rule
5 of the Valuation Rules the actual cost of transportation from the place
of removal up to the place of delivery is only to be excluded. If
the assessee is recovering an amount from the buyer towards the cost of return
fare of the empty vehicle from the place of delivery, this amount will
not be available as a deduction. If, however, only the cost of transportation
has been indicated in the invoice without any break-up for the forward and
return journey, normally it should be accepted as the cost of transportation
from the place of removal to the place of delivery.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal
in the Majestic Auto case, held</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Expenses incurred
for the onward journey are to be allowed. There is no reason to deny the expenses
incurred for return journey of those vehicles which are specially designed
and which cannot carry any other goods on its return<br>
<br>
This has been the position for the last two years. But now suddenly with no
provocation, government has decided to change all that. Board has issued a
draft circular which clarifies that,</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> As per Rule
5 of the Valuation Rules the actual cost of transportation from the place
of removal up to the place of delivery is only to be excluded. If the assessee
is recovering an amount from the buyer towards the cost of return fare of
the empty vehicle from the place of delivery, this amount will not be available
as a deduction. Therefore, unless the assessee specifically mentions in invoice
that the transportation charges do not include such charges for return
journey of the vehicle, the deduction of the said cost of transportation will
not be admissible.<br>
<br>
But why this sudden change of stance? There will hardly be 50 assessees in
the whole country availing this facility.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/corrig_cus-exe.htm">Board’s
draft circular</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Amitabh
in Aaykar Bhavan</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Mumbai’s
Income Tax Headquarters had a VIP visitor yesterday, the Big B himself. The
visit is said to be a courtesy call. But it is not every day that superstars
go visiting IT offices on courtesy calls, but what can a poor rich man do
if he is summoned?</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>Top Cop is highest paid IIM graduate</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> M.V.N. Surya
Prasad, DIG of Police, Tamil Nadu has beaten all records to land up in a job
with an annual salary of Rs. 34 Lakhs on graduating from the IIM, Ahmadabad.
The policeman had joined IIM with a top rank in the CAT and is now out of
IIM with a top pay packet. Incidentally there are quite a few IIM graduates
in the IRS.<br>
</font></p>
<P align=center><B><IMG height=62 src="http://www.taxindiaonline.com/RC2/image/ddt/gnl_txt.jpg" width=375></B></P>
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<TD><IMG height=67 hspace=5 src="http://www.taxindiaonline.com/RC2/image/ddt/gnl_word.jpg" width=67 align=absMiddle vspace=5><B><I> Onus
probandi </I></B></TD>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Obligation
to furnish evidence to prove a thing; the burden of proof </b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The burden of
proof is on the plaintiff to show by a "preponderance of evidence"
that all the facts necessary to win a judgment are probably true. In a criminal
trial the burden of proof is on the prosecution to prove the guilt of the
accused is "beyond a reasonable doubt,". However, the burden of
proof is not always on the plaintiff. In some issues it may shift to the defendant
if he/she raises a factual issue in defense, such as a claim that he/she was
not the registered owner of the car that hit the plaintiff, so the defendant
must prove his/her claim. If at the close of the plaintiff's presentation
he/she has not presented any evidence on a necessary fact (e.g. any evidence
of damage) then the case may be dismissed.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Legal
maxim</b></font></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cogitationis
poenam nemo patitur. No one is punished for merely thinking
of a crime.<br>
<br>
A law-suit is like an ill-managed dispute, in which the first object is soon
out of sight, and the parties end upon a matter wholly foreign to that on
which they began.</b></font></p>
<p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(Edmund
Burke (1729-1779) </i></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6666">Until
Monday with more DDT</font></b></font></p>
<p><font color="#FF6666"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice Weekend .</font></b></font></p>
<p><font color="#FF6666"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to</font></b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font>
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