TIOL-DDT 372 · 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
372</font><br>
29 05 2006<br>
</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Monday</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service
Tax on freight to depot – MRP assessees not eligible for credit – Board vs Board?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Service Tax on GTA has generated more controversies than revenue. And this is
continuing merrily right from 1997, with clarifications reaching their confusing
crescendo in the years 2005 and 2006. The Board, the DGST, the Chief Commissioners
and Commissioners, DGCEI not left out have been giving their own clarifications
making life miserable for both the assessees and officers. Of course there is
one section of society which is enjoying the tamasha, laughing all the way to
the bank – the consultants. Every consultant in <st1:place w:st="on">India has
a few cases relating to the 75% abatement in which case in spite of the DGST’s
letter (withdrawal), Show Cause Notices are being issued to all the manufacturers.
</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sadly
the latest clarification is from the horse’s mouth. Mr. R. Sekar,
the Joint Secretary (Service Tax) in TRU is reported to have clarified
in a PHDCCI seminar that a manufacturer of a product under Maximum Retail
Price (MRP)-based excise levy would not be entitled to Cenvat credit on
the service tax paid on freight incurred for moving the product from the
factory gate to a depot. This is because such expenditure would be treated
as post-manufacturing expenditure in the case of MRP-based excise levy,
where the place of removal for excise duty purpose is the factory gate.
He is quoted as saying, "For MRP-based excise levy,
I go by the ex-factory price and do not determine the depot price. The assessable
value is determined at the factory gate. Whatever happens outside the factory
gate for such items is outside the purview of excise department and cannot
be eligible for Cenvat credit"</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As
<b>DDT</b> has covered the issue on several occasions, repetition, though tempting
is being avoided but we only hope Mr. Sekar has been misquoted and this could
not be what he really said for what has excise valuation got to do with cenvat
credit of Service Tax? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
what is really tragic is the difference of opinion within the Board. Now
who is the real authority? The Board or the JS? May be it is actually the
DGST! Why we have this doubt is the fact that Board had emphatically clarified
on this very issue and the Board’s opinion is diametrically opposite
to what Mr. Sekar is reported to have clarified. The Board had in <strong>F.No.
137/3/2006-CX.4 dated February 2, 2006 clarified this very issue as:-</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">02.
In this regard a doubt has arisen as to whether a manufacturer manufacturing
and clearing goods on payment of duty at specified rates (for example cement)
or on the basis of valuation with reference to retail sale price (for example
refrigerators), and selling the goods from a depot, is also eligible to take
credit of service tax paid on transportation of goods up to such depot. The
doubt appears to be based on reasoning that since such goods are not charged
to duty on the basis of valuation under section 4 of the Central Excise Act,
the definition of the expression 'place of removal' given in that section would
not apply in case of such goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">03<b>.
The matter has been examined at the level of the Central Board of Excise and
Customs</b>. It has been observed that the availment of credit and valuation
for payment of duty are two independent issues. Further, the provisions under
rule 2(t) of the CENVAT Credit Rules refers to definitions under the Central
Excise Act, 1944 and the Finance Act, 1994 for uniform understanding of the
words and phrases used in the Credit Rules. Therefore, if an expression is not
defined in the Credit Rules but is defined under a particular section of the
Central Excise Act, it shall be applicable to all goods for purposes of the
Credit Rules, irrespective of whether or not the said section is applicable
for the purposes of working out the duty on such goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">04.
In view of the above, the undersigned is directed to state that, <b>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.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Has
Mr. sekhar over ruled the Board and is he competent to do so? They say in Government
the left hand does not know what the right hand is doing but sometimes the left
hand will not know what the left hand itself is doing.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
any case, as of now, we have a proper Board clarification which is binding on
the department and the opinion of a Joint Secretary reported to have been expressed
in a seminar, which certainly does not have any legal validity. As said earlier,
we hope Mr. Sekhar has been misquoted; if so he should give a clarification
before the panic buttons are pressed and Show Cause Notices are issued for recovery
of <i>irregular credit</i>. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
is the problem with too many officers giving too many clarifications. </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Excise
duty reduced on LPG and CNG driven motor vehicles. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
this year’s budget, by Notification No. 6/2006-Central Excise, dated the 1st
March, 2006, excise duty was reduced to 16% from 24% for Petrol driven vehicles
of engine capacity not exceeding 1200cc and vehicle’s length not exceeding 4000
mm. Now the exemption is extended to Liquefied Petroleum Gases (LPG) or Compressed
Natural Gas (CNG) driven vehicles also</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/etariff06_032.htm">NOTIFICATION
NO. 32/2006-Central Excise, Dated: May 25, 2006</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs
vs Security – Colombo echoes in Chennai?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
was only on Friday that DDT reported about the altercation between Security
and Customs in Colombo airport which sent the Customs on a flash strike
and within a couple of days it is echoed across the ocean in Chennai. PTI
reports that heated arguments were witnessed at the International Airport
in Chennai on Saturday night between security and customs department personnel
after a customs official, who was not in uniform and his friend, were denied
entry into the airport. Normalcy was restored and customs work in the airport,
which was affected for about an hour, resumed after the airport Manager
rushed to the spot and pacified both groups. Airport is perhaps a place
where you go for an ego trip and sometimes one has to trip on one’s
ego. <b>DDT</b> spoke to the
Customs officer in charge of Chennai airport late Sunday night and he said
there was no problem; it was only a small misunderstanding and everything
is sorted out. May be CISF and Customs belong to a cozy family and only
nosey journalist intrudes and gives a bad picture.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Clove
not grown in Pakistan but exported to India</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sri
Lanka is exporting cloves and areca nuts to India under the Indo-Sri Lanka Free
Trade Agreement; the only catch is recently the Sri Lanka Customs found that
the cloves and areca nut were from Indonesia and not Sri Lanka. It all started
a year ago when the Cochin Customs detected cloves imported from Pakistan and
later learned from the Indian Embassy that clove was not grown in Pakistan.</font></p>
<P align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><B><IMG height=62 src="http://www.taxindiaonline.com/RC2/image/ddt/gnl_txt2.jpg" width=375></B></font></P>
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<TD><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i><font color="#0000FF">Pecuniary
</font>- </i>Of or relating to money: a pecuniary loss; pecuniary
motives. Requiring payment of money: a pecuniary offense.</b></font></div></TD>
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<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
word is actually derived from the Sanskrit word <b>pasu </b>and the Latin word<b>
Pecu </b>meaning <b>cattle. </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
possession of cattle in those days denoted wealth and a man was considered rich
or poor according to the large or small number of cattle that he owned. In the
Ramayana king Janaka's wealth was described by reference to the large number
of herds that he owned. It appears that the cow was gradually raised to the
status of divinity. Kautilya's Arthasastra has a special chapter (Ch.XXIX)
dealing with the "superintendent of cows" and the duties of the owner
of cows are also referred to in Ch.XI of Hindu Law in its sources by Ganga Nath
Jha. – The Supreme Court of India in <i>State of Gujarat v Mirzapur Moti Kureshi
Kassab Jamat & Ors.</i></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Maxim</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><em>discretio
est discernere per legen qiud sit justum</em></b><em> - <b>discretion consists
a knowing what is just in law</b></em></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Discretion
in general is the discernment of what is right and proper. It denotes knowledge
and prudence, that discernment which enables a person to judge critically of
what is correct and proper united with caution, to discern between falsity and
truth, between shadow and substance, between equity and colourable glosses and
pretences and not to do according to the will and private affections or illwill.
It has to be done according to the rules of reasons and justice, not according
to private opinion. It has to be done according to law and not humour. It is
not be arbitrary vague and fanciful but legal and regular. – Supreme Court </font></p>
<p ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
tomorrow with more DDT</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">vijaywrite@taxindiaonline.com</a>
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