TIOL-DDT 461 · the untouched capture
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<html> <head> <meta http-equiv=Content-Type content="text/html; charset=windows-1252"> <title>Taxindiaonline's DDT 402</title> </head> <body link=blue vlink=blue> <p> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 461</font><br> 03 10 2006<br> Tuesday</b></font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">ASSOCHAM</font></strong><font color="#006600"><strong> seeks new Cenvat Credit Rules </strong></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a representation to the Finance Minister, P. Chidambaram, the ASSOCHAM has suggested replacement of the existing Cenvat Credit Rules with a new Cenvat Credit Rules,2006, to take care of practical aspects of business across the country. ASSOCHAM has identified a few issues on which there is confusion in the trade as well as government.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The confusion according to the ASSOCHAM is on issues related to</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Credit of Service Tax on transport of final products from the place of removal.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Cenvat credit of Service Tax paid on mobile phones</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Input services used in taxable and non taxable services</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Input services by a manufacturer who is also a trader.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is there any confusion? The problem actually is the Board has two faces. The laws made by them are fairly reasonable and correct, but when they interpret these laws, the other face takes over. This may be because when the laws are made, there is intensive consultation and vetting at various levels, including the law ministry. But clarifications are off the cuff remarks of the bureaucrats and often tend to be erratic and outright wrong. Take the issues raised by ASSOCHAM. Actually there need be no confusion at all, but ASSOCHAM is right; there is tremendous confusion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <b>Credit of Service Tax on transport of final products from the place of removal.</b>DDT had extensively covered this issue. Please see <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2870">TIOL-DDT 2</a></u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2870"><u>39 - 1111 2005</u></a><b><u>. </u></b>The law is very clear that transport of final products from the “place of removal” is an input service, but logical commissioners agitatedly ask in ASSOCHAM seminars, “how can the transport <b>out</b> from the depot to the customer be <b>input service</b>?”. Many confused assessees are convinced with this logic. Even the few courageous assessees, who had the audacity to take credit based on the “ill advice” of “unscrupulous” consultants, are threatened with penalty and interest. All this, because there is confusion at some high levels. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>2. Cenvat credit of Service Tax paid on mobile phones. </b>Though Board had been maintaining a deafening silence on the issue after that prankish circular of 2003, recently the Tribunal clarified the issue, when it observed, <b>In the absence of any express prohibition, under the new Cenvat Credit Rules, 2004, I am of the view that Service Tax paid on Mobile Phone is available as credit to eligible Service providers of output service and manufacturers. </b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>3. Input services used in taxable and non taxable services. </b>Only last week we had carried an article on this contentious issue. The 20% credit is actually a boon to some service providers. If the confusion in this area is removed, consultancy work is bound to suffer badly.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>4. Input services by a manufacturer who is also a trader. </b>What happens to the input services used in his trading activities and what happens when common input services are used? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">May be the concept of the same Cenvat Credit Rules for excise duty and Service Tax is not after all practical. Should we go separate Rules?</font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:City><st1:place><strong><font color="#006600">Bangalore</font></strong></st1:place></st1:City><font color="#006600"><strong>LTU to function from today</strong></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The LTU was to function from 1<sup>st</sup> October 2006, but as 1<sup>st</sup> and 2<sup>nd</sup> of October happened to be holidays, the LTU is to start functioning from today. Hurried notifications were issued on 30<sup>th</sup> September when CBEC’s web site was happily enjoying puja holidays. As usual it was left to us to make the notifications public as the rest of the nation especially the government was holidaying. A notification is effective only when it is made public. We are happy to perform the job – if only they are made available to us. Please see our breaking news story <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4328">First LTU takes off with 30 known corporates at <st1:City><st1:place>Bangalore</st1:place></st1:City>; all benefits notified </a></u>.</font></p> <p align="justify"></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The first LTU in <st1:country-region>Pakistan</st1:country-region> started functioning in <st1:City><st1:place>Karachi</st1:place></st1:City> from 1st July 2002. Slow promotions for de-motivated work force, scarcity of vehicles, and difficulty in destroying accumulated junk records are some of the problems faced by the Pakistani LTU. Will it be different here?</font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Books reveal hidden surprise </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/auscus.jpg" width="200" height="200" border="1" align="left">The Australian Customs in a press release today said that Customs officers stopped an estimated one kilogram of the precursor chemical, pseudoephedrine, being smuggled through air freight at <st1:place><st1:PlaceName>Cairns</st1:PlaceName> <st1:PlaceName>International</st1:PlaceName> <st1:PlaceType>Airport</st1:PlaceType></st1:place>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The stash was found inside the covers of eight books. When Customs air cargo officers x-rayed the parcel's contents anomalies were identified. During further examination a white substance was found concealed within the books' covers. Further tests returned a positive reading for pseudoephedrine.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pseudoephedrine is a prohibited precursor chemical which can be converted in clandestine laboratories from its legitimate use to produce illegal amphetamine-type substances, such as methamphetamine. </font></p> <p> </p> <p> </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></span></font></p> </body> </html>