TIOL-DDT 463 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT 463</font><br>
05 10 2006<br>
Thursday</b></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Bottling
of liquor – Board realizes reality?</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please recollect
our article <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4081%20">Beer
manufacture and service tax - intaxicating?</a> and
the High Court judgement in </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2006/2006-TIOL-268-HC-MP-ST.htm">2006-TIOL-268-HC-MP-ST</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">.
regarding Service Tax on bottling of liquor. The article suggested and
the High Court held that the activity of bottling liquor was liable to
Service Tax. Under Business Auxiliary Service definition, manufacturing
activity within the meaning of clause (f) of Section 2 of Central Excise
Act is excluded from its purview. Since bottling of liquor does not
amount to manufacture under Central Excise as liquor is not excisable
at all, the obvious conclusion was that it would fall under Service Tax.
But one of our enlightened netizens, Unnikrishnan had pointed out,<br>
<br>
“As per section 2 (f) of the CEA, 1944 'any activity incidental or ancillary
to the completion of a manufactured goods amounts to manufacture'. <b>There
is no condition that the process should be carried out for the completion
of excisable goods.</b> So any activity incidental or ancillary for the completion of
non-excisable goods also comes under the purview of section 2 (f). Accordingly,
it is only to find out whether the bottling is essential for the completion of
liquor. As such the liquor cannot be marketed without bottling; the activity
of bottling has to be considered as manufacture for the completion of liquor.
So, it is pertinently seen that activity of liquor bottling is outside the purview
of 'packaging service' under Section 65 of Finance Act, 1994. It appears that
the aforesaid law point was not argued in the HC . Hope the said point will be
presented in the apex court.”<br>
<br>
Before the issue is decided by the Supreme Court, perhaps Board wants to get
its share in the liquor business. Board has released a draft circular
which stipulates that,<br>
<br>
the activity of blending, manufacture, bottling or labelling, etc on job
work basis by a distiller, in respect of Indian Made Foreign Liquor on
behalf of brand owner, would be covered under the category of business
auxiliary service.<br>
<br>
While we are happy that Board has taken note of the issue pretty fast,
we wish the Board would take into consideration the issue raised by Unnikrishnan,
which has serious ramifications.<br>
<br>
Incidentally is it legal and right for the Board to clarify an issue already
decided by a High Court? Fortunately in this case the Board agrees with
the High Court.<br>
<br>
Interestingly, the Board circular has a disclaimer, “This Draft Circular
has been put up only to elicit public response. No final decision has been
taken by Government/ Board. Government/ Board will proceed further in the
matter only after due examination of the responses received.”<br>
<br>
Is it to preempt the powerful liquor lobby from going to court? Trouble
is brewing fast for the brewing industry and the concept of contract
brewing is likely to undergo a major change. Intaxicating days ahead?
If you have any comments, send them to the Board by 20th October.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/draft_st_on_imfl.htm">Draft
Circular in F.No. 249/1/2006-CX.4 </a></font>
</p>
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<p align="center"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ST-3
Form to be amended</font></b></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Board wants to amend the ST- 3 form again. This was a simple form for Service
Tax return in 1994. The form survived for 8 long years when it was substituted
with a new form by notification No. 12/2002-S.T., dated 1-8-2002. The form
was again changed by Notification No. 31/2005-S.T., dated 20-10-2005. Now
exactly a year later, Board proposes to change the form. A draft form has
been published for comments. This also has the disclaimer.<br>
<br>
<a href="http://www.taxindiaonline.com/RC2/pdfdocs/Draft_Cir_For_Form_ST.pdf">DRAFT FORM ST-3</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Sale
to SEZ – How to claim rebate?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
netizen has sent us a copy of a letter written by the Gujarat Chamber of
Commerce and Industry to the CBEC Chairman about difficulties in getting
rebate for goods supplied to SEZ. The letter states,<br>
<br>
As per the provisions of the Special Economic Zone, goods sold by a unit in
Domestic Tariff Area to a Unit in this Zone are considered as exports.
As per Rule 30 of the Special Economic Zone Rules 2006, a unit in DTA can
supply goods to a unit in SEZ either under Bond or under claim of rebate. As
per the rule, if the goods are supplied to SEZ unit by DTA unit under claim
of rebate, the DTA unit can claim the refund of Excise Duty.<br>
<br>
Notwithstanding the aforesaid provision, the DTA units are not in a position
to get refund of Excise duty paid on the goods supplied to a unit in
SEZ as no procedure has been prescribed by the Government.<br>
<br>
On account of the above anomaly, huge amount of funds of DTA units are blocked
for want of rebate of Duty.<br>
<br>
No procedure is required Sir. As you have rightly mentioned, Rule 30 of the
SEZ Rules provides that<br>
<br>
The Domestic Tariff Area supplier supplying goods to a Unit or Developer shall
clear the goods, as in the case of exports, either under bond or as duty
paid goods under claim of rebate on the cover of ARE-I referred to in notification
number 40/2001- Central Excise (NT) dated the 26th June, 2001. (<font color="#663399">Of
course this Notification was rescinded in 2004 about which the Commerce
Ministry is blissfully ignorant in 2006</font>)<br>
<br>
SEZ is deemed to be outside India and any clearance to SEZ is export and
rebate can be claimed as if the goods are exported. Apparently, the Chamber
has faced some problems where rebate is not sanctioned. Will the Board issue
a clarification that clearances to SEZ should be treated as exports and rebate
granted?</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">SEZ – why treat them on par with real estate – Commerce
Secretary seeks clarification</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new Commerce Secretary GK Pillai
in his first press conference after assuming office had quite a few
bites for the press. He informed that he had a written a lrtter to
the RBI seeking a clarification on why the SEZs are treated on par
with real estate.<br>
<br>
++ not a single farmer has been displaced
owing to the 181 SEZs which have been cleared till now<br>
<br>
++ much of the debate around SEZs does
not consider the fact that only one SEZ in Mumbai in Maharashtra
had been cleared for an area as large as 10,000 hectares. The other
SEZs in Gurgaon and Dadri being cited had earlier been given approval "in
principle'' before the SEZ Act came into force, but had not been
formally cleared by the Board.<br>
<br>
++ land being a State subject, the
Board of Approval had advised State industrial development corporations
to give land in SEZs on a lease rather than to sell it.<br>
<br>
++ States had been told to ensure that
double cropped land should not amount to over 10 per cent of the land
being acquired.<br>
<br>
++ It was envisaged that housing should
be provided within the SEZs for employees as otherwise it could lead
to congestion in neighbouring cities as has happened in Bangalore.<br>
<br>
++ Customs clearance of perishable
goods will be faster.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Exporting
corruption – India tops</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">‘Corruption’, as a great lady, remarked
is a global phenomenon and we are true to globalization. Not only do we practice
it, but we export it. Transparency International has just released its “Bribe
Payers Index 2006” of
exporting countries.<br>
<br>
The BPI looks at the propensity of companies from 30 leading exporting
countries to bribe abroad. Companies from the wealthiest countries generally
rank in the top half of the Index, but still routinely pay bribes, <b>particularly</b>in developing economies. Companies from emerging export powers India, China
and Russia rank among the worst. In the case of China and other emerging
export powers, efforts to strengthen domestic anti-corruption activities
have failed to extend abroad. <br>
<br>
India consistently scores worst across most regions and sub-groupings.
China is the world’s fourth largest exporter and ranks second to last
in the Index.<br>
<br>
India’s exports account for hardly one percent of the world’s
exports, but in corrupting abroad, we are right on top.<br>
<br>
But in all these great countries where Indians paid bribes, obviously
there were <b>innocent bribe takers.</b> Who is more guilty, the bribe giver
or taker? That reinforces the view that corruption is after all a global
phenomenon.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>LTUs – How
serious is the Government?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Bangalore LTU is supposed to be functioning from 3rd October but they are
still posting people and they could not find a Chief Commissioner to head
the LTU. It is another additional charge.<br>
<br>
<b><font color="#FF6666">Until tomorrow with more DDT<br>
<br>
Have a nice day.<br>
<br>
Mail your comments to</font></b> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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