TIOL-DDT 472 · the untouched capture
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<p><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT
472</font></b><b></b></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><b><br>
18 10 2006<br>
Wednesday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Capital Goods Credit – balance 50% before use</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG had been
vigorously pursuing an objection that balance 50% cenvat credit on capital
goods cannot be taken in the subsequent years if the capital goods are not put
to use. Board put up a spirited defence but finally caved in. Board has
sometime ago informed the field that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The legal position has to be interpreted in the
context of the wordings of the rule at the relevant time. As long as the word ‘use’ is specifically referred to in the rules, installation is a prerequisite
to availment of the second installment of CENVAT credit.
Accordingly, the audit objections have been accepted for the period 01-04-2000
to 09-09-2004. <b>It is, therefore decided that during the period 01-04-2000 to
09-09-2004, the balance of 50 % of CENVAT credit cannot be allowed in the
subsequent year unless the capital goods are put to use and mere possession is
not enough</b>. The Board desires that immediate action should be initiated for
recovery of Credit wherever it is taken irregularly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What
is the action to be initiated? If the Capital goods are not put to use in 2003,
but credit was taken, Board now wants action in 2006, by which time the goods
must have been put to use. So what is to be done? Get the credit reversed, ask
for interest and penalty and then give the credit back? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly
this very issue had been considered by the Tribunal in <i>Ispat Industries</i> -<u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2006/2006-TIOL-608-CESTAT-MUM.htm"><font size="1">2006-TIOL-608-CESTAT-MUM</font></a></u> wherein the Tribunal
observed,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Buying
a car for use and parking the same in the garage, even if no actually used for transportion would definitely and undoubtedly mean that the
car is in possession and use of the owner”. It cannot be said that since the
car has not actually been used, the same cannot be held to be in use of the
owner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The
clear mandate of the legislature in the above Rule is that an assessee would be
entitled to the balance of 50% credit as long as the goods are in his
possession and use of the manufacturer of the final products and has not been
sold or cleared from his factory. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As
long as the capital goods are lying in the factory meant for installation and
future use in the manufacture of the final products, they have to be treated as
in possession and use of manufacturer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As
we are of the view that the capital goods are in the possession of the assessee
and are for use of the manufacturer, the balance 50% of the credit would be
available to the assessee in the subsequent years.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As such, it is essentially an issue of time of
taking the credit and not eligibility of the credit, in which case the same
could not have been denied to the appellants in toto.
If not, available in 2002-2003, the same would become available in any
subsequent financial year, when the capital goods are actually installed and
put to actual use. In such a scenario, the worst allegation against the
appellants could be prematurely taking the credit thus entitling the revenue to
the interest on the same for use of the credit during and in between the
period. But this definitely cannot lead to denial of credit to the appellants.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board and the CAG seem to be
working very hard to keep the consultants rich.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2006/cxinstruct05.htm">Board’s F.No.267/26/2006 – CX – 8
dated the 28<sup>th</sup>April,
2006</a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Foreign
air travel – even return journey is taxable </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax is leviable with effect from 1st May,
2006 on services provided by an aircraft operator to passengers embarking in
India for international journey by any class, other than economy class, under
section 65(105)(zzzo) read with section 66 of the
Finance Act 1994. Board of Airline Representatives in India
(BAR) have sought clarifications on the levy of service tax and the good
Board clarifies.</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
<b>Issue:</b> <b>Stopover – tax till end:</b> For a journey starting from <st1:country-region>India</st1:country-region> with stopover at intermediate airports- Mumbai-Dubai-London-New York</st1:State>. Is the tax for
the ticket from Mumbai to Dubai or from Mumbai
to New York</st1:State>? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board
Clarification: </b>Stopover is irrelevant – pay tax for the whole
journey. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What if a separate ticket
is bought for journey from Dubai to New York</st1:State>? Still taxable?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
<b>Issue: If international journey involves domestic travel too - </b>Delhi-Mumbai-London<b>, is the domestic sector taxable? </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board
Clarification: </b>Pay tax on the whole value!
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again what happens if a separate ticket
is bought for Delhi – Mumbai?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
<b>Issue: </b>In the case of round trip/return
ticket, whether service tax is leviable on the total value of the ticket or
only half the value of the ticket?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board
Clarification: </b>Pay tax onthe whole value. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does it mean that a ticket from Dubai to Mumbai is also
taxable?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
<b>Issue: </b>Whether ticket issued outside <st1:country-region>India</st1:country-region> for an international journey commencing
from <st1:country-region>India</st1:country-region> (say Delhi–London) is leviable to service tax? </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax is payable by the service provider for
the taxable service provided. Place of purchase/ issue of ticket is of no
relevance or consequence to determine the levy of service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case who will pay the tax? Suppose
my friend buys a ticket for me in New
York</st1:State> for a journey from Mumbai to London. Am I liable
to pay the tax and should I get registered before I board the aircraft? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/sercir85.htm">CIRCULAR NO. 85/3/2006-ST, Dated: October 17, 2006</a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Anti dumping duty on
</strong><b>Sodium Hydrosulphite</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After a sunset review in the matter of continuation of anti-dumping on
imports of Sodium Hydrosulphite originating in, or
exported from the People's Republic of China imposed vide notification No.114/2001- Customs, dated the 2 nd
November, 2001, the Government has re imposed the anti dumping duty for a further
period of five years. Consequently Notification No. 114/2001 is rescinded.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2006/ctariff06_108.htm">NOTIFICATION No. 108 </a><b>and </b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2006/ctariff06_109.htm">109/2006-Customs, Dated: October 16, 2006 </a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CAT quashes CBDT
transfers</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the good olden days, the Board could transfer anyone and nobody would
lift a little finger but somewhere down the line, they formed a transfer policy,
but they were not advised that if there is a policy, it had to be followed.
Every transfer order is a blatant arrogant violation of the policy. But then a
transfer is a trauma and people are not going to take it lying down. Officers
have approached the CAT and though generally CAT does not interfere with
transfers, clearly visible violation cannot go unchecked
and in a recent case the CAT quashed the transfer order of certain IRS
officers. Please see our breaking news for the case.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Avoid Criticism – but the King has no clothes</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A netizen recently advised us to avoid criticism and suggested that we
derive our popularity from criticism. We will be happy to follow the advice,
but when the King walks round nude and everyone praises his dress, shouldn’t
someone tell that the king has no clothes?. Perhaps it
is easy to criticize and perhaps it is very difficult to work, but when dead
notifications are amended and dead people are posted to important offices,
should we just say everything is fine. We would be happy to shower the
government with praise for any small good work done by them, but they hardly
give us an opportunity. Our criticism is not meant for our popularity; it is only
with a hope that corrective measures would be taken and some sort of clarity
and order prevails. In the process, if we are popular, we are only happy.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Two wrong exemptions</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A netizen wrote to us, <i>“As per suggestion on the message board by a
netizen, criticism is to be restricted. But when the matters are handled in a wishy washy manner without proper perspective and clarity
thus dragging the assesses and field officers to an
avoidable tussle for no reason and no revenue gain, it is inevitable that major
issues get exposed.</i></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i></i>He points out two such instances on Customs Notifications-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)- On white sugar- As per notification no.63/06-cusdt.23-06-06 a new sl.no. 38-A was
inserted in the notn.no. 21/2002-cusdt. 01-03-2002 -this was
effective only upto 30-09-2006. The entries relating
there to exempted -white sugar falling under 1701.91.00 And 1701.99.90 from the
whole of basic customs duty ..But actually the heading
should have been 1701.11.90 and 1701.99.90; because
1701.91.00 is 'refined sugar containing added flavouring
or colouring material'.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)-Borax: Budget Explanatory note vis-à-vis notification- The budget explanatory
notes(customs) against chapter 28.7 reads-'Customs duty on Borax and Boric Acid
is being reduced from 15% to 10%.' However, the amendment made to notn.no.21/2002-cus. Dt.01-03-2002
relating to Sl.No.522 indicates - in col.2 heading as 2810 and in col.3-description
as 'Borax or Boric acid'. Here the boric acid alone is covered by 2810;Borax falls under 2840.(as so
classified by customs house). Thus for want of heading 2840 in col.2alongwith 2810, the customs
is not allowing the rate @10% for import of Borax. Thus if the explanatory note
is to be relied upon, the entry 2840 also should have been shown in col.2 against sl.no.522.ofnotn.no.21/2002-cus.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></span></font></p>
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