The Year 2006 with DDT
Let me take you through a whirlwind tour of the year that just went by as seen by DDT.
Export containers- tamper-proof bottle seals –
CBEC stated the year with a circular on 2.1.2006that the containers for movement of goods to gateway ports/ICD/CFS should be sealed with tamper proof one time bottle seals. For the seals supplied by the department, cost will be recovered. However exporters can use their own seals.
NTT grounded – stayed by several High Courts -
The National Tax Tribunal which was notified in the first week of the year by the government has again run into troubled waters. At least three High Courts – Punjab and Haryana, Orissa and Madras have stayed the implementation of the Act – at least partially. But this partial stay is paralytic. The P&H High Court has stayed Section 23 of the Act which requires the High Courts to transfer their cases to the NTT, while the Madras High Court has stayed the constitution of the Tribunal.
Star studded year for Revnue. –
It was stars all the way. Actor Saif Ali Khan appeared before the customs department to answer the charges of duty evasion on an imported car, Toyota Lexus, though he is said to have avoided the summons initially. The Customs had Dhoom fame Aishwarya Rai very tense after a huge amount of Euros was found in her mail. AmitabBachan who was paying large amounts of Service Tax had also a few friendly calls from the Income Tax department.
Online submission of applications – DGFT initiative -
DGFT had automated the entire process of issuance and transmission of DEPBlicences for shipments effected from 1st October 2005 from specified 23 EDI ports. Now 10 more EDI Custom ports will be added to the list of EDI ports.
Customs wins Oracle award-
The Indian Customs has won the Oracle award – “Oracle Excellence in e-Governance Award”. The Indian Customs is one of the oldest licenced users of Oracle.
Prospective disobedience of appellate orders – Board issues draconian circular - Board
wants the field to respect the stay orders of the appellate authorities only for the past period but to implement the impugned order prospectively. In simple terms this means if the central excise Commissioner passes an order that the mangoes grown in the factory premises are dutiable and demands duty and the assessee goes to the Tribunal and gets a stay and waiver of pre deposit, Board will honour the Tribunal’s order only for the past period and for future clearances you may have to pay excise duty on those mangoes, unless the Tribunal specifically mentions that the stay applies for future too.
Used Rails fall under CTH 7302 and not 72.04 -
By Circular No. 1/2005 dated 11.1.2005, Board had clarified that used rails should be classified under 7204. After about a year, Board now has changed its view and for the sake of uniformity has declared that used rails would correctly fall under CTH 7302. was there no uniformity under 7204?
Air Cargo agents are covered under Business Auxiliary service – DGST -
For once, the DGST, famous for his clarifications, was not giving one; he was passing a speaking order on the directions of the Bombay High Court.
JM Kishore - Indian Customs Officer wins WCO prize -
Mr. JM Kishore an Appraiser in Vizag Customs House secured sixth place in this International event. In the top ten, Mr Kishore was the sole representative of Indian Customs, while Mr NasruddinDjokoSurjono of Indonesian Customs obtained the second prize.
Absolutely no duty on export goods – Board issues Section 37B order - but what is export under bond?
- After nearly two years and much unwanted litigation, Board has now come up with a Section 37B order that no duty whatsoever need be paid when goods are exported under bond under Rule 19. The whole cause of the litigation was Board’s ignorance of the existence of Notification No. 42/2001 when the 2004 budget was presented. Why should Board go about defining ‘duty’ in the notification and then forget to include a new duty that was introduced in the budget?
Anytime, anywhere filing of I-T returns -
The Income Tax department will soon introduce a system where assessees can file their returns from anywhere in the country by the click of a mouse, with the setting-up of a single national database linked through computers with all 742 income-tax offices in 510 towns.
File notings are not, as a matter of law, exempt from disclosure under Right To Information Act – CIC -
In a landmark order the Central Information Commission has ordered that file notingsare not exempted from disclosure under the RTI Act.
Tax on education is regressive – Kerala High Court
++ even if the State is not able to finance higher education as required under the Directive Principles of State Policy under article 41 of the Constitution, it should not deny and discourage opportunities for education by adding cost to it in the form of tax on education which will certainly disable the economically weaker sections from pursuing higher studies
++ If education is run on business lines, then solution is to amend section 11 and other relevant provisions of the IT Act withdrawing the exemptions to institutions and Government can simultaneously provide financial aid to beneficiaries which will put an end to misuse of income-tax provisions.
Service Tax on Goods Transport – Clearance to depot – eligible for credit -
Board has now clarified that 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.
The Bird Flu – the taxman not chickening - Are poultry Farms covered under Service Tax ambit?
Service Tax net- especially Business Auxiliary Service- is so wide that even the service providers themselves do not know about providing any taxable service until they are caught in the net. - An alert Service Tax officer sees a tremendous opportunity in this process. Whether the chicken contracts Flu or not, it is sure to attract Service Tax.
Construction Service - DG, Service Tax overrules Board Circular – issues notice to Board -
The DGST is at it again. In a controversial letter to all the Chief Commissioners, He (yes, he is a Capital H) has not only over ruled a Board Circular but put the Board on Notice – all because only 43 days are left to collect the Service Tax illegally, in this financial year.
CBEC and CBDT – Rules notified for selection of Chairmen and members -
Can you believe it, there are no rules for the appointment of the Chairman and Members of the CBEC and CBDT? In Sunil Kumar Chaudhury v Union of India, the Central Administrative Tribunal asked the governmental counsel as what were the rules for appointment of the Chairman and Members of CBEC. He really had no answer. Now the rules are made.
Valuation for Service Tax
- It had to come one day. Once the tax is on the value, the method of valuation is important. In Central Excise, valuation has been a major issue of contention. (personally, I made a small fortune writing a book on valuation) All the complicated concepts of Central Excise valuation were not imported into Service Tax all these days and finally in this year’s budget an honest attempt has been made by a sincere government to complicate Service Tax valuation. Section 67 is to be amended to include considerations other than money to the value for taxable services.
CESTAT bench at Ahmadabad -
The President deserves all praise for expanding the Tribunal and taking it nearer to the litigants. But this expansion should continue. Hyderabad should be the next destination. With 8 Central Excise Commissionerates and two big custom houses, Andhra Pradesh deserves to have a bench of the Tribunal.
Board’s numbering system goes for another toss – Circular No. 12/2006 issued again -
The least that you can expect from a premier Revenue collecting Board is arithmetical accuracy. The Board can never have any authentic statistics on the exact amount of revenue collected; on the number of Commissioners it has; the number of ranges or for that matter any numbers. But the least it can do is to keep track of the numbers of the circulars it issues.
Idli Dosa is not fully exempted after all -
The budget has been termed as an idlidosa budget (perhaps without chutney). The explanatory notes to the budget stated that idlidosa mix is being exempted but if you referred the relevant notification, you would understand that they were taxed at 8%. Now which one do you believe – the notes or the notification? Fortunately Board clarifies that the notification is right and not the notes.
It’s not butter mil but butter milk – Government amends notification. -
Somebody is obviously running a spell check on the notifications issued in the budget. They should have done it before these got printed, but better late than never. So the Government has amended the Customs notification No. 20/2006 – cus to correct some spelling mistakes like mil for milk and cocoon for concoon.
Income Tax Form 16 amended -
The CBDT has amended Form 16, the certificate of tax deduction issued for income from salaries.
Cenvat Credit Rules amended – Service exporters eligible for refund -
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.
Candles exempted – Notification issued -
After we reported that candles were exempted, a doubt has been expressed whether it was exempted by a notification or in the Finance Bill. It was indeed exempted by a notification.
Service tax on maintenance of Computer Software–Board clarification – impossible to implement.
Demands Can be raised from 9. 7. 2004, the date on which Notification No.20/2003-ST dated 1.08.2003 was rescinded vide Notification No. 7/2004 dated 9.7.2004.
Target plus abolished. In a terse notification, the Government has abolished the Target Plus Scheme with effect from 1.4.2006. The DGFT says this is in public interest. It should be.
AreIIMs manpower recruiting agents? The Service Tax department thinks so
Rail fare collected by air travel agent exempted!!!!!!! - The rail fare collected by air travel agent in respect of service provided by him; and (Does the air travel agent collect rail fare? Board should know or they should have asked the Railway Board.) [ Boardhs of course later corrected this lapse]
Central Excise valuation – Return fare – Includible? - Board says, yes.
Foreign Service – Indian Tax- “It may be noted that only services received in India are taxable under these provisions”
. – This is a wonderful clarification. Let us hope the field follows it.
Should officers get reward for doing their duty? – Delhi High Court-
The Delhi High Court asked the government to explain whether it was within law to give rewards to Government servants for discharging their duties. A Customs officer had approached the court for a higher reward as his bosses were not sanctioning him further rewards after he has crossed Rs. 10 lakhs of reward. The Court observed, "cases where officials have made false claims for bounty and rewards is reported with alarming frequency. This malaise has infiltrated even the Army. According to press reports, persons have been killed only to further certain officers' careers."
Municipal water exempted from excise duty -
Drinking water supplied by civic bodies taxable? Surprisingly the answer is yes. It is really surprising why the shrewd excise men did not pounce upon Municipal Corporations to pay duty. Obviously the government realized the lapse and now a notification is issued exempting waters not cleared in sealed containers.
Central Excise officers not to visit any factory without Assistant Commissioner’s permission -
It seems Board had Vide letter F.No.201/07/2006-CX6 dated 31.03.2006, decided that for visiting units other than SSI units also prior permission of Asstt. Commr/Dy.Commr should be obtained and reiterated that the officer visiting these units should follow all the procedures laid down for visit to SSI units including making entries of relevant particulars in visitors book being maintained by the assessee and that any violation would be viewed very seriously.
Don’t issue summons at the drop of a hat - CBEC
- it is desirable that summons need not always be issued when a simple letter, politely worded, can also serve the purpose of securing documents relevant to investigation. Board has emphasized the use of summons only as a last resort when it is absolutely required.
DEPB rates notified retrospectively -
Don’t worry! This is in favour of the trade.
Service Tax clarification from Customs Commissioner - Customs EDI centre liable to Service Tax -
clarified a Mumbai Customs Commissioner.
Default of monthly payment of duty – Payment only through PLA – no need of order from Assistant Commissioner -
The duty has to be paid from PLA consignment wise till dues are cleared with interest and there is no need of any order from the Assistant Commissioner/Deputy Commissioner.
New Form – not all that Saral -
“Nothing can be simpler”, declared the mandarins of AyakarBhavan about the new Income Tax form for individuals. But tax professionals are not impressed. They feel it is notsimpler than Saral.
Service Tax on Goods transport – DGST confirms withdrawal of controversial letter. -
It is more than a year since we broke the story of the DGST’s controversial letter not to allow abatement to manufacturers paying Service Tax on goods transport. Even after we confirmed several times that the DGST had withdrawn his circular, the field officers were not prepared to accept the withdrawal and thousands of Show Cause Notices have been issued all over the country. While the Chief Commissioners were prompt in circulating the DGST’s first missive, they ignored his second letter withdrawing the first one.
KP Singh transferred -
The high profile DG, Service Tax , Mr. KP Singh has been transferred to the very significant Tax Arrears Recovery unit. During his stint as DG , he was famous for issuing controversial and often illegal directions to the field and even to the Board.
Service Tax on post offices – Board clarification opens a Pandora’s box
In order to take the postal department out of the purview of Service Tax, Board has issued a circular which is bound to result in more damages than solutions.
Service Tax – consulting work by Chartered accountants exempted -
In the last budget, the exemption to CAs doing other work like representing, consulting etc, was withdrawn. The CA’s institute had represented to the government that this was discriminatory as a lawyer appearing before a court was not subject to Service Tax, but if a CA did the same job, he had to pay the Service Tax. Government has relented and exempted representation work done by CA/Cost Accountant/CS from Service Tax.
Interest converted into loan – deduction - CBDT clarifies -
As per the explanations to Section 43B of the Income-tax Act, inserted by the Finance Act 2006, any sum payable by the assessee as interest on any loan or borrowing or advance shall be allowed as deduction if such interest has been actually paid and any interest which has been converted into a loan or borrowing or advance but has not been actually paid shall not be allowed as deduction in the computation of income.
What is duty? DGFT clarifies -
The DGFT has received representations asking for clarifications on the meaning of the duty as it appears in the policy and procedures - DGFT now clarifies that duty in these cases means only the ‘Basic Customs Duty'
EASIEST - Electronic Accounting System in Central Excise & Service Tax - Now you can actually pay your excise and Service Tax without moving out of your office, any time you want to pay, using the internet banking facility.
Err for revenue – Nagarkar overruled -
actually in practice, very few officers are charge sheeted on account of their orders. And even the few who had to face disciplinary proceedings could succeed by citing the Supreme Court case of ZBNagarkar. - This case was a big protection for the rare officer passing a judicial order. But now the Supreme Court has ruled that Nagarkar is bad law. Wehad carried in depth analyses of the now famous DuliChand case