TIOL-DDT 526 · the untouched capture
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<p align="justify"><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="3">TIOL-DDT
526</font></b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
05.01.2007<br>
Friday</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">SEZ – Procurement of
goods from the DTA – difficulties resolved </font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For
some strange reason, the Customs and Excise Authorities are not prepared
to accept the fact that there is an SEZ Act and Rules, the provisions of
which prevail over their sanctimonious Customs and Excise Laws. The SEZ Act
and the Rules had come into force from 10.02.2006, but the field officers
refuse to accept the fact. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After more than six months of the
SEZ Act and Rules coming into force and realizing that excise and customs
officers have scant respect for the other Laws, the Commerce Ministry issued<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=260&filename=sez/sez_instructions/2006/sez06ins006.htm"> <u>INSTRUCTION NO. 6/2006, Dated: August 3, 2006 </u></a>emphasizing the fact that <b>“By virtue of Section
51 of the SEZ Act, the provisions of the SEZ Act and the Rules will have
overriding effect over the provisions contained in any other Act.” </b>Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4145">TIOL-DDT 432
22 08 2006</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That also did not have much
effect.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some time back we had carried an
article by one of our distinguished contributors, Joseph Prabhakar - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4453">Procurement of goods by SEZ units from DTA :
Confusion prevails despite an Act!</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Joseph had mentioned in his
article,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though the above mentioned legal
position is clear, the implementation of the new procedure for clearance of
goods to SEZ has run into certain problems. The Central Excise officers in
charge of the DTA units are refusing to allow the
materials to be cleared against ARE 1 and they continue to demand Domestic
Procurement Certificate from the SEZ units. At the same time, the officers at
the SEZ are refusing to issue Domestic Procurement Certificate to the SEZ units
for the obvious reason that it is not required any more since the SEZ Act and
SEZ Rules have already come into force. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this context, the Ministry of
Commerce vide Instruction No 6/2006 dated August 3, 2006, addressed to all the
Chief Commissioners of Central Excise and all the Chief Commissioners of
Customs, had clarified that Section 55 of the SEZ Act would prevail over all
other legislations and that the excise officers should not insist on Domestic
Procurement Certificate, but allow the goods to be cleared to the SEZ as per
Rule 30 of the SEZ Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, this communication has
not solved the problem. The Central Excise officers in charge of the DTA unit contend that the relevant provisions in the
Central Excise Act / Notification have not been amended to give effect to the
said procedure. In the meanwhile the SEZ units and the DTA
units supplying to the SEZ units, are made to suffer because of the lack of
clarity in the procedures. Ministry of Commerce is under the
wrong impression that by merely issuing Instruction No 6/2006 dated August 3,
2006, the issue has been settled. The right
course of action for the Ministry of Commerce would be to interact with the
Ministry of Finance and to request the Finance Ministry to take the following
action.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Rescind Central Excise
Notification No. 58/2003 dated July 22, 2003.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Issue a fresh Central Excise
Notification for clearance of goods by DTA unit to
SEZ, incorporating the procedures laid down in Rule 30 of the SEZ Rules, 2006.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. CBEC to issue a
Circular to clarify the effect of Section 55 of the SEZ Act and the fact that DTA units would now have to follow the SEZ Act and SEZ
Rules.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are extremely happy to report
that the CBEC has reacted – though action in response to point 1 and 2 are yet to come,
they have issued a circular clarifying the above position. The Board Circular
confirms the view expressed in the article mentioned above and clarifies that:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Supplies from DTA
to SEZ shall be exempt from payment of any Central Excise duty under Rule 19 of
Central Excise Rules, 2002. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Similarly, such supplies shall be
eligible for claim of rebate under Rule 18 of Central Excise Rules, 2002
subject to the fulfillment of conditions laid there under. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The provisions relating to exports
under Central Excise Act, 1944 and rules made there under may be applied, <i>mutatis-mutandis,
</i>in case of procurement by SEZ units & SEZ developer from DTA for their authorized operations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Now the procedure for procurements
of goods from Domestic Tariff Area to a SEZ Developer or a unit would be
governed by the provisions of Rule 30 of the SEZ Rules, 2006, and the movement
of goods from the place of manufacture to the SEZ shall be</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
on
the basis of ARE1 (in cases where export entitlements
are not availed);</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
on
the basis of ARE 1 and Bill of Export (in cases where export entitlements are
availed) and against a general Bond or Letter of Undertaking, specified in
Annexure-I and Annexure-II, under notification no. 42/2001-C.E.(N.T.) dated 26.06.2001. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So there is no need of procurement
certificate after all! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is a customs circular;
will the Central Excise wing accept it?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2006/cuscir06_29.htm">CIRCULAR NO. 29/2006-Cus, Dated : December 27, 2006 </a></u></font></p>
<p align="justify"></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">International in-bound roaming – Service Tax applicable – CBEC</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board clarifies that the
Indian service provider providing the roaming facility to a visiting foreigner is
liable to pay Service Tax. The Draft circular proposed in September 2006 is now
finally issued.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4259">TIOL-DDT 450 15 09 2006.</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
during the period of roaming, the Indian telecom service
provider provides telephone service to an international in-bound roamer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ This
service to in-bound roamers is delivered and consumed in India and,
therefore, it is not an export of service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
International
practice treats the telephone service provided to an in-bound roamer by the
visited network, for purposes of taxation, in the same manner as a telephone
service provided to any home subscriber. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Accordingly,
the domestic telecom operators providing roaming service to international
in-bound roamers are liable to pay service tax on the amount received through
the home network on account of service provided to
such international roaming subscriber.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the Board wants to collect
this tax only from 15.1.2007. While this is a welcome step – to collect the tax
from ten days after the clarification, the anti climax is – the past is an
unsure terrain. Board is examining the issue and will eventually come up with a
clarification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While on this, <b>DDT</b> would like to remind the Board of
two earlier Circular on the issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax Circular No. 22/2/97,
dated 3-9-1997 in which Board had clarified that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the cell phone company with whom the
subscriber is registered should collect the tax from the subscriber
irrespective of the adjustment or sharing of the bills with other companies
whose services are utilized by the subscriber while roaming. In
view of the above it is clear that in case of plastic roaming
facility, the home operator (home network), i.e., where the subscriber belongs
to and who arranges roaming facility in other metro cities through the arrangements
with the service operators (visiting network) should collect and pay the
service tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While further clarifying the issue
with regard to international roaming, Board had in Service Tax Circular No.
28/2/99, dated 4-6-1999, clarified that:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case of International
roaming the foreign visited network operator forwards the usage bills to the
Home Network operator pertaining to the subscribers of Home Network operator
who have made usage of visited network. On receipt of the usage bill from the
foreign network operator the Home Network operator includes the said amount and
roaming surcharge in the regular monthly bill of the subscriber. As the value
of taxable service under Section 67(b) of the Finance Act, 1994 as amended is
the gross total amount charged by the telegraph authority (here Home Network
operator) from the subscribers, the Board is of the view that the service tax
shall be chargeable on the comprehensive (gross) bill raised by Home Network
operator on its subscribers inclusive of foreign usage bill and roaming
surcharge.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly it is held that the
Service Tax Circular No. 22/2/97, dated 3-9-1997 would not only apply to
plastic roaming facility but also apply mutatis mutandis to automatic roaming
facility including International Automatic/plastic roaming facility provided by
Cellular phone operators.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Isn’t the present circular
contradictory to the two previous circulars? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/sercir90.htm">CIRCULAR NO. 90/1/2007-Service Tax, Dated
: January 3, 2007</a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Export of software – clarification issued</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per
Notification No. 153/93 – cus read with Notification
No. 52/2003, STP units are allowed import of certain
goods for use in export of software. Now what does software really
mean? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
clarifies that for the purpose of the notification, software includes all the
activities of manufacture or development of software, data entry and
conversion, data processing, data analysis and control data management or call
center services for export. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Good clarification, but the
absence of a proof reader in the Board is again so badly visible. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para</st1:place> 2 of the Board Circular
states, “This matter
has been examined.
Goods are imported under notification no. 153/93-Cus
dated <u>13.08.2003</u>”
Notification No. 153/93 was issued on 13.8.1993, not in 2003. Only a spelling
mistake, but goes to prove that in the Board the only person who reads the
circulars or notifications is the author – beyond him, others just sign. As
this column had suggested many times, Board badly needs a few proof readers.
Can the government afford it?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2007/cuscir07_01.htm">CIRCULAR NO. 01 /2007-Cus., Dated: January 3, 2007</a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Korea</font></strong><font color="#006600"></st1:place><strong>’s nuclear related programmes – import and export prohibited.</strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has direct or indirect export and import of all
items, materials equipment, goods and technology which
could contribute to DPRK's nuclear-related, ballistic
missile-related or other weapons of mass destruction- related programmes, based on UN Security Council documents. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2006/dgft06not039.htm">NOTIFICATION
NO. 39 (RE-2006)/ 2004-2009, Dated: December
29, 2006 </a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Prohibition on
export of sugar – not to apply to those who already hold a licence </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Notification No.18
(RE-2006)/2004-2009 dated 4.7.2006, export of sugar has been prohibited. Now
the Notification is amended to stipulate that the “prohibition shall not apply
to export of sugar by existing advance licence holders as on 4/7/2006 as per
their obligations on that date.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2006/dgft06not040.htm">NOTIFICATION NO.40 (RE-2006)/2004-2009, Dated: January 3, 2006</a></u></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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</font> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a
href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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