TIOL-DDT 585 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 585</font><br>
03.04.2007<br>
Tuesday</b></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax Return – form changed again</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government is at it again. The ST-3 form has been
changed. Do you have printed copies of the form? Just sell them to the raddiwala and order fresh forms. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The ST3 prescribed along with
the original Service Tax Rules lasted a good seven years when the first
amendment was made by Notification No. 10/2001-Service Tax, dated 9-10-2001. But
within ten months by <a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfsertax/pdf2002/sernot12.pdf">Notification No. 12/2002-S.T</a>., dated 1-8-2002, the Board changed
the whole form. And this form lasted a good three years when the government
again replaced it by Notification No. 31/2005-S.T.,
dated 20-10-2005. And in this year’s budget they made a small amendment to the
form but now just after a month and may be after the comfort of collecting all
their revenue, they have yesterday brought in a new form. The new form running
into more than 10 pages will need a couple of experts to fill up.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the important question is why the government is so
callous in changing such forms so frequently? Is the CBEC determined to wipe
out all the forests of the country? Why waste so much paper? Incidentally the
return is to be filed in triplicate. Assuming that ten lakh
assessees file two returns in a year, each filing sixty pages, that is 6 Crores
pages! What do they do with so much destruction?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There
is another tragic angle to this. In many cities you will find small, poor
traders printing these forms and selling them to small units, for a small
profit. Whenever the Government changes the proforma, all the printed materials
lying in stock with these small traders become useless and they incur heavy
losses, promoting them from poverty to starvation.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even
large units would get their stationery printed for a year or two and all that
would go waste now. Perhaps there should be some law that whenever the
Government changes the proforma, the forms have to be supplied for a year at
Government cost. <b>It is sheer <i>adhoc</i>
callousness and lack of concern for the assessees that make our babus behave
like this</b>. Only those officers should
be posted to the Board who have at least one close relative running a small
industry and paying excise duty/Service Tax. Only then they will understand the
agony they are able to cause in their great notification manufacturing and
repairing exercise.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/pdfdocs/stnot07_014.pdf" target="_blank">Notification. No. 14/2007-Service Tax dated the 2<sup>nd</sup> April, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Unused
credit of AED (T&TA)
– Refund eligible</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If
you don’t remember, this is the Additional Duty on Textiles and Textile
Articles. There was a restriction that the credit of this AED
can be used only for payment of the duty of AED (T&TA). What happens if the inputs suffered AED (T&TA) and the final
product was not liable for this duty? And the final products were exported. Can
the assessee claim refund? In an identical situation, with respect to AED(GSI), the Board had in Circular No. 701/17/2003-CX, dated 12.3.2003, clarified that the refund of AED(GSI) is to be allowed under
Rule 5 of the CENVAT Credit Rules, 2002, regardless of the fact that the said
duty is not leviable on the finished product. Now will this clarification apply
to AED (T&TA)?. It has taken the Board exactly four years to clarify that
it does.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board’s
latest clarification proclaims that</font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, such unutilized accumulated credit of AED (T&TA) can be claimed as
refund under rule 5 of the CENVAT Credit Rules, 2004 on export of goods. Accordingly, it is clarified that
clarification issued for the refund of AED (GSI) under rule 5 of the CENVAT Credit Rules, 2002 vide
Board’s Circular No. 701/17/2003-CX, dated
12.03.2003, will be applicable to AED (T&TA) subject to the conditions and limitations as
prescribed under the said rules.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At
this late point will any one get refund?</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=31&filename=notification/excise/2007/instruct0207.htm" target="_blank">CBEC’sF.No.267/11/2003-CX-8 dated 22nd March,
2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Automobile
Cess – no rebate – And for
export under LUT, pay the cess
- clarifies CBEC</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has come to know that in certain cases the Department has sanctioned the rebate of automobile cess paid on the
goods exported on payment of duty even though it is not covered under the
Explanation in the notification No. 19/2004 CE(NT) dated 06.09.2004. And Board
is not exactly happy with this and clarifies that</font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rebate of excise duty is governed by rule 18 of the
Central Excise Rules, 2002, which states that the Government by notification
may grant rebate of duty paid on excisable goods exported subject to the
conditions or limitations imposed and the procedure specified in the said notification. Accordingly, notification no. 19/2004-CE(NT) dated 06.09.2004 has been issued under rule 18. Further, for the purpose of this notification
the term ‘duty’ has been defined in the Explanation I. Therefore, rebate of
only those duties, which are included in this Explanation
can be given as rebate on exported goods.
</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, rule 3 of the Automobile Cess Rules, 1984 cannot be applied for grant of rebate as
rebate on goods exported is governed by rule 18 of the Central Excise Rules,
2002 read with notification No. 19/2004 CE(NT) dated 06.09.2004 and not by rule
3 of the Automobile Cess Rules, 1984. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, since notification no. 19/2004-CE(NT)
does not specify automobile cess as ‘duty’ for the purpose
of granting rebate, the rebate of automobile cess
cannot be granted. This interpretation
would be applicable for all types of cesses.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And
the Board does not stop there. It further clarifies that <font color="#663399">where goods are exported under bond, without payment of
duty, the applicable ‘cess’ is liable to be paid
unless it is exempted by a notification.
<b>Necessary steps may be taken to safeguard the revenue.</b></font><b> </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There
could be a large number of Show Cause Notices in the pipeline.</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=31&filename=notification/excise/2007/instruct0107.htm" target="_blank">CBEC’sF.No.</a></u> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/instruct0107.htm"><u>262/01/2007-CX-8 dated 20th March, 2007</u></a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Amendment to Rule 21
of CE Rules - Half done!– Now fully done!</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
our Budget articles, we had carried a story <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5157" target="_blank">Amendment to Rule 21 of CE Rules -
Half done !</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">wherein it was pointed out that</font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the second and third
provisos, in fact two words need to be substituted in each proviso, for upper
and lower limits, but only one word of the revised upper limit has been substituted.
So now there is overlap of powers between the Superintendent
, Assistant / Deputy Commissioner and the Joint Commissioner. Therefore
there is a need to substitute " one
thousand" in second proviso to "ten thousand" and in the third
proviso, "two thousand five hundred" needs to be replaced with
"one lakh rupees".</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are happy to report that the Government has corrected the mistake. Though the
Board had corrected the mistake by 15<sup>th</sup> of March, as usual the Ostrich
phenomenon was in play and it took us all of 15 days to lay our hands on the
correction. Why is the Board shy of publishing its notifications? </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=30&filename=notification/excise/2007/corrigendum2.htm" target="_blank">CORRIGENDUM
to Notification No. 8/2007 dated the 15th March, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Is the <st1:country-region
w:st="on"><st1:place w:st="on">Sikkim</st1:place></st1:country-region> Celebration
over? Excise exemption expires?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prashant from Mumbai asked us in a mail
yesterday,</font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">request you to update us if
any amendment issued by Central Govt. for the extension of exemption for unit
located at state of Sikkim.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/excise/2003/etariff071.htm" target="_blank">Notification No. 71/2003-Central Excise, DATED
September 9, 2003</a><b> stipulates that</b></font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The exemption contained
in this notification shall apply only to the following kinds of units namely:- </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
new industrial units which have commenced commercial production on
or after the 23rd day of December, 2002, but not later than the <b>31st day of March, 2007</b>;</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
Industrial units existing before the 23rd day of December,
2002, but which have undertaken substantial expansion by way of increase in
installed capacity by not less than twenty-five per cent. on
or after the 23rd day of December, 2002, but have commenced commercial
production from such expanded capacity, not later than the <b>31st day of March, 2007</b>. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar
is the stipulation for Notification No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/excise/2003/etariff056.htm" target="_blank">56/2003-Central Excise, DATED June 25, 2003</a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
31<sup>st</sup> March 2007 is history. But what happens to these notifications?
<b>TIOL</b> tried to find out from the Government and as usual, nobody had a
clue. But then is the Sikkim
exemption over? Doesn’t seem so!. Maybe they will do a
retrospective correction.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally
on 29<sup>th</sup> March 2007, the cabinet had approved the North
East Industrial and Investment Promotion Policy (NEIIPP),
2007, the main features of which are</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
Sikkim will be
included under NEIIPP, 2007 and the ‘New Industrial
Policy and other concessions for the State of Sikkim’ announced earlier in
December, 2002 will be discontinued from the date of notification of NEIIPP, 2007.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
Under NEIIPP, 2007, all
new units as well as existing units which go in for substantial expansion,
unless otherwise specified and which commence commercial production within the
10 year period from the date of notification of NEIIPP,
2007 will be eligible for incentives for a period of 10 years from the date of
commencement of production.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii)
The incentives under the NEIIPP,
2007 will be available to all industrial units, new as well as existing units
on their substantial expansion, located anywhere in the North Eastern Region. Consequently, the
distinction between ‘thrust’ and ‘non thrust’ industries made in NEIP, 97 will be discontinued from the date of notification
of NEIIPP, 2007.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv)
Under NEIIPP, 2007
incentives on substantial expansion will be given to units effecting ‘an
increase by not less than 25% in the value of fixed capital investment in plant
and machinery for the purpose of expansion of capacity/modernization and
diversification’ as against an increase by 33 ½ % prescribed at present.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v)
<b>Under NEIIPP, 2007, 100% excise duty
exemption will be continued as at present on finished products made in the North
Eastern Region. However,
in cases, where the CENVAT paid on the raw materials and intermediate products
going into the production of finished products (other than the products which
are otherwise exempt or subject to nil rate of duty) is higher than the excise
duties payable on the finished products, ways and means to refund such overflow
of CENVAT credit will be separately notified by the M/O Finance.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi)
100% income tax exemption will continue under NEIIPP, 2007 as at present.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii)
Capital investment subsidy will be enhanced from 15%
of the investment in plant and machinery to 30% and the limit for automatic
approval of subsidy at this rate will be Rs. 1.5 crore
per unit as against Rs. 30 lakhs at present. Such subsidy will be applicable to
units in the private sector, joint sector, cooperative sector as well as the
units set up by the State Governments of the North Eastern Region. For grant of
capital investment subsidy higher than Rs. 1.5 crore
but upto a maximum of Rs.30crore, there will be an Empowered Committee.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii)
Interest subsidy will be made available @ 3% on
working capital loan under NEIIPP, 2007 as at present.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ix)
Under NEIIPP, 2007, new
industrial units as well as the existing units on their substantial expansion
will be eligible for reimbursement of 100% insurance premium under the
Comprehensive Insurance Scheme.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This must have been the reason
for the government not amending the notifications extending the dates. But when
is it going to come and as of now should prospective investors cancel their
tickets to Sikkim?</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</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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