TIOL-DDT 591 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT 591</font></b><b></b></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><b><br> 12.04.2007<br> Thursday</b></font></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Area Based Exemption – no double jeopardy? </b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One main reason for our reasonable success in bringing you the latest with the best possible incisive analyses, is that we have a team of highly committed, talented and intensive research ‘volunteers’ who are ever ready to share their wisdom with the rest of the world. They do it not for money, not for fame, but just for the love of it and we often bask in the glory of their hard work. Whenever we carry an article that has far reaching consequences, we get the article analysed by several experts, so that the best reaches you. It was at 1.30 am that we took a decision to carry Santosh Hatwar’s article on this subject in our Special column and I asked Suresh Kumar Nair for his counterview on the issue. And here is what he has to say. Though we don’t like to use this column for blowing our trumpet or that of our celebrated authors, today I have no choice but to carry Suresh’s article as it is, in spite of some praise here and there. And here is the other view on the CBEC’s clarification. </font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>In support of CBEC – Clarification personified</b></font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>by</strong></font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Suresh Kumar Nair</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If there is “speed of light” in physics – in tax domain, we have “<b>TIOL</b>”. Apart from the in-house ‘<b>DDT’</b> which champions the cause, celebrated columnists and famous duo of Jai Kumar and Natarajan have in the past set exacting standards in analysis on tax issues – quick, impromptu and crisp !!! This time around my friend, Santosh, has come out with a super quick take on the possible confusion created by Board’s Circulars dated 8.12.2006 and 03.04.3007 in his latest piece ‘<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5301" target="_blank">Area-based exemption - Double benefits theory may put exports in double jeopardy !</a> Kudos to <b>TIOL</b> for attracting the genius !!!</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since I had stitched a few words on the subject matter in <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3570" target="_blank">Region specific exemption and rebate of duty - Having the cake and eating it too!!</a></u><b><u>,</u></b> it is difficult to refrain from maintaining stoic silence after the developments on the issue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First and foremost, let me reiterate that we have not two but three clarifications. This is important in the context of this issue. Prior to the clarifications dated 08.12.2006 and 03.04.2007, Board had given a decent burial to this issue with the clarification <b>“ As there appears to be no legal bar, the Board desires the claim<i> ( read rebate claim ) </i>should be processed as per the existing provisions of law”</b>. In fact, the Board had examined the issue as to having granted cash refund to the manufacturer in the specified areas, whether there would be a legal bar in allowing rebate of the duty paid by the manufacturer of the said goods to the eventual exporter. And the answer, as stated above was ‘ <b>no legal bar</b>’ !!! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Questions which come as a natural corollary to the above - What happened to this clarification? Why is there no mention or reference of the same in the further clarifications? Has it been over ruled? If so, why not say so explicitly? Last but not the least – what necessitated the need for further clarification from the Law Ministry on the issue? <b>And now what do we have – not one but two further clarifications on the subject matter !!!</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming back, clarification dated 08.12.2006 stated that the term 'duty paid' used in rule 18 does not include that portion of duty, which is subsequently refunded to the manufacturer. They have further opined that the amount so refunded to the manufacturer is to be treated as an exemption and rebate of the said amount cannot be paid. So, the Revenue officers were required to issue notices to such merchant exporters who have availed / claimed rebate of the duty paid on the export goods which was also refunded in cash to the manufacturer of the goods situated in the specified area enjoying the special dispensation. <b>Note that even the adjudicating authorities were directed to follow the Board’s take on the subject matter.</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, coming back to the article in the Special Column. <b>Is the second clarification dated 03.04.2007 out of place or does it really confuse the field formations?</b> I have views other than my learned friend though I thoroughly appreciate that the Board probably did not consider the issue of ‘input stage rebate’. <b>My take is that the second clarification dated 03.04.2007 is just to prevent our over zealous field officers from stopping rebate of duty paid by manufacturers ( in other areas ) who have availed Cenvat credit of the duty paid by such area based manufacturers and exported goods manufactured out of such duty paid goods</b>. I feel the Board has rightly clarified that “there is no bar on utilizing this credit for payment of duty on goods cleared for exports. The units located in other parts of the country manufacture the goods, and pay the applicable excise duty on export of goods, and therefore, they are eligible to claim rebate of said duties under rule 18 of the Central Excise Rules, 2002.” This should nip in the bud our magnificent pro revenue officers who go that extra mile to issue show cause notices at the drop of a hat and provide fodder for our ‘safer than safe’ adjudicating authorities who blindly order for a draft order confirming the duty demand. This circular, seen in this context, will be a great relief for one and all. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, what is the status now – Merchant exporters will not get rebate of the duty paid by the manufacturers in the specified areas whereas manufacturers in other areas who have used the said goods as their inputs to manufacture their export goods will get rebate of duty paid on the goods exported by them. Fair enough!!! Looks okay, to this mortal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Summing up, I do not think that the Board has permitted sanctioning rebate to merchant exporters in the above scenario. The Circular dated 08.12.2006 clearly denies the same. Rebate of input stage credit by the manufacturer in other areas does not appear to have been explicitly addressed by the Circular dated 03.04.2007 as pointed out in the article whereas the said Circular takes care of the case of rebate of duty to manufacturers in other areas who have used the said goods as their inputs to manufacture and clear their export goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And I think credit should be given to the Board for not discussing the term ‘double benefit’ angle at all in both the said Circulars – in case the same was attempted to be addressed or clarified, it would have turned into a disaster. As is apparent, there is no discussion on the contentious issues in the clarifications eventually leaving it to the Tribunals and the Courts to give relief to all such exporters hit by the sledge hammer of circular dated 08.12.2006. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hopefully, we have heard the last on the subject matter – until, a breaking news column in <b>TIOL</b> analyses the first judgment settling the dispute arising out of Circular dated 08.12.2006 !!!</font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Why is Revenue wasting the Court’s time and energy – High Court wants to know – No full stop in litigation, only comma!</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The P&H High Court had the following question before it recently. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Whether the manufacturer of final products is entitled to avail Deemed Credit when the supplier of the goods has not discharged their duty liability as determined by the competent authority under Compounded Levy Scheme and the invoices of manufacturer/supplier of the inputs do not contain the proper declaration regarding payment of duty as required under Notification No. 58/97-CE dated 30.8.97"</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mark Tully wrote, <i>No Full Stops in India</i>! Just have a keen eye for detail, and one sees that probably nothing ever stops in India– births, deaths, marriages, you name it, and the list is endless. And of course litigation – State sponsored and nurtured. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this particular case the High Court observed that,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, we are constrained to observe that despite the view taken by a Division Bench of this Court in Vikas Pipe's case way back on October 6, 2003 and same having been accepted by the revenue, the appeals are still being continuously filed raising the same issue.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And so the High Court wanted to know as to why this course is being adopted, which is resulting in unnecessary wastage of time and energy of the Court and the department. The High Court wanted an affidavit from the Chief Commissioner, Chandigarh. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is there no accountability on wasting the time, energy, and money of the Department and the Courts? Or does the Department exist for making the lawyers rich?</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=33&filename=legal/hc/2007/2007-TIOL-185-HC-P-H-CX.htm" target="_blank">2007-TIOL-185-HC-P&H-CX </a> </font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Seminar in <st1:City w:st="on"><st1:place w:st="on">Hyderabad</st1:place></st1:City></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With the run away success of our Vizag Seminar, we are planning a ‘never before’ kind of seminar in <st1:City w:st="on"><st1:place w:st="on">Hyderabad</st1:place></st1:City> next month. Apart from the top officers of the Board, the top writers of this portal are going to be assembled in Hyderabad for the mega event. See these columns for more details soon.</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> </body> </html>