TIOL-DDT 612 · the untouched capture
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<p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 612</font></b><font size="2"><b><br>
14.05.2007<br>
Monday</b></font></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Finance
Bill enacted – New Section 5B in Central Excise</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Bill has finally received the assent of the President and the CBEC was quick enough to issue the urgently required notifications. While a couple of interesting notifications are analysed here, for a quick review of the notifications see our<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5460 " target="_blank"> <u>Breaking News</u></a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Notification No. 21/2007-Cus. Rescinded - Why</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 21/2007-Cus. Dated 1.3.2007 had fixed the effective rates of duty of Customs of 427 items. This notification is now rescinded. Does it mean that the exemption is gone? If you look at the printed tariffs of any publications, you will find that the rates printed in notification No. 21/2007 are the same as the tariff rates. What is the mystery?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue is simple. In the Budget, the Finance Minister had announced reduction in peak rates of duty for several commodities. As is well known, under the Provisional Collection of Taxes Act, the Customs and Excise duties proposed in the Finance Bill have immediate effect. But this immediate effect is only for imposition or increase, <b>not for decrease</b>. So, if a Finance Bill proposes decrease in Customs or Excise duties, the decrease does not have immediate effect. But the Government any way has the power to exempt duties partly or wholly. So to give effect to the reduction immediately, Notification No. 21/2007-Cus., was issued on 1.3.2007. With the enactment of the Finance Bill, this notification is no more required. And so rightly rescinded.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/2007/ctariff07_068.htm" target="_blank">Notification No. 68/2007-Cus., Dated May 12, 2007</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Exemption from Education Cess – Notification rescinded</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 18/2007-C.E., Dated 1.3.2007 exempts excisable goods from Education Cess in excess of 2%. But is not education cess 2%? Then what is the exemption. This is a long and circuitous story. The Secondary and Higher Education Cess was imposed by Clause 126 of the Finance Bill and as per the Provisional Collection of Taxes Act, it had immediate effect. Section 93 of the Finance Act, 2004 prescribes the rate of education cess as 2% on the aggregate of duties of excise but <b>excluding</b> education cess. This Section 93 was proposed to be amended by clause 131 of the Finance Bill, 2007 to exclude SHE also while computing the Cess. But this clause 131 being neither imposition nor increase in duties did not have immediate effect. It is to solve this problem that education cess in excess of 2% was exempted by Notification No. 18/2007. Now that the provisions of the Bill are enacted this notification is no more required and so 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=30&filename=notification/excise/2007/etariff07_25.htm" target="_blank">Notification No. 25/2007-C.E., Dated May 12, 2007</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">If goods become non-dutiable, credit already taken need not be reversed – New Section 5B</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is a great piece of beneficial legislation tucked away in some corner of the Budget amendments. The Central Excise Act is amended to include a new Section 5B which is sure to provide great relief to a large number of assessees and which is sure to be a great loss for the consultants. The new legislation provides that if an assessee has paid duty on a final product and has taken CENVAT Credit on the inputs, capital goods or services, and later if a court holds that the process does not amount to manufacture and so no duty is payable, then the Government can by notification order </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Non-reversal of the credit taken subject to specified conditions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Non-reversal of credit taken by the buyers of the final product.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And of course the non-reversal of credit will not apply if the assessee has claimed refund. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember the litigation in respect of drawing of wire from wire rods? The department was of the opinion that it is dutiable. Even though many assessees contested the departmental stand, many others, to buy peace with the department, paid the duty, as they were any way getting the credit. Finally the Supreme Court held that the activity does not amount to manufacture. Now the department turned its guns against those obedient assessees who paid the duty and their customers. Department argued that since the process did not amount to manufacture and no duty was payable, what these manufactures actually paid was not duty and so their customers were not entitled to take credit. Litigation has been going on, and finally the Government, on the request of the assessees amended the Section Note to specify the drawing of wire does amount to manufacture. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though the amendment to the Central Excise Act is a welcome beneficial piece of legislation, it seems to have been drafted badly. The Section says “if the product is held by <b>the</b> <b>court</b> as not chargeable to duty”, it is not mentioned which court should hold. May be for the Government, court means the Supreme Court as they would ultimately like all cases to reach the Supreme Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Section gives a lot of discretion to the executive. If credit has been taken and duty has been paid, why can’t you just forget the issue and be done with it instead of going around issuing notifications? Now after winning in the court, is the assessee required to make trips to the North Block requesting for issue of the notifications?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 106A of the Finance Act, 2007</font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Exemption from Service Tax - No clash with Commerce ministry – Finance Ministry </font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Ministry in a press release clarifies that it has no difference of opinion with the Commerce ministry on Service Tax exemption. The release states,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“The Annual supplement to the Foreign Trade Policy released in April, 2007 had stated that service tax on exports shall be exempted. Various newspapers have been reporting that differences persist between the Finance and Commerce ministries on this issue.” <br>
<br>
TIOL was the only one to point out that it was not for the Commerce Minister to grant exemption from Service Tax, while every newspaper and news channel shouted hoarsely that KamalNath has exempted Service Tax. In fact the reporter of a leading TV channel called us up and wanted to know what the issue was. He had talked to the Commerce Secretary and the CBEC Chairman and was still confused as to what the whole issue was all about. We told him that KamalNath exempting Service Tax was like Chidambaram reducing Railway fares. He understood. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Ministry clarification continues, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The taxes paid on inputs or input services used for manufacture of export goods or for providing export services are already being neutralized under rebate, refund and drawback schemes. However modalities for refund/rebate service tax on certain services, which are not input services, but are related to goods or services exported from India, and to neutralize service tax on services received/rendered abroad are being worked out in consultation with the Department of Commerce. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is exactly what we said. Until the Finance Ministry issues its notifications, whatever the Commerce Minister says is only wishful thinking. Of course the Government is expected to speak with one voice, but that rarely happens. </font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Fake fracture and bags of cocaine </font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><b><img src="http://www.taxindiaonline.com/RC2/image/stories/fracture.jpg" width="105" height="105" hspace="3" vspace="0" border="0" align="left"></b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dutch customs caught a woman from the Latin American country of <st1:country-region w:st="on"><st1:place
w:st="on">Suriname</st1:place></st1:country-region>, trying to smuggle 3.3 pounds of cocaine into the country in a plaster cast on her leg. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The woman acted nervously while her passport was being checked and agents became suspicious about the thickness of the cast. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She had two different letters from a doctor about her leg, and both of them appeared fake. A sniffer dog quickly indicated that the cast contained more than plaster. The woman was taken to hospital, where an X-ray revealed the drugs but no fractures. </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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