TIOL-DDT 678 · the untouched capture
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<p align="justify"><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL</font></b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><b>-DDT 678</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
14.08.2007<br>
Tuesday</b></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sixty Years Of Independence - Role Of Salt </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I am really proud to be associated with the Central Excise Department, for this was one department closely associated with India's freedom movement. Mahatma Gandhi was violating the Salt Act, the predecessor to the Excise and Customs Acts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Salt was more precious than gold. In fact the word, salary came from the word salt as salaries used to be paid in salt. And so did the phrase "worth his salt". As we celebrate the sixty years of freedom and as the babus are hoping for a huge rise in salaries, it is time to question whether they are worth their salt. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sir John Banks, a businessman from Kent as Governor of the East Indian Company in 1672, was able to arrange a contract which included a loan of £20,000 and £30,000 worth of saltpetre for the King 'at the price it shall sell by the candle' - that is by auction - where an inch of candle burned and as long as it was alight bidding could continue. In 1673, Banks successfully negotiated a contract for 700 tons of saltpetre at £37,000 between the King and the Company. So urgent was the need to supply to the armed forces in the United Kingdom, America and elsewhere that the authorities sometimes turned a blind eye on the untaxed sales. One governor of the Company was even reported as saying in 1864 that he would rather have the saltpetre made than the tax on salt.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The coastal village of Dandi is a small village in the district of Valsad, Gujarat. It shot into worldwide prominence in 1930 when Mahatma Gandhi selected it to be the place for the Salt Satyagraha. He marched from Ahmedabad to Dandi to protest against the imposition of a tax on salt.For his civil disobedience campaign, Gandhi chose to contravene the Salt Acts because they not only appeared to be basically unjust but also because they symbolized an unpopular, unrepresentative and alien government.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When Gandhi began his campaign, revenue realized from the Salt Tax amounted to 25,000,000 pounds sterling. The salt tax had a long and ugly history. The British East India Company considered this taxing of a necessity, salt, as an excellent way of earning revenue. The salt tax initially was imposed in the form of 'land rent' and 'transit charges' before it was consolidated into duty in 1762. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To corner the salt market, the English began to tax Indian salt which drove the price of salt still higher. Even this was not enough because the English introduced the Salt Act which gave a monopoly on salt production to the government. Violation of the law was punishable with the confiscation of salt and six months imprisonment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Gandhi understood that salt was the only relish which the teeming poor in Indian villages could afford to their monotonous diet. Next to water and air, it was perhaps the greatest necessity of life, the only condiment of the masses and indispensable for land, life and several industries.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This tax on a natural product from the sea water and consumed by every person was symbolical of human oppression and Gandhi could easily add salt to the British wounds.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Salt - the tax and need</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u1:p>Can you imagine about 20% of your annual earnings going for salt? It indeed was the situation in India!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Gandhi's salt march drew attention to the Salt Tax in the twentieth century, but the Salt Tax was much greater in the earlier period of British rule - especially in the Bengal Presidency. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Salt in Bengal had been taxed prior to British rule. Under the Mughals, the retail price of salt varied according to the degree of local monopoly and difficulty of supply, but was generally cheaper, relative to wages, than it became under the British. The Mughals had levied a tax on salt as it passed up the River Ganges to the interior. This had been at the rate of 2 ½ per cent on Muslim, and 5 per cent on Hindu traders. In addition, local rulers had sometime imposed small tolls. In the early years of East India Company rule, a small "tax" had been levied by imposing transit duties and a high ground rent on some salt works. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Swingeing taxation of salt developed from the establishment of the Exclusive Company by Clive in 1765. This private company, owned by the East India Company's senior servants, was given a total monopoly on salt. All production by others was declared illegal. This enabled the Exclusive Company to double the wholesale price of salt to Rs 2.47 a maund. In 1768 the Exclusive Company was forced to relinquish its monopoly on salt, and free manufacture resumed. The wholesale price fell to Rs 1.48, which included a Rs 0.3 tax to the East India Company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1780, Hastings brought salt manufacture under government control again, under a complicated system of farming. The wholesale price was fixed at Rs 2, of which Rs 1.1 to Rs 1.5 went to the government as a "tax." The farmers used their sub-monopoly to raise the price of salt excessively. In 1788, a system of direct government auctions was started. The retail price of salt at the beginning of 1878 in Patna, Allahabad, and Lucknow was recorded as Rs 5 a maund. In 1836, John Crawfurd described "a wholesale price of five rupees per maund upon the spot, and without reference to distribution over an immense tract of country, often without roads or bridges, for the most part with indifferent ones, and notoriously deficient in capital"</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As a measure to control the supply of cheap illicit salt into the Presidency, a customs line was established, which stretched across the whole of India, which in 1869 extended from the Indus to the Mahanadi in Madras, a distance of 2,300 miles; and it was guarded by nearly 12,000 men and petty officers...it consisted principally of an immense impenetrable hedge of thorny trees and bushes, supplemented by stone wall and ditches, across which no human being or beast of burden or vehicle could pass without being subject to detention or search. [more on this hedge later]</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The Need for Salt </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The chemical requirements of the human body demand that the salt concentration in the blood be kept constant. If the body does not get enough salt, a hormonal mechanism compensates by reducing the excretion of salt in the urine and sweat. But it cannot reduce this output to zero. On a completely salt-free diet the body steadily loses small amounts of salt via the kidneys and sweat glands. It then attempts to adjust this by accelerating its secretion of water, so that the blood's salt concentration can be maintained at the vital level. The result is a gradual desiccation of the body and finally death. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Actual Salt Consumption</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How much salt was actually consumed? As mentioned above, the price of salt was often about Rs 5 a maund [and sometimes much higher]. The minimum family requirement of half a maund would have cost Rs 2 ½ . In 1788 this would have represented about two months' income for an agricultural labourer, and by 1878 a month's or more. With such high level of tax, the temptation would have been to economise on consumption. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AbhayCharan Das wrote in <i>The Indian Ryot, </i>printed in 1881,: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then again there is a still more wretched creature, who bears the name of labourer, whose income may be fixed at thirty-five rupees per annum. If he, with his wife and three children, consumes twenty-four seers [ 49 lb ] of salt, he must pay a salt duty of two rupees and seven annas, or in other words 7 ½ per cent income tax. Now we leave it to our readers to judge, whether the ryots and the labourers can procure salt in the quantities they require. We can positively state from our own experience, that an ordinary ryot can never procure more than two-thirds of what he requires, and that a labourer not more than half. </font></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">The
great hedge of India </font></strong></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Salt,
smuggling, tariffs, trade, oppression, taxes and death and independence </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Indian equivalent of the Great Wall, the Customs Hedge, which is not mentioned in history books, was grown to prevent the smuggling of salt in response to the East India Company's oppressive Salt Tax. Composed of thorny trees and shrubs, this barrier covered 2500 miles and was attended by 12,000 men for 50 years before it was finally abandoned in 1879.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Great Hedge of India or Inland Customs Line was a customs barrier across India from the 1840s to the 1880s built by the British rulers to facilitate collecting the heavy salt tax. The barrier consisted of fences, stone walls, and above all a nearly impenetrable barrier of trees, thorny bushes, and hedges, with periodic guard stations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unlike sugar, salt is not a luxury. Although those with high blood pressure are warned to limit their salt intake, humans in general cannot survive without salt in their diet. The human body contains about six ounces of salt--salt is critical for the body processes. Every day, the body loses salt it must replace. Failure to replace the lost salt leads to everything from delirium and fainting to death. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Great Hedge was forgotten in India and in Britain, until its existence was unearthed by Roy Moxham, a conservator at the University of London Library. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to Moxham, the customs line was an instrument of exploitation employed by the most powerful empire in the world to extort money out of its poorest subjects, by depriving them from the most basic food item. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>From the book: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>I was deeply shocked by what I discovered about salt. When I had the idea of finding the remnants of the Customs Hedge, I had imagined the barrier as a piece of British whimsy constructed to collect a minor tax. I had assumed it was merely a flamboyant boundary, perhaps fashioned by administrators with fond memories of English hedgerows. It was a terrible discovery to find that it had been constructed, and ruthlessly policed, so as to cut off an affordable supply of an absolute necessity of life. </i></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>AIR of Drawback for HSD and FO</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DGFT has announced the All Industry Rate of Drawback of Rs. 1160/- per MT for both HSD and Furnace Oil, supplied by Domestic Oil Companies under various schemes like Advance Authorisation, DFIA, DEPB, EOU, EHTP, STP, BTP and deemed exports.</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=47&filename=notification/dgft/2007/dgft07pn032.htm" target="_blank">DGFT PUBLIC NOTICE NO. 32 (RE-2007)/2004-09, Dated: August 10, 2007</a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner - Thursday's cases<br>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u1:p><font color="#FF0000"> </font></u1:p><font color="#FF0000">Income Tax<u1:p></u1:p></font><u1:p></u1:p></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>If a non-resident is assessed independently, its representative assessee cannot be taxed u/s 163 for same income : ITAT</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TAXING a non-resident has always been challenging, and wherever possible the law has provided adequate safeguard for the Revenue. That is how Sec 163 came into being. The issue here is : If a non-resident is assessed independently, can its agent in India be also assessed as representative assessee for the same income u/s 163? This was the issue that came before the Mumbai bench of ITAT which decided the question in the negative in favour of assessee by holding that this can't be done as the primary reason for enactment of Sec.163 was to protect the interest of revenue where it is difficult to make assessment and recover tax from a non resident assessee by assessing its agent in India as representative assessee but once the actual assessee is independently assessed then protective assessment in the hands of agent u/s 163 is unjustified. </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax</b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cellular Telephone Service - Credit on cell site towers or parts of towers and pre-fabricated shelters prima facie available : Tribunal </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">CELLULAR</font> </b>companies raised a toast on 9<sup>th</sup> September 2005 when the Tribunal pronounced its order - " <i>Cell site/BTS site/BSC site are not excisable - the activity of installing and commissioning a cell site cannot be an activity of manufacture as no marketable goods arise even in those cases where the cell site is relocated by dismantling and reassembling of individual components </i>". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000">Central Excise <u1:p></u1:p></font></strong></font><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Shortage noticed in Audit - Cenvat Credit to be reversed - burden is on assessee to prove eligibility of credit - Demand and interest confirmed, penalty quashed : Bombay HC </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DURING the course of Audit of Records of the respondent by Internal Audit Officers of Central Excise, it was observed that in the Cost Audit Report for the year 2002-2003, for the physical verification of inventory, there was shortage of raw material worth Rs. 33,42,161/-. The amount involved CENVAT Credit of Rs. 5,34,746/-.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Show-cause notice dated 15-12-2004 was issued directing the assessee to show cause as to why demand of Rs. 5,34,746/- may not be confirmed, why interest under section 11AB of the Central Excise Act, 1944 may not be recovered and why penalty under section 11AC of the Central Excise Act, 1944 may not be imposed. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Revenue's case that unjust enrichment is applicable is without basis, as Central Govt would not have issued exemption notification, under Sec 11C for products in question : Tribunal </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TAPES/STRIPS (S.H 3920.32) were being captively consumed by the assessee during the manufacture of ropes falling under S.H 5607.90, which apparently were cleared on payment of duty. Revenue contended that these intermediate products are chargeable to Central Excise duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A demand of duty on the said intermediate products was raised for the period 22.5.88 to 22.11.88. The assessee deposited an amount of Rs.12,00,000/- in PLA vide Entry no. 493 dt. 25.9.89 'Under Protest' as they knew that the matter was already under the active consideration of the Central Government. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter was amicably resolved as the Central Government issued a notification 38/90-CE(N.T) dated 9.10.1990 in terms of Section 11C of the CEA'44 directing that the duties of Central Excise were not required to be paid on the tapes/strips used in the manufacture of ropes for the period 1.03.1987 to 31.05.1989.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u1:p> </u1:p></strong><b><u><font color="#663399">See
our columns for the judgements on Thursday </font></u></b></font></p>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u1:p></u1:p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u1:p> </u1:p><u1:p><font color="#FF6666">HAPPY INDEPENDENCE DAY</font></u1:p></b><u1:p></u1:p></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Thursday with more DDT</font></p>
<font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><u1:p></u1:p>
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<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"><u>vijaywrite@taxindiaonline.com</u></a></font></p>
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