TIOL-DDT 703 · the untouched capture
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<p><font size="2"><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 703</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
20.09.2007<br>
Thursday</b></font></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>EOUs - caught in the dichotomy of "exempted" and "non excisable" goods.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A 100% EOU is engaged in manufacture and export of excisable goods. It also clears some of these goods in DTA. But the goods cleared in DTA are exempted under Customs and Central Excise Acts. It also avails Cenvat Credit on some of the raw materials which are procured on payment of Central Excise duty for manufacture of dutiable and exempted goods. Needless to say the EOUs are entitled for Cenvat Credit on the duty paid raw materials w.e.f. 6-9-2004 ( Notification No. 18/2004-C.E. (N.T.), dated 6-9-2004). </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question is in respect of goods cleared in DTA which are exempted from both BCD and CVD, whether the EOU has to pay the duty foregone on the raw material procured duty free? Or pay 10% on the sale price of the exempted goods in terms of the Cenvat Credit Rules in view of taking credit on some duty paid inputs? Or Both?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para 6.8 (j) of the Exim Policy reads " In case of DTA sale of goods manufactured by EOU/EHTP/STP/BTP, where<font color="#663399"> <b>basic duty and CVD is nil</b></font>, such goods may be considered as <b><font color="#663399">non-excisable</font></b> for the purpose of payment of duty".</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of the above para, the goods cleared in DTA are to be considered as non- excisable if the basic customs duty and CVD are NIL. Now, let us see the provisions of exemption notifications which allow the EOUs to obtain the raw materials without payment of Customs / Excise duty:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Second proviso to para 6 of the Notification 22/2003 CE(NT) Dated 31.3.2003 reads:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided further that where such articles (including rejects, waste and scrap materials) are <b><font color="#663399">not excisable</font></b>, duty foregone equal in amount to that leviable on the inputs obtained under this notification and used for the purpose of manufacture of such articles, which would have been paid but for the exemption under this notification, shall be payable at the time of clearance of such articles.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A similar proviso is also found in Notification 52/2003 Dated 31.3.2003.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the goods cleared by EOU in DTA are exempted from both Customs and Excise duties, the EOU has to pay the duties foregone ( both customs and excise) on the raw materials procured as per the proviso to the relevant Notifications as the same are <b><font color="#663399">non excisable</font></b> under Exim policy.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With effect from 6.9.2004, the EOUs are also entitled for Cenvat Credit. So the provisions of Rule 6 of Cenvat Credit Rules are also applicable.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of the said Rule, if a manufacturer is engaged in manufacture of both dutiable and exempted goods, and no separate records are maintained, an amount of 10% has to be paid on the price of the exempted goods.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As a result, in the above case, the EOU has to </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 1 Pay back the duty foregone on the raw material used in the manufacture of exempted goods as these are to be considered as "non excisable" under Exim Policy and also</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 2 Pay 10% amount on the sale price of the exempted goods under Rule 6 of the Cenvat Credit in view of taking credit on some of he raw materials used in the manufacture of "exempted goods".</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apparently there is no uniformity in the Exim Policy, Notifications and the Cenvat Credit Rules as the "same goods" can not be considered as non-excisable for the purpose of exim policy and exempted for the purpose of Rule 6 of Cenvat Credit Rules. </font></p>
<p align="center" ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CBDT does not know how many Commissioners are working - orders for a stock taking</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT is annoyed with the inaccurate information furnished by the CCITs regarding the sanctioned strength and working strength of the Group A officers working under their charge. The Board regrets that though the letter calling for disposition list of all group A officers was placed on the department's website, no action has been taken. Therefore now the Board ordered that complete information should be furnished by 22<sup>nd</sup> September. The list should include the officers, who are under suspension, on unauthorized leave, absconding etc. Board also ordered that Addl. CIT(HQ) to have a daily watch on the Department website regarding important letters issued by the Board.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sernews/order/cbdt_order2007.htm" target="_blank">CBDT Order Dated : September 18, 2007</a></font></p>
<p align="center" ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>ITC(HS) classification of Exportand Import Items, 2004-2009 - Appendix 3 of Schedule 2 amended</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Schedule
2 of the ITC (HS) classification contains the export policy and Appendix
3 contains list of Special Chemicals, Organisms, Materials, Equipment
and Technologies (SCOMET). This list has been amended by <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not027.htm" target="_blank">DGFT
Notification 27(RE-2007)/2004-2009, Dated: September 7, 2007</a><b>. </b>But
the Notification was made available only on Monday and nearly 70% of the
content was junk and was made good only yesterday. Why such important
amendments are not published immediately? What will happen if the goods
exported from 7<sup>th</sup> September to 19<sup>th</sup> September attracted
some new conditions which the exporters failed to fulfill?</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=45&filename=notification/dgft/2007/dgft07not027.htm" target="_blank">DGFT Notification 27 (RE-2007)/2004-2009, Dated: September 7, 2007</a></font></p>
<p align="center" ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>RBI clarifies the issues relating to TDS on 8% Savings (Taxable) Bonds, 2003</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Whether tax will be deducted on existing bond holders or only those who invest after 1.4.2007? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TDS on 8% Savings (Taxable) Bonds, 2003 is effective from 1.6.2007. Any interest credited or paid on 8% Savings (Taxable) Bonds, 2003 on or after 1.6.2007 would attract TDS if the amount of interest exceeds Rs. 10,000 for the financial year. Therefore, date of investment is not a relevant factor. TDS would, thus, apply to existing bond holders also. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) If tax is to be deducted on interest payable from 1.7.2007 (relating to the period 1.1.2007 to 30.6.2007), will the depositor who has opted for cumulative interest will be issued Form 16A with details of interest accrued and tax deducted thereon for the period 1.1.2007 to 30.6.2007? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yes. Wherever TDS on interest has been made, Form 16A has to be issued to the depositor. Tax is to be deducted on interest payable from 1.6.2007 and not from 1.7.2007 as stated in the question. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) If tax is to be deducted only on maturity for those who have opted for cumulative scheme, what is the position of those who are adopting mercantile system of accounting and offered interest on accrual basis in the past years? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax deduction does not have to wait until maturity but is to be made, whenever the interest is credited or paid, whichever is earlier provided the amount of interest credited or paid during the financial year exceeds the threshold limit of Rs. 10,000/-</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=49&filename=notification/rbi/2007/rbi200708141.htm" target="_blank">DGBA.CDD No H - 3024 /13.01.299 / 2007-08 Dated: September 19, 2007 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The humble squirrel and Ram setu- IRS officer victim of modern day Ravanas</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is fabled that when the ancient demi-god, Ram was making a causeway across the sea, to rescue his consort from captivity, the faithful squirrel brought at the end of its tail, a few grains of sand, not indeed, hoping to advance the high enterprise in any appreciable degree, but to show an inclination to serve. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The mythological Ram had saved his Sita and really had no use of the bridge and had he been King today, he would have gladly dismantled it for constructing the project, but our politicians who want to sell Ram are not prepared for economic progress, but in all this tamasha, an innocent IRS officer Chandrasekhar who is on deputation to the ASI as Director, Administration was suspended. How can this poor Customs officer certify about the bridge built by Ram, especially when the bridge was not even under the protection of the ASI? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Several biblical propositions have been disproved by scientists, but that in no way diminished the respect for Bible. Nobody remembers the Pope who in 1633 found Galileo guilty of heresy. He was forced to kneel down and confess that the Earth did not move, but as he got up, he muttered, <b><font color="#663399">"But it does" </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is pathetic that in 2007, we are ready to make an issue because the ASI could not produce a birth certificate for Ram Setu.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hey Ram, You only can save us. Please See today's <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6088" target="_blank">CobWeb.</a></u></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner - tomorrow's cases</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font></b></font></strong></font></b></font></strong></font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs - right to appeal - Tribunal insists for huge pre-deposit - Since a part of consignment still in custody of Revenue, proviso to Section 129E should have been invoked </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue made an assessment of Customs duty, and an appeal was preferred against. But it was dismissed for failure to pre-deposit a sum of Rs 3.3 Cr as directed. The issue went to the Gujarat High Court which directed the appellant to make a prayer before the Tribunal. But the Tribunal asked the assessee to pre-deposit Rs 3 Cro and also asked the company's Director to make deposits. That is how the issue reached the <st1:Street w:st="on"><st1:address w:st="on">Apex Court</font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central Excise </b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Order passed by Commissioner (A) has no legs to stand once Tribunal has disposed of assessee's appeal - Doctrine of merger comes into play.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue and assessee both prefer appeals before the Commissioner (A). The assessee fails and this order is dated 24.03.2003. He moves the next appellate authority & the Tribunal passes an order on 28.11.2003/04.12.2003 in his favour. So, what happened to the Revenue's appeal filed before the Commissioner (A)?</font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax </b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>IT - Claim of deduction u/s 80-M is with respect to any dividend received by a Co. from another domestic Co. - only restriction is that the claim should not exceed the total amount distributed as dividend and Sec.115-O has no applicability and cannot restrict the claim under the said section </b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns tomorrow for the judgments</u></b></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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