TIOL-DDT 712 · the untouched capture
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<p><font size="2"><b><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 712</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
04.10.2007<br>
Thursday</b></font></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>EPCG – changes – DGFT amends HOP </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 5.3.1 of the Handbook of Procedures (v1) for EPCG Authorisations,</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RA concerned shall, on the basis of nexus certificate from an Independent Chartered Engineer (<st1:stockticker w:st="on">CEC) submitted by applicant in Appendix 32A, issue EPCG authorization.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is changed to </font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">5.3.1 RA concerned shall, on the basis of nexus certificate from an Independent Chartered Engineer (<st1:stockticker w:st="on">CEC) submitted by the applicant in Appendix 32A, issue EPCG authorisation </font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">and thereafter forward a copy of the EPCG authorisation to the concerned Jurisdictional Central Excise Authority.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, now the RA has to forward a copy of the EPCG authorisation to the Central Excise Authority. Saves a lot of time and effort.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:place w:st="on">Para 5.3.2 of Hand Book of Procedure now reads as:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Authorisation holder shall produce to concerned RA a certificate from Jurisdictional Central Excise authority or an independent Chartered Engineer (<st1:stockticker w:st="on">CEC) confirming installation of Capital goods at factory premises of authorization holder or his supporting manufacturer(s)/ vendor(s) within six months from date of completion of import. In the case of import of spares, the installation certificate shall be submitted by the importer within a period of three years from the date of import.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is amended to read as </font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">5.3.2 Authorisation holder shall produce to the concerned RA a certificate from the Jurisdictional Central Excise Authority, confirming installation of Capital goods at factory premises of authorization holder or his supporting manufacturer(s)/ vendor(s) within six months from date of completion of import. In the case of import of spares, the installation certificate shall be submitted by the Authorisation holder within a period of three years from the date of import.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#663399">However, in case of units not registered with Central Excise Authorities, the Authorisation holder shall produce to the concerned RA, a certificate from an independent Chartered Engineer confirming the said installation of Capital goods / spares.</font></b></font></p>
<p style=' text-align:justify'><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The certificate from the Chartered Engineer will now be accepted only in cases of units not registered with the Central Excise Department. <strong><font color="#663399">DDT</font></strong> understands that even the mighty Reliance had problems in getting these certificates from the mightier Central Excise Department and had outsourced this job to a consulting firm.</font></p>
<p style=' text-align:justify'><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Fulfillment of Export Obligation</b></font></p>
<p style=' text-align:justify'><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new norms for Fulfillment of Export Obligation are </font></p>
<div align=center>
<table border=1 cellspacing=0 cellpadding=3 width=450>
<tr>
<td width=325 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Period from the date of issue of Authorisation </font></p></td>
<td width=175 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum export obligation to be fulfilled</font></p></td>
</tr>
<tr>
<td width=325 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Block of 1<sup>st</sup> to 6<sup>th</sup> year </font></p></td>
<td width=175 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% </font></p></td>
</tr>
<tr>
<td width=325 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Block of 7<sup>th</sup> and 8<sup>th</sup> year </font></p></td>
<td width=175 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% </font></p></td>
</tr>
</table>
</div>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In respect of Authorisations, on which the value of duty saved is Rs.100 crore or more, the export obligation shall be fulfilled over a period of 12 years in the following proportion</font></p>
<div align=center>
<table border=1 cellspacing=0 cellpadding=3 width=450>
<tr>
<td width=310 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Period from the date of issue of Authorisation </font></p></td>
<td width=180 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum export obligation to be fulfilled</font></p></td>
</tr>
<tr>
<td width=310 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Block of 1<sup>st</sup> to 10<sup>th</sup> year </font></p></td>
<td width=180 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% </font></p></td>
</tr>
<tr>
<td width=310 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Block of 11<sup>th</sup> and 12<sup>th</sup> year </font></p></td>
<td width=180 class="Normal">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50% </font></p></td>
</tr>
</table>
</div>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Some more benefits:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the export obligation of a particular block of year may be set off by the excess exports made in the preceding block of year. The Authorisation holder would intimate the regional authority on the fulfillment of the export obligation as well as average exports within three months of completion of the block, by secured electronic filing using digital signatures.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>If you don't export, pay Customs Duty with interest. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where export obligation of any particular block of years is not fulfilled in terms of the above proportions, except in such cases where the export obligation prescribed for a particular block of year is extended by the competent authority, such Authorisation holder shall, within 3 months from the expiry of the block of years, pay duties of customs (along with applicable interest as notified by DoR) of an amount equal to that proportion of the duty leviable on the goods which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation.</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=47&filename=notification/dgft/2007/dgft07pn054.htm" target="_blank">DGFT PUBLIC NOTICE NO. 54 (RE-2007)/2004-2009., Dated: <st1:date Year="2007" Day="1"
Month="10" ls="trans" w:st="on">October 1, 2007</a></u></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:stockticker w:st="on"><b><font color="#006600">ACU Dollar – as good as freely convertible currency - benefits of Export Promotion schemes - available</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 2.40 of the Foreign Trade Policy,</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">However export proceeds against specific exports may also be realized in rupees provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of <st1:stockticker w:st="on">ACU or <st1:country-region w:st="on">Nepal</st1:country-region> or <st1:country-region
w:st="on"><st1:place w:st="on">Bhutan</st1:country-region>.<br>
Additionally, rupee payment through Vostro account must be against payment in free foreign currency by buyer in his non-resident bank account. Free foreign exchange remitted by buyer to his non-resident bank (after deducting the bank service charges) on account of this transaction would be taken as export realization under export promotion schemes of FTP.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Contracts for which payments are received through Asian Clearing Union (<st1:stockticker w:st="on">ACU)] shall be denominated in <st1:stockticker w:st="on">ACU Dollar. Central Government may relax provisions of this paragraph in appropriate cases. Export contracts and Invoices can be denominated in Indian rupees against EXIM Bank / Government of India line of credit.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The Doubt: </b>whether the benefit of Export Promotion Schemes, including incentive schemes, are available to exporters realizing free foreign exchange in <st1:stockticker
w:st="on">ACU$.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The clarification: </b>since <st1:stockticker w:st="on">ACU$ is equivalent to freely convertible currency as per RBI guidelines, benefits of Export Promotion schemes including the Incentive Schemes, being administered by DGFT, shall be available to the exporters for realisation in <st1:stockticker
w:st="on">ACU$. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2007/dgft07cir012.htm" target="_blank">DGFT POLICY CIRCULAR NO. 12 (RE-07)/2004-2009 Dated: <st1:date Year="2007" Day="1" Month="10" ls="trans" w:st="on">October 1, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Benefit of DFIA Scheme to Rupee Payment Area countries – DGFT clarifies</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade and Industry have represented that exports to Rupee Payment Area (RPA) countries are entitled for Advance authorisation scheme in terms of paragraph 4.1.6 of FTP. Since reference to this paragraph has not been specifically mentioned in the said paragraph, a doubt has been raised by Trade and Industry as to whether DFIA scheme benefit is available to exports made to RPA countries.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the DGFT clarifies that the benefit of DFIA scheme is available for exports made to RPA countries as well, subject to</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. achievement of value addition, either prescribed in DFIA scheme or as specified in Appendix 11 of <st1:stockticker
w:st="on">HBP v1 or</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. value addition prescribed for specific product (s) under Advance Authorisation scheme,</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whichever is higher.</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=46&filename=notification/dgft/2007/dgft07cir013.htm" target="_blank">DGFT POLICY CIRCULAR NO. 13 (RE-07)/2004-2009 Dated: <st1:date Year="2007" Day="1" Month="10" ls="trans"
w:st="on">October 1, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Stocks at 18K – FM cautions</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is PC nervous about the bull run in the Sensex? He has asked the retail investors to be cautious. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An aggressive buying by international funds in blue-chip stocks has created the stock market bubble in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region>. <st1:country-region w:st="on"><st1:place w:st="on">China</st1:country-region> has a similar story. But is it a bubble ready to burst any moment? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The international funds bring in mega funds and create the bubble. They can leave in a moment's notice creating a deep depression in Indian economy. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A catastrophic collapse will cause a massive depression in <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region>. <st1:country-region w:st="on"><st1:place
w:st="on">China</st1:country-region> faces the same grim outlook. The food prices in <st1:country-region w:st="on">China</st1:country-region> and <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region> are increasing close to 3% per quarter while official inflation is registered at one fifth of that. The crude oil price is building massive trouble spots in both the economies. </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>Central Excise </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Explanation to Clause 82 of Finance Bill, 2005 comes to rescue - Appellant not liable to interest and penalty : Tribunal</font></b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>THE</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> </b>issue before Tribunal was whether the appellants were liable to pay interest on the confirmed duty demand of Rs.1,29,212/- and also liable to penal action. The demand was confirmed on the ground that the appellant had not maintained separate inventory of raw material used in the exempted final product as required under Rule 57 CC(9) of the Central Excise Rules, 1944. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF0000">Income Tax</font></b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Expenses on convertible debentures - eligible for deduction till conversion : ITAT</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the expenditure on issue fresh shares is revenue expenditure or capital expenditure?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the money is secured for certain period the expenditure is revenue expenditure within the meaning of section 10(2), clause (xv) of the Act. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:stockticker w:st="on"><b><font color="#663399">CIT (A) can enhance income if assessee is made aware of proposal, formal notice not required - R & D expenditure for launching new car is revenue in nature - warranty is allowable expenditure : ITAT</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no doubt about the fact that the assessee is already engaged in the business of manufacture of cars and the production had commenced about three years before. The new model of the car relates to the same line of business which the assessee has been carrying on. The assessee has not set up a separate and independent unit to manufacture new model of the car. From the details of the expenses given, it is clear that the expenses related to travelling, training & seminar and advertisement, technical guidance fee etc. of the on going business. It is common knowledge and there is a cut throat competition in the automobile market and the assessee is required to bring new models in the market in order to retain/capture market. Therefore, the expenditure incurred by the assessee in respect of on going business is a revenue expenditure.</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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Export - overvaluation - undue DEPB benefit - CESTAT by majority sets aside denial of DEPB</font></b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>case arises out of the Commissioner Customs' order lowering the <st1:stockticker w:st="on">FOB value of the CD roms exported under DEPB and imposing penalties for export overvaluation. The exporter, M/s. Advance Export purchased 60,000 pcs. of <st1:PersonName w:st="on"><st2:GivenName w:st="on">CD</st2:GivenName> <st2:Sn w:st="on">Roms</st2:Sn> from M/s Padmini Polymers and exported to M/s. Wajilam Export (Singapore Pvt. Ltd., <st1:country-region
w:st="on"><st1:place w:st="on">Singapore</st1:country-region>). The goods were exported under claim for DEPB at the declared value of US $ 18 per CD Rom. In support of the value, the appellants produced on record the invoices under which the same were procured by them from the Indian Manufacturer M/s. Padmini Polymers Pvt. Ltd. The goods were cleared by M/s. Padmini Polymers under AR-4 at the purchase price of Rs.750/- per pc. The payment for the said goods was made by M/s. Advance Exports to M/s. Padmini Polymers through Bank.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns tomorrow for the judgements</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><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></p>
<p><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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