TIOL-DDT 718 · the untouched capture
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<p align="justify" ><font size="2"><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 718</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
12.10.2007<br>
Friday</b></font></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Compounded Levy -Does Rule 96ZO/ZP survive even after omission of section 3A? - <st1:PersonName w:st="on"><st2:GivenName
w:st="on">CESTAT</st2:GivenName> <st2:Sn w:st="on">LB</st2:Sn> order stayed - High Court<i> </i></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Madras High Court has day before yesterday stayed the Larger Bench decision
which we reported last month. Repeal, omission, validity etc, are all back
in action and the issue as we commented is no more within a compound. TIOL
is proud to maintain its record and brings you the case today. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday a kind netizen wrote to us, "I am sorry that I cannot conceal my pleasure over performance of Taxindiaonline."</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And I really couldn't resist the temptation of using this. Excuse me.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6197" target="_blank">Breaking News</a> for the story and case.</font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i><font color="#006600">ORGANISATION FOR ECONOMIC CO-OPERATION <st1:stockticker w:st="on">AND DEVELOPMENT</font></i></b> </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Economic survey - India</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.</i></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.</i></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is what the OECD Economic Survey for India 2007 says,</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The indirect tax system needs to be simplified to create a true national market, while for direct taxes, the taxable base should be broadened and rates lowered. Public expenditure should be reoriented towards infrastructure investment by reducing subsidies.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the optimal policy would be to remove these bottlenecks across the country, the creation of Special Economic Zones that aim to reduce a number of these barriers locally might demonstrate the benefits of such reforms and so act as a catalyst for more generalised change, but care needs to be taken as to the extent of tax concessions that are granted. Furthermore, taxation policies need to be reformed in order to create a truly national market and improve incentives and release resources for reducing bottlenecks in infrastructure, which are a key constraint on growth.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Direct taxes have been reformed, but more needs to be done</i></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Despite large cuts in direct tax rates, which have strengthened the economy, the share of direct tax revenues in <st1:stockticker w:st="on">GDP has risen. Nonetheless, the tax system still bears some traces of past interventionism, through extensive loopholes and exemptions which introduce distortions and complexity, facilitating tax evasion. These are most noticeable in the areas of saving, agriculture and corporate taxation. The treatment of some forms of savings is so favourable that they are often exempted from taxation at the time of initial savings, during the period when invested funds earn returns, and finally when investments are liquidated. Agricultural incomes are not subject to income tax and numerous exemptions exist in the corporate tax system. Indeed, these are so prevalent that corporate tax collections are only half of the theoretical yield. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The government should consider reducing exemptions and loopholes in all these areas, creating room for cuts in statutory rates, thereby moving towards equalisation of effective tax rates across sectors and activities.</i></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Significant reform of indirect taxation has also been undertaken, including the introduction of a destination-based, state-level VAT on goods in 2005. However, as taxes still represent a barrier to trade between states, further reform is needed to achieve a true internal market for goods and services. At present, there are a series of indirect taxes at the central and state levels that need to be integrated into a single tax that is neutral, both as to the sector and location of production, and minimises the possibilities for fraud. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At present, the major barrier to interstate trade is the Central Sales Tax and this is being phased out. When this process is completed, controls could be abolished on nearly all state borders as they would not be needed for this purpose. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The government is committed to the introduction of a nationwide goods and services tax by 2010 that would meet these objectives, but its final form has yet to be determined. Experience with VAT systems in <st1:place w:st="on">Europe shows that careful design is necessary to simultaneously reduce trade barriers and contain fraud. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The government should consider two options: either, moving to a national VAT with central revenue collection and redistribution of the tax yield to the states through a formula, or, introducing a two-tier system that would allow both a central VAT and a state VAT. </i></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The first option would not exempt interstate exports while the second option would for the state VAT (as is currently the case) but not for the federal VAT. Such a system would maintain the audit chain in interstate trade (through the federal VAT), thereby facilitating tax enforcement. With this option states could retain a degree of fiscal sovereignty and could also set different tax rates. The second option would require close co-operation between state fiscal authorities to limit fraud. However, if this system were to also include a central rebatable VAT surcharge on cross-border trade, then fraud could be minimised.</i></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mumbai Customs wants a name - best name dropper to get Rs. 1000/-</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st2:Sn w:st="on">Shakespeare</st2:Sn> said, "what's in a name?, that which you call a rose, by any other name will smell so sweet." But we still would like to call a rose, a rose, whatever way it smells. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mumbai Customs Department has acquired a plot named as 'SULEIMAN SHAH PLOT' at Wadala (East), Mumbai admeasuring <st1:metricconverter ProductID="54 acres" w:st="on">54 acres, where the department<strong><font color="#663399"> intended</font></strong> to construct office buildings, warehouses and Sports complex. This dream project when completed will be a matter of great pride for each and every employee of CBEC. Actual construction at the site will commence in near future.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department desires to rename this plot, and as such the staff is requested to suggest a suitable name for the same. The entries to this effect may please be sent to Samir Bajaj, Joint Commissioner of Customs (G), New Custom House, Mumbai latest by 15.10.2007 positively. The participant whose name is accepted will be awarded cash prize of Rs 1000.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is Great that the Customs has hit upon this great idea of calling suggestions from the Staff. The Department consists of the best HR talent in the country, but you hardly use it. It used to be said that the British Aristocracy used to educate their daughters in convents and then marry them off to pirates. You recruit the best talent in the country and then go out of your way to ensure that the talent is never put to use. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is a great idea to call for suggestions from your staff, recognise them and reward them. But then Rs. 1000/- is too low - make it a Lakh! </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By the way, are you serious about calling for names or do you already have a name and an officer and this calling for names is just another farce? The letter calling for names is dated 8<sup>th</sup> October and the last date is 15<sup>th</sup> October. When will the staff come to know about your letter?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And incidentally <st1:PersonName
w:st="on"><st2:title w:st="on">Mr</st2:title> <st2:GivenName w:st="on">Samir</st2:GivenName> <st2:Sn w:st="on">Bajaj</st2:Sn> has not addressed this letter to a single Customs Commissioner or Chief Commissioner. The letter is addressed to the Commissioner of Central Excise Zone I to VI. There are no Commissioners for zones. The learned JC should be aware that Zones are headed by Chief Commissioners and not Commissioners and in any case there are only two Central Excise Zones in Mumbai. Who are the other four Zonal Commissioners in Mumbai? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Just another example of how casual the Department is - they don't even know their own offices and if an assessee makes a mistake, they will pounce on him.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/suggestion.htm" target="_blank">Mumbai Customs letter F. NO. <st1:stockticker w:st="on">SSP/Miscll 2007 Dated : <st1:date Year="2007" Day="8"
Month="10" ls="trans" w:st="on">October 8, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Changes in SION </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has made certain changes in the statement of Standard Input Output Norms (SION) as contained in the Handbook of Procedures (Vol.2), 2004-2009</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/dgft07pn065.htm" target="_blank">PUBLIC NOTICE NO. 65 (RE: 2007)/2004-2009, Dated: <st1:date Year="2007" Day="9"
Month="10" ls="trans" w:st="on">October 9, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>No raid on <st1:PersonName
w:st="on"><st2:GivenName w:st="on">Gautam</st2:GivenName> <st2:Sn w:st="on">Gambhir</st2:Sn>, CBDT clarifies</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Press had gone to town yesterday that Cricketer gautam Gambhir was raided by Income Tax. The CBDT has clarified that the Income Tax department has conducted a search on a business family on the basis of information that it is involved in unaccounted draft discounting. The search was conducted at 6 business and residential premises in <st1:City w:st="on"><st1:place
w:st="on">Delhi. Investments in various properties and bank accounts have come to light, which is being investigated.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
It is clarified that there is no search in respect of <st1:PersonName w:st="on"><st2:GivenName
w:st="on">Shri</st2:GivenName> <st2:middlename
w:st="on">Gautam</st2:middlename> <st2:Sn w:st="on">Gambhir</st2:Sn>, a member of the national cricket team of <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region>. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Meanwhile in another incident, Income Tax officials raided the house of a doctor in Chennai who was arrested in Mumbai a couple of days ago on charges of running a huge retail business of human body parts.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Appreciating Rupee - DGFT to conduct survey</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Has the continuing appreciation of rupee affected various industries in <st1:country-region w:st="on"><st1:place
w:st="on">India</st1:country-region>? The Directorate General of Foreign Trade (DGFT) has decided to conduct a survey to find out the real impact of the strengthening of rupee and weakening of dollar, according to R S Gujral, Director General, DGFT. Already there was a decline in orders in the apparel industry thanks to rupee appreciation, he admitted.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was a decline in seven sectors, including tea and apparel in July, while moderate drop in growth of several other industrial sectors was noticed in August. <br>
<br>
Based on the survey, DGFT had suggested to the government to cut the interest rate further.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though the commerce ministry had two months ago recommended an interest rate cut by four per cent, the finance ministry had announced only two per cent cut, he said. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He added, "We also seek exemption of service tax for 10 other categories besides the seven already announced." </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Obviously he and his Minister don't cut much ice with the Finance Ministry!</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Fire
in Income Tax office - assessees to be revisited?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many an assessee who had an unfriendly visit from the Income Tax, Customs etc, would secretly wish that the Income Tax office is burnt down and his records are lost, so that he is saved from further harassment. You will have no such luck unless your office is also burnt down. After the fire in <st1:PersonName
w:st="on"><st2:GivenName w:st="on">Mayur</st2:GivenName> <st2:Sn w:st="on">Bhavan</st2:Sn>, where the records of the DG, Intelligence, Income Tax were burnt down, it seems the sleuths are revisiting the assessees to build up their files. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There
is an anecdote about a Central Excise Inspector who had his office on the
banks of the river <st1:place w:st="on">Godavari.
Once when the river flooded, this Inspector simply threw all his files
into the <st1:place
w:st="on">Godavari and thus cleaned his office and sent a report that all the
files were washed away in the floods.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A school building was burning and all the children were happily shouting outside that they would have a prolonged vacation. However there was one sincere boy who was crying. A passerby asked him, "why are you crying, are you not happy that the school is burnt down and you can have a long vacation?" "I am happy for that", replied the boy, "but I am sad that all the teachers are left outside!" </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner - Monday'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"><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></b></font></strong></font></b></font></strong></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Deduction for late PF payment disallowed - Sec 43B - Omission of second proviso not curative, and amendment cannot be treated as retrospective : Bombay HC</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"> general perception is that our Income Tax Act is highly litigation-prone. If one talks of Sec 43B, it is widely regarded as more dispute-prone than the Act itself. Vide Finance Act 1983, it was inserted to curb the mischief of deliberate delays in payment of statutory liabilities. Then came two provisos which were added to the section by Finance Act 1987. The second proviso was quickly substituted by Finance Act, 1989. And, finally, vide Finance Act 2003, the second proviso was deleted. And this is the subject matter of dispute in this case in which the Bombay HC has held that<font color="#663399"> <b>the omission of the second proviso was not curative, and it cannot be said that the amendment is retrospective.</b></font></font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b> <b></b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import of PU coated fabric - Dispute on thickness of fabric - Revenue seizes goods but does not get them tested even after five months - goods and seized IC ordered to be released : Delhi HC</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">THE</font> </b>petitioner seeks</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. release of goods imported under bill of entry no. 583202 dated 24th April, 2007 on a value of US$ 1.90 per meter pending adjudication.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. a direction to Customs to release the seized Indian currency of Rs.23.90 lakhs and to prohibit the customs from requiring the Petitioner to maintain a minimum balance of Rs. 4.89 lakhs in the bank accounts of the Petitioner.</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">Vicks Cough Drops manufactured on jobwork basis - Revenue's contention to assess goods on sale price of Procter and Gamble rejected by 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>appellant is a job-worker for M/s Procter and Gamble India Ltd. They entered into an agreement with PGIL wherein PGIL shall supply the raw materials, manufacturing technology, packing materials etc. to the appellant on job work basis. It has been alleged that the transaction is not on principal to principal basis and the appellant is not an independent job worker and therefore, the appellant is liable to pay duty on the price charged by the depots of PGIL. The Commissioner confirmed the demand of duty and imposed penalty along with interest.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant contended that they are paying duty correctly on the value as determined as per the decision of the Hon'ble Supreme Court in the case of Ujagar Prints Vs Union of India. </font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns Monday for the judgements</u></b></font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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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