TIOL-DDT 739 · the untouched capture
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<p ><font face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 739</font><font size="2"><br>
13.11.2007<br>
Tuesday</font></b> </font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Service Tax on activities undertaken at mines prior to 1.6.2007 – Board clarifies </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 9.10.2006, Board issued a draft circular on this issue. (<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4368" target="_blank">See DDT 466<u> 10 10 2006</u></a><b>). </b>More than a year later, the draft is converted into a letter clarifying certain issues pertaining to the period prior to 1.6.2007, when any service in relation to mining has been comprehensively brought under the tax net. There have been doubts about the classification of the following services in relation to mines, which the Board has now clarified.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.<b> Excavation/drilling and removal of the overburdens : </b>Such services include blasting and rock removal work, clearance of underground, drilling and boring, overburden removal and other development and preparation services of mineral properties and site, and other similar excavating and earth moving services. These <font color="#FF6666">activities are taxable under the category of site formation and clearance, excavation and earthmoving and demolition service w.e.f. 16.6.2005.</font></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <b>Coal cutting or mineral extraction and lifting them up to the pithead: </b>These activities are essential integral processes and are part of mining operations. Mining activity has been made taxable by legislation under the Finance Act, 2007 (w.e.f.01.06.2007). Prior to this date, such activities, being part of mining operations itself are not subjected to service tax. <font color="#FF6666">Therefore, no service tax is leviable on such activities prior to the said date.</font></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. <b>Handling and transportation of coal/mineral from pithead to a specified location within the mine/factory or for transportation outside the mine: </b>These activities are post-mining activities and are chargeable to service tax under the relevant taxable services, i.e., “Cargo Handling service” and “Goods Transport by Road”. However, in case, such transportation is undertaken by mechanical systems, such as conveyor belt system, ropeway system, merry-go-round systems etc., and the same is not transported by road, no service tax would be chargeable. Service tax is, however, chargeable under cargo handling service, even if the loading, unloading and similar activities are done using mechanical systems.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board had issued two master circulars on <st1:date ls="trans" Month="8" Day="23"
Year="2007" w:st="on">August 23, 2007 even allotting a reference code for each service. It was assumed that all future clarifications will be amendments to those two circulars. Now this clarification is not included in the master list. Where will this fit in?</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=41&filename=notification/servicetax/2007/stclarify.htm" target="_blank">F.No. 232/2/2006-Cx.4 dated the 12th November, 2007</a></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:PersonName w:st="on"><st2:title
w:st="on"><b><font color="#006600">Pan</font></b></st2:title><font color="#006600"><b> <st2:Sn w:st="on">Masala</st2:Sn> - machines to be brought in only after verification by excise</b></font></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has come to know that some pan masala and gutkha manufacturing units have more machines than declared to the department. Board clarifies that new machines can be brought inside the factory only after verification by the Central Excise officer.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This important information to the targeted manufacturers is contained in yet another secretly held communication of the Board. Why can't the Board make its profound pronouncements public? </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=31&filename=notification/excise/2007/instruct0213.htm" target="_blank">CBEC F.No. 213/16/2007-CX-6 dated <st1:date
ls="trans" Month="9" Day="25" Year="2007" w:st="on">September 25, 2007</a></font></p>
<p align="center" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Economic affairs report of GOI – economy is fine!</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Economic Affairs Report presents a rosy picture of the economy. Just look at the Income Tax report.,</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In 2006-07, direct tax collections provisionally amounted to Rs.2,30,091. The direct taxes collection exceeded both Budget Estimate of Rs 2,10,684 crore by a wide margin and even bettered the stiff target set in the Revised Estimates of Rs.2,29,272 crore. Thus 109.21% of Budget Estimate and 100.36% of Revised Estimate has been achieved.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ This is for the first time that the annual growth rate of direct tax collections has been more than 20% for five consecutive years and the last year's growth was at stupendous rate of 39.27% over previous year.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Direct tax-<st1:stockticker w:st="on">GDP ratio for 2006-07 recorded at 5.58% as against 4.63% for 2005-06. With the current trend of collection the ratio is likely to reach a healthy figure of 6.5% of <st1:stockticker w:st="on">GDP.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The collection from arrear demand during 2006-07 recorded at Rs 12,285 crore against an internal target of Rs 11,741 crore. The collection from arrear demand for 2006-07 has shown a quantum jump of 52.3% over the previous year's arrear collection of Rs.8,064 crore.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Budget Estimates for direct taxes for 2007-08 have been fixed at Rs.2,67,490 crore. The collections till October 2007 records at Rs. 1,28,864 crore, which is 43.15% more than the collections made during the corresponding period of 2006-<st1:metricconverter ProductID="07. In" w:st="on">07. In fact the Income Tax Department has already collected 48.18% of Budget Estimate though December and March quarter of advance tax are yet to be paid.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Collections under Fringe Benefit Tax up to October 2007 amount to Rs.2,755 crore. Collections under Securities Transaction Tax and Banking Cash Transaction Tax for the same period are Rs.3,783 crore and Rs. 311 crore, respectively. There is a growth of 43.02% in the collections under these three new taxes during April-October 2007 over the collections during the same period last year.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Pilot Project of State Bank of <st1:country-region
w:st="on">India</st1:country-region> acting as a Refund Banker has been extended to select charges of four more cities namely Mumbai, Kolkata, Chennai, <st1:City w:st="on">Bangalore apart from existing cities at <st1:City w:st="on">Delhi and <st1:place
w:st="on"><st1:City w:st="on">Patna. The refunds are issued to the taxpayers both through paper and ECS mode through the refund banker.</font></p>
<p align="center" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Fiscal scenario</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The apparently satisfied FM told the Economic Editors' Conference yesterday,</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The financial year 2007-08 has so far shown the expected revenue buoyancy. 40.7 per cent of the budgeted revenue receipts have been realized by September 2007, as against 40.0 per cent during <st2:GivenName w:st="on">April</st2:GivenName>-September 2006-07 and 35 per cent during <st2:GivenName w:st="on">April</st2:GivenName>-September 2005-06. Revenue receipts and capital receipts, especially non-debt capital receipts, have shown improvement. On the revenue side, the gross tax collection has shown a 25 per cent growth during April-September 2007. Customs duty has increased by 16 per cent, taxes on income by 38.9 per cent, corporation tax by 41 per cent, service tax by 36.3 per cent and union excise duty by 6.5 per cent. Non-tax revenue went up by 19 per cent during the period</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">. </font></p>
<p align="center" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">From our Legal Corner – Tomorrow's cases</font><strong><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></strong></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6699">Income Tax</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">Assessee not entitled to investment allowance on dewatering equipment used in construction work - 'Business of construction, manufacture or production of any article or thing' not to include removing water from land - <st1:City w:st="on"><st1:place w:st="on">Delhi HC </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Assessee, who started a business in the name and style of M/s. Complete Dewatering Systems with effect from <ST1:DATE u1:st="on" Year="1977" Day="1" Month="7" ls="trans"><st1:date
ls="trans" Month="7" Day="1" Year="1977" w:st="on">July 1, 1977, claimed that he is engaged in two distinct activities, for each of which he claimed investment allowance under Section 32A of the Act. The first activity was the running of an industrial undertaking engaged in the business of construction. The assessee claimed to have participated in the business of construction by dewatering the land i.e. pumping out water from the ground water table so that the work of excavation of the land thereunder could take place in completely dry conditions. According to the assessee dewatering is integral to the construction activity and for this purposes he used his own equipments on the site. The second activity was the manufacture of the dewatering equipment itself.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6699">FEMA</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">FEMA violations - delay in investigation - passports to be released : Bombay HC</font></b></font></p>
<p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IF</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> you thought the dark days of FERA are over, read this story. And do remember that there is no imprisonment under the FEMA.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6699">Central Excise </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">Supplier of raw materials getting his goods manufactured through several job workers, not a manufacturer - job workers are manufacturers : CESTAT</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suppliers of cotton yarn to job workers who converted the yarn into bed sheets and towels on payment of charges are not manufacturers of bed sheets and towels.; The yarn loses its commercial identity and becomes bed linen / towel at the hands of the weavers who are independent entrepreneurs not subject to any control and superintendence by the appellants.; Just like the women who tie knots at either end of the towels and bed linens for a payment, the weavers also work for a compensation paid by the appellants. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u><font color="#663399">See our columns tomorrow for the judgements</font></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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