TIOL-DDT 742 · 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 742</font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font face="Verdana, Arial, Helvetica, sans-serif"><br>
16.11.2007<br>
Friday</font></b> </font></p>
<p align="center" class=style1><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cenvat availed capital goods cleared as such - The full circle- Is the problem solved?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To yesterday's DDT comments on the subject, two very knowledgeable netizens wondered whether the amendment really solves all the problems or whether fresh problems will crop up. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An Industry leader from <st1:place
w:st="on"><st1:City w:st="on">Kochi remarked,</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The amended Cenvat Credit Rules provide for "payment of amount equal to the Cenvat credit on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit" if "the capital goods, on which CENVAT Credit has been taken, are removed after being used"</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">At the same time the provision under sub Rule (5A) of Rule 3 of Cenvat Credit Rules 2004 continues to be there, which reads as under</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(5A) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.</i></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(Is it not a fact that, for ascertaining the amount equal to duty leviable on the transaction value, some rate of duty is also to be applied? What is the duty rate to be applied in this case? Is it supposed to be the maximum rate leviable under CET Act which is 16% ? Whether the duty leviable under C.Ex.Tariff Act only is to be considered here or whether the ECS/SHECS also is to be considered? These aspects appear to have been ignored, leaving room for disputes and litigation)</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Notwithstanding the above limitations/inadequacies of Rule 3(5A), reading both the provisions together, one is led to the following conclusion:</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">1. If the capital goods on which credit has been taken are removed after use, in such a manner that they can still be put to the same use in another premises/location, then amount equal to the cenvat credit on the said capital goods reduced by 2.5 percent per quarter, has to be paid;</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">2. If the capital goods on which credit has been taken are removed after use, as waste and scrap, amount equal to the duty leviable on transaction value has to be paid. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">If such an interpretation is not possible, then both these provisions concurrently available, will only compound the confusion..</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A leading advocate remarked, </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Even after introduction of the 3rdproviso to Rule 3 (5) vide Notification No: 39/2007 CE (NT) dated 13.11.2007, there can be litigations. For instance, ina case of clearance of Capital goods after 10 years, nocredit reversal is called for as per the amendment introduced w.e.f. 13.11.2007, even if the CG fetches a price. However, the department may demand duty by calling the said clearance as"waste and scrap" in terms of Rule 3 (5A) of CCR, 2004. Similarly, in other situations of clearances of CG within 10 year period, the best of the above two provisions [3rd proviso to Rule 3 (5) or 3 (5A)] could be forced on the assessee by the department, with revenue bias.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the CBEC has done a bit of improvement, the situation is not going to be litigation-free.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope the Board will allay these fears too. - In due course of course! </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tariff Value of Brass Scarp - Decreased</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has decreased the Tariff Value of imported Brass Scrap from US $.4495 to US$.4368. There is no change in the Tariff Value of other products.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_113.htm" target="_blank">NOTIFICATION NO. 113/2007-Cus.,(</a></u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_113.htm"><st2:GivenName w:st="on"><u>N.T.</u></st2:GivenName><u>), Dated: November 15, 2007</u></a></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:stockticker w:st="on"><st1:stockticker w:st="on"><b><font color="#006600">CFS, Sriperumbudur - jurisdiction to Chennai customs Commissioner </font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CBEC has notified that the <st1:stockticker
w:st="on">CFS at <st1:PersonName
w:st="on"><st2:GivenName w:st="on">Sriperumbudur</st2:GivenName> <st2:Sn w:st="on">Taluk</st2:Sn> of
Kancheepuram District will be under the jurisdiction of the Customs Commissioner,
Chennai. Who had jurisdiction earlier?</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=24&filename=notification/custom/2007/cnt07_112.htm" target="_blank">NOTIFICATION NO. 112/2007-Cus.,(</a></u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_112.htm"><st2:GivenName w:st="on"><u>N.T.</u></st2:GivenName><u>), Dated: November 14, 2007</u></a></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DUTY FREE IMPORT AUTHORISATION (DFIA) SCHEME - transferability - exemption from excise duty available even after transfer if Cenvat is not taken</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 4.4.6 of the FTP, </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Once export obligation has been fulfilled, request for transferability of Authorisation or inputs imported against it may be made before concerned RA. Once, transferability is endorsed, Authorisation holder may transfer DFIA or duty free inputs, except fuel and any other item(s) notified by DGFT. However, for fuel, import entitlement may be transferred only to companies which have been granted authorisation to market fuel by Ministry of Petroleum and Natural Gas.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Once transferability is endorsed, imports against authorisation or transfer of imported inputs shall be subject to payment of applicable additional customs duty / excise duty. While endorsing transferability, authorisation would bear a note as to liability of such additional customs duty / excise duty. Such additional customs duty / excise duty would be reimbursed to exporter as drawback. In case of local sales by excisable unit, CENVAT credit would equal excise duty already paid.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the second para is amended as follows:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once transferability is endorsed, imports / domestic procurement against authorisation or transfer of imported inputs / domestically procured inputs shall be subject to payment of applicable additional customs duty / excise duty. While endorsing transferability, authorisation would bear a note as to liability of such additional customs duty / excise duty. However, in case where CENVAT facility has not been availed, exemption from additional customs duty / excise duty would be available even after endorsement of transferability on DFIA.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not049.htm" target="_blank">DGFT NOTIFICATION NO. 49 (RE-2007)/2004-2009, Dated: <st1:date
ls="trans" Month="11" Day="14" Year="2007" w:st="on">November 14, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Avian Influenza - import of live-stock and live-stock products prohibited - relief to pigs</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 30/2007 dated 24.09.2007, Government had prohibited import of certain livestock including live pig and pig products (including pig bristles). Now this is amended to <font color="#FF0000">live pig and pig products (except processed pig bristles).</font></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not050.htm" target="_blank">DGFT NOTIFICATION NO. 50 (RE-2007)/2004-2009, Dated: <st1:date
ls="trans" Month="11" Day="14" Year="2007" w:st="on">November 14, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Facilities for ITAT DRs</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBDT chairman <st1:PersonName w:st="on"><st2:GivenName w:st="on">R.</st2:GivenName> <st2:Sn w:st="on">Prasad</st2:Sn> yesterday inaugurated a newly remodelled and refurbished office space for officers of the Income Tax department working in the Delhi Income Tax Appellate Tribunal (ITAT).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Shishir Jha, Commissioner & Spokesperson, CBDT informed that the new office fitted with compactors for proper record management, addresses a long-standing requirement for proper office accommodation. Officers of the Income Tax department posted as Departmental Representatives in the ITAT defend high value tax litigations. <b><font color="#FF9966">This system of government officers matching their wits against the sharpest tax consultants and practitioners is unique to the revenue earning tax departments in <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region>. </font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As on 30.9.2007, direct tax revenue of about Rs.20,500 crore was locked up in litigation before the ITAT all over <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">Well
done! CBDT even though it is too late, but it is great that the CBDT has
noticed the important role of the DRs and how they have to match their wits
with the sharpest consultants. It is time both the Revenue Boards realise
the great work done by the DRs in pathetic working conditions and the most
unkind unrewarding attitude of the Boards. Even after slogging it in the
Tribunals for many years, they are unceremoniously transferred out to unwanted
places, leaving them frustrated.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government
should seriously consider giving them facilities like secretarial assistance,
vehicles, library and a small fee for each case they handle and access to
quality library online and offline.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CESTAT jubilee in Bangalore</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Celebrations are continuing. Today the jubilee is to be celebrated in <st1:place w:st="on"><st1:City w:st="on">Bangalore. <st2:title w:st="on">Mr.</st2:title> <st2:GivenName w:st="on">Cyriac</st2:GivenName> <st2:Sn w:st="on">Joseph</st2:Sn>, Chief Justice of Karnataka High Court is the <st1:PersonName w:st="on">Chief <st2:Sn w:st="on">Guest</st2:Sn>. Several judges of the Karnataka High Court apart from Members of the Tribunal, past and present are expected to attend. </font></p>
<p align="center" class=style4><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"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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></b></font></p>
<p align="justify"><font color="#FF3366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax</b></font></p>
<p align="justify"><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>If two reasonable constructions of taxing provisions are possible, that construction which favours assessee must be adopted - deduction allowable on <st1:stockticker w:st="on">ESI fees paid before filing return; fee for placement of shares is capital expenditure; no interest while computing income u/s 115J : ITAT</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fee paid to the Registrar of the Companies for expansion of the capital base of a company is directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Foreign travel expenses - in spite of giving opportunity at the assessment stage, and also at the appellate stage, the assessee has not been able to give corroborative evidence</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:stockticker w:st="on">ESI contribution - delayed? since the payment have been made towards <st1:stockticker
w:st="on">ESI before the due date for filing the return under section 139(1) of the Act, the same is allowable deduction. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No interest u/s 234B and <st1:metricconverter ProductID="234C" w:st="on">234C is chargeable while computing the income of the assessee in terms of Section 115J of the Act.</font></p>
<p align="justify"><font color="#FF3366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>FERA</b> </font></p>
<p align="justify"><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>While evidentiary value of a retracted statement u/s 40 of FERA may prima facie appear to be weak, there is no thumb rule which prevents Court from relying upon it as a material during charge-framing stage : Delhi HC</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"While the evidentiary value of a retracted statement under Section 40, FERA, may prima facie appear to be weak, it must be remembered that there is no thumb rule which prevents a Court from relying upon it as a material during the charge framing stage. Here, the trial Court did not rely on that statement alone; statements of other prosecution witnesses (duly cross examined by the Petitioner) were also considered by it. The trial Court also had the benefit of other evidence such as bank account statements, expert opinion etc. Thus, the argument about inadmissibility of Section 40 FERA statements pales into insignificance."</font></p>
<p align="justify"><font color="#FF3366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central Excise </b></font></p>
<p align="justify" class=style5><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Remission of duty - Amount of insurance claim received cannot, by any stretch of imagination, be called as transaction value under Sec 4 of Central Excise for demand of duty : Tribunal</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">THEY </font></b>never
fall short of ideas. Giving is usually an excruciating process. We are referring
to remission claims filed by an assessee whose excisable goods have been
lost or destroyed by natural causes or by unavoidable accident etc. That
'poor man' has already suffered financial loss and trudging the steps of
the insurance office and the surveyor's office has caused him great anguish.
He also has to satisfy the excise authorities that the excisable goods have
certainly been lost or destroyed by natural causes/unavoidable accident and
then seek remission of duty in terms of rule 21 of the CER, 2002. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Usually such applications lie amongst the dusty files of the department and are resurrected only after the range Superintendent, as a measure of abundant caution & in order to safeguard revenue issues the assessee with a notice demanding Central Excise duty on the goods now shown "missing" in the statutory excise records. </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 weekend.</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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