TIOL-DDT 777 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 777 </font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font face="Verdana, Arial, Helvetica, sans-serif"><br> 08.01.2008 <br> Tuesday </font></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TDS in Central Excise? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sounds ridiculous? This is not a funny idea, we got while hunting for stories. If the Board has its way, they would collect excise duty from the customer, not the manufacturer. If Service Tax can be collected from the service recipient, why not excise from the customer? But why this provocation? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department has come across evasion of excise duty in respect of supplies made to Government organizations. A sample:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) A manufacturer eligible for SSI exemption paid concessional rate of duty, but in the customer's copy indicated the full duty and realized the same from the Railways. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) A manufacturer did not account for supplies made to the Railways against some of the orders received by him and realized the full amount of duty from the Railways through forged duty paying documents. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) A manufacturer supplied materials to Coal India without payment of duty, but realized the duty amount by submitting forged duty paying documents to the customers, Eastern Coal Fields Ltd. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) A reputed manufacturers cleared excisable goods on payment of duty at a much under-valued price to his another unit and then sold to the Railways at a much higher price claiming / declaring and realizing a much higher amount of duty </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this according to the Department is only the tip of the proverbial iceberg. So what is the solution? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) To start with, focus on big purchases (say Rs. 10 lakhs and above) by big Government purchasers like the Railways, the Defence, P&T Department and DGS&D . ( <strong><font color="#FF6633">Is there still a P&T Department?</font>) </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) provide by rule to have clearance of excisable goods from the factory for such supplies without payment of duty against the indent issued by the purchasing department, under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 (analogous to the erstwhile Chapter-X procedure for supply of OE to industrial consumers). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) The purchasing department will work out the CE duty component from the purchase price and deduct the same at source in a way analogous to the system of <strong><font color="#FF6633">deduction of Income Tax at Source. </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) At quarterly interval, they will forward CE duty so deducted at source to the Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(5) Cenvat credit availed on the inputs used in the manufacture of such goods may be treated at par with manufactured goods under export, as provided under Rule 5 of Cenvat Credit Rules, 2004. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Project sounds good, but is it workable? The Board assumes that big government organizations like railways and Defence are perfect in their accounts and tax payments. Central Excise officers routinely make cases of huge non-payment of taxes by large government organizations ( <em>evasion </em> may not be exactly the correct word) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And how will these organizations calculate the excise duty? How will they know about any exemptions available? And when will they pay the duty? Is it on receipt of the goods or after payment is made? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you try to ape the Income Tax TDS , you are sure to fail in excise. In Income Tax, there is a PAN/TAN and deductions are fairly accounted – here in excise you will end up making all kinds of unworkable rules followed by irrational clarifications followed by relentless litigation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board's proposal dreams that the new procedure will prevent hundreds of Crores of rupees from being siphoned off from the exchequer. Good dream indeed! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has asked the Chief Commissioners to give their comments/views on the legislative proposal. </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/exciseletter.htm" target="_blank">CBEC's F.No.201 /25/2007- CX -6 dated September 26, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax – erection of transmission towers and other equipment – Board clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A clarification was sought on the admissibility of abatement in case of erection contract. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And Board has clarified that:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. For availing abatement from the gross amount charged, one of the conditions stipulated is that the gross amount charged should include the value of plant, machinery equipment, structure or parts and any other material sold by the commissioning and installation agency. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The other condition is that the service provider should not take the credit on input, input service and capital goods. The objective of allowing abatement for calculation of service tax is to offset the value of goods supplied in case of a composite supply of goods and services and availament of abatement is optional. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Therefore, abatement would not be admissible in such cases where erection and commissioning service is provided under a contract/agreement that does not include the value of goods i.e., transmission tower and other accessories which are erected or commissioned under such contract/agreement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In other words, service tax would be applicable on the entire amount charged for erection and commissioning service if such amount does not include the value of all goods supplied. </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/erection.htm" target="_blank">CBEC F.No . 137/73/07- CX.4 Dated : November 12, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP - agencies authorized to grant quality certification </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 2.59.2 of the HOP, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">List of such agencies authorised to grant quality certification is given in Appendix 6. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any agency desirous of enlistment in Appendix –6 may submit their application as per Annexure I to Appendix 6 to concerned RA. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now in between the two paras above, the following para is added, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For ISO -9000 (Series) and for ISO -14000 (Series), the Agencies accredited with National Accreditation Board for Certification Bodies ( NABCB ) under Quality Council of India shall be deemed to be authorized under this Policy. List of such accredited agencies is available on the website www.qcin.org and also provided under Appendix 6. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And of course the Appendix 6 is amended. </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=47&filename=notification/dgft/2007/dgft07pn97.htm" target="_blank">DGFT PUBLIC NOTICE NO . 97 (RE-2007) /2004-09., Dated: January 4, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Babus' day out – brainstorming in Surajkund </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps, first effort of its kind, the Department of Economic Affairs (DEA) went on an off-site Retreat to Surajkund outside of Delhi last weekend. Led by Finance Secretary Dr. D. Subbarao , about 50 officers of DEA of the rank of Deputy Secretary and above spent an entire day and indeed a good part of the night, intensively brainstorming on their vision of the emerging role of DEA in the fast changing economic situation and how best they might contribute to that vision. <br> <br> Reflecting the theme of the Retreat which was “Improving the Way We Work”, each Division of the Department made a presentation on the ‘best practices' they are evolving and identified one or two tasks where they will bring about a ‘paradigm shift' in quality of output. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The highlight of the Retreat was a two hour session with the Finance Minister, P. Chidambaram . Shorn of the hierarchical barriers that inhibit communication in the Government and in a remarkably frank and honest exchange of views with the senior officers of DEA, the Finance Minister said that maintaining and accelerating economic growth should be central to all the work of DEA. He admitted that Ministry of Finance does not have policy control of the entire economic agenda because of democratic structures and coalition politics, but officers must capitalize on that part of the agenda on which they do have control, such as for example, driving the FRBM targets. He agreed that all policies must have a pro-poor bias, but was quick to add that economic growth was at the heart of poverty reduction. There cannot be any sustainable poverty reduction without economic growth. <br> <br> The strength of DEA, in the Finance Minister's view is a sense of pride that the officers had in working in this premier Department of the Government. Their high academic qualifications made them specially suited to give their best to their department. Pressed by the participants to let them know of their weaknesses or shortcomings, the FM said that the weakness, if any, was the quality of written communications. Written communication needs to be precise, brief in content and with sharply delineated positions for getting decisions from him. He also said officers must be on top of the subjects that they deal with. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When asked to give his view on whether and what kind of changes he has observed in the civil service over the last 20 years, the Finance Minister said that while the civil service attracted the best talent in the country over 20 years ago, today a lot of talented youngsters seek careers outside the Government, notably in the financial sector. He also thought that the life style of civil servants has become more ostentatious over the years. This he thought was not a positive development. Responding to a concern that even as the majority of the civil servants are competent and clean, the stereotype view of the entire civil service is shaped by a few corrupt officers, the Finance Minister said that while our civil service is not entirely meritocratic, and there may be a few exceptions, but in the long run competent and clean officers do rise to the top. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Retreat had several sessions on team building. Asked to let their imagination run riot, and indicate where they would like to be in five years, the DEA officers said they would like, in five years, India to become an acknowledged global power, India to achieve poverty reduction to such an extent that it will be unprecedented in human history and showcased as a text-book case of successful development. They also envisioned that DEA will be seen as the best run Department of Government of India and will be credited with the intellectual leadership for India 's economic transformation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Retreat featured Dr. Bimal Jalan , former Governor of RBI and Nandan Nilakani , Co-chairman of the Board of Infosys as lunch-time speakers. Dr. Jalan said that there was a time when clout was thrust upon DEA because it had the power to ration foreign exchange. In today's world of globalization and coalition politics, DEA will have to earn its clout by intellectual leadership. In a remarkably analytical speech, Nandan Nilekani agreed that there were differences in the challenges and opportunities of the civil servants and private sector managers. Unlike in the private sector, civil servants are not masters of their destiny. However, DEA, being the premier Department of the Government, must assume intellectual leadership in critical initiatives such as our transition to a low carbon economy, which, in the final analysis, is not a political or environmental issue, but an economic issue. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font> <font color="#FF6633" size="5">tiol </font> – <font color="#006600">Monday's cases </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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></b></font></b></font></b></font></b></font></strong></font></strong></font></strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Officers of DGCEI cannot be considered as law unto themselves – It was quite improper on their part in obtaining post-dated cheques and encashing the same thinking as if they are not accountable to anyone on earth : Tribunal </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ABHISHEK</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>Fashions Pvt. Ltd. had filed a Petition under Article 226 of the Constitution of India praying that the forcible collection of 13 cheques by the department from the petitioner be quashed and set aside. They further sought directions against the respondent to return the dishonored and un-deposited cheques as well as to refund Rs. 2 ,00,000 /- to the petitioner, which had been recovered in violation of provisions of Section 11A of the Central Excise Act, 1944. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Gujarat High Court while allowing the Petition <strong>[</strong><font size="1"> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2006/2006-TIOL-430-HC-AHM-CX.htm">2006-TIOL-430-HC- AHM - CX</a></font> <strong>] </strong>had the following piece of advise to the Preventive Officers of Surat -I Commissionerate – “Any tax or duty can only be levied and collected in accordance with law, namely, backed by and supported by appropriate provision empowering the authority to undertake such an exercise of levy and collection. The respondent authorities must bear in mind that they are creatures of statute and are bound by statutory law; the powers that they exercise are granted to them by the statute and there are no powers de hors the statute. Therefore, the authorities are bound to act as provided by the provisions under which they can exercise such powers. The revenue is not an organization which is entitled to retain money without sanction of law.” </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Software exports - Deduction u/s 10A - uplinking charges to be reduced from export turnover before incentive allowed; Transfer pricing - deduction allowable for enhanced income returned : ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IN this case involving a major software exporter, the Tribunal has decided many law points related to Section 10A which has of late become controversial. Some of the points which landed up before the Tribunal are : </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1) Whether uplinking charges are to be reduced from export turnover in arriving at the amount of deduction eligible under section 10A ? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2) Whether uplinking charges reduced from the export turnover are also to be reduced from the total turnover ? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3) Whether loss of one STP unit is to be set off from profits of other STP units along with deduction under section 10A ? , and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4) Whether deduction u/s 10A is allowable on the adjustment made by the assessee on the basis of the arms' length price? </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Interest on deposits made compulsorily to get BG is not income; Fee paid to RoC is capital expenditure and loss on account of exchange rate fluctuation is admissible deduction : ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">this is not a case where the assessee had made deposit of surplus money lying idle with him in order to earn interest. This is a case where the amount of interest earned from fixed deposit was due to compulsorily keeping the funds with the bank as margin money against the letter of credit issued for import of capital goods and for bank guarantee. This issue is squarely covered by the decision in the case of Karnal Cooperative Sugar Mills Ltd. So the Tribunal held that Revenue was not justified to make the impugned addition and so deleted the same .. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns tomorrow for the judgements </strong></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 time. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>