TIOL-DDT 791 · the untouched capture
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<p><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 791 </font><font size="2"><br>
28.01.2008 <br>
Monday </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Education Cess on automobile Cess – yet another view </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last week, we carried two articles by two scholarly Departmental officers who were highly critical of <strong>DDT's </strong> analysis of the cess on cess . Though we had absolutely no doubt on the issue, we had carried the pieces as they were written by erudite authorities on the subject and we wanted to maintain objectivity in our reporting. But the problem, as a Netizen reminds us, is that we have too many too good interpreters. I am reminded of an industrialist who wanted an adviser with only one hand, because he was fed up of experts who would give him an opinion and immediately say, “on the other hand…” He did not want the other hand. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of our top authors wrote in, “ Your view was perfect. E cess cannot apply to Sugar Cess and Tea Cess. No way. I will try to prove by writing a detailed article.” Even before he could send in his detailed article to prove the point, another enlightened Netizen sent us this. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The article <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6702" target="_blank">Education Cess on Automobile Cess - A critique</a> is yet another one on the ongoing debate on levy of cess post the now infamous judgment of Indo Farm Tractors and Motors Ltd <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2007/2007-TIOL-724-HC-HP-CX.htm">2007-TIOL-724-HC-HP- CX </a>. The view that ‘Tax' and ‘Interpretation' is wedded since time memorial and would continue to be so comes to mind. Though the article has raised some pertinent issues, here's an attempt at another ‘interpretation' to the subject matter with reference to few issues from the said article. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">a) The judgment of Bombay Burmah Trading Corporation <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2007/2007-TIOL-1899-CESTAT-MAD.htm">2007-TIOL-1899-CESTAT-MAD </a> finds mention but has not been discussed upon in the said article. The said judgment discusses Circular of the Board ( F.No.345 /2/2004/ TRU ) dated 10.8.04, wherein it has been clarified that, as the Education Cess was calculated on the aggregate duties of excise/customs levied and collected by the Department of Revenue, only such duties which were (a) levied and collected as duties of excise/customs and (b) both levied and collected by the Department of Revenue should be taken into account for calculating Education Cess . </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">b) The Board Circular (supra) has not been rescinded. It is also settled law that Circulars issued by CBEC are binding on Department and unless the Board decides to have a relook at the said Circular, the contents therein would be applicable on the Revenue authorities. So, what should the Revenue be doing? Appeal against the Shimla High Court Order and probably find a mention in the Limca Book of Records as the first pro revenue order to be appealed against! </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">c) Section 93 of Finance Act, 2004 states that education cess is ‘duty of excise', to be calculated on aggregate of all duties of excise including special excise duty or any other duty of excise, but excluding education cess on excisable goods. Basic duty, special duty, AED ( GSI ) ( <em>This additional duty of excise was levied on some goods of special importance under Additional Duties of Excise ( Goods of Special Importance )Act, 1957 now exempted vide notification no 11/2006- CE dated 01.03.2006 </em> ) , AED ( T&TW ) and NCCD are ‘duties of excise'. Other “duties of excise” would include Additional Excise duty on pan masala and tobacco products, duty on Medical and Toilet preparations under Medical and Toilet Preparations (Excise duties) Act, 1955 and Additional duty on mineral products is payable under Mineral Products (Additional Duties of Excise and Customs) Act, 1958. These duties would come under the ambit of duties of excise levied and collected as duties of excise (by <em> the Department of Revenue whether under the Central Excise Act or any under any law for the time being in force </em>). </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">d) There is a distinction between Cess and duty of excise/ customs. Cess is a charge levied and collected for specified / definite purposes while duty of excise/ customs is for general revenue purposes. Infact , High Court of Delhi in Pasupati Fabrics Ltd vs Union of India [2004 (165) ELT 35 (Del)] has in the context of Textile Cess levied under Section 5A of Textile Committee Act, 1963 observed that the nature of levy thereof is ‘fee' and not ‘excise' merely because words ‘duty of excise' are used in Section 5A ibid. High Court has arrived at the decision that <em>“ One has to see the real nature of levy under Section 5A of the Act. It is imposition of cess , which is prescribed. Moreover, excise duty is leviable specifically under Central Excises and Salt Act, 1944 --- </em>“ </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">e) This is the difference that apparently the Circular ( supra ) attempts to highlight. Cess may be referred to as ‘duty of excise' but the nature of levy is ‘fee' and not ‘excise' merely because the words ‘duty of excise' are used in the corresponding Act/Rules levying Cess . Cess levied under any other Act for the time being in force would not qualify as duty of excise ( support from the High Court judgment) and according to the Board Circular only such duties which are ( i ) levied and collected as duties of excise/customs and (ii) both levied and collected by the Department of Revenue need to be taken into account while computing education cess . </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">f) To be fair to the article, there could be an arguable point in the case of cess on sugar, jute, beedis , paper and paper board where the relevant Act/Rules specifically states that the cess is a ‘duty of excise'. An argument could therefore be extended that education cess will be payable on the same as brought out in the article “ Leviability of Education Cess on Sugar Cess ”. However, the High Court judgment in the case of Pasupati Fabrics needs to be considered before arriving at any conclusion qua the interpretation from the judgments referred to in the article. Having said that in the case of Automobile Cess even the provisions of Automobile Cess Act, 1984 does not refer to the said cess as ‘duty of excise' and hence one interpretation could be that there should not be any education cess payable on the said cess , the decision of Tribunal in <em>Mahindra and Mahindra </em>notwithstanding. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">g) The Supreme Court judgment <em>in the case of Baranagar Jute Mills v. Inspector, ( </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-582-SC-CX.htm">2002-TIOL-582-SC- CX </a><em>) </em>is in the context of levy of cess on jute and the relevant cess act ( Jute Manufacturers Cess Act ) makes a reference of the said levy as ‘duty of excise'. However, there is no such oblique reference in the Automobile Cess Act, 1984. So one line of argument could be to question whether the said Apex Court judgment should be extrapolated and read to infer the same in the case of levy of cess on Automobiles? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">h)
Further ‘levy' and ‘collection' are not synonymous terms as held in Somaiya
Organics vs State of Uttar Pradesh [ 130 ELT 3 ]. Further ‘levy' does not
include ‘collection' as Article 265 of Constitution makes a distinction between ‘levy'
and ‘collection' as held in National Tobacco Co of India Ltd [1978 ( 2) ELT
( J399 )] . Same view has been propounded by Apex Court in Hindustan National
Glass [2005 (182) ELT 12] wherein it has been held that there is a distinction
between levy and collection. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">So what am I coming to?? When there are case laws which go either way, interpretations fly the way one would like to see and perceive it, there are subtle efforts by the lawyers/practitioners slugging it out before Tribunal and Courts not to refer to judgments which look the other way- Tribunals overlook decisions of the Courts and Apex Courts judgments are selectively taken to suit one interests- We would continue to encounter such interpretative skills which could then continue to be countered. I for one know that even this above attempt can be ripped and rapped with another umpteen decisions (which look the other way) and support the ‘other school of thought'. But in the context of the Board Circular, the dosage by DDT in capsule 759 is just the “right” dosage for the issue. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">So whatever you say, there is always, “on the other hand…” </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Non-payment of service tax on the international travel in any class other than the economy class – Board wants report </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi Service Tax Commissionerate has reported to the Board that one of the major international airlines has deposited a service tax amount of Rs. 94.3 Crore pursuant to the investigations caused by the Commissionerate. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax levy has been made applicable, w.e.f . 1.5.2006, on international travel, other than by the economy class, by a passenger embarking from India . However, this airline has not paid any service tax on such services provided by it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board feels that such non-compliance may also exist in the case of some of the other airlines engaged in international travel of passenger by premium class. This issue has thus significant revenue implication and non compliance by such large carrier is a matter of serious concern. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So Board wants necessary action to be taken by the field formations on priority, to ensure timely recovery of service tax in all such cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Outcome of the action is to be communicated to DG (Service Tax) also, to facilitate preparation of a consolidated report to the Board. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the DGST has already written to all Chief Commissioners to furnish their reports by 08.02.2008 </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2008/freight.htm" target="_blank">CBEC's F.No . 4/Com (ST)/2008 Dated : January 7, 2008</a><strong> and </strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2008/dgstsafe.htm" target="_blank">DGST's F.No . V/ DGST /( 21)01/IT/2008/284 Dated : January 21, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prohibition on export of non-basmati rice - exports to Madagascar , Comoros and Mauritius </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The prohibition imposed on export of non-basmati rice shall not be applicable to export of 50,000 MT of rice to Madagascar through STC , and 25,000 MT of rice to Comoros and 9,000 MT of rice to Mauritius through MMTC .” </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not073.htm" target="_blank">DGFT NOTIFICATION NO. 73 (RE-2007)/2004-2009 Dated 24th JANUARY, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exemption notification – customs – textiles - amended </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Sl No. 167 of notification No. 21/2002-Customs, dated the 1 st March, 2002, the following goods are exempted. </font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top" width="54"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">167. </font></p></td>
<td valign="top" width="91"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">52 or any Chapter </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) Fasteners </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Inlay cards </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) Shoulder pads; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) Buckles; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) Eyelets </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) Hooks and eyes </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) Rivets </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(h) Collar stays, collar patties, butterfly and other garment stays including plastic stays </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Fusible embroidery motifs or prints </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(j) Laces </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(k) Badges including embroidered badges </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(l) Embroidery threads </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(m) Sewing thread </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(n) Stones (other than precious and semi precious) </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(o) Sequin </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(p) Tape, Elastic tape and hook tape of width not exceeding 75 mm </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(q) Velcro tape </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(r) Cord and cord Stopper </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(s) Toggles </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(t) Polywadding material </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(u) Stud; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) Elastic cloth and Elliptic band </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(w) Quilted wadding materials; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(x) Beads for embroidery; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(y) Sample fabric of total length up to 500 meter imported during one financial year; </font></p></td>
</tr>
</table>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now after (y) a new item (z) “printed bags” is added. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similarly Sl No. 168 of the Notification exempts Lining and inter-lining materials falling under Chapters 43, 52, 54, 55, 56, 58 or 59. Now Chapter 60 is added to the list. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2008/ctariff08_013.htm" target="_blank">NOTIFICATION NO. 13/2008 Dated 24th JANUARY, 2008 </a></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" size="2">– Tomorrow'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"><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></strong></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">High Court quashes transfer of file from one ITO to another – time spent in litigation not excluded from limitation : AP High Court </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>High Court stays the transfer of a file from one ITO to another; the transferred ITO ignores the High Court order and proceeds with the assessment. Later on the High Court quashing the transfer, the old ITO proceeds with assessment. Tribunal rules that it is time barred; High Court concurs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Income Tax Appellate Tribunal, Hyderabad Bench, by its order dated 23.01.1995, referred the following question, which according to it covered the controversy raised in the four questions proposed by the Revenue, for the opinion of this Court under Section 256(1) of the Income Tax Act: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether on the facts and circumstances of the case, the Tribunal, is right in holding that the extended limit as provided under S.153 ( 1)(b) of the Income Tax Act, 1961 is not available in this case </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Revenue wants stay of order favourable to it – application dismissed: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS is a classic case of how the litigation loving Revenue routinely files appeals and when once somebody prepares a paper, he is the Supreme Court – no higher authority bothers to check or read the draft. The Department has surpassed itself in making mindless appeals. CBEC field formations also do not appear to be taking a cue from the sustained drive of the key High Courts of Delhi and Mumbai against frivolous appeals being filed by the Income Tax Department which has been suffering costs in eight out of 10 orders. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the Department is praying for a stay against an order which is favourable to it. </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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Gas Turbine Fuel manufactured and used captively for production of electricity which in turn is used for manufacture of exempted goods – Benefit of captive consumption available : Tribunal </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants are manufacturing Gas Turbine Fuel. This GTF is used as fuel by them in their Captive Power Plant ( CPP ) for manufacture of Electricity. This Electricity in turn is used in the manufacturing operations viz. manufacture of dutiable final products. Incidentally, they also manufacture exempted goods. They also use this electricity to light up the residential quarters of their workers, the canteen & guesthouse etc., all of which can neither be considered to either belong to the dutiable or exempted category. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department finds this funny. What - manufacturing an excisable item GTF , producing electricity & lighting up residential quarters, canteens, guesthouses? Okay, so they also use this electricity to manufacture dutiable goods & also exempted goods – but what does the Revenue earn in this entire exercise – no doubt, Excise duty on the dutiable final product. Isn't that sufficient? No. They want Central Excise duty also on GTF [Gas Turbine Fuel] manufactured by the assessee and captively utilized in producing electricity which in turn is used for manufacture of exempted goods & used in non-excisable activities. </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 day. </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>
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