TIOL-DDT 801 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 801 </font><br>
11.02.2008 <br>
Monday </strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Assessees beware – It's revenue times </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>In-depth revenue analysis of selected taxable services ordered </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board feels that certain services having major revenue potential are either showing a negative growth or showing a growth rate much less than expected. Board has listed some services which have limited number of taxpayers, such as ( i ) Telecom Services, (ii) Stock Brokers Services/Commodity exchange, (iii) General Insurance Services, (iv) Insurance Auxiliary Services, (v) Air Travel Agent Services, (vi) Tour operator Services, (vii) Broadcasting Services, (viii) Transport of goods by Air Services, (ix) Transport of goods through pipe lines, (x) Port Services, (xi) Banking and other financial Services, (xii) TV/Radio programme production Services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC wants the Commissioners and Chief Commissioners to do an in-depth analysis to ascertain the reasons for low growth. The idea is that with limited resources, if efforts could be concentrated in finding out the reasons for such inadequate growth in respect of these services and adequate steps could be taken to augment revenue during the last quarter of the current Financial Year, it may lead to better overall revenue performance. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So these service providers may get friendly calls from the polite Service Tax officers soon and you will find Revenue shooting up in the next 45 days. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the field bosses to do the following </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Intensive audit (if not done already) including special audits (if felt necessary) to verify be correctness of Cenvat Credit availment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Intensive scrutiny of the last four returns – from April 2006. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Contact the taxpayers (preferably through association) and ascertain the reasons for low growth as well as the projected revenue during the last quarter. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Further, in certain cases (like stock brokers, telecom, general insurance etc.) the information about the turnover of the service providers are available with third party sources, such as regulatory authorities, stock exchanges, Income tax department etc. Attempt should be made to obtain such third party data and compare the same with return data. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Further published/printed information in respect of service provider providing these services may also be collected and compared with the information furnished in the service tax return. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The growth in revenue from the selected services is being monitored at the level of Secretary (Revenue). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So Action Taken reports have to be sent to DGST on 1.2.08 and 1.3.08, who will forward it to Member (Service Tax) who will ……? </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/2008/analysis.htm" target="_blank">Board's F. No <strong>. </strong>F.No . 137/72/2007- CX.4 Dated : January 4, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>And now Service Tax Divisions </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CBEC has approved creation of Service Tax Divisions at Jaipur, Raigad, Guwahati
and Trivandrum and a Service Tax range at Kota . The Chief Commissioner will
have to find manpower from his existing strength as of now and the Directorate
of Personnel & Management will subsequently look into the feasibility
of providing additional manpower by re-allocation of staff. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What does it mean to the assessee? Nothing much! </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/2008/range.htm" target="_blank">CBEC F.No . 137/270/2007- CX.4 Dated : January 21, 2008 </a></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Service Tax on Escort Services </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Clara </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>An escorted Netizen </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Little knowing the damage caused, National dailies have no qualms in carrying advertisement of various Escort services provided by someone called Nancy, Gabrina , Julie, Nikita, Tyra , Celina, Mallika , Nicky, Laila & the like. These Escort services are available round the clock and the payments are to be made either by Cash (any currency) or by Credit Cards. Even online payments are accepted by these “service providers” who promise 100% satisfaction & service that would refresh one's body & soul! Importantly, if the client prefers a Russian or Spanish or an Australian escort, these service providers would be more than happy to provide the same, albeit for a small “raise” in the service rates. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A quick visit to these “active” websites after googling would reveal that these providers accept “donations” & the rates of which shoot up from 15K for a two hour service to 30K for an overnight one. Okay, let me clarify – “K” stands for Rs.1000 /- <em>you morons! </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Considering that the national dailies and afternoon tabloids publish such advertisements with photographs of scantily clad models and there being no objection either from the Moral Police or the Advertising Standards Council of India or for that matter any Women's organization, it can be presumed that the services being offered are perfectly legal and not at all tainted ones as you were probably imaging. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If this be so, since in these escort services, there is a client and a service provider, it would be prudent for the Central government to bring them within the ambit of Service Tax starting this year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After all, Service Tax does not necessarily require providing a “ <em>tangible service </em>”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nonetheless, if these service providers do not pay Service Tax, either the Central Government can bring in an Amnesty Scheme or allow the Central Excise authorities to carry out “provisional attachment” of property. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We Indians have grown up – <em>Chak De! </em></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">– 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"><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"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6633">Inputs supplied by 100% EOU – Credit of Education Cess component cannot be denied to recipient manufacturer – Tribunal delivers a much-awaited decision </font></font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">PRESCRIBING</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> a formula for arriving at the Cenvat credit quantum that a consignee manufacturer is eligible to take in respect of inputs or capital goods produced or manufactured by a hundred percent EOU was for the first time laid down in rule 3 of the Cenvat Credit Rules, 2002 thanks to the case lost by the Revenue in the case of Vikram Ispat Ltd. [ <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2002/2002-TIOL-32-CESTAT-DEL-LB.htm">2002-TIOL-32-CESTAT-DEL-LB </a>]. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the Revenue wants a further adaptation of the “ <em>truncated </em>” clause to suit its needs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The <em>adaptation </em> being
that it wants to deny the Credit of Education Cess paid by these 100% EOU's
on the ground that the said formula now contained in rule 3(7)(a) of the
Cenvat Credit Rules, 2004 nowhere refers to the same. And the further
reasoning given being - that rule 3(7) of the Cenvat Credit Rules, 2004 begins
with the following <em>non-obstante </em> clause “ <em>Notwithstanding anything
contained in sub-rule (1) and sub-rule (4) ... </em>” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter is before the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tail Cess: We suggest that it would be in the fitness of things that the Board gracefully takes cognizance of this order and brings out a Circular on the lines contained therein. <strong><font color="#FF6633">If wishes were horses…</font> </strong></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Bank guarantee furnished to secure due performance of export obligation cannot be regarded as payment of duty – refund - limitation not applicable : Madras HC </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">Commissioner of Customs has filed this appeal with the following two <strong><em><font color="#FF6633">substantial </font></em></strong> questions of law : </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether the Tribunal is right in holding that time limit is not applicable to the refund of bank guarantee for Rs.12 ,58,190 /- being the difference in duty between actual rate of duty and concessional rate of duty by enforcing the bank guarantee realised by the appellant on 03.09.2001 and refund claim was filed only on 01.06.2005, i.e., beyond the period of six months as stipulated in section 27 of the Customs Act, 1962? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Whether the Tribunal is right in not considering the legal issue that whether the respondent is entitled for refund when the respondent has not discharged the export obligation within the stipulated time? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court noted that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. It has been repeatedly held that the bank guarantee furnished in order to secure the due performance of the export obligation cannot be regarded as payment of duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <strong><font color="#FF6633">If that be so, the invocation of section 27 of the Customs Act, which provides for refund of any duty and interest, if any, paid on such duty in pursuance of an order of assessment, is misconceived, as there is no payment of duty in pursuance of an order of assessment. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The bank guarantee has been furnished in order to safeguard the interest of the revenue in the event of the importer committing default in performing the export obligation cast upon him for the purpose of availment of concession in importing the capital goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The differential duty was neither levied nor demanded. </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">Ranbaxy Laboratory loses Transfer Pricing case; ITAT upholds invocation of powers u/s 263 by CIT and finds many holes in assessee's audit report and method to calculate net margin </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRANSFER</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>PRICING is a new area of taxation within the fold of Income Tax Act. And the latest Tribunal decision has gone <strong><font color="#FF6633">against the billion-dollar case of Ranbaxy Laboratories Ltd</font>. </strong> In a lengthy order, but in-depth analysis of voluminous facts, the Bench, headed by the President, Mr Vimal Gandhi , has <strong><font color="#FF6633">upheld the invocation of powers u/s 263 by the CIT </font></strong> and found the AO's order erroneous and prejudicial to the interest of revenue. Although the Tribunal found <strong><font color="#FF6633">many instances of non-application of mind by the AO to the facts of the case</font> </strong> but it has also clarified that the Bench does not mean any disrespect to the AO nor any motive is attributed while pointing out errors in the assessment order. While dismissing the contention of the counsel of the assessee that the AO is competent and well within its power not to refer the international transactions to the Transfer Pricing Officer ( TPO ) as per the Board's Instruction No 3 of 2003, the Tribunal once again reiterated that this issue has been settled by the Delhi HC in the Sony India case ( <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2006/2006-TIOL-323-HC-DEL-IT.htm" target="_blank">2006-TIOL-323-HC-DEL-IT</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2006/2006-TIOL-323-HC-DEL-IT.htm"> </a>) and the Special Bench decision in the Aztac Software and Technology Services case ( <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=53&filename=legal/itat/2007/2007-TIOL-210-ITAT-BANG-SB.htm" target="_blank">2007-TIOL-210-ITAT-BANG-SB </a>) that the Board's direction to the AO to refer cases involving international transactions <strong><font color="#FF6633">exceeding Rs five crore is binding on the AO. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While allowing the order of the CIT for fresh examination of facts the Tribunal observed that the AO not at all applied its mind to the details of the assessee's international transactions with 17 of its Associated Enterprises ( AEs ) located in several continents nor paid any attention to the <strong><font color="#FF6633">unique characteristics of the transactions.</font> <font color="#FF6633">While finalising the selection of tested party, the AO should have taken into account many factors, including different geographical markets and different types of risks accounted by various sorts of contractual obligations entered into by the assessee. Even the selection of comparables was not done properly besides choosing a wrong method of calculating profit margins.</font> </strong>The AO also did not attach the due important to the FAR analysis. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Export of services - Service providers are eligible for refund of un-utilised credit under Rule 5 of Cenvat Credit Rules even for exports made prior to 14.3.2006, if refund claims were filed after 14.3.2006 : CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ARE service providers eligible for refund of un-utilised credit under Rule 5 of Cenvat Credit Rules even for exports made prior to 14.03.2006? ‘YES', says CESTAT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sometimes enthusiastic departmental officers try to read conditions, which are not there in the Statute, just to reject any benefits the assessees are eligible otherwise and derive a vicarious satisfaction. And aggrieved assesses have no option but to knock at the doors of higher appellate forums for reddressal . This is exactly what happened in the case </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>You can see this case in our <strong>ST se GST tak </strong> tomorrow. </em></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p>
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