TIOL-DDT 804 · 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
804 </font><br>
</strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">14.02.2008<br>
Thursday</font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Works
contract service – ongoing projects – Delhi High Court issues
notice</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The controversial
CBEC Circular No. 98/4.1.2008 in which the Board had clarified that the assessees
who have classified their service under other category of taxable service
‘Commissioning or Installation Services’, ‘Commercial or
Industrial Construction Services’ and ‘Construction of Residential
Complex Services’ and paid the service tax accordingly prior to 01.06.2007,
shall not be entitled to pay the tax under the ‘works contract services’,
had drawn a lot of critical comments from our enlightened contributors. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The unanimous
opinion was that the Board was patently wrong.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue came
up before the Delhi High Court yesterday and the High Court issued notice
to the Government and the matter is to come up again for hearing on 26th March
2008.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instead of cutting
a sorry figure before the High Court, the CBEC should consider withdrawing
the controversial circular and tell the High Court that the circular has been
withdrawn.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs
duty concession for manufacture of excisable goods – reduce the hassles
</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC has received
representations from trade and industry requesting for amendment to the procedure
to avail Customs Duty Concessions under the Customs (Import of Goods at Concessional
Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.</font></p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
A manufacturer intending to avail of the benefit of an exemption notification,
has to obtain a registration from the (Assistant / Deputy Commissioner of central
excise) having jurisdiction over his factory. A manufacturer who manufactures
excisable commodity (unless he is exempted from whole of excise duly) has to
be registered with central excise authorities to take a registration again for
this purpose is duplication of work and waste of time. Further, there is no
time limit specified for giving the registration. Therefore, it is suggested
to scrap this procedure as it does not serve any useful purpose.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
A manufacturer who intends to import any goods for use in his factory at concessional
rate of duty, shall make an application to this effect to the AC/DC indicating
the estimated quantity and value of such goods to be imported, particulars of
the notification applicable on such import and the port of import the application
is required to be filed port wise - the material asked for import at a port
cannot be received at any other port. Further, the manufacturer has to execute
a bond under the Customs (Import Of Goods At Concessional Rate Of Duty For Manufacture
Of Excisable Goods) Rule 1996, for difference of duty (normal rate of duty minus
concessional rate of duty as per notification) and an annexure (iii), giving
all the particulars of import consignment for each and every consignment. Though
there is an option to file an application for a quarter indicating his estimated
requirement, this procedure is also to be routed through the Superintendent's
office, which creates duplication of work, causing delay in countersigning annexure
(iii) by AC/DC and subsequently incurring demurrage on import consignment. Therefore,
it is suggested that the certificate should be for annual consumption and the
entire process should get completed at the range level. The verification of
consumption of imported inputs, quantity reconciliation etc. should be done
by the audit team which visits all units annually.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii)
The manufacturer has to give information of the receipt of the imported goods
in his factory, within two days of such receipt to the superintendent of central
excise having jurisdiction over his factory. Assessee has to intimate receipt
of all imports within 24 hrs to the excise authorities which is often impractical,
maintain account indicating the quantity and value of goods imported, the quantity
of imported goods consumed for the intended purpose, and the quantity remaining
in stock, bill of entry wise and shall produce the said account as and when
required by AC/DC. Traceability of input, bill of entry wise within the factory
is tedious and impractical. Cost of compliance is very high as it increases
the paper work and avoidable interaction with excise officials. Therefore, it
is suggested that the intimation should be given to the excise office at the
end of each month/quarter as shipments are arriving everyday and requires sending
documents on a daily basis. Maintaining separate accounts is difficult, time
consuming and adds to the costs. A simple declaration of end use should suffice.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Board wants the field officers to examine the suggestions and give the views,
stating whether such relaxation in the procedure may lead to any loss of revenue.
A list of cases booked regarding the misuse of Customs (Import of Goods at Concessional
Rate of Duty for Manufacture of Excisable Goods) Rules. 1996 should also be
provided.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
wants the field reports by 31.3.2008.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2008/concessions.htm">CBEC
F.No.267/03/2008-CX-8 dated the 6th February 2008</a></strong></font></p>
<p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>North-East
exemption – Exemption cannot be denied for depositing duty amounts in
interest bearing accounts - Senior officials of the department are expected
to interpret exemption notifications intended to further the developmental interest
of a region in a more pragmatic and liberal way - CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As
per Notification No.8/04-CE dated 21.01.04, excisable goods manufactured in
North-Eastern states are exempted in a complicated procedure. The exempted duty
has to be deposited in an escrow account and used for investment in the NE States.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
<font color="#FF3333"> <strong>learned</strong></font> Central Excise Commissioner
found fault with an assessee for depositing this amount in an interest bearing
account and denied the entire exemption benefit to an assessee, demanding a
duty of Rs. 50 Crores and imposing a penalty of Rs. 50 Crores.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Kolkata bench of the CESTAT yesterday set aside this order of the Commissioner
observing,</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Senior
officials of the department are expected to interpret exemption notifications
intended to further the developmental interest of a region in a more pragmatic
and liberal way.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apparently,
this Commissioner was against all proclaimed policies of the Government –
He ensured that the exemption granted for developing industrialisation of the
North Eastern States was frustrated; he ensured that funds for investment in
these states were locked up in litigation; he ensured that the assessee is made
to run from pillar to post to escape from his 100 Crore demand. Who are these
revenue officers serving? Unfortunately many of the Revenue officers in the
country are on a full time job of killing the industries which lay the golden
eggs for them. The FM can try with a gamble. He can close down the department
for one year – give the taxmen a one year paid holiday (pay them 10% more
for not coming to office) – he will find that the Revenue has gone up
by at least 40%.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming
back to the case, the Tribunal observed that the Adjudicating Commissioner has
taken a very mechanical view of the matter. This order was delivered by the
Kolkata bench of the CESTAT yesterday and to create a record of sorts, we wanted
to carry the order today. But though we have the text of the order with us,
we are waiting for a certified copy and will bring you the full order in a couple
of days.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Theft
of four sculptures and Ganesh idols – CBEC alerts field.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Archaeological Survey of India has reported the theft of four stone sculptures
from the premises of "A Miniature Stone Saiva Temple (Jagatsukh), a centrally
protected monument in District Kullu (Himachal Pradesh) and the theft of a Ganesh
idol.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC
has alerted the field about the theft to the field to watch out if these are
exported.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ten
Special Economic Offences Courts for Delhi</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Delhi
Chief Minister Sheila Dikshit has announced creation of 10 special Courts for
economic offences. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These
courts are to be set up as per the directions of the Union Ministry of Finance
to try cases relating to Customs, Central excise, income tax and sales tax.
101 posts in different categories have been sanctioned which would entail an
annual financial implication of Rs. 1.6 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Meanwhile
the CESTAT is running short of judges. Will the Finance Ministry do something
to fill up the vacancies?</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INDIAN
STEEL SECTOR – UNDER PRESSURE</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Moosa
Raza, President, INDIAN STEEL ALLIANCE, says,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Iron
ore which was fetching USD 60 in March 2007 climbed to USD 150 in December 2007
– a rise of 150% in nine months. The last quarter of 2007 saw a sharp
rise of USD 50 in the iron ore prices. China’s insatiable hunger for Indian
iron ore has been the major factor in this stupendous rise.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even
the public sector mining company, The National Mineral Development Corporation
(NMDC), increased its prices by over 47%, and that too with retrospective effect
from 1st October 2007. All the steel manufacturers who have long term agreements
with NMDC have been adversely affected. They have to absorb the cost impact.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
prognosis for long term prices of iron ore too is not very favourable. Economists
are predicting an increase of 50 – 70% even in the LTA prices during 2008.
Spot prices are unpredictable.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If
one looks at the coking coal prices, the price increases have been even more
appalling. In the last quarter of 2007 alone, the price went up from USD 160
to USD 220, an increase of 37%. In the 9 months from April 2007 to January 2008,
the prices rose from USD 96 to USD 220. Coking coal price increase alone has
increased the cost of production of steel by about Rs.2,000 per tonne!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
situation with reference to Coke prices is almost incredible. Prices that were
ruling at USD 280 in April 2007 increased steeply to USD 500 per tonne in a
short span of 8 months – an increase of 125%. China, the major source
of coke has imposed an export tax on coke to help the domestic steel industry.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifteen
percent of the steel produced in India is through the induction and electric
furnace route. Steel scrap is the main input for this. Scrap prices have gone
up by almost 36% in the quarter ending December 2007, impacting the cost of
production in this segment significantly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Other
inputs into steel making too have not escaped price escalation. Ferro manganese
has registered an increase of 40% in the last quarter of 2007 – from Rs.51,000
to Rs.71,000 per tonne. Silico manganese price increased from Rs.43,000 to Rs.62,000
– registering a rise of 40%. Impact in steel cost is around USD20.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At
a time when entrepreneurs are going in for both brown field and green field
expansions and steel sector is attracting the largest amount of investment in
India, it would be difficult for the steel manufacturers to absorb all the cost
escalation in the raw materials. The need of the hour is to enable the industry
to expand and produce more by assuring them of iron ore security and raw material
availability. This is the best way of bringing down prices.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
market economy where the prices of raw materials are governed by export and
other official policies, how long will the steel manufacturers continue to absorb
the huge escalation in the cost of production without affecting their margins
and impacting on their ability to expand is moot question.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will
someone listen to him?</font></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Jurispruden</font><font color="#FF6633" size="5"> tiol </font></strong><font color="#006600" size="2"><strong> – Tomorrow ' s cases </strong></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"><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 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></strong></font></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>offence
case – when prosecution is quashed, on same set of facts, accused cannot
be punished in Departmental adjudication – Revenue appeal dismissed :
Madras HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is an admitted case that there is no variance in the charges levelled and the
acquisition made against the first respondent herein before the Customs Excise
and Service Tax Appellate Tribunal, which was the subject matter of the Criminal
Revision before this Court in which the first respondent was discharged. The
basic material which formed the basis for levelling the charges against the
first respondent herein, before this Court in the criminal proceedings and before
the Tribunal are verbatim same, neither there is a deletion nor addition in
it. In those factual circumstances of the case, the Tribunal allowed the appeal
by stating that on the very same charges levelled against the first respondent,
this Court, in the Criminal Revision, discharged him from all the charges and
hence, the first respondent cannot be thrust with penalty in a sum of Rs.5,00,000/-,
as there was no material to connect him with the alleged charges.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When
the attempt of the appellant to establish the charges levelled against the first
respondent has failed and this Court has also categorically viewed that there
was absolutely no material adduced by the appellant to connect the first respondent
in the alleged smuggling activities, we are of the view that the Tribunal is
correct in allowing the appeal filed by the first respondent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And
there is no question of law, much less substantial question of law arising to
admit this appeal. Accordingly, this Civil Miscellaneous Appeal is dismissed.
There will be no order as to costs.</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>Finished
goods damaged in floods but later reconditioned and cleared on duty payment
– by lodging a claim with insurance and recovering damages assessee has
not violated any Excise Rules – Finding a Prima facie case, Tribunal waives
pre-deposit of penalty</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">26th
July 2005 spelt disaster for Mumbaikars. Unprecedented rains on that day caused
immense loss of lives and property. Ultimately, instead of blaming the benevolent
Rain gods & the Municipal Corporation for not taking enough measures to
prevent water logging at low lying areas in and around Mumbai, the ones held
responsible were the mushrooming slums, plastic bags & the Mithi river which
had not done its duty of carrying the excess rain water into the sea!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nothing
has changed except some bombastic statements by the ruling parties and some
superficial disaster management plans that by now are conveniently relegated
to history.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
all this, there were some manufacturers who lost everything. It will be surprising
to hear that even today there are some duty remission applications pending before
the competent Central Excise authorities.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally
pending remission applications should send jitters to the jurisdictional range
Superintendent. But he is learned man! Noticing that the remission applications
were pending, he had issued demand notice on the quantity of goods that were
lost/destroyed by alleging that the goods were clandestinely removed by the
assessee – great idea that for safeguarding government revenue!</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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Can
RWAs be termed as charitable u/s 2(15)? - Are they entitled to registration
u/s 12A? - ITAT holds they are entitled to exemption under Income Tax Act</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE
issue before the Tribunal was : Can Resident Welfare Associations (RWA) also
be said to be formed for charitable purposes within the scope of Sec.2(15) and
entitled to registration u/s 12-A for the purpose of claiming exemption under
the Act? Though it undoubtedly depends on the objects of the association but
even if the objects are charitable, can it be termed as a charitable institution
keeping in mind the fact that such RWAs usually cater to a small select community
living within a locality. The Tribunal answered the questions in the affirmative
in favour of the association and declared it to be a charitable institution
entitled to registration u/s 12-A holding that it caters to a section of the
public which is sufficient to qualify the objects to be of general public utility
as long as it does not cater for personal benefits of a particular individual.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until
tomorrow with more DDT</font></font></p>
<p align="justify"><font color="#FF6666"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice Day.</font></font></p>
<p align="justify"><font color="#FF6666"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to</font></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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