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<div align="justify"><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong>TIOL-DDT
829</strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
20. 03. 2008<br>
Thursday</font></strong></div>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods
Transport Agency – not output service, but credit allowed for capital
goods? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is really difficult to make laws. It is one thing to make laws and another one
to update them to suit your needs, mainly to overcome irritating judicial interpretations.
The irresponsible and unconcerned judiciary in this country unfortunately does
not have the capacity to understand to the great legal minds of our bureaucrats
and they naughtily interpret the laws without understanding the Babus’
logic! More sadly, the system does not allow the judges to be under the administrative
control of the bureaucrats. So the only thing that the dynamic babu can do to
undo judicial over-action is to undo judicial decisions, if needed, by retrospective
legislation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
when they amend the laws, quite often they forget the cascading effects. The
same provisions must be sitting silently in some other corner of your vast and
complicated laws and it is humanly impossible for the babus to keep track of
all the places where the same provisions exist.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
controversial Service Tax on goods transport by road has generated more litigation
than revenue. As these columns have repeatedly analysed, the Service Tax on
outward transport was always an input service, but many in the department could
not digest the concept that outward transport can be input service. The “out”
and “in” created the confusion and the department found support
in a couple of CESTAT benches, though the issue is before the Larger Bench.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe
to set at rest the confusion, the Government has in this budget amended the
Cenvat Credit Rules to stipulate that input service is only outward transport
up to the “place of removal”, not “from the place of removal”.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
there is another issue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Can
the Cenvat Credit be used to pay the Service Tax on GTA?</strong> Department
had always taken the stand that the consignor or consignee paying Service Tax
on GTA is a service provider for the limited purpose of paying Service Tax,
but he cannot utilise the Cenvat Credit for payment of this tax and it should
be paid in cash only. What’s the difference? THE EGO OF THE DEPARTMENT!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Several
benches of CESTAT have unanimously held that tax can be paid from the credit
account – and not a single dissenting bench! But government does not like
such unanimity among CESTAT members. So the law was amended in this budget.
Now GTA is out of the purview of output service and so credit cannot be used.
The changed definition of output service reads as,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"output
service" means <font color="#FF6633">[any taxable service, excluding the
taxable service referred to in sub-clause (zzp) of clause (105) of section 65
of the Finance Act, provided by the provider of taxable service]</font>, to
a customer, client, subscriber, policy holder or any other person, as the case
may be, and the expressions ‘provider’ and ‘provided’
shall be construed accordingly;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzp,
as is well known, is our goods transport agency. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
far so good, but see the definition of Capital Goods under the Cenvat Credit
Rules. It includes </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(B)
motor vehicle registered in the name of provider of output service for providing
taxable service as specified in sub-clauses (f), (n), (o), (zr), <font size="3"><strong><font color="#000000">(</font>zzp<font color="#000000">)</font></strong></font>,
(<font color="#000000">zzt</font>) and (<font color="#000000">zzw</font>) of
clause (105) of section 65 of the Finance Act;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That
means a truck is Capital goods for one who provides the GTA service and so he
can take credit on the excise duty paid on the truck, but GTA is not output
service and so what would he do with that credit? </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Such
contradictions are bound to occur when you make your laws so complicated! </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">All
Industry Rates of Duty Drawback, 2008-09 – Govt invites data</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under
the Duty Drawback Scheme, the duties (Customs & Central Excise) paid on
inputs and service tax paid on input services used in the manufacture of export
goods are refunded to the exporters in the form of drawback. The drawback rates
are worked out and notified every year after taking into account the budgetary
changes in the duty structure and other relevant facts.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
exercise is underway in the Ministry to re-work and revise the rates of duty
drawback.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All
Industry Rates of Duty Drawback are worked out by considering the consumption
of input materials and the incidence of duties on these input materials. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since
the work is time bound, they want the information in the prescribed proforma
by 5th April, 2008. The information may also be sent by e-mail at <strong>mofdbkdatabank@hotmail.com.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Like
the previous year, for formulation of All Industry Rates of Duty Drawback, 2008-09
the Government has constituted a three-member Committee consisting of Shri Saumitra
Chaudhuri, Member, Economic Advisory Council to Prime Minister, Shri S.B. Mohapatra,
Secretary to the Government of India (retired) and Shri T.R. Rustagi, Chief
Commissioner of Customs & Central Excise (retired). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If
you wish to make a presentation before the Committee, a time table may be worked
out and intimated in advance so that the same can be organized.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/do_duty_dback_0809.htm" target="_blank">D.O.F.NO.
609/48/2008-DBK Dated : 18th March, 2008 </a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central
Excise and proprietor and other changes in the rules – Board explains.
</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See
yesterday’s <strong>DDT</strong> for a detailed analysis on the proprietary
issue in Central Excise. Board has also explained the provisions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification
no. 7/2008-CE(NT) amends Rule 11(2) of the Central Excise Rules, 2002. A new
proviso has been inserted in this sub-rule to provide that in case of a proprietary
concern or a business owned by Hindu Undivided Family, the name of the proprietor
or Hindu Undivided Family, as the case may be, shall also be mentioned in the
excise invoice issued by a manufacturer or dealer. Notification no. 16/2008-CE(NT)
has been issued to amend the format of Registration Certificate to incorporate
the name of the proprietor or the Hindu Undivided Family in the Registration
Certificate issued under rule 9 of the Central Excise Rules, 2002. Further,
relevant instructions of the Application Form for Central Excise registration
have also been amended. These amendments are being carried out to ensure that
in case of a proprietary concern or HUF, the names of the persons who are actually
responsible for manufacture, clearance etc., are available with the Department.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
this regard, it may be noted that the proprietorship firms that are already
registered with the Department do not have to file a fresh application. Since
the name of the person seeking registration is available at sl.. No. 2(iii)
& 13 of the application form, fresh registration incorporating the name
of the proprietor may be issued suo moto. In case of partnership firm, no new
registration certificate is to be issued, however, the name of all the partners
are to be incorporated in the application form.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Attention
is also invited to notification no. 15/2008-CE (NT) dated 1st March, 2008,
wherein the formats of ER-1 and ER-3 returns have been amended. The table
at sl. No. 3 of returns relating to – ‘details of the manufacture,
clearance and duty payable’ have been amended to insert two new columns
to seek information in respect of opening and closing balance of quantity
of goods manufactured and cleared. Two new rows have been inserted in the
tables ( sl no. 8 of ER-1
& sl. No. 6 of ER-3) relating to- ‘details of CENVAT Credit taken
and utilized’ to seek information on (i) credit utilized for payment
of amounts in terms of rule 6 of CENVAT Credit Rules, 2004 and (ii) credit
utilized for other payments. A new column has been added for inserting serial
numbers to the existing rows. Similarly, in the tables relating to-‘details
of other payments made’ a new row has been inserted in the table for
seeking the ‘total’ of various payments made. These changes have
been made for ease of calculation at the time of scrutiny of returns. This
notification has been made effective from 01.04.2008. Accordingly, the ER-1
and ER-3 returns for the month of April, 2008, should be in the revised format. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
amendments carried out vide the above referred above notifications may be brought
to the notice of the field formations as well as trade and industry, especially
the fact that excise invoices issued by a proprietor or HUF, must show the name
of the proprietor or HUF, as the case may be, in addition to the business name.
For example, if Mr. Ram Prasad is the proprietor of a business by the name of
M/s Star & Co., in that case in addition to the name of M/s Star & Co.,
the name of Mr. Ram Prasad, Proprietor should also be printed on the excise
invoices.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Board should be grateful to Justice Abichandani, former President of CESTAT
for bringing this issue to light. </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/2008/instruct02.htm" target="_blank">CBEC’s
F. No. 201/14/07-CX-6 Dated : 17th March, 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">– 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"><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"><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 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"><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"><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 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></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></b></font></b></font></b></font></b></font></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></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>Central
Excise</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Another
Revenue appeal bites dust as Revenue did not understand what the order of adjudicating
authority meant!</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SOME</strong>
time back an assessee had sent across an order passed by the Commissioner <strong><em>for
our eyes only</em></strong>. No, that order did not drop or confirm any
duty demand or did something <strong><em>miraculous</em></strong> so as to have
a mention in TIOL. But then, nothing ought to go waste! We are using bits
& pieces of the same for today’s story.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
that order, the assessee had succeeded before the Tribunal in his submission
that the demand was hit by time bar. Accordingly, the matter was remanded
to the adjudicating authority for working out the duty liability for the normal
period. Incidentally, the assessee had already made a payment of Rs.6 lakhs
when the case was booked.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To
cut the long story short, in de novo adjudication, the revised duty demand worked
out to a meager Rs.2,80,058/- & <strong><em>the adjudicating was mighty
worried that a refund may become due.</em></strong> Hence he imposed a
penalty of Rs.1 lakh on the Managing Director & Rs.2,19,942/- on the company. Why
such an <em><strong>odd, sorry even</strong></em>, amount of penalty you may
ask – add the three amounts & the total stands at Rs.6 lakh. We
do not know what happened thereafter.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exempted
and dutiable services – common input services - Not maintaining separate
records cannot be a ground for denying Input Service Credit in respect of service
tax paid on services referred in Rule 6(5) of CCRs, 2004 : Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RULE
</strong>6 of the CCR, 2004 cannot but continue to hog the limelight.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sub-Rule
6(5) of the Cenvat Credit Rules, 2004 reads thus –</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(5)
Notwithstanding anything contained in sub-rules (1), (2) and (3), <strong>credit
of the whole of service tax paid</strong> on taxable service as specified in
sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg),
(zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance
Act <strong>shall be allowed</strong> unless such service is used exclusively
in or in relation to the manufacture of exempted goods or providing exempted
services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is the submission of the Appellant Revenue that the respondents have not maintained
separate records for utilization of the credit taken and the services received
by them for exempted and for the non-exempted categories; that the provisions
of Rule 6(3)(c) will be applicable and even if the credit has been allowed under
rule 6(5), the respondent is entitled to utilize only 20% of the amount of credit
that is available to him as a credit. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
Tax.</font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excise
duty and sales tax cannot form part of 'total turnover' u/s 80HHC(3), otherwise
formula becomes unworkable : ITAT Special Bench</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS
</strong>Special Bench has decided on as many as 16 grounds:- </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CIT
(A) has erred in deleting addition of Rs.38,64,109/- debited to year's revenue
account as value of stores written off by holding that it is for the A.O. to
prove that consumable stores had either not been used or individually costed
less than Rs.5,000/- ignoring, in the process, the findings in assessment that
claim could not be established on record. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">The
Tribunal held:</font></strong> The assessee has not furnished any evidence to
prove that the above consumable stores have become obsolete during the year
under consideration. At the same time, considering the volume of the assessee's
business wherein the assessee's turnover exceeded Rs.6000 crores, the possibility
of some consumable stores becoming obsolete cannot be ruled out. Further, the
obsolete stores would also have some realizable value. In the case of the assessee
the items written off included 1246 M .T. of coal. Even if the coal is dust
or rejected, it has some realizable value. The ld. counsel for the assessee
has claimed that whenever consumable stores are sold, the amount realized are
credited as other income in the assessee's books of account. However, the learned
counsel for the assessee could not point out whether any amount on the realization
of 1246 M .T. of coal and other consumable items written off in the year under
consideration was shown as misc. income on its realization in this year or any
of the subsequent years. Considering the totality of these facts and the arguments
of both the sides, in our opinion, it would meet the ends of justice if the
disallowance is sustained at 25% of the consumable stores written off by the
assessee. We hold and direct accordingly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tomorrow
is a HOLIDAY - Good Friday, Holi and Milad un Nabi , a holiday for Hindus, Muslims
and Christians – A CESTAT bench consisting of Messrs Peeran, Chacko and
Jayaraman – the most secular Bench possible in India, a CESTAT Member
told me! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Enjoy
an extended weekend!</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See
our columns Monday for the judgements</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Monday with more<strong> DDT</strong></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><a href="mailto:vijaywrite@taxindiaonline.com" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">vijaywrite@taxindiaonline.com</font></a></p>
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