TIOL-DDT 831 · 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="3"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 831 </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><br> 25.03.2008 <br> Tuesday </strong></font></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rules of origin – Singapore – mistake in the name of the Rule corrected </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The <strong>Short Title </strong>to the Rules of Origin brought in by Customs NT Notification No. 59/2005, reads as </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">These Rules may be called ‘Rules of Origin' for determining the origin of products eligible for the preferential tariff concessions pursuant to Comprehensive Economic Cooperation Agreement between Republic of India and Republic of Singapore (hereinafter referred to as ‘the Agreement), <strong>the following Rules shall apply; </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Obviously, the rule did not make sense. So it is now amended to read as, </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">These rules may be called the Customs Tariff Determination of Origin of Goods under the Comprehensive Economic Cooperation Agreement between the Republic of India and Republic of Singapore (hereinafter referred to as “the Agreement”) Rules, 2005. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now it makes sense. Somebody noticed this lapse – after three years. Anytime is a good time to correct mistakes. One thing that is common to the Board and TIOL is that both of us don't have good proof readers. The Pay Commission should have recommended appointment of a few highly paid proof readers for the Boards. However the Pay Commission has suggested hiring of experts on high salaries on contract basis to make government work better. Maybe the Board can hire a few good elementary school English teachers to correct the compositions written by the Board boys! </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=24&filename=notification/custom/2008/cnt08_030.htm" target="_blank">Notification No. 30/2008 – Cus ( NT) Dated 20th March 2008. </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please respect the Board – CBEC requests Commissioners </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has come to the notice of the Board that a Commissioner has issued a Standing Order on an issue relating to service tax, contrary to the clarification / circular issued by the Board. The issue was examined and the Commissioner was advised to withdraw the said Standing Order immediately. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board requests the Chief Commissioners to tell their Commissioners to bring to the notice of the Board, any dissenting opinion of the Commissioners instead of their rushing to issue Standing Orders contradictory to Board's instructions. Why should the Board tolerate such undisciplined commissioners? Even the Supreme Court had held that Board circulars are binding on the Commissioners even if they are wrong. The Commissioner has no choice; he is not to question why, he's but to do and die! Commissioners who disobey the Board so blatantly do not deserve to be Commissioners and Board should take serious action instead of politely requesting them to be obedient. </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/standingorder.htm" target="_blank">CBEC's F. No. 345/2008 - TRU Dated 11 th March 2008. </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax – publication of names – rules and procedure not applicable in Delhi Commissionerate </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact is that the Board is not taken seriously by its own Commissioners. You may request the Commissioners to be obedient, but they just don't bother. <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6951" target="_blank">DDT 817 - 04.03.2008 </a> and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7021" target="_blank">DDT 825 14.03.2008 </a>had highlighted that the Delhi Service Tax Commissionerate has the names of alleged offenders. And this is patently illegal as per the Rules and the Board's instructions. <strong>DDT </strong> had noted that, <font color="#FF6633">“But brazen publication of names by the Government in its own website against the LAW is totally illegal and a government that shows scant respect for its own laws is an offender!”</font> Do you think it had any effect? It did! The website now has some more names! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The release carried by the official website of the Delhi Commissionerate states brazenly, </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The major demands issued by the Commissionerate includes an amount of service tax demanded are Ms M S decorators Private Limited for Rs. 11.20 crores , M/s MCM constructions & Real Estate Private Limited for Rs. 5.2 crores , M/s Odean Builders Private Limited for Rs. 9.50 crores , M/s S. Sony and Co. for Rs. 2.12 crores , M/s Space India Constructions for Rs. 0.55 crores , M/s United Builders for Rs. 0.65 crores . </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In a case against M/s IES Made Easy, SCN has been issued for demanding service tax of Rs. 8 lakhs. The party was rendering commercial coaching services and had <strong>suppressed </strong> income (taxable service) amounting to Rs. 75 lakhs, thus <strong>evading </strong> service tax as well as income tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Board's Circular No. 100/3/2008 – ST dated 12.3.2008, for the names to be published, the Commissioner has to send a proposal to the Chief Commissioner who should examine it and send the proposal to the Board, which will send it to a Committee and the Committee will send its recommendation to the Member (ST) and then the Board will take a decision on publication of names. And this will apply only in cases where the evasion is more than a Crore of Rupees and after the appeal period is over. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Either the Commissioner is not aware of the rules and procedure or he simply does not bother about the Board and its illogical directions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>In Service Tax, perhaps, one is treated guilty unless proved innocent! </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the Board can now send another letter to his Chief Commissioner requesting him to request the Commissioner to show a little more consideration and respect for the Rules and Board instructions. Click on the link to see the list of offenders published by the Delhi Service Tax Commissioner. <a href="http://servicetaxdelhi.gov.in/readnews.asp?nid=97">http://servicetaxdelhi.gov.in/readnews.asp?nid=97 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sugar export DGFT allots 10,000 MTs </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has allocated 10,000 MTs of white Sugar for export to EU for the year 2008-09 (July, 2008 to June, 2009). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This refers to HS Code No.1701 00 00 in the Schedule 2 of ITC(HS) Classification of Export & Import items, 2004-09 under which M/s Indian Sugar Exim Corporation Ltd., New Delhi is the designated agency for export of sugar to EU under preferential quota. As regards Special Certification requirement, entries to be made in document EUR and GSP are as follows:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Application of Regulation (EC) No.950 /2006, ACP /India Sugar, Serial No.09.4337 .” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And also allocates additional quantity of 4124 (Four Thousand one hundred and twenty four) MTs of Raw Sugar for export to EU for the year 2007-08 (October, 2007 -September, 2008). </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/dgft07pn124.htm" target="_blank">DGFT Public Notice No. 124</a><strong> and </strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2007/dgft07pn125.htm" target="_blank">125 /( RE-2007)/2004-2009 Dated March 20, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Only three closed holidays for Government offices </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the major recommendations of the Pay Commission is that the Government offices should be closed only for the three National Holidays. This is a wonderful recommendation. There is no point in closing a Central Government office in Sivaganga in Tamil Nadu on the Birthday of Guru Nanak. Now employees will be allowed to take leave on their festivals, instead of forced holidays on festivals which they cannot relate to. But there will be demand for more leaves and more national holidays like Dr. Ambedkar 's birthday. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pay Commission doubles advance for Hindi training </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Pay Commission has recommended a 100% increase in the advance granted for training in Hindi through Correspondence Course, for Central Government officers. This is an interest free advance of a huge amount of Rs. 150/- and is recoverable in four instalments. This is now increased to Rs. 300/-. What is the cost to the Government to grant this advance of Rs. 300/- and recover it in four instalments? Certainly more than Rs. 300! And who in government wants an advance of Rs. 300? </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"><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></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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Non-compete fee paid to ward off competition but no period recorded in agreement - Since no capital asset created nor any advantage of enduring nature acquired, it is business expenditure, eligible for deduction : Delhi HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WHETHER an expenditure is capital or revenue in nature is a complex issue which can be decided based on facts of the individual case. In this high-profile case, involving Eicher Ltd, where a payment of Rs four crore was made as a non-compete fee to one of its employees and a rival company which had joined hands to come out with a potential competition in the two-wheeler segement , the High Court has held that since the assessee did not acquire any capital asset by paying non-compete fee and merely neutralised competition for a while, such an expenditure cannot be treated as capital expenditure. What makes it further clear is the fact that it was no clear from the records how long the restrictive covenant was to last - it was neither permanent nor ephemeral. In simple words, the assessee did not acquire any advantage of an enduring nature. There is also no evidence to indicate that the fee of Rs four crore was taken out of the capital of the assessee. Thus, such an expenditure is to be treated as business expenditure, eligible for deduction. </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>Customs – valuation - Merely because supplier was holding 30% of equity in share capital of buyer does not establish mutuality of interest - Burden to prove undervaluation lies on Revenue : Supreme Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No doubt, the exporter was holding 30% of the equity in the share capital of the importer but the holding of the equity in the share capital does not establish the mutuality of interest as the respondent did not hold any equity in the unit of the supplier. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no doubt that the respondent had imported the identical goods at a higher price prior to the agreement dated 16th April 2001/23rd April 2001, but, the respondent had purchased goods in question at a lesser price from the exporter only after the said agreement subject to the condition that the respondent shall purchase 100% of its annual requirement from the same exporter. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The burden to prove that the goods in question were under-valued by the respondent lies on the Revenue which the Revenue has failed to discharge. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Security Services utilized by appellant for residential colony – whether eligible for Cenvat Credit – Matter remanded as Commissioner( A) has passed a non-speaking order : Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE issue in this appeal before the Tribunal is regarding availment of Cenvat credit on the input service (security agency) utilized by the appellants for residential colony which is adjacent to the factory. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is the contention of the Revenue that the security services utilized by the appellant would not fall under the category of input service for residential colony used directly or indirectly in the manufacture of final products. The adjudicating authority upheld the charges alleged in the show cause notice and confirmed the demand. The appellants aggrieved by such order preferred an appeal before the Commissioner (Appeals) who also upheld the order-in-original. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, they are now before the Tribunal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant vociferously argued that the issue involved in this case requires de novo adjudication proceedings as the first appellate authority had not given any findings on merits inasmuch as he has only reproduced the findings that have been arrived at by the lower adjudicating authority & not given any findings against the grounds of appeal filed by the appellants. </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 size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>