TIOL-DDT 843 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 843</font> <br>
10.04.2008 <br>
Thursday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Singapore exemption – more exemption </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 50% and 20% exemption given to goods imported from Singapore are enlarged to 75% and 35%. Notification Numbers 74 and 75/2005 - Cus are amended. </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=23&filename=notification/custom/2008/ctariff08_045.htm" target="_blank">Notification No. 45/2008-Customs, Dated the 9 th April, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Utilization of Cenvat credit on specified 17 input services, when they are used for exempted as well as taxable services – Board clarifies. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per sub-rule (5) of Rule 6 of the Cenvat Credit Rules, 2004, in respect of 17 services, full credit is allowed 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">The Mumbai Chief Commissioner, had on 5th September, 2005 asked the Board for a clarification whether the restriction of credit utilization upto 20% would still apply to credit relating to such services. (That was certainly a good day for asking a clarification, being “Teachers Day”). The Teachers in the Board took a good two years time to study the issue and issued a leisurely clarification two years later on October 1 2007. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board clarification states </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The basic purpose of identifying 17 specified services for special dispensation is that these services are used in relation to the entire activities of the service provider and cannot be co-related or apportioned with any inpidual service (whether taxable or exempted) provided by such service provider. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. For example service tax paid on construction of an office of a service provider (who provides more than one service) cannot be linked with any particular service provided by him as it may be using it for various purposes and for all services provided by him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Thus, these services are similar in nature to capital goods which is a part of fixed assets/cost that cannot be apportioned for maintaining separate records. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. It is for this reason that there is no restriction in taking and utilization of credit on these services, so far as they are used for providing some taxable services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. If the restriction of 20% is applied to these services also, this basic purpose would be defeated. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. As regards, 'taking' of credit is concerned, that is anyway available to all input services and there would not have been any reason to select these 17 services for placing them under sub-rule (5). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. They have been placed in a separate sub-rule [i.e. sub-rule (5)] because in respect of utilization of credit of tax paid on these services, the restriction of 20% does not apply, while the restriction applies in all other cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. In conclusion the credit taken in respect of the services can be utilized for payment of service tax without any limit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Wonderful! One of the most logical and reasonable clarifications given by the Board, but as usual, they hide such important clarifications from the Public. It beats logic as to why the good Board is shy of making its good deeds public. In spite of the fact that the Board is full of good people, in spite of the fact that they are trade friendly, the fact remains that it is extremely difficult to get them to part with their creations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why don't they understand that their clarifications have meaning only when they are in the public domain? Or are they so obsessed with secrecy? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This clarification was given in October 2007 and we could bring it to you only today. We are ready to freely make available their pearls of wisdom only if they are ready to share them with the public, for whose service, they exist. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What are the 17 specified services for which credit can be taken, if used in exempted as well as dutiable/taxable goods/services? </strong></font></p>
<p align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td class="Normal" valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sl. No. </font></strong></p></td>
<td class="Normal" valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Clause of Section 65(105) </font></strong></p></td>
<td class="Normal" valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service </font></strong></p></td>
</tr>
<tr>
<td class="Normal" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.</font></p></td>
<td class="Normal" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">g </font></p></td>
<td class="Normal" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consulting engineer </font></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">p</font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">architect </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">q </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">interior decorator </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">r </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">management or business consultant </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">v </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">real estate agent </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">w </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">security agency </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">za </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">scientific or technical consultancy </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zm </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">banking and other financial services </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zp </font></p></td>
<td width="401" valign="top" bordercolor="#FF6633" class="Normal"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Omitted. <strong><font color="#FF6633">Though this item has been deleted in 2004, it strangely figures in the rule</font> </strong>. </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zy </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">insurance auxiliary services concerning life insurance business </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzd </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">erection, commissioning and installation agency </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzg </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">management, maintenance or repair </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">13. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzh </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">technical testing and analysis </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">14. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzi </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">technical inspection and certification </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzk </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">foreign exchange broker </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">16. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzq </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">commercial or industrial construction service </font></p></td>
</tr>
<tr>
<td class="Normal" valign="top" width="57"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">17. </font></p></td>
<td class="Normal" valign="top" width="76"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">zzr </font></p></td>
<td class="Normal" valign="top" width="401"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">intellectual property service </font></p></td>
</tr>
</table>
</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/stcredit.htm" target="_blank">F.No. 137/203/2007-CX.4, Dated : October 1, 2007 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Holidaying in the Himalayas – Meerut II Commissionerate welcomes you. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Meerut II Central Excise Commissionerate has acquired holiday homes for Departmental officers and their guests at <strong><font color="#FF6633">NAINITAL , RANIKHET </font></strong><font color="#FF6633">and <strong> KAUSANI</strong></font><strong>. </strong>The Commissioner has requested the Directorate of Publicity & Public Relations, and others concerned to give wide publicity to the Guest Houses/Holiday Homes so as to have high occupancy rate to avoid any audit objections at a later date. Please visit Nainital and ensure that the Commissioner who has provided such facilities do not face audit objections. Why not fix a quota for CAG's Audit and then ask them to raise an objection that not enough auditors are taking that much needed holiday? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For bookings and other formalities, Asstt. Commissioner, Central Excise, pision, Haldwani (Uttarakhand) may be contacted on his office telephone no. 05946-267015/16 and fax No. 05946-267019. </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=70&filename=pitara/welfare/guesthouse.htm" target="_blank">Meerut II Commissioner's C.No. II(8)33/Guest House/Adm/M-II/07/4159 Dated : March 27, 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 color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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></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>Hospital, not industrial undertaking; Review of assessment orders - If wrong claims availed, quoting wrong application of law not allowed to be reviewed, a chaotic situation will arise, putting a big dent to exchequer – disciplinary action against officers directed : Madras HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">REVENUE </font></strong>by going in appeal has invited disciplinary action against its own officers. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Neither the respondent nor the DHCL are the 'industrial undertakings' within the meaning of Section 72A(7)(aa) of the Act and hence the set-off availed by the respondent for the assessment year 2000-2001 is illegal; that the impugned action initiated by the appellant is very well within the stipulated time of limitation prescribed under Section 147 of the Act and the appellant being the Assessing Officer has got jurisdiction to reassess such set-off illegally availed by the respondent. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Action against officer for dereliction of duty:</font></strong> The High Court did not stop there and observed, <font color="#FF6633"><strong>This Court wonders as to how such a huge claim of Rs.11,60,29,077/- has 'escaped' the assessment of the Department, leading to illegal availing of set-off by the respondent for the said amount that too when there is no order permitting the respondent to avail such set-off, causing loss of revenue to the State. Therefore, the officers of the appellant at the helm of affairs at the relevant point of time shall be made responsible for their lethargic attitude in discharging their official duties and for their dereliction in duty. </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>Goods seized under Customs Act – once provisional release order is issued, six month period to issue notice prescribed under Section 110 (2) is not applicable though importer did not take provisional release of goods: Bombay HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THERE</font></strong> seems to be lot of confusion among the trade and field in respect of Section 110(2) of the Customs Act which stipulate that if no show cause notice is issued under Section 124 within six months from the date of seizure of the goods, the goods shall be returned to the person from whose possession the same were seized. As normally the investigation cannot be completed within six months, it is a common practice to issue notice only for confiscation of the goods seized before the expiry of six months from the date of seizure. Even in cases where the goods are provisionally released, the notices are issued within six months. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>UP Trade Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>High Court should not have interfered on findings of fact of Department and Tribunal: Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court ought not to have interfered with the orders of the departmental authorities and the Tribunal, that too on the question of appreciation of the factual aspects. The High Court has not analyzed as to how the conclusions of the Tribunal suffer from any infirmity <strong>. <font color="#FF6633">If fact finding authority comes to certain conclusions honestly and bonafide the mere fact that Court may have a different perspective of that question, cannot be a ground to interfere with the finding even though another view may be possible.</font> </strong> Considering the limited jurisdiction exercisable under Section 11 of the Act, such a course is not available. Section 11 of the Act confers limited jurisdiction to interfere with the order of the Tribunal only on the question of law, which is required to be precisely stated and formulated. In the instant case, even that has not been done. </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>Twisting and texturising of POY, amounts to manufacturing or production: Bombay High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It would be clear that POY has different physical and chemical properties and when POY chips undergoes the process of texturising and/or twisting, the yarn i.e. twisted and/or texturised or both results in a product having different physical and chemical properties. In other words the process applied to POY either for the purpose of texturising or twisting constituted manufacture as the article produced is recognised in the trade as distinct commodity pursuant to the process it undergoes and which amounts to manufacture. Under the Central Excise Act, the Union of India itself treat the POY as distinct from POY, drawn twisted or textured or both. From all the material `the court had no hesitation in arriving at a conclusion that the process which POY undergoes in the process of texturising and twisting results into a new and distinct product and regarded in the Trade as distinct from the commodity involved in the manufacture. The process amounts to manufacture as the original commodity loses its identity. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns tomorrow for the judgements </font></strong></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>
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