TIOL-DDT 853 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 853</font> <br> 28.04.2008 <br> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EOUs – where to claim refund of unutilised Cenvat Credit? – CBEC issues another secret clarification. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In port cities like Chennai, Mumbai and Kolkata, also in Bangalore, EOUs are under the administrative control of customs formations in terms of Board circular No. 31/2003- Cus dt . 7.04.2003. The EOUs , EHTP , STP units are entitled for claiming rebate of service tax paid on taxable service exported or service tax paid on inputs and input services used providing such taxable services. Further, as per Rule 5 of Cenvat Credit Rules 2004 the refund of accumulated CENVAT credit is admissible in those cases where a manufacturer or provider of output service is not in a position to utilize the input credit or input service credit taken. In this regard an issue has been raised as to which authority (i.e Customs formation or Service Tax formation) should disburse such rebate of service tax or refund of accumulated credit in the port cities. It is reported that due to this confusion EOU / EHTP / STP units located in some of these places are not getting rebate/refund in time. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue was examined in full Board meeting held on 22.10.2007. It was decided that the rebate or refund of unutilized credit in respect of input and input services used in relation to manufacture of goods which are exported by EOUs would be processed and disbursed by the jurisdictional central excise or customs authority and not by the service tax Commissionerate . However, if an EOU provides/exports taxable services it would register itself with the jurisdictional service tax Commissionerate and refund or rebate in respect of inputs or input services used for export of such services would be sanctioned by the service tax Commissionerates . Other controls relating to registration, filing of return etc. in respect of EOUs liable to pay service tax or engaged in provision of taxable service would remain the same as it exists at present i .e. they should be registered with the service tax Commissionerates . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This important clarification meant to solve the problems of EOUs is hidden in a letter written by the Board to the Chief Commissioners. Why can't this decision of the Full Board be made public and given enough publicity? It simply beats logic as to why the Board is shy of making public its good deeds public? And why can't such important instructions be issued through public circulars instead of private letters? God and Board should have the answer! </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=41&filename=notification/servicetax/2007/eoustp.htm">CBEC F.No . 137/82/2007- CX.4 (Pt.) Dated : : 24 th Oct, 2007 </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>E.Cess can be utilized for payment of E.Cess relating to Output Service only – FAQ answer becoming pet audit objection </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen brought to our notice that a manufacturer who also is registered as a service provider is being told to pay Education Cess when it relates to excisable goods by cash only & is not allowed to utilize the Cenvatted quantum. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He says that the Audit group is pointing a finger to the following Q&A from the booklet brought out by the CBEC & DGST in December 2007 – </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“11.2 . What are the duties/taxes that can be availed as credit? </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Duties paid on the inputs, capital goods and the Service Tax paid on the ‘input' services can be taken as credit. Education Cess paid on the Excise duty and Service Tax can also be taken as credit. However, <strong>the credit of Education Cess availed can be utilized only for payment of Education Cess relating to output service. </strong> The interest and penalty amounts cannot be taken as credit.” </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We tried to pacify the Netizen by drawing his attention to the provisos appearing under Rule 3(7 )( b) of the Cenvat Credit Rules, 2004 & saying that this is not true but he is not satisfied & wants the Board to clarify. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Will the kind Board look into this please? </font></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Modern Panchtantra Story </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once upon a time, there was a software engineer who used to develop programmes on his Pentium machine, sitting under a tree on the banks of a river. He used to earn his bread by selling those programmes in the Sunday market. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One day, while he was working, his machine tumbled off the table and fell in the river. Encouraged by the Panchatantra story of his childhood (the woodcutter and the axe), he started praying to the River Goddess. As usual, the Goddess wanted to test his honesty. She showed him a match box and asked, “Is this your computer? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Disappointed by the Goddess ' lack of computer awareness, the engineer replied, “No." <br> <br> She next showed him a pocket-sized calculator and asked if that was his. Annoyed, the engineer said "No, not at all!!" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finally, she came up with his own Pentium machine and asked if it was his. <br> The engineer, left with no option, sighed and said "Yes." </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The River Goddess was happy with his honesty. She was about to give him all three items, but before she could make the offer, the engineer asked her, "Don 't you know that you 're supposed to show me some better computers before bringing up my own?" <br> <br> The River Goddess, angered at this, replied, "I know that, you stupid donkey! The first two things I showed you were the Trillennium and the Billennium, the latest computers from IBM!” So saying, she disappeared with the Pentium!! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Moral of the story: If you are not updated with technology, it is better to keep quiet !. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And don't forget to see our CESTAT decision ruling that Kiosk is a computer, but you will have to wait till tomorrow. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Delhi Service Tax Commissionerate continues illegal publication of names </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apparently the Delhi Service Tax Commissionerate has no respect for LAW as we have been pointing out recently. As if to prove that it is above the laws of the land and to proclaim loudly that it has no respect for the Board, whose instructions it has decided to flout openly, on Friday the Commissionerate website carried another story that it has issued a notice to Master Card International for alleged evasion of over Rs. 8 Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Surely the Commissionerate can't be ignorant of the fact that they are not authorised to publish the names of alleged offenders – surely they are flouting the laws challenging somebody and is it the Board? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And why is the Board so helpless when its own instructions are so callously violated by a Commissioner right in Delhi? If the Board cannot make its Commissioner follow the law, the least it can do is to delete the <font color="#FF6633">Service Tax (Publication of Names) Rules, 2008;</font> from the Statute books. After all what purpose does a law serve when your own Commissioner is breaking it every day? The FM may consider telling Parliament that he is withdrawing this legislation as one of his own Commissioners had been seen violating the law on a daily basis – and so blatantly and publicly! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no worse anarchy, when law enforcers are themselves the law breakers! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A Birthday greeting </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Advocate S Jai Kumar sent us this <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"In terrible taxing night, <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You are the guiding light, <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the bureaucratic might, <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You are the fighting knight, <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When you celebrate eight, <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We wish you cosmic height! <br> </font></strong></font><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- jk </font></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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 color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></font></strong></font></strong></font></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633" size="5"> tiol</font> – Tomorrow 's cases </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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 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></strong></font></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>Swagging amounts to manufacture - Once the process amounts to manufacture, the fact that goods belong to same tariff heading would not be relevant: SC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of "manufacture" includes "any process incidental or ancillary to the completion of a manufactured product". Therefore, on analyzing Section 2(f), it becomes clear that the word "process" must be in relation to manufacture. By this definition, it is made clear that the process must be incidental to the completion of the manufactured product. In other words, incidental process must be an integral part of manufacture resulting in a finished product which has to be of a different physical shape, size and use. The said process must impart a change of lasting character to the original product or raw material. After the process, a new finished product must come into existence. It comes into existence only when it acquires a distinguishable identity. </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>CIT (A) transferred but holds on to office and also functions without jurisiction : De facto doctrine not to apply to such a case but HC directs CBDT to prevent officers under posting of transfer from discharging quasi-judicial functions till issue is sorted out </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IT is Annual General Transfer ( AGT ) season in North Block. And some officers going to CAT and getting some temporary relief is not uncommon. However, here is a situation which neither the CBDT nor the taxpayers ever imagined to see in real life, and the same has compelled the High Court to pass strictures against the Commissioner of Income Tax who despite being transferred out continued to hold on to his CIT(A) office and also pass appellate orders. This irregularity became more glaringly unpleasant particularly in the light of the fact that his successor who was posted there as per the Board 's transfer order had assumed the charge of CIT ( A). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are similar cases under CBEC also where Commissioners (Appeals) have passed back dated orders after they have been transferred out of their postings. </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>Kiosk is a computer, rules CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">OUR</font> </strong>judges are required to decide complicated technical issues, which they do with great aplomb, putting even experts to shame. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the CESTAT was to decide whether a kiosk is a computer and decide it did with computer accuracy and poetic perfection. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is common knowledge that information technology is a fast-developing phenomenon and the commoners in our country are yet to keep pace with it. Common parlance is, therefore, likely to lag behind technological parlance. Those associated with the technology, manufacture and marketing of the kiosks- like the appellants and the ELCOT functionary – will identify these machines today as computers customized for special purposes, but the laymen may take some more time to do so. Therefore, in our considered view, the Commissioner applied the common parlance test inappropriately to the kiosks in question. He ought to have gone by the Explanation to the Notification, which explained the term ‘computer', rather than by common parlance. </font></p> <p align="justify"><font color="#FF3333" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Also see Modern Panchatatntra above </strong></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 <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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>