TIOL-DDT 857 · 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 857 </font><br> 02.05.2008 <br> Friday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refund of Special Additional Customs Duty – another view </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A concerned Netizen, wrote in; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Happy to read your timely comments in your <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7230" target="_blank">DDT-854</a> on the issue of the refund of the Special Additional Customs Duty of 4%. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I have the following comments to offer which is the result of my interactions with experts. You may share this for the benefit of the netizens. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To begin with, the theory of 'Unjust Enrichment' cannot be made applicable to the refund under notification no. 102/07- CUS , for the simple and foremost reason, that it is not a 'refund' in its statutory sense, but an 'exemption' granted vide a notification issued under Section 25 of the Customs Act. The so called refund is only instrumental, a modus operandi to give effect to the 'exemption'. What come under the mischief of 'unjust enrichment' are only those refunds that are sanctionable under Section 27 of the act and NOT the ones which are designed to give effect to an exemption. In other words, the mechanism of refund has been adopted only to operationalize the exemption envisaged under notification no. 102/07. So along as the conditions of the parent notification are satisfied, the refund needs to be sanctioned. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the past too, similar notifications granting exemptions in the form of refunds has been issued in respect of area based exemptions like Jammu & Kashmir. There are notifications no. 56/2002-CE and 57/2007-CE. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC had then clarified vide its circular 842/19/2006- CX dated 8/12/2006 that the provisions of Section 11 B of the Central Excise Act will not be applicable to the above notifications for the reasons discussed above. The clarifications given by the CBEC are equally applicable to the notification no 102/07, because Section 27 of the Customs Act is <em>pari materia </em> with Section 11 B of the Central Excise Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Basically designed to give effect to exemption, the doctrine of 'Unjust Enrichment' cannot be extended to the refunds under notification no. 102/07. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the above lines, the limitation of 6 months (one year provided by the Board's circular) is also not applicable to refunds designed to give effect to exemptions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As rightly opined by you, the circular far overrides the scope of the notification, in as much as, the restrictions and paper work makes the notification a nullity. But then that is what our Board always wanted. </font></p> <p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Regards,<br> Krishnan</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Thank You Krishnan, for your very right comments. Let us hope the Board listens! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Payment of excise duty on broken grinding wheels – CBEC clarifies in yet another private clarification! </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chief Commissioner, Chennai had requested the that the Board may examine the option of introducing a new chapter heading at the end of Chapter 68 for broken grinding wheels since there is no specific tariff sub heading for the broken grinding wheels. Further, it was stated that the broken/rejected/defective grinding wheels are sold by the assessee for use in the floor scrubbing, knife polishing, marble and cuddapah stone polishing, which also indicates that the broken/rejected/defective grinding wheels are marketable product. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter has been examined by the Board. CBEC feels (who exactly is the feeler is not known) that it is not necessary to amend the tariff, which is aligned with the internationally accepted H.S.N. However, since these products are capable of being used for various purposes like polishing, etc. as mentioned in the reference, it would be appropriate that they are classified in the respective headings depending upon their end use. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This important Tariff Classification clarification is couched in a letter from an Under Secretary in the Board to the Chief Commissioner concerned with copies to all Chief Commissioners. Again we fail to understand why the Board cannot make such important clarifications through Public Circulars? Why does the government work overtime in preventing information reaching the stake holders? </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/boardsrinding.htm" target="_blank">CBEC F. No. 68/1/2006- CX.1 , Dated 09 April 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Utilization of Vishesh Krishi and Gram Udyog Yojana ( VKGUY ) scrips (Erstwhile Vishesh Krishi Upaj Yojana ( VKUY ) scrips) – DGFT clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been reported that some customs authorities are not permitting utilization of the scrips issued under VKGUY scheme (erstwhile VKUY Scheme) for purpose of imports even of goods/items that are freely importable under the ITC (HS) Book. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So DGFT clarifies that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) In terms of the ITC HS Book, all items that are listed from chapters 1 to 98 and where the itemized policy reads as ‘free' are the freely importable items. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) For VKUY Duty Credit Scrips issued for exports made during 2004-05, Policy - FTP ( RE2004 ) applies. Accordingly Para 3.8.3, read with Para 3.8.3.1 (Notified by Notification No. 15 dated 4.1.2005) would determine the items permitted for imports under the scheme. Notification No. 15 dated 4.1.2005 specified that items under Chapters 1 to 24 were allowed for imports, except a few as listed therein. <strong><font color="#FF0000">This is an additional provision (by adding Para 3.8.3.1) and does not undo what is already granted in Para 3.8.3. </font></strong>No negative or positive list for import of capital goods was announced, which means that<font color="#FF0000"> <strong>import of capital goods was not allowed for duty credit scrips earned for export during this period. </strong></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) For VKUY Duty Credit Scrips issued for exports made during 2005-06, Policy FTP ( RE2005 ) applies. Accordingly Para 3.8.3, read with Para 3.8.3.1 would determine the items permitted for imports under the scheme. The negative list of imports for VKUY was listed as Appendix 37B items. Policy Circular 40 dated 8.12.2005 has been issued during FTP ( RE2005 ), which clarified that all items that are freely importable under ITC HS, are allowed and this would include items covered under Chapters 1 to 24 also, except for a few items listed in Appendix 37B . However capital goods are not allowed, for VKUY scrips earned on export made during 2005-06. Thus all freely importable items except those listed in Appendix 37B were allowed, for duty credit scrips earned for export during this period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d) In FTP ( RE2006 ), the scheme was renamed as VKGUY . For VKGUY Scrips issued for exports made during 2006-07, import allowed is governed by Para 3.8.3 read with Para 3.8.3.1 of FTP ( RE2006 ). All freely importable items covered under ITC HS book, <strong><font color="#FF0000">except for a few items listed in Appendix 37B of the Handbook of Procedures Vol. I,</font> </strong> are allowed. Further all freely importable capital goods are also allowed, except a few capital goods. This was done by amending Appendix 37B vide Public Notice No 61( RE2007 )/2004-09 dated 5.10.2006. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e) VKGUY Duty Credit Scrips issued for exports made during 2008-09 can be used for imports, as governed by Para 3.12.4 of FTP ( RE2008 ), of all freely importable items covered under Chapters 1 to 98 of the ITC HS book, except for a few items as listed in Appendix 37B of the Handbook of Procedures Vol. I. Similarly for VKGUY Duty Credit Scrips issued for exports made during 2007-08, Para 3.12.4 of FTP ( RE2007 ) is relevant, and the Duty Credit Scrips can be used for imports of all freely importable items covered under Chapters 1 to 98 of the ITC HS book, <strong><font color="#FF0000">except for a few items as listed in Appendix 37B of the Handbook of Procedures Vol. I. </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus for export made during 2006-09, VKGUY duty credit scrips can be used for payment of duties of Customs on import of any items covered under Chapters 1 to 98 of ITC HS Book that are freely importable therein, <strong><font color="#FF0000">except for a few items as listed in Appendix 37B of the Handbook of Procedures Vol. I.</font> </strong> There has been no change in permitted items of imports during 2006-09 export periods. </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=46&filename=notification/dgft/2008/dgft08cir005.htm" target="_blank">DGFT Policy Circular No. 5 (RE-2008)/2004-2009 Dated April 28, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>New technocrat Chairman for CBDT – for a couple of months? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rabender Singh Mathoda has taken over as the Chairman of the Central Board of Direct Taxes (CBDT) with effect from 1st May, 2008. He belongs to the 1971 batch of the Indian Revenue Service. His predecessor had exactly a month as Chairman. He has a month extra. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new Chairman is a graduate from IIT Kharagpur and belongs to the 1971 batch of IRS. But what is the point in appointing Chairmen of such High Power Boards for a month or two? What does he do in a month or two? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Like the Defence Chiefs, shouldn't the Revenue Chiefs have also a minimum tenure? </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633" size="5">tiol</font> – Monday's cases </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"><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>Customs </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs authorities cannot refuse exemption when DGFT had no qualms about Advance licences issued by them – Tribunal grants stay in a multi-Crore case </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THE</font></strong> case against the appellant is that excess quantity of raw material viz. white/yellow phosphorus valued at Rs.13.93 crores was <strong><font color="#FF6633">imported duty free </font></strong> by inflating the value of inputs in the application filed before the DGFT for the Advance Licenses and thereby the importer had obtained excess entitlement of duty free imports. </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>Good news for EOUs - Cestat rules proviso to Notification 22/2003-CE or 52/2003- Cus is applicable only if final goods are exempted – vice of proviso is not attracted if byproducts , waste and scrap are cleared without payment of duty in DTA </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THE</font></strong> department contended that since Aluminium Dross is non-excisable, the EOU has to pay the duty foregone on the imported Ingots on pro-rata basis in terms of the proviso to Notification 52/2003 Cus . The demand of duty by invoking the above proviso was dropped by the Commissioner and the revenue was in appeal. For the subsequent period, the successor Commissioner confirmed the demand and hence the EOU was in appeal before the Tribunal. While disposing both the appeals, the Tribunal held: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Only the final products, which are manufactured and cleared to the DTA with the permission of the Development Commissioner are liable to Central Excise Duty in terms of Section 3 of the Central Excise Act. However, if the goods are not excisable, there is a proviso to para 3 of the Notification. In terms of this proviso, if the finished goods are not excisable or non-excisable, then, the liability to discharge the Customs Duty on the materials, which are used in the manufacture of such finished goods arises. Now, this proviso comes into force only in cases where the finished goods of the EOU are not excisable. It will have no application whatsoever where the finished goods are excisable. In this case, the finished goods of the assessees or 100% EOU , are Aluminium Wheels. They are excisable and they are exported and where they are cleared to DTA , they would be paying duty in terms of para 3 main section after taking the permission of the Development Commissioner. Therefore in a case like this, where the finished product is Aluminium Wheels and which is excisable, the proviso cannot be invoked at all for any reason. </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>Deduction for leave salary payable - any liability which has accrued in relevant year of account is allowable as a deduction; Appeal by Revenue to Tribunal on same issue already decided, not maintainable: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THE</font></strong> Tribunal found that the matter is squarely covered by the decision of the Supreme Court cited. There is no dispute that the provision has been made in accordance with the rules of the company. The assessee is following the mercantile system of accounting and, therefore, any liability which has accrued in the relevant year of account is allowable as a deduction. There is no suggestion that the liability is a contingent liability. In these circumstances and respectfully following the judgment the ITAT confirmed the decision of the CIT (Appeals) and dismissed the ground. </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 DDT </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend. </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>