TIOL-DDT 858 · 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 858 </font><br>
05.05.2008 <br>
Monday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Special Economic Zones – Guidelines for field formations - DGEP </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Director General, Export Promotion, has issued instructions to the field formations on taking a proactive approach at the meetings of the Approval Committees for safeguarding the interest of Revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurisdiction </strong>: DGEP reiterates the Board instructions that in the port cities, the administrative control over the Special Economic Zones falling within the territorial jurisdiction of the Commissioner of Customs shall be with the Commissioner of Customs. At other places, the administrative control over Special Economic Zones shall be with the jurisdictional Commissioner of Central Excise. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Who should attend the approval Committee meetings? </strong> Needless to say, the representative of this Department in the Approval Committee shall be from the Commissionerate having jurisdiction. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Officers – please read the law : </strong>The officers nominated to the Approval Committee of SEZs should familiarize themselves with the SEZ Act and Rules and instructions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Verify Customs and excise offence : </strong>Officers should verify the past misdeeds of prospective units. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ensure <font color="#FF0000">manufacture</font> and <font color="#FF0000">taxable
service</font> : </strong> Ensure that the unit's process is covered under ‘manufacture' and export of service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ensure that ‘unwanted materials' don't enter </strong>: It should be ensured that the quantum of raw material/machinery and services required are relevant to authorised operations. Since for activities the setting up of hospitals, hotels and other such social infrastructure, no duty free material is permitted for operation and maintenance of such facilities in terms of sub-rule (3) of Rule 27 of the SEZ Rules, 2006, care should be taken not to allow any duty free material for these purposes. For example, consumer goods such as washing machines cannot be allowed duty free for use in such premises. Similarly, vehicles for transportation cannot be allowed as authorised operations. The nominee of the Department should therefore, carefully examine any proposal for allowing goods for authorised operations based on actual need and in accordance with the law. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Nothing outside : </strong> Any activity outside the SEZ cannot be allowed as Authorized Operation. Hence, no duty free material or tax benefit should be allowed for activities like water sewerage / drainage pipelines outside the SEZ or power/telecommunication lines outside SEZ . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Movement of goods to DTA : </strong> Field formations (Range / Divisions) should follow the procedure laid down for movement of goods from SEZ to DTA and from DTA to SEZ as mentioned in the Customs Circular No. 29/2006 dated 27.12.2007 on Implementation of Special Economic Zone Act, 2005, and Special Economic Zone Rules, 2006. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Don't forget the walls. </strong> No unit should be allowed to start functioning till the walls and specified entry / exit points and the offices of the Development Commissioner (including the Customs officers posted under him) are in place. The processing area should be properly fenced and secured to segregate it from the non-processing area. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>How to do fencing? </strong> In case of the IT/ ITES /EH/ Biotechnology SEZs the BoA's power to decide manner of fencing and number of entry exit points shall be exercised by the Development Commissioner concerned who shall be kept the BoA ' informed of the decisions in this regard. Wherever, the developers are proposing to create 2.4 meters high wall/chain linked fencing with 0.6 meters barbed wire fencing with single entry/exit points, as was provided in the SEZ Rules 2006 prior to amendment dated 15th March 2007, no separate approval of the BoA shall be required. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Only one gate </strong>! Only one entry/exit gate should be permitted in view of security and revenue loss concerns as well as paucity of Customs Staff for manning the gates unless more gates have been specifically permitted by the BoA . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax exempted only for services rendered within SEZ ! </strong>The SEZ Act and Rules do not permit any exemption to services provided by a SEZ unit to any individual inside an SEZ as it does not get covered under the export of services. Similarly, regarding exemption of service tax on services availed by units / developers in SEZs and regarding taxability of service rendered to an SEZ unit in respect of authorised operations by a DTA service provider in DTA , it may be kept in mind that service tax is exempted only for services rendered within the area of SEZ . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No Cenvat! </strong>CENVAT credit is not available for the inputs used in the finished product supplied to “Developer” of SEZ in terms of Rule 6(6) of CENVAT Credit Rules 2004. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Fill up posts with competent officers : </strong>all cadre controlling authorities are requested to immediately take action to fill up the posts of Customs Officers in SEZs by posting suitable officers in all SEZs which are in the process of being set up or have become functional. Care should be taken to ensure that the staff so deployed have the necessary experience to carry out the duties required to be performed by them as authorised officer/specified officers and officers are rotated in due course. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://taxindiaonline.com/RC2/subCatDesc.php3?filename=dgep.htm&subCatDisp_Id=278" target="_blank">DGEP's F.No DGEP / SEZ /473/2006/ Dated: 03.04.2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SEZ - AUTHORIZED A CTIVITIES WHI CH CAN BE UNDERTAKEN BY THE DEVELOPER/APPROVED CO. DEVELOPER BY DEFAULT FROM THE DATE OF NOTIFI CATION </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(A) Information Technology/Information Technology Enabled Services, Bio-technology and Gems and Jewellery Special Economic Zone : </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Roads with Street lighting, Signals and Signage </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Water treatment plant, water supply lines (dedicated lines up to source), sewage lines, storm water drains and water channels of appropriate capacity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal, Sewage treatment plants </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Electrical, Gas and Petroleum Natural Gas Distribution Network including necessary sub-stations of appropriate capacity, pipeline network etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Telecom and other communications facilities including internet connectivity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Rain water harvesting plant </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Air conditioning of processing area </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Fire protection system with sprinklers, fire and smoke detectors </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Landscaping and water bodies </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. Boundary wall </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. Built up processing area not less than minimum prescribed 1 lakh sq. m. </font></p>
<div align="justify">
<ol>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Office space for Customs and Security staff not exceeding 500 sq.m . </font></li>
</ol>
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<p align="left"><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(B) Sector Specific Special Economic Zones </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Roads with Street lighting, Signals and Signage </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Water treatment plant, water supply lines (dedicated lines up to source), sewage lines, storm water drains and water channels of appropriate capacity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal, Sewage treatment plants. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Electrical, Gas and Petroleum, Natural Gas Distribution Network including necessary sub-stations of appropriate capacity pipeline network etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Effluent treatment plant and pipelines and other infrastructure for Effluent treatment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Telecom and other communications facilities including internet connectivity </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Rain water harvesting plant </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Landscaping and water bodies </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Wi Fi and / or Wi max Services </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. Drip and Micro irrigation systems </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. Boundary wall </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. Factory sheds in processing area </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">13. Office space for Customs and Security staff not exceeding 500 sq.m . </font></p>
<p align="left"><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(C) Multi Product Special Economic Zones </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Roads with Street lighting, Signals and Signage </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Water treatment plant, water supply lines (dedicated lines up to source), sewage lines, storm water drains and water channels of appropriate capacity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Sewage and garbage disposal plant, pipelines and other necessary infrastructure for sewage and garbage disposal, Sewage treatment plants </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Electrical, Gas and Petroleum Natural Gas Distribution Network including necessary sub-stations of appropriate capacity, pipeline network etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Effluent treatment plant and pipelines and other infrastructure for Effluent treatment </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Play ground </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Landscaping and water bodies </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Wi Fi and / or Wi max Services </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Drip and Micro irrigation systems </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. Boundary wall </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. Factory sheds </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. Office space for Customs and Security staff not exceeding 500 sq.m . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://taxindiaonline.com/RC2/subCatDesc.php3?filename=dgep.htm&subCatDisp_Id=278" target="_blank">Annexure to DGEP's F.No DGEP / SEZ /473/2006/ Dated: 03.04.2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commendable recovery of Service Tax from foreigner – Board wants others to follow suit. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">C BE C informs that the officers of the Central Excise & Customs Commissionerate, Raigad have been able to recover service tax arrears of Rs.58 ,86,132 from M/s Corus Consulting B.V. of Netherlands . M/s Corus had provided 'consulting engineering services' to M/s Ispat Industries Ltd during March, 1999 to March, 2003 and had not discharged their tax liability. <strong>Recovery of arrears from parties located outside India is creditable and it shows that it is indeed possible to recover such arrears with persistent and tenacious efforts. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard, Board wants the Chief Commissioners to guide the field formation under their charge to make similar concerted efforts for recovery of such dues as was done by the officers of the Central Excise & Customs Commissionerate, Raigad. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the Board letter does not specify what magic wand the Raigad Commissionerate used to get the Netherlands Company to shell out the Service Tax after five to nine years? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now can Commissioners go on foreign jaunts to collect Service Tax? </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/strecovery.htm" target="_blank">CBEC F. No. 137/59/2008- C X.4 Dated March 11, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Vox Populi </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Blame the top not the field : </strong><font color="#FF6633">A Netizen wrote in, It is always seen in the articles on your website that the field officers are at the receiving end of any action taken by them after interpretation of the issues involved. It is strange that none of the articles are raising any finger towards the officials who are responsible for issue of various circulars / notifications etc., which leaves scope for different interpretation as the same are not taken out in plain language bringing out the intention of the statute.</font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We point out a mistake wherever it occurs and whoever is responsible. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refund of Special Additional Customs Duty : </strong><font color="#FF6633">Another Netizen wrote in, exemption is not covered under the provisions of un-just enrichment, that's why the Notification does not mention it, if notification does not prescribe for any other document other then the proof of payment of custom duty and VAT/sales tax and a declaration on the face of the invoice that the credit of SAD has not been passed on( this is relevant when goods are sold by a regd. dealer to another regd. trader or a manufacturer), then how a circular can put additional conditions? </font></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what about the Finished Products like "CAR" imported and sold to dealers or to customers on payment of VAT, where is the question of CENVAT credit of this duty. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">All type of questions are doing rounds in the Customs (like seller has not included the SAD amount in the sale price, does the importer is reqd. to give the break-up of his cost on the invoice at all under any act) but not a single claim have been paid till now. This matter is creating so much confusion thanks to the CBEC. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>C lassification of grinding wheel – our report not up to the mark : </strong><font color="#FF6633">A concerned Netizen told us, I generally admire quality of your articles and daily tax dose. However, news relating to classification of used grinding wheel was not up to the mark. The Chief Commissioner asking for such a stupid clarification should have been reminded by Board about the General Rules of Interpretation, that is, classification, in terms of which all articles can be classified in some or other heading in Customs and in Central Excise, if manufactured or produced in India . There is no need to issue public notice when law is clear on the subject. What is required is training of Officers to make basic concepts clear with relevant case law. </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Vox populi </em> is <em>vox dei </em> – we respect the opinions. </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><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></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>Assessee collects exam fees on behalf of tax-exempt non-resident institutes - Indo-USA DTAA - Such payments are not taxable in India as assessee is not a dependent agency; No question of TDS : Advance Ruling </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus the Authority concluded that in terms of paragraph 5 of article 5 of the DTAA , the applicant cannot be deemed to be a permanent establishment of API CS and /or AST&L in India . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As regards the TDS, the Authority held that since no income is chargeable to tax in India , no question of TDS arises. Since it has been held that since no tax is attracted on payment of examination fees being made to API CS & AST&L by virtue of paragraph 1 of article 7 of the DTAA , it stands to reason that no deduction of taxes need be made from such payments. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sales Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The 'test of irreversibility' is important criterion to ascertain as to when a given process amounts to manufacture; Courts have to go by principle involved in fiscal legislation: Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The "test of irreversibility" is an important criterion to ascertain as to when a given process amounts to manufacture. In the present case that test is not satisfied. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the Tribunal has examined the process and has come to the conclusion that by adding impurities to the sandalwood oil the product could become red oil once again. </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>Export of Taxable Services effected prior to 14.03.2006 also entitled for Rule 5 C C R , 2004 refund: Tribunal </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TILL the day the notification 4/2006- C E( N.T ) dated 14.03.2006 came on to the scene & substituted the earlier rule 5 of the Cenvat Credit Rules, 2004, <strong>only a manufacturer </strong> could claim a refund under the said rule of <em>C ENVAT credit in respect of the input or input service so used in the manufacture of final products cleared for export under bond or under LUT . </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What was missing was a reference to the “ <strong>service providers </strong>” who were placed in similar situations as the rule contained the following clause – <strong>“…and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the, Central Government, by notification:” </strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns tomorrow for the judgments </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p align="justify"><font color="#FF6633" 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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