TIOL-DDT 867 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 bgcolor="#FFFFFF"> <p align="justify"><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong>TIOL- DDT 867<br> </strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">16.05.2008 <br> Friday</font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade associations are liable for service tax under Clubs and Association Services </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi Service Tax Commissioner informs that it has been clarified by the Central Board of Excise and Customs (CBEC) that the trade association falls within the scope for “clubs and association services”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was held that the services provided by these associations are not of charitable, religious or political in nature. They collect membership fees and other charges from their members and they work for the interest of trade and industries. Therefore, they do not have objectives which could be categorized as public service. Accordingly, they do not fall within the scope of the excluded categories. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> It was further clarified that the services provided by the trade associations to their own members are not in the nature of “self service” by virtue of the Explanation under Section 65 of the Finance Act, 1994 which clearly states that the taxable services includes any service provided by any unincorporated association or body of person to a member thereof, for cash deferred payment or any other valuable consideration. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3592" target="_blank">TIOL-DDT 343 18 04 2006</a> for a detailed analysis </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Interpretation of a notification and two High Court orders. </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Two High Court orders have come to our Notice on the same issue and same party. </font></strong></p> <p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The first order dated 9.4.2008 states, </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">We have also heard Mr. Vasant Naag , the Petitioner no.2 who is present in the Court. He categorically states that the Armed Guards are waiting at his residence to take him into custody. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Pending further orders, the Respondents shall not arrest Petitioner no.2 or any other Officers of the Petitioner-Company till 17th April, 2008.</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Second order dated 6.5.2008 states, </font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In this Petition, under the peculiar facts and circumstances of the case, we had granted ad-interim relief on 9th April, 2008 not to arrest the Petitioner No.2. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">After hearing the parties for some time, the ad-interim relief granted on 9th April, 2008, which is continued till today, to continue further, subject to the Petitioners depositing a sum of Rs.16 crores with the Respondent No.2, and also furnishing a bank guarantee of Rs.16 Crores in favour of Respondent No.2, within a period of two weeks from today. The aforesaid deposit of Rs.16 Crores and bank guarantee of Rs.16 Crores will be without prejudice to the rights and contentions of the Petitioners. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the event, the Petitioners fail to deposit the aforesaid sum of Rs.16 Crores and furnish a bank guarantee of Rs.16 Crores in favour of Respondent No.2 within the aforesaid period of two weeks from today, the ad-interim relief granted on 9th April, 2008 will stand vacated without any further reference to this Court. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Respondents are at liberty to carry out further investigation in the above and issue appropriate show cause notice and pass an order in accordance with law. No other interim relief in the above. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From a reading of the two orders, certainly no one can make out what the case is all about, except that the petitioner feared arrest and was given a stay and in the second order they were directed to deposit Rs. 32 Crores. What is this all about? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is what our Research Team came up with. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is a composite mill and manufactures “Polyester Fibre Tops” classifiable under Tariff Item 5506 of the Central Excise Tariff. The manufacturing process envisages procuring Polyester Tow falling under Tariff Item 5501 & converting the same into Polyester Wool blended Top. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue allegation is that the goods falling under TI 5506 are <strong><font color="#FF6633">conditionally exempt</font></strong> from payment of Excise duty in terms of Sl. No. 10 of Notification 30/2004CE dated 09.07.2004 <strong><font color="#FF6633">inasmuch as the condition is </font></strong><font color="#FF6633">– </font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Staple fibres procured from outside and subjected to carding, combing or any other process required for spinning by a manufacturer who does not have the facilities in his factory (including plant and equipment) for producing goods of heading nos. 55.01, 55.02, 55.03 and 55.04” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the assessee does not procure “Staple fibre <strong><font color="#FF6633">( uncarded polyester staple fibre falling in heading 5503 )</font></strong> but procures polyester tow (heading 5501) they are not eligible for exemption, the allegation goes. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the alleged problem in the present case is that the assessee is procuring Polyester Tow (5501) <font color="#FF6633">[<strong>but not uncarded polyester staple fibre falling in heading 5503</strong></font><strong> </strong>as per Department contention ] & converting the same to Polyester Wool blended Top [5506]. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is important to note is that <strong><font color="#FF6633">Tow is an intermediate product coming into existence in the manufacture of Staple fibres.</font></strong> The Central Excise Tariff presently has separate Tariff headings for Tow & Staple Fibre. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the big question is , “if a manufacturer begins his manufacturing process by using an input from a stage anterior to that referred to in the notification, is he eligible for the exemption?” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Revenue apparently is of the view that he is not. The assessee is afraid that he would be arrested and sees armed guards waiting outside his house. The High Court orders deposit of Rs. 16 Crores and bank guarantee for another Rs. 16 Crores.! </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=33&filename=legal/hc/2008/2008-TIOL-271-HC-MUM-CX.htm" target="_blank">Click here for the High Court order No.1</a> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2008/2008-TIOL-272-HC-MUM-CX.htm" target="_blank">High Court order No.2</a></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Nepalese Citizens can now send money home easily through banks </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Workers' remittance to the developing world has grown substantially in recent years. Though the number of Nepalese migrant workers in India is quite substantial, no formal channel of remittance between the two neighbouring countries exists. Considering this, there is a need for a strong cross border remittance facility between the two countries. Appreciating the urgency of developing a remittance system between India and Nepal, Reserve Bank of India constituted a Committee to set up a low cost and efficient remittance system between the two countries to enable a large number OF Nepalese nationals working in India to remit funds to their families in Nepal . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nepalese citizens working in India can now remit funds to their families in Nepal using the National Electronic Funds Transfer (NEFT) system. More than 44,000 branches of banks, which are participating in the NEFT system in India , can offer this remittance facility. Nepalese citizens, staying in India can avail of this service as either a walk-in customer or as an account holder and can initiate the remittance to a beneficiary in Nepal upto Rs.50,000. The scheme envisages concessional charges as it is aimed at poor migrant workers of Nepalese origin in India who desire to remit money to their kith and kin. The money would flow to a designated branch of State Bank of India . From here it would be consolidated and flown to Nepal SBI, which in turn would disburse the remittance proceeds to the beneficiaries. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The system has been developed by State Bank of India in close coordination with the Reserve Bank of India as a follow up of the report of the Committee on “Modalities of Workers' Remittance between India and Nepal ” constituted by the Reserve Bank of India . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The one-way funds transfer mechanism between India and Nepal was yesterday operationalised. The system was inaugurated by the Reserve Bank Executive Director, Dr.R.B.Barman in the presence of senior officials of RBI, Nepal Rashtra Bank, large commercial banks in India and Nepal SBI Ltd. RBI took the initiative as a part of the SAARC FINANCE activities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/nepal.pdf" target="_blank">Click here for procedural guidelines issued by RBI </a></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Annual Confidential Report – a farce? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our COBWEB story on Annual Confidential reports has evoked quite a response apparently from Revenue Officers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Former Member of the Board wrote in, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The SC decision to make it mandatory to convey any entry in CCR-whether Good or Bad is indeed a land mark decision. The DOPT is the most rotten organization in GOI. It protects the turf for the IAS .That is all. So long as they are in control of the central cadres, they would only protect the interests of IAS members. It is high time that an independent Tribunal is created to administer All India Services and Central services. Only such a professional body can reform our bureaucracy and bring about the required degree of transparency and fairness in our administration. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen wrote in to say that a Superintendent could not get a promotion because his ACR could not be written because both his Assistant Commissioner and Additional Commissioner, who should have written his annual Confidential Report and reviewed it, were in jail. These two worthies whom the Government found fit to be in jail could have spoiled the ACR of the Superintendent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems a Commissioner wrote in the ACR of his JC, “There is scope for improvement”. The JC came to know about this and confronted the Commissioner and pleaded that it was unfair. The obliging Commissioner changed the remarks to, “there is no scope for improvement”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Superintendent whose command over English was exemplary had two inspectors – one was a very hard working guy and the other was never attending office and was always outside the office. In the ACR, for the first officer, he wrote, “He hardly works” and for the second, he wrote, “He is always outstanding” </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 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></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>For the umpteenth time, Tribunal tries to teach Commissioner (Appeals) what his job is – Matter remanded for passing a reasoned & speaking order </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">''THE</font></strong> impugned order shows that a mechanical order was typed out<font color="#FF6633"> <strong>leaving two blank spaces</strong></font> to be filled up. One was relating to the date of hearing and the other was name of the Consultant who appeared for hearing before the Authority. Also the Appellate Order was <strong><font color="#FF6633">signed without any date</font></strong> by a public servant engaged in administration of justice. Added to this, top portion of the body of the impugned order was still <strong>left blank</strong> without mentioning the order number.” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Netizens, these are not our observations but those of the Tribunal which was hearing an appeal filed by the assessee. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Compounding of offence - CBDT has authority to issue instructions, and CCIT to comply with them to accept or reject an application: Delhi HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">UNLIKE</font> </strong>Customs & Central Excise, compounding of offence under the Income Tax Act has a chequered history. Though many finer points of the CBDT guidelines and also the powers vested in the CCIT/DG under Sec 279(2) have been settled by the judiciary but it continues to be perceived as a right by most tax offenders. The latest case is one such example where the Delhi High Court observes that it was a clear case of <strong><font color="#FF6633">well thought out stragegy of tax evasion.</font></strong> The Bench once again clarified that the CBDT has the <strong><font color="#FF6633">necessary powers u/s 119(1) of the Act and also a critical role to play in directing the CCIT/ DGIT as to whether a particular case is fit for compounding or not</font></strong> , and can advise the authorised officer to deny the same at any stage of processing of the application for compounding. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">What tilted the case in favour of Revenue are the clearly-worded Instruction which illustrates three situations for compounding: </font></strong></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>D-linked – Excise Valuation Case – sandwiching cost of IT peripherals into value of driver software - Pay pre-deposit of Rs One crore, says Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THEY say</font> </strong>that the best way to reduce your duty liability is to indulge in undervaluation <em>because </em> experience says that on almost on all occasions the law falls short to pin you down & you scrape through! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was this case of the assessee collecting higher transportation charges from his clients & the department alleging that it is only the “actual transportation” costs that can be allowed as a deduction from the Assessable value. Consequently, the said “ <em>excess charges of transportation </em>” have to be loaded into the assessable value of the manufactured goods & differential duty paid thereon, is what the authorities alleged. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The “transport” matter traveled up to the Supreme Court in the case of Baroda Electric Motors [ <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-96-SC-CX.htm" target="_blank">2002-TIOL-96-SC-CX </a>] & when the Apex Court held that the duty of excise is a tax on the manufacture and <strong><font color="#FF6633">not a tax on the profits</font></strong> made by a dealer on transportation. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements </font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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>