TIOL-DDT 870 · 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 870 </font><br>
22.05.2008 <br>
Thursday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Duty paid by EOUs for DTA clearance – amount of credit eligible. Board forgets to amend Cenvat Credit Rules while amending Notification No. 23/2003 – C.E </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When excisable goods are cleared from the EOUs to the DTA , the duty payable is the aggregate of the customs duties payable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Notification No. 23/2003 C.E dated 31.3.2003, a 75% exemption was given on the Basic Customs Duty for calculating the aggregate of Customsduties. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assume the Value to be Rs. 100, Basic Customs Duty to be 10% and CVD (equal to excise duty) is 16%, the duty calculation was </font></p>
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<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">value </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">100 </font></p></td>
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<td valign="top" width="274"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">B C D = 25% of the actual duty </font></p></td>
<td valign="top" width="76"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">2.5 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Value for CVD </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">102.5 </font></p></td>
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<td valign="top" width="274"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CVD = 16% of 102.5 </font></p></td>
<td valign="top" width="76"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">16.4 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total duty </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">18.9 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Of this CVD /excise duty component would be </strong></font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>16.4 </strong></font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what is the Cenvat Credit that a DTA buyer can take? Apparently Rs. 16.4 as that was the excise duty component. Strictly he would be eligible for Rs. 18.9, the entire duty as the aggregate of customs duties is actually the excise duty. To avoid this, there is a provision in the Cenvat Credit Rules that <font color="#FF6633">Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification no. 23/2003- C entral Excise dated 31st March, 2003 [ G.S.R. 266(E), dated the 31st March, 2003] shall be equal to <strong>X multiplied by {( 1+BCD /400) multiplied by ( CVD /100)}]. </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us calculate this on the value of Rs. 100 and BCD of 10% and CVD of 16%. This would be </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">100x [1+10/400] x16 /100 = 100x410 / 400x16 /100 = 100x1.025x0.16 = <strong>16.4 </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is exactly the amount paid corresponding to excise duty and so this should be the amount of credit that should be allowed. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The confusion created by the 2008 budget. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Notification No. 10/2008, the 75% has been reduced to 50%. So now the duty payable by EOUs would be like this:- </font></p>
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<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">value </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">100 </font></p></td>
</tr>
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<td valign="top" width="274"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">BCD = 50% of the actual duty </font></p></td>
<td valign="top" width="76"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">5 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Value for CVD </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">105 </font></p></td>
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<td valign="top" width="274"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CVD = 16% of 105 </font></p></td>
<td valign="top" width="76"><p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">16.8 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total duty </font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">21.8 </font></p></td>
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<td valign="top" width="274"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Of this CVD /excise duty component would be </strong></font></p></td>
<td valign="top" width="76"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>16.8 </strong></font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the Cenvat Credit Rules have not been amended to suitably increase the credit to be allowed. This would have been correct if the formula for credit was changed to </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>X multiplied by {( 1+B C D /200) multiplied by ( CVD /100)}]. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The figure 400 should have been substituted with 200. Let us see the formula with our numbers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">100x [1+10/200 ] x16 /100 = 100x210 / 200x16 /100 = 100x1.05x0.16 = <strong>16.8 (which is the amount of CVD payable.) </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We brought this to the notice of the Board in our Seminar at Hyderabad and the very obliging Member Mr. Sridhar promised to answer the questions raised in the Seminar. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question raised by an assessee was, </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the recent budget, the duty now chargeable would be equivalent to 50% of the Basic Customs duty plus CVD (as applicable) as per notification no 10/2008 CE dated 01-03-2008 . We request you to kindly advice us any corresponding amendment with regard to availment of Cenvat credit under Rule 5(7) of Cenvat Credit Rules, 2004. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the reply we received from the Board tersely states, “there has been no amendment in this provision”!!!!!!!!!!!!!!!!!!!!! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>We hope the Cenvat Credit Rules amending Section in the Board will give a serious thought to this problem. </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prohibition on export of cement, not to apply to SEZ – but will export duty on steel products apply? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The dichotomy of an SEZ situated very much in India being treated as a foreign land for the purpose of exports and imports is causing quite a lot of hardships. DGFT has now notified that the bar on cement export will not apply to SEZ . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The prohibition on export of cement will not apply to supplies of Cement from Domestic Tariff Area ( DTA ) to units in Special Economic Zone (SEZ) or SEZ Developers/ Co-Developers for use within the SEZ only. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the existing ban on export of cement and cement clinker shall not be applicable to export to Nepal . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what about export duty on goods cleared from the DTA to SEZs ? On 10 th May, 2008, the Government imposed export duty on several steel items and the entire SEZ scheme is put on hold as nobody is clear whether export duty has to be paid on the clearances from DTA to SEZ . In fact some Range officers are already “persuading” their assessees to pay export duty. Even if export duty is to be paid, it is not to be paid by the manufacturer clearing his goods to the SEZ – it has to be paid by the SEZ unit! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will somebody clarify soon before our consultants become richer? </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=45&filename=notification/dgft/2008/dgft08not012.htm" target="_blank">DGFT Notification No. 12 (RE-2008)/2004-2009, Dated: May 21, 2008 </a></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></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong><font color="#006600">– Tomorrow's cases </font></strong><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>Ban on export of edible oils does not amount to infringement of fundamental right of carrying business under article 19(1)(g) of C onstitution: P&H High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE soaring domestic prices of essential commodities forced the Government to come up with some policy changes in relation to regulation of export / import of these commodities recently. One such move was to impose a ban on export of edible oil and simultaneously allow exemption from import duties for the crude oil. But the boon has turned out to be a bane for some manufacturers who had no idea about the likely policy changes when they had entered into agreements with their clients for supply of these goods. </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>Pre-deposit u/s 35F - Furnishing Bank Guarantee towards payment of amount under order of pre-deposit is not to be treated as a rule: Gujarat HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>“GOVERNMENTS </strong><em> are not run on mere Bank Guarantees </em>. We notice that very often some courts act as if furnishing a Bank Guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere Bank Guarantees. <em>Liquid cash is necessary for the running of a Government as indeed any other enterprise </em>.- Supreme Court in AC.,C.Ex . vs. Dunlop India Ltd <em>. <strong><font size="1">[ </font></strong></em><strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-156-SC-CX.htm" target="_blank">2002-TIOL-156-SC- CX </a><em>] </em></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>Deduction u/s 80 HHF - profits of entire business to be taken into consideration, notwithstanding loss in exports; expenditure on leased building - depreciation allowable & cable subscription is turnover: ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Deduction u/s. 80HHF : the profits derived from the business as referred to in sub-section (1) would be such profits as are computed in accordance with the provisions of sub-section (3) read with Explanation (f) thereof. For this purpose, the profits of the entire business would be taken into consideration. Consequently, it is held that the Assessing Officer was not justified in denying the claim on the ground that there was loss in the business of export television's software on the basis of segmented Profit & Loss A/c. </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>
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