TIOL-DDT 875 · 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 875 </font><br>
29.05.2008 <br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Services provided in relation to chit – 30% abatement granted</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Government has granted a 30% abatement to Services provided in relation to chit. And the Notification defines “chit” as <font color="#FF6633">“Chit” means a transaction whether called chit, chit fund, chitty, kuri, or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount.” </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Are Chit funds taxable under 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/2007/sercir96.htm" target="_blank">CBEC had in Circular No. 96/7/2007-ST, Dated : August 23, 2007, clarified</a></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Chit Funds are of two types, namely:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (a) Simple Chit Funds: In this case, members agree to contribute to the fund a certain amount at regular interval. Lots are drawn periodically and the member, whose name appears, gets the periodical collection. No separate amount is charged from the members.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (b) Business Chit Funds: In this case, there is a promoter known as foreman who draws up the terms and conditions of the scheme and enrolls subscribers. Every subscriber has to pay his subscription in regular installments. The foreman charges a separate amount for the services provided. Some States prescribe a ceiling limit for the amount to be charged by such promoter for the services provided. Commission amount is retained by the promoter as consideration for providing the services in relation to chit fund.</font></p>
</blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Whether services provided in relation to chit fund is leviable to service tax under “banking and other financial services” or not?</font></strong></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#FF6633">(a) In the case of Simple Chit Funds, no consideration is paid or received for the services provided and, therefore, the question of levy of service tax does not arise.</font></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> (b) In the case of Business Chit Funds, cash management service is provided for a consideration and, therefore, leviable to service tax under “banking and other financial services”.</font><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> So, the Board thinks that, Chits are covered under “banking and other financial services”. But what is the value on which Service Tax is payable. Anyway, now on whatever the amount be, there is a 30% abatement.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> As is the case with all hurried notifications, there is a major blunder here.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Government wants this abatement to be included as Sl. No. 4A in the Notification No. 1/2006-Service Tax, dated the 1st March, 2006.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> But dear Board, there is already a Sl. No 4A in the Notification; What happens to that now? Or will there be two serial Numbers marked 4A?</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Why can't the Board put up all its notifications for scrutiny by the public?</font></strong></p>
<p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_027.htm" target="_blank">Notification No. 27/2008-Service Tax Dated: May 27, 2008 </a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Customs duty refunds – Unjust Enrichment – verify before denying – Board instructs field</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> While reviewing a case of a refund arising out of an appellate order of the regional Bench of the Tribunal, it was found that an Assistant Commissioner of Customs had passed an order of refund sanctioning the refundable amount but crediting the same to Consumer Welfare Fund without going through the due process as provided in Section 27 of the Customs Act, 1962 and not looking into details of the materials on record to deny the refund to the assessee, on the grounds of unjust enrichment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> So the CBEC instructs that:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 1. The <font color="#FF6633"><strong>concerned</strong></font> AC / DC of Customs has to go through the facts of the case and the material placed before him in order to determine whether the amount claimed by an applicant is refundable to him or not.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 2. The AC/DC should go through the details of audited balance sheet and other related financial records, certificate of the Chartered Accountant etc., submitted by the applicant in order to decide whether the applicant had not passed on the incidence of the duty and interest thereon, if any, to any other person.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Order-in-Original passed by the AC/DC in the adjudication process should be a speaking order providing specific details including the relevant financial records that are relied upon to arrive at a conclusion whether the burden of duty or interest, as the case may be, has been passed on or not.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>4.</strong> <strong>Refund orders issued in a routine and casual manner thereby sanctioning the amount but crediting the same to the Consumer Welfare Fund without going through the factual details of the case and the due process as provided in the first proviso cannot be considered as a complete and speaking order.</strong></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> So the Board wants officers to carefully examine this aspect of the refund claim before passing an Order-in-Original, so that unnecessary hardships caused to the applicants and protracted litigation in claiming refunds is avoided.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Apparently here is a fair Board which is concerned about unnecessary hardships caused to the applicants. </font></strong></p>
<p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2008/cuscir08_07.htm" target="_blank">CIRCULAR NO 7/2008-Cus., Dated: May 28, 2008</a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Trade Credits for Imports into India – Review of all-in-cost ceiling – RBI instructions</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> At present, the all-in-cost ceiling in respect of Trade Credits up to one year is 50 basis points over 6 months LIBOR for the respective currency of credit or applicable benchmark. On a review, it has been decided to enhance the all-in-cost ceiling for trade credits as under:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Maturity Period </font></p>
<div align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top" width="189"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Maturity Period </strong></font></p></td>
<td valign="top" width="379" colspan="2"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>All-in cost ceiling over 6-month LIBOR</strong></font></p></td>
</tr>
<tr>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif">
</td>
</font>
<td valign="top" width="189"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Existing </strong></font></p></td>
<td valign="top" width="189"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Revised </strong></font></p></td>
</tr>
<tr>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Up to one year </font></p></td>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">50 basis points </font></p></td>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">75 basis points </font></p></td>
</tr>
<tr>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More than one year up to three years </font></p></td>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">125 basis points </font></p></td>
<td valign="top" width="189"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">125 basis points </font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This amendment to Trade Credit Policy will come into force immediately. All other aspects of Trade Credit remain unchanged. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately.</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=280&filename=notification/rbi/2007/rbi07cir042.htm" target="_blank">RBI Circular No. 42/RBI., Dated: May 28, 2008</a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Exchange rates notified for export and import.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Exchange rates for the purpose of export and import have been notified with effect from 1st June 2008 vide Notification No 45/2008 Cus (NT) dated 28th May 2008.</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=24&filename=notification/custom/2008/cnt08_045.htm" target="_blank">NOTIFICATION NO 45/2008-Cus., Dated: May 28, 2008</a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Chief Commissioner's conference today with PC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Finance Minister P. Chidambaram will inaugurate the two-day all-India annual Conference of the Chief Commissioners and Directors General of CBEC, in Delhi today.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Conference will commence with the performance appraisal of the Department in key areas such as revenue collection, enforcement, trade facilitation, and the opportunities and challenges before the Department followed by a session on the status of automation initiatives in CBEC and the expectations from the field formations in this regard. It will also deliberate upon measures to raise compliance level in Service Tax as well as issues relating to SEZs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> There will be a session on recent developments in International Customs which cast obligations on Customs administrations. Other important issues such as the current trends in smuggling and commercial frauds, Department's preparedness in terms of equipments to meet these challenges, dispute resolution, and human resource development will also be discussed.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Minister of State for Finance (Revenue) S.S.Palanimanickam will preside over the valedictory function on 30th May, 2008.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Report on IT surcharge on oil baseless, Finance Ministry clarifies. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Attention of the Ministry of Finance has been drawn to reports appearing in a section of media (including DDT) following a routine meeting between the Minister of Petroleum and Natural Gas and the Finance Minister. The reports are largely speculative and in particular, reports about certain new tax proposals are totally baseless. Ministry of Finance points out that no body from the Ministry had briefed the media.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Do they have these routine meetings, especially when the petrol issue is burning?</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Customs bosses do not provide effective leadership - employees </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> If you are a Customs officer and you think that your bosses are not providing effective leadership, you are not alone; most of the employees of the HM Revenue and Customs of England share your views. Unlike the CBEC, the HMRC conducts national staff surveys and its latest poll, held last November, has shown growing concerns.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Some 52% did not have confidence in senior managers compared to 21% who did. Just 15% felt they provided effective leadership</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 58% said the department was not well managed compared to 15% who felt it was in the survey of 20,062 staff – 63% of those invited to take part.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Only 32% were proud to work for the agency, with 33% unhappy </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Some 41% were dissatisfied with their job while 59% would not recommend it as a good place to work.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> More than two-thirds were not satisfied with the department, compared to 13% who were – a fall from 21% in the previous survey.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 78% felt the department was changing for the worse compared to 16% who said it was improving.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> However, the vast majority of staff took pride in delivering great performance, with 97% saying they behaved professionally and with integrity.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The results would be almost same if the CBEC conducted such a survey.</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 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 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></strong></font></strong></font></strong></font></strong></font></p>
<p align="justify"><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 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 color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></font></strong></font><font color="#663399">Income Tax </font></strong> </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Amounts exceeding twenty thousand rupees, paid otherwise than by crossed cheques disallowance of expenditure, not voilative of the constitution when the statute is clear, no need to peruse the purpose of enactment ITAT Sp Bench</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#FF6633"><strong><font color="#000000">General applicability and scope of Sec. 40A(3).</font></strong><font color="#000000"> Admittedly, Central Govt. enjoys the constitutional right to levy tax on income. The Income-tax Act also provides the levy of tax upon the income of the assessee. However, such income has to be computed in accordance with the provisions prescribed under the Income-tax Act which includes the disallowance under certain circumstances. <strong>The
arguments that disallowance of expenditure u/s.40A(3) would amount
to violation of Article 265 of the Constitution of India , rejected
. </strong></font></font></font></p>
<p align="justify"><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Purpose behind enactment not relevant:</strong> From
the plain reading of the section itself it is evident that it would be applicable
where the assessee incurs any expenditure exceeding Rs.20,000/- otherwise
than by a cross cheque or by a crossed bank draft. In such circumstances,
20% of such expenditure shall be disallowed. There is no ambiguity in the
language of Sec. 40A(3) and, therefore, relying upon the decisions of Apex
Court in the cases of Tara Agencies and Anjum M.H.. Ghaswala, we hold that
the section is to be interpreted by giving literal meaning to the language
used in the section itself </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>Clearances made to Advance licence holders – additional discounts given – includible in AV, but whether benefit of Notification 44/2001-CE(N.T) can be claimed after clearance – matter referred to Third Member</strong></font></p>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify"> The appellant is a manufacturer of products falling under chapter 25, 26, 27, 28, 29, 38, 39, 73, 84; they are selling their products to various categories of customers including advance licence holders.</font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify"> The appellants have been offering to their customers different types of discounts such as trade discount, cash discount, quantity discount; in particular to the category of 'deemed export customers' they have granted additional discounts varying from 20 to 30% and these buyers were required to invalidate the advance license held by them in favour of the appellant.</font></li>
</ul>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Notification 108/95-CE, rule 6 of CCRs and an 'un-updated' MEA site – Asian Development Bank is an International Organization, says Tribunal and sets aside Rs 1.83 Cr demand</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> It is to be held that Asian Development Bank is an international organization covered by Notification No.108/95-CE and if that be so, the provisions of Rule 6, sub-rule (1), (2), (3) of Cenvat Credit Rules are not applicable to the goods supplied to such projects.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Asian Development Bank stands mentioned against the Sl.No.21 below Section 3 of the Act, United Nations (Privileges and Immunities) Act, 1947 as an international organization</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Adjudicating Authority could have sought more clarification from the Min. of External Affairs instead of rejecting the appellants' claim of the Asian Development Bank being one of the specified bank to which the provisions of Section 3 of the United Nations (Privileges and Immunities) Act, 1947 stand extended.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> See our columns tomorrow for the judgements</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#FF6666">Until Tomorrow with more <strong>DDT</strong></font></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" target="_blank">vijaywrite@taxindiaonline.com</a> </font></p>
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