TIOL-DDT 894 · 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 894 </font><br>
25.06.2008 <br>
Wednesday </strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">AP celebrates anniversary of emergency with editor's arrest </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was on this day 33 years ago that Madam Indira Gandhi imposed emergency and locked up journalists and politicians. Today Andhra Pradesh is the only major state in India totally under Congress Rule. The Chief Minister of AP goes around promising <em>Indiramma Rajyam </em>. And Indiramma is still an icon in Andhra Pradesh ! Maybe in pursuance of that ambition, the State of AP celebrated the anniversary of the Emergency by arresting the Editor of <em>Andhra Jyoti </em>, a famous vernacular journey. The Editor and a couple of his colleagues were arrested under the provisions of the S C /ST (Prevention of Atrocities) Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nothing wrong !, but the timing was great. They arrested the Editor at 10 pm when he must have been at his busiest worst. The whole idea must have been to stop the edition the next day. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Every autocratic government that tried to ensure that the <em>pen is </em><strong><font color="#FF6633">condomed</font> </strong>, has failed but arrogance driven by power never realises that and the dim-witted politicians continue to ignore the lessons of history. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">RBI </font></strong><font color="#006600"><strong> Announces Monetary Measures </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Important developments have taken place in recent weeks with regard to inflation. To assess these developments, it is important to recognise the key forces at work. The escalation in inflation last week mainly reflects the pass-through of international crude prices to domestic prices effected on June 5, 2008 . Unlike in some mature economies, however, the pass-through is not occurring on a continuous basis in developing economies including India . Thus, the policy response to the escalation in crude prices could be somewhat similar to other countries but tailored to suit our conditions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Besides oil prices, there are some underlying inflationary pressures impacting inflation in India . Inflation, based on variations in the wholesale price index ( WPI ) on a year-on-year basis, increased to 11.05 per cent as on June 7, 2008 from 7.75 per cent at end-March 2008 and 4.28 per cent a year ago. Excluding the fuel sub-group, inflation rose to 9.61 per cent from 5.92 per cent a year ago. Excluding fuel and food, inflation was 10.33 per cent as against 6.33 per cent in the corresponding period of the preceding year. Inflation based on the consumer price index ( C PI ) for industrial workers ( IW ) and urban non-manual employees ( UNME ) stood at 7.81 per cent and 6.99 per cent, respectively, on a year-on-year basis in April 2008 as compared with 6.67 per cent and 7.74 per cent a year ago. Inflation based on CPI for agricultural labourers (AL) and rural labourers ( RL ) stood at 9.11 per cent and 8.84 per cent in May 2008, respectively, as compared with 8.22 per cent and 7.90 per cent a year ago. Therefore, it is important to recognise that an adjustment of overall aggregate demand on an economy-wide basis is warranted to ensure that generalised instability does not develop and erodes the hard-earned gains in terms of both outcomes of and positive sentiments on India's growth momentum. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At this juncture, the overriding priority for monetary policy is to eschew any further intensification of inflationary pressures and to firmly anchor inflation expectations. Several positive factors that currently exist need to be recognised. Relative to several other emerging economies, the Indian economy has, by and large, a reasonable supply-demand balance which provides some insulation in managing this unprecedented shock from global oil markets. Domestic financial markets and institutions have been largely secured against the contagion from the unsettled conditions in international financial markets. Furthermore, India is somewhat de-coupled from the intensifying global food crisis in view of the improvement in domestic agricultural performance. The external sector is strong and resilient with modest current account deficits relative to the size of the economy and has a comfortable level of foreign exchange reserves. Accordingly, the major focus of public policy at the current juncture needs to be on dealing with the impact of the escalation of international crude prices in a well-managed and smooth adjustment that draws on demonstrated strengths and positive outcomes. Moderating and managing aggregate demand so that pressures on prices are not intensified is a critical element of this approach. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard, monetary policy has to urgently address aggregate demand pressures which appear to be strongly in evidence. First, inflation has increased to a 13-year high and inflation expectations have been driven up by unrelenting pressures from international commodity prices, particularly crude and metals. Second, investment demand continues to be strong, growing in the range of 14-19 per cent annually since 2002-03 and currently constituting 36 per cent of GDP . This is also reflected in the pick-up in the growth of domestic capital goods production in April 2008 after some deceleration in January-March. Furthermore, consumption demand appears to be reviving the production of consumer goods, with a turnaround in the production of durables. Third, with merchandise imports running ahead of exports, the trade deficit widened sizeably in 2007-08 and has continued to expand in April 2008. Although large oil imports appear to be the main driver, non-oil imports have also increased at a considerable pace, contributing more than 60 per cent of the overall import growth in April 2008 and reflecting the pressure of domestic demand. There has also been some tightening of external financing conditions in the ongoing global financial turmoil. Fourth, fiscal pressures are emerging due to the possibility of enhanced subsidies on account of food, fertiliser and POL as well as for financing deferred liabilities relating to farm loan waivers with implications for additional pressures on aggregate demand, and with potential spillovers into the external sector. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consistent with the stance of monetary policy and on the basis of incoming information on domestic and global macroeconomic and financial developments, RBI has decided to take the following measures: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The repo rate under the Liquidity Adjustment Facility ( LAF ) is increased from 8.00 per cent to 8.50 per cent with immediate effect. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) The cash reserve ratio ( C RR ) of the scheduled commercial banks, regional rural banks ( RRBs ), scheduled state co-operative banks and scheduled primary (urban) co-operative banks is being increased by 50 basis points to 8.75 per cent in two stages, effective from specified fortnights as indicated below: </font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td valign="top" width="300"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Effective date <br>
(i.e., the fortnight beginning from) </font></p></td>
<td valign="top" width="300"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">C RR on net demand and time liabilities <br>
(per cent) </font></p></td>
</tr>
<tr>
<td valign="top" width="300"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">July 5, 2008 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">July 19, 2008 </font></p></td>
<td valign="top" width="300"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8.50 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8.75 </font></p></td>
</tr>
</table>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">RBI </font></strong><font color="#006600"><strong> Governor on inflation </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a legitimate concern about the recent developments on the inflation front. I will mention five relevant factors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. First, most of the latest hike in inflation is on account of oil prices, as has been explained in detail on Saturday by the Finance Secretary and the Chief Economic Advisor. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Second, the hike on account of oil has come on top of some underlying inflationary pressures. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Third, at the current level of global prices, the pass-through of oil prices is not happening on a continuous basis. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Fourth, oil price increase is now a global problem, making inflation a problem for all countries, both developed and developing. Hence, our solutions to the problem will also be similar, but tailored to suit our conditions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Fifth, and finally, this high level of energy prices may not necessarily be temporary. So, the whole economy and indeed our society is better off adjusting to the possible new reality of high and volatile energy prices. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are approaching this issue in a calm and calculated fashion, and on an ongoing basis, in a timely manner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The problem is such that we should look at it in terms of both the past and the future also. <br>
<br>
<strong><font color="#FF6633">The future. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Of the three shocks from global economy, we are safe in regard to the financial sector and the outlook is optimistic on the food front. Therefore, as of now, fuel prices are the main, though a difficult, problem. The macro policy can, therefore, focus on this problem of fuel prices in the background of some strength in many other aspects. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are confident that with a well-managed smooth adjustment of this episode, the inflation would be brought in alignment with our aim as expressed in the Policy from time to time. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We must recognize that the oil shock has been externally imposed on India . We have to manage the shock and smoothly adjust to new realities, taking advantage of our strengths in the real sector also. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our financial and external sectors are strong, efficient and resilient to manage the adjustment process. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the process of difficult adjustment, the RBI will play its part in moderating and managing aggregate demand so that pressures on prices are not intensified. <br>
<br>
I call upon all market participants, in particular the financial market participants, to appreciate the problem with the analysis at their command, participate with us in managing demand and maintaining orderly conditions in financial markets, while drawing upon the strengths of their respective balance sheets. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The RBI will continue to take determined and calibrated measures, as and when warranted, with a focus on managing expectations and on enabling adjustments in the economy in response to the oil shock. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Wrong availment of Customs Duty Exemption on import of Cash Dispenser Machines declared as “ATM” – DRI Alert</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 25/2005- Customs Dated 01.03.2005, Automatic Teller Machines ( ATM ) of Sub- Heading 847290 are exempted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has come to the notice of DRI that some of the importers have availed the duty exemption on “Cash Dispenser Machines” by mis -declaring them as ATM, which are otherwise chargeable to merit rate of duty and no exemption from customs duty is admissible on them. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Cash Dispenser Machine is distinct from an automated Teller Machine (ATM) since the former can only dispense cash and cheques. Accordingly, these two are functionally different and duty exemption granted on imports of ATM is not applicable to Cash Dispenser Machines. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So DRI wants the field to review all past clearances of Cash Dispenser Machines misdeclared as ATMs, where duty exemption has been claimed under Notification 25/2005-Customs dated 1.3.2005, either inappropriately or through mis -declaration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DRI wants suitable corrective action to be initiated, wherever necessary. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">C</font></strong><font color="#006600"><strong>BEC appoints common Adjudicating Authorities for DRI cases </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBE C has appointed Adjudication Authorities for specified DRI cases. </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_074.htm" target="_blank">Notification Nos 74</a> ,<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2008/cnt08_075.htm" target="_blank">75</a>,<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2008/cnt08_076.htm" target="_blank">76</a> <strong>&</strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2008/cnt08_077.htm" target="_blank">77/ 2008- Customs ( N.T. ) Dated 23rd June, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633"> tiol</font> – Tomorrow's cases </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">C</font></strong><font color="#663399"><strong>ustoms </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></font></strong></strong></strong></strong></strong></strong><font color="#FF6633">C</font></strong><font color="#FF6633"><strong>arrying gold in shoes not indicative of smuggling; it is an accepted trade practice: CESTAT by Majority </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Smuggling – Burden of Proof: </font></strong> It can be noticed that the burden of proof that the seized goods are not smuggled, lies on the person who claims ownership of the said seized goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Bills need not be of the same date – even banks issue bills after two or three days -</font> </strong>A lot was argued by SDR that the Bills produced by the appellants were of not the same date. The trade practices in the bullion market seem to indicate otherwise. The documents show that even today the nationalized banks, for the sale of foreign marked gold biscuits, issue the bills for the sales affected, after two to three days. If the nationalized banks are following the said procedure, than it has to be held that just because the invoices are of subsequent date it would not matter, as long as the burden of proof, that the goods are not smuggled, is discharged. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">What is legal and genuine in one Revenue Department cannot be illegal for another Revenue Department:</font> </strong>It is also to be noted here that Income Tax authorities on the same set of evidence (based upon the information shared by customs with Income Tax Department) concluded that the transactions of purchases and sales were genuine, on the basis of documentary evidences. If that be so, then the transactions which are genuine and legal to one revenue department cannot be said being illegal for another revenue department, both working under the same Ministry. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">C</font></strong><font color="#FF6633"><strong>arrying gold in shoes – Even Customs has endorsed it: </strong> </font>As regards the mode of transportation of the gold biscuits in shoes, it may look odd, and it may raise a suspicion and nothing more. The mode of transportation of valuables in a covert manner has been accepted as a general practice It seems that the C ustoms department itself accepts the mode of transportation of gold biscuits in shoes, which is evident from the remarks on the Baggage receipt no 0296644 dated 1.3.2007, which is endorsed by the C ustoms officials as produced along with the miscellaneous application. It is seen from records that revenue has not adduced any evidence, even remotely, to indicate that the seized gold biscuits were of smuggled nature, while appellants have clearly demonstrated that they had licitly purchased the gold biscuits in a normal sale and purchase transactions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Income Tax </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">AOP </font></strong><font color="#FF6633"><strong> or HUF 'Notice' should be clear: Before assuming jurisdiction to complete assessment, notice has to be issued in status in which assessment is sought to be completed: ITAT </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition of ‘person' very clearly shows that Individual, HUF , Association of Persons ( AOP ) are different persons. Before assuming jurisdiction to complete the assessment, notice has to be issued in the status in which assessment is sought to be completed. In this case, though notice was issued twice in the status of HUF , first under sec.158B C on 29.10.2001 and later under sec.158BD on 26.12.2002, but still the assessment has been completed in the status of AOP .<font color="#FF6633"> <strong> Therefore, the assessment is without jurisdiction and void ab initio. </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">C</font></strong><font color="#663399"><strong>entral Excise </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Limitation under Section 11A is not applicable to demands under Rule 223A of erstwhile Central Excise Rules, 1944: CESTAT Larger Bench </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS case has only academic interest as the dispute relates to the erstwhile Central Excise Rules 1944. In those days of strict Control Raj, there was one rule called 223 A . The rule stipulated: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Account of stock of goods in a factory or warehouse to be taken and balance to be struck.</font> </strong> As often as the Commissioner may deem it necessary or proper, the stock of excisable goods remaining in a factory, warehouse or store-room registered or approved for the storage of such goods shall be weighed, measured, counted or otherwise ascertained in the presence of the proper officer; and if the quantity so ascertained is less than the quantity which ought to be found in such premises (after taking into account receipts and deliveries, and making such allowance for waste by evaporation, or other natural causes, as the proper officer may consider reasonable, and as may be in accordance with any instructions issued by the Central Board of Excise and Customs) the owner of such goods, or if the premises be a public warehouse, the keeper thereof, shall, unless the deficiency be accounted for to the satisfaction of the proper officer <strong><font color="#FF6633">be liable to pay the full amount of duty chargeable on such goods as are found deficient and also a penalty which may extend to two thousand rupees. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns Tomorrow for the judgements </font></strong></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 DDT </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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