TIOL-DDT 916 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663366" size="3">TIOL-DDT 916 </font><br>
25.07.2008 <br>
Friday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DVDs will cost more : Anti Dumping Duty imposed </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today you can get a good 4.7 GB DVD for as less as Rs. 15/- and this can perhaps carry a whole library. Instead of wasting paper and depleting our forests, a lot of data can be comfortably transferred in a DVD , but the Government is prepared to waste paper rather than allow inexpensive DVDs. They are told that DVDs are dumped into the country and have imposed an anti dumping duty of around Rs. 3/- on each DVD imported and this would certainly ensure that DVDs become more expensive. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If somebody wants to dump DVDs in India at prices lower than their value, why can't we take advantage of the situation and enjoy it? Instead of supplying tons of paper to Government offices, it will be far cheaper to supply DVDs. In Central Excise, every Superintendent, Assistant Commissioner and Commissioner can carry his entire office in one DVD. Perhaps such dumping should be encouraged, even if the domestic industry suffers. Actually the Domestic Industry can also buy these dumped DVDs and sell them in India . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway Government has decided to impose anti dumping duty on digital versatile discs-recordable generally known as DVD-R and DVD-RW originating in, or exported from China PR, Hong Kong, and Chinese Taipei at rates ranging from Rs. 2.96 to Rs. 3.06 per piece. The Government has clarified that the product under consideration is digital versatile disc recordable of all kinds. Such product includes DVD -R, DVD +R, DVD-RW and DVD+RW . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2008/ctariff08_089.htm" target="_blank">Notification NO. 89/2008- Cus ., Dated: July 23, 2008 </a></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000" size="4">India</font> <font color="#006600">under different Acts </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Anomalies in “ India ” under different Indirect Taxes </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen has sent us this researched piece. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Customs Act, 1962 extend to the whole of India . Under Section 2(27), India includes the Territorial Waters of India. Similarly, under Section 2(28) Indian Customs Water means the waters extending into the sea upto the limit of contiguous zone of India under Section 5 of Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 and includes any bay, gulf, harbour , creek or tidal river. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, the limit of territorial water is 12 Nautical Miles. The contiguous zone of India is 24 Nautical Miles and the continental shelf of India and the exclusive economic zone of India is 200 Nautical Miles. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Ministry of External Affairs vide Notification No. S.O. 189 (E) dated 07.02.2002 has extended the Customs Act, 1962 and Customs Tariff Act, 1975 to the whole of continental shelf of India and exclusive economic zone of India for the following purposes : </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The prospecting for extraction or production of mineral oils in the continental shelf or the exclusive economic zone. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Supply of any goods in connection with any of the activities referred to in Clause (a). </font></p>
</blockquote>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification also clarifies by way of explanation that mineral oils include Petroleum and Natural Gas. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Consequent to the issue of Notification by Ministry of External Affairs, the CBEC have issued Circular No. 17/2002 – CUS dated 13.03.2002 clarifying the implications of the said notification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While clarifying Customs Duty implications for mineral oil extracted or produced in exclusive economic zone and continental shelf, it was also stated as under : </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Further, mineral oils produced in the EEZ or Continental Shelf of India would be deemed to be produced in India and subject to levy of Central Excise Duties under the Central Excise Act, 1944.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC rescinded the above circular substituting it with new Circular No. 22/2002 – CUS dated 23.04.2002. The only change in this circular is deleting the observation with reference to levy of Central Excise Duties under the Central Excise Act, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The Central Excise Act, 1944 extend to the whole of India . India is not defined under Central Excise Act, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, under Notification No. 166/87-CE dated 11.06.1987, the Central Excise and Salt Act, 1944 has been extended to the designated area in the continental shelf and exclusive economic zone of India as declared in the Ministry of External Affairs Notification No. S.O. 429(E) dated 18.07.1986 . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the above background, India will include the territorial waters of India which is 12 Nautical Miles. In addition, <strong><font color="#FF6633">designated areas</font> </strong> in the continental shelf and exclusive economic zone of India will be treated as territories of India for applicability of Central Excise Act, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Under Service Tax Legislation, Section 64 of the Finance Act, 1994 provides that levy will extend to the whole of India except the State of Jammu and Kashmir . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Notification No. 1/2002 – ST dated 01.03.2002 provisions of Chapter 5 of Finance Act 1994 have been extended to the designated areas in the continental shelf and exclusive economic zone of India as declared by Notification Nos. S.O. 429 (E) dated 18 th July, 1986 and S.O. 643 (E) dated 19 th September, 1996 by the Ministry of External Affairs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequent to the above, provisions of Service Tax Legislation are applicable to the whole of India which will include territorial waters of India which is 12 Nautical Miles and also to <strong><font color="#FF6633">those designated areas</font> </strong> in continental shelf and exclusive economic zone which are notified by the Ministry of External Affairs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. From the above, it can be seen that India has different territorial connotation for levy of taxes under 3 different legislations. It is giving rise to <strong><font color="#FF6633">contradiction</font> </strong>. Under one legislation it is India and under another legislation it is outside India . </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The contradiction can be understood by a simple example. What will happen to oil or gas produced in <strong><font color="#FF6633">non-designated areas</font> </strong> of exclusive economic zone or continental shelf? Customs Act is <strong><font color="#FF6633">not applicable</font> </strong> for the obvious reason that it is within the territory of whole of India . Similarly, Excise Act is also <strong><font color="#FF6633">not applicable</font> </strong> being territory outside the whole of India under the Excise Act. Similarly, provisions under Service Tax Legislation are also not applicable as the same are not extended to whole of exclusive economic zone and continental shelf of India and these territories are outside India unlike in the case of Customs Act. The designated areas also differ under Excise Act and Service Tax Legislation as one covers one notification whereas the other covers two notifications. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. May we request CBEC to bring uniformity to the taxing provisions as taxes have no equity, but the basic requirement is that there must be uniformity of approach under various legislations and not the adhocism for Indirect Taxes of significant magnitude? </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>So where does it place our SEZs ? Are they in India or not? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Income Tax Act was amended in 2007 to define as “India” to be “the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone s Act, 1976, and the air space above its territory and territorial waters.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see <font color="#006600">What is India</font> ? in<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5096" target="_blank"> <strong>DDT 563 01.03.2007 </strong></a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Maharashtra VAT vs Central Excise Tariff Act</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many VAT Notifications of Maharashtra use the numbers representing the headings, sub-headings or tariff items of the Central Excise Tariff Act, 1985 in order to clarify the commodities intended to be covered under the notifications. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Questions have arisen regarding the interpretation of these entries in the instances where the Central Excise Tariff Act has been amended. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner of Sales Tax, Maharashtra has clarified that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“where any Notification is issued for the purposes of any schedule entry and the Central Excise Tariff numbers appearing in the Notification are changed or the commodities corresponding to these numbers are changed, then nevertheless only those commodities which were originally covered by the headings, sub-headings or tariff items of the Central Excise Tariff at the time of issue of the Notification will continue to be covered by the scope of the Schedule Entry. The State Government, in due time, will re-notify the products for the purposes of the Schedule Entry by using the revised Central Excise Tariff. However, until such revised Notifications are issued, the existing Notifications will continue to be effective as aforesaid. For removal of doubts it is clarified that no additional product will be covered by any notification irrespective of any change in the Central Excise Tariff and all products covered earlier will continue to remain covered. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/vatcircular1.htm" target="_blank">MAHARASHTRA TRADE CIRCULAR No. 26 T of 2008 Dated 23 July, 2008 </a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VAT Audit – Maharashtra instructions </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With regard to Audit, the Commissioner, Sales Tax, Maharashtra gives the following clarifications:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Procedure of Audit: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the present procedure, the audit is carried out at the place of the dealer by the officers working in the Business Audit Divisions. The cases for audit are selected by the Business Audit Criteria Committee on the basis of certain criteria. Normally, the audit is carried out with prior information of the date to the dealer, unless there is deliberate decision to conduct surprise audit. The notice of information to the dealer shall also contain what information he should keep ready at the time of visit. The officer is authorised by the Joint Commissioner of Sales Tax of the respective Business Audit Division for this purpose. If however the officer is unable to keep the appointment then he will inform the dealer well in advance. If the information sought for in the notice sent to the dealer is not kept ready by the dealer at the time of the visit, the auditor may levy penalty in suitable cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Scope of Audit: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the primary object of Business Audit is to ensure the compliance of laws implemented by the Department, the audit officer will ascertain the correctness of returns filed by the dealer, both under MVAT Act and CST Act. Obviously, the audit officer will verify the books of accounts maintained by the dealer along with sale bills, purchase bills, sales journals, purchase journals, ledger, cash book, delivery challans , dispatch proofs, bank statements and every other document or piece of evidence to ascertain the correctness of turnover returned and also the correctness of claims made through returns. The audit officer may also ask for agreements, purchase orders, work orders, tender documents etc., if such documents are required for ascertaining the correctness of returns. The audit officer is also authorised to ask for the details of filing of returns and payments, if required. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Powers of the Audit Officer: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If any discrepancy is noticed in the process of audit, either in returns or books of accounts or otherwise, then the audit officer has to communicate his observations to the dealer, if possible on the date of audit itself or immediately thereafter. The communication to dealer is expected to be unambiguous and clear in its import. If the audit observations / objections are acceptable to the dealer then after compliance by the dealer the process of audit would stand concluded. The corrective action could be filing of revised returns and making payment of differential dues, if any, including interest. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the event of audit observations / objections not being acceptable to the dealer, the audit officer would initiate appropriate proceedings including assessment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Duties of Dealer: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As expressly mentioned in Section 22 read with section 2 (18), 63 (4), 64, the dealer under audit has to afford necessary facility to auditor to inspect books of accounts. The dealer shall give unhindered access to his books of accounts and / or to computerized books of accounts. The audit process can be hastened only if the dealer keeps his books of accounts, bills and all relevant documents at the place of business. The queries raised by audit officer are expected to be clarified with requisite evidence or documents then and there only so that the issues are immediately resolved and the resolution of issues is not kept pending. Legal issues having financial implications, of course, could be resolved on a later date. The dealer shall also furnish the E-mail addresses and contact numbers of his vendors/ vendees. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rights of the Dealer: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The dealer under audit has a right to ask for valid authorisation of audit officer for carrying out audit. He can also ask for Identity proof of audit-team. The dealer can continue his business during audit. He can also take help of sales tax consultant / practitioner, if so required by him. It is the discretion of the dealer either to accept or reject the audit observations communicated to him by the audit officer. The dealer under audit will have a right to know the result of audit within a reasonable period of time. Normally, audit process is expected not to continue beyond a period of three months or so for reaching to final conclusions, provided the dealer extends full co-operation in the proceedings. This time limit would of course not be applicable, if the audit results in initiation of assessment proceedings. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/vatcircular1.htm" target="_blank">MAHARASHTRA TRADE CIRCULAR No. 25 T of 2008 Dated 23 July, 2008 </a></strong></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 color="#006600"><strong> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">– </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Monday's cases </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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 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_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></font></strong></font><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>Clearance of goods on job work does not amount to clearance under full exemption or at nil rate of duty – CENVAT credit on inputs used in such job work allowed: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is strange that the department is still agitating an issue which was settled by the Larger Bench of the Tribunal and an Apex Court judgment and the ratio of these judgments were followed by various benches of the Tribunal in cases involving similar issue. It is time the Board sensitizes the Commissioners to follow the judgments of the Tribunals and Apex Courts and dispense with the practice of filing frivolous appeals. </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>Refund of Input Service credit to exporter – there is nothing in rule 5 that such refunds would apply only in respect of exports made after 14.03.2006 – even a consolidated yearly claim can be filed as Notfn 5/2006-CE( N.T ) employs word 'may': Tribunal </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE assessee filed a refund claim of Rs.43.28 lakhs on 25.07.2006 under Rule 5 of the Cenvat Credit Rules being the amount of Cenvat Credit availed by them on the input services which remained unutilized on account of the export clearances of their finished goods effected by them during the period 01.04.2005 to 31.03.2006. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue's contention is that during the relevant period neither Rule 5 of the Cenvat Credit Rules nor Notification no. 11/2002-CE( N.T ) dated 01.03.2002 issued thereunder provided for refund of unutilized amount of input service credit in case of provider of export services and was confined to manufacturer only and such facility was extended by substituted Rule 5 with effect from 14.03.2006 read with Notification no. 5/2006-CE( N.T ) dated 14.03.2006 and therefore refund cannot be granted relating to exports made prior to 14.03.2006. Moreover, as per conditions and limitations set out in para 2(b) of the Appendix to Notification No. 5/2006-CE( N.T ) dated 14.03.2006, an EOU is required to file claim for such refund for each calendar month whereas refund claim filed by the appellants was for the period 01.04.2005 to 31.03.2006 which means a total period of twelve months. </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>Singapore-based company - Benefits under Article 8 of DTAT cannot be allowed to profits derived from commission earned on ship-cargo booking; Article 24 - exemption allowed only to extent an income is received in Singapore : ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IN an interesting decision, the Tribunal has denied the benefits of Double Taxation Avoidance Treaty ( DTAT ) with Singapore to a shipping agency company as it was not found to be deriving its profits from the operation of ships in international traffic as mandated under Article 8 of the Treaty. Since the agency was found to be just one of the agencies forming the chain between the actual cargo owner and the real ship owner, its profit derived from commission earned on such deals cannot avail the benefits of DTAT . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The non-resident company was also denied the benefits under Article 24 as it can be allowed exemption only to the extent an income is received in Singapore . If the amount of income is not remitted to the country of residence, then the country of source shall be entitled to charge tax on that part of the income as per its own provisions. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></font></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 Weekend. </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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