TIOL-DDT 941 · the untouched capture
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<!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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 941 </font><br> 01.09.2008<br> Monday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Partiality in amending Notifications – Notification 12/2005 ST leaves gap</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When you allow rebate of Secondary and Higher Education Cess paid on input services used for export of services, don't you allow the SHE cess paid on inputs used? Logically, yes. But incomplete amendment to Notification No. 12/2005-ST has resulted in denying the refund of SHE cess on inputs used for providing the taxable services exported.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification 12/2005-ST dated 19.4.2005 prescribes the procedures for grant of rebate of duty/service tax paid on the inputs/input services used for export of services. As per the explanations 1 and 2 to this notification,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Explanation 1<em>.- </em></strong>“service tax and cess” for the purposes of this notification means,-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) service tax leviable under section 66 of the Finance Act, 1994; and</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) education cess on taxable service levied under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004). </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Explanation 2</strong><em>.- </em> “duty” for the purposes of this notification means, duties of excise leviable under the following enactments, namely :-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the Central Excise Act, 1944 (1 of 1944);</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as amended by section 169 of the Finance Act, 2003 (32 of 2003), section 3 of the Finance Act, 2004 (13 of 2004) and further amended by clause 123 of the Finance Bill, 2005, which clause has the force of law by virtue of the declaration made under the Provisional Collection of Taxes Act, 1931 (16 of 1931);</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) special excise duty collected under a Finance Act;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) additional duty of excise as levied under section 157 of the Finance Act, 2003 (32 of 2003);</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) Education Cess on excisable goods as levied under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004); and</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(h) the additional duty of excise leviable under clause 85 of the Finance Bill, 2005, which has the force of law by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931).</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With the levy of SHE Cess on goods and Services vide Finance Act 2007, this notification has been amended vide Notification No 22/2007 ST dated 12.5.2007 and the following has been added after (a) and (b) to the explanation 1:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(c) Secondary and Higher Education Cess on taxable services levied under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007).”</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But they forgot to make the same amendment to Explanation 2 and as a result, the SHE cess paid on the inputs is not covered under the duty and the same is being denied while granting rebate.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, why did this happen in the first place? If we examine, it leads to an interesting discovery. Actually there are two Notifications 11/2005 ST which grants rebate of service tax paid on the services exported and 12/2005 ST which grants rebate of duty/service tax paid on the input/input services used in export of services. After the levy of SHE Cess, both these notifications have been amended in a similar manner by adding SHE Cess on services in explanation relating to service tax vide Notifications 21/2007 ST and 22/2007 ST respectively, both dated 12.5.2007 and in this copy paste confusion, no one must have bothered to see explanation 2 in Notification 12/2005 which also required an amendment to include SHE Cess on goods.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the Board can do it now, to avoid litigation.</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Does “or” mean “and”</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We raised this issue in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7779" target="_blank">DDT 938</a> </strong> and it evoked tremendous response from Netizens and our own experts. In a unique endeavour, we constituted a Special Bench of our experts who by a 3-2 margin held that it doesn't – at least in the referred context. See details in our <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7797" target="_blank">TIOL TOP </a></strong> today.</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SSI exemption to branded packaging goods, diaries etc</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court in the case of M/ s.Kohinoor Elastic Pvt Ltd <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2005/2005-TIOL-120-SC-CX.htm" target="_blank"><font size="1">2005-TIOL-120-SC- CX</font></a> has held that the benefit of SSI exemption is not available to the goods bearing a brand name/trade name of the customer, manufactured by a SSI unit, as per the orders of the customer, for further use by the customer in the manufacture of final product.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the manufacturer was engaged in the manufacture of elastic bands as per the orders of the customers, who were manufacturers of undergarments. As per the orders of the customers the manufacturer affixed brand/trade names belonging to the respective customers, on the elastic band manufactured for that customer. The SSI Units claimed exemption which was denied to them and subsequently the matter reached the Supreme Court. The Supreme Court has observed that the ‘course of trade' is between the SSI manufacturer and his customer. Whether or not such goods reached the market in the same form is not relevant for the purpose of ‘course of trade'. It could never be the intention to enable the manufacturers who are otherwise not eligible to get their goods or some inputs manufactured from small scale industries, affix their brand/trade name, and still avail of the exemption. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has now brought this judgment of the Supreme Court to the notice of the Chief Commissioners and Commissioners with a request to initiate action to raise protective demands wherever warranted. <strong>Existing instructions which are at variance with the Supreme Court decision are being withdrawn, but the action for issuing show cause notices may be taken based on the Supreme Court order immediately, without waiting for withdrawal of circulars. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This judgement of the Supreme Court was delivered on 4/8/2005 and we carried it on <strong>Oct 3, 2005. </strong>Now after <strong>THREE </strong> years, the Board wants SCNs to be issued. Will they allege suppression? And can a notice be issued three years after the Supreme Court judgement? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board believes that as soon as a Notification is signed in North Block, it is known to the assessees and is enforceable law! But a Supreme Court Judgement, which was prominently carried by the media, is made known to field only after three years.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board should perhaps instruct the field to browse <strong>TIOL </strong> more often.</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=31&filename=notification/excise/2008/ssiclarification.htm" target="_blank">CBEC Letter in F.No.115 /01/2008- CX -3 Dated the 16th June, 2008</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Anti Dumping Duties don't have expiry dates - Sun and/or Dust Control Polyester Film - extended</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a><font color="#FF0000">Anti Dumping Duty on import of Sun and/or Dust Control Polyester Film, which is also known in the commercial parlance by various names such as Sun Control Films, Sun Films, Solar Films, Solar Control Films, Solar Window Films, Window Films, Heat Solar Films, etc., falling under sub-heading 3920 69 of the First Schedule to the Customs Tariff Act, originating in, or exported from, United Arab Emirates</font> (</a>UAE) and Chinese Taipei, was imposed with effect from 26th August, 2003 and would have normally expired on 25th August 2008. But Anti Dumping duties don't die that easily – even if the Government forgets to extend them before expiry. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this anti dumping duty is extended till 25th August 2009. This Notification is dated 29 th August 2008. Now what happens to the imports that might have taken place during the three days when there was no notified anti dumping duty? The previous notification is supposed to be live and the government can take its sweet time to extend it.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what prevents the Government from waking up on time? </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=23&filename=notification/custom/2008/ctariff08_100.htm" target="_blank">Notification No. 100/2008-Customs Dated the 29 th August, 2008</a><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2008/ctariff08_100.htm" target="_blank">. </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>All Industry Rates of Duty Drawback, 2008-09 </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has announced the revised All Industry Rates of Duty Drawback made effective from 01.09.2008. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Like in previous years, the drawback rates have been determined on the basis of certain broad parameters including the prevailing prices of inputs, standard input/output norms (SION), share of imports in the total consumption of inputs and the applied rates of duty. The incidence of duty on HSD /Furnace Oil has been factored in the drawback calculation. The incidence of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods has also been factored. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC wants Commissioners to ensure that the exporters do not avail of the refund of this tax through any other mechanism while claiming the all industry rate of drawback. </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_103.htm">Notification No. 103/2008- Cus (NT) Dated the 29 th August, 2008</a>. And <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2008/cuscir08_13.htm" target="_blank">Circular No. 13/2008- Cus Dated the 29 th August, 2008</a>. </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></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><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></strong></strong></strong></strong></strong></strong></strong></font><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>Disallowance of provision for bad debt u/s 36(1)(viia) - Borrowing of various concepts from Banking Regulation Act for purposes of allowing exemption, deduction or computation of income under Income-tax Act cannot be extended endlessly - Assessee's appeal for relief set aside: ITAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>assessee is a registered co-operative Society with Registrar of Co-operative Societies and carrying on banking business by obtaining license from RBI in terms of s.22 of the Banking Regulation Act, 1949. The assessee had claimed a sum of Rs.95 ,46,813.59 as bad and doubtful debts which was debited in the reserve account. Total receipts as per profit & loss account was shown at Rs.40,38,588.41. The AO observed that as per provisions of section 36(1 )(viia) only 5% is allowable under this head which comes to Rs.2,01,929.42. Hence, the excess over 5% which was worked out at Rs.93,44,884.17 was disallowed and added into the total income of the assessee.</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>Recalcitrant Revenue finds its appeal dismissed by Tribunal as being defective</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS </strong> is one order served by “ <strong>dasti </strong>” that Revenue ought not to take lightly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Filing an appeal for the sake of filing one has become the order of the day. It was only a small “authorization” that was required to be filed along with the appeal and that should have ended the matter, <em>presuming there is one on record! </em> Fortunately, the Tribunal did not vent its ire against the helpless DR, but we are certain this is not the end of the story.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ServiceTax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Applicant primarily providing Security Agency services coupled with other services such as management advice, group auditing and financial planning - Adjudicating authority treating it as single service of Security Agency - Tribunal orders pre-deposit of Rs.15 lakhs considering service tax liability only on security agency services</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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Day.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6633">Mail your comments to</font> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>