TIOL-DDT 943 · 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 943 </font><br> 03.09.2008 <br> Wednesday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Full Duty Exemption For Bihar Flood Relief Material</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has decided to fully exempt-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) from basic customs duty and additional duty of customs, goods imported for donation for the relief and rehabilitation of people affected by the floods in Bihar. Since exemption is being provided from basic customs duty and additional duty of customs, such goods would be automatically exempt from 4% CV duty;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) from basic excise duty, goods donated or purchased out of cash donations for the relief and rehabilitation of people affected by the floods in Bihar.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These exemptions are subject to certification conditions and procedural requirements provided in the notification and would be valid till 28 th February, 2009.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notifications 101/2008-Customs and 48/2008-Central Excise, both dated 2.9.2008 have been issued, but not yet made public. They will hopefully do it today.</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax – ST-3 amended again</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has again amended the ST-3 Form for Service Tax mainly to include the details of the ‘Amount of service tax paid in advance under sub-rule(1A) of rule 6'. This is immediately effective and should be incorporated in the Return to be filed in October.</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=40&filename=notification/servicetax/2008/stnot08_031.htm" target="_blank">Notification NO. 31/2008-Service Tax, Dated: September 2, 2008</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Payment and Settlement Systems Act, and Regulations come into effect</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Payment and Settlement Systems Act, 2007 and the <em>Payment and Settlement Systems Regulations, 2008 </em> have been notified and have come into effect from August 12, 2008. The <font color="#FF0000">Payment and Settlement Systems Act</font> stipulates that no person other than the Reserve Bank shall commence or operate a payment system except under and in accordance with an authorisation issued by the Reserve Bank under the provisions of the Act.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All persons currently operating a payment system or desirous of setting up a payment system, as defined in Section 2(1)(i) of the Act should apply for authorisation to the Reserve Bank, unless specifically exempted in terms of the Act. Existing payment systems will cease to have the right to carry on their operations, unless they obtain an authorisation within six months from the commencement of the Act (i.e.,12th August 2008).</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Payment and Settlement Systems Regulations, 2008 detail the form and manner in which the application is to be made to the Reserve Bank for grant of authorisation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#000000">What is this all about?</font> </strong>This is what <strong>DDT </strong> Research found out.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Wikipedia explains it as, <font color="#FF0000">“A payment system are the procedures and associated computer networks used to settle financial transactions in bond markets, currency markets, and futures, derivatives and options markets, and to transfer funds between financial institutions. Due to the backing of modern fiat currencies with government bonds, payment systems are a core part of modern currency systems.”</font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Evolution of Payment System in India: The history of the payment system can be said to be virtually co-terminus with the evolution of money. The earliest form of payment system could perhaps be traced back to the pre-historic days of barter trade when the settlement of consideration took place through exchange of conch shells, goods, cattle and later commodities.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Such a system, in the absence of money as a medium of exchange, was obviously very cumbersome due to highly improbable ‘coincidence of wants' of the two parties to a barter transaction. Subsequently, more formalised payment instruments, such as coins, developed. The earliest payment instruments known to have been used in India were coins, which were either punch-marked or cast in silver and copper; even leather is known to have been used for making coins. Thus, with the advent of institutionalised forms of money, initially in the form of coins and later as paper money, the barter trade withered away and the usage of currency became the order of the day.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally the word, ‘pecuniary' originated from <font color="#FF0000">‘pasu'</font> the Indian word for animal – cattle which were money – a man was judged by the number of <em>pasus </em> he had.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Paper money, in the modern sense, has its origin in India in the late 18th century with the note issues of private banks as well as semi-government banks. Among the earliest issues were those by the Bank of Hindoostan, which was the first joint stock bank established in 1770, the General Bank in Bengal and Behar, and the Bengal Bank. Later, with the establishment of three Presidency Banks since 1809, the work of issuing notes was taken over by them and each Presidency Bank had the right to issue notes within certain limits. The private banks and the Presidency Banks introduced other payment instruments in the Indian money market and cheques were introduced by the Bank of Hindoostan.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Buying and selling bills of exchange became one of the items of business to be conducted by the Bank of Bengal from 1839. The Paper Currency Act of 1861 conferred upon the Government of India the monopoly of Note Issue, thus, bringing to an end the note issues of private and Presidency Banks.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1881, the Negotiable Instruments Act (NI Act) was enacted, formalising the usage and characteristics of instruments like the cheque, the bill of exchange and promissory note. The NI Act provided a legal framework for non-cash, paper payment instruments in India and continues to be an operative legislation even today.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Hundi: </strong> While the modern cheques came into being in India only in the 19th century, India had pioneered the use of non-cash based payment systems long ago, which established themselves as strong mechanism for the conduct of trade and business. The most important form of credit instrument that evolved in India was termed as ‘Hundis' and their use was reportedly known since the twelfth century.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hundis were used as instruments of remittance, credit and trade transactions, and were of various types, each type with its own unique features. However, with the steady rise in volumes of trade and commerce and the growing confidence of the public in the usage of cheques, etc., there was also rapid growth in the payment transactions using these instruments. With the development of the banking system and higher volume of cheques used, the need for an organised cheque clearing process emerged among the banks. Clearing associations were formed by the banks in the Presidency towns and the final settlement between member banks was effected by means of cheques drawn upon the Presidency Banks.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With the setting up of the Imperial Bank in 1921, settlement was done through cheques drawn on that bank. After the establishment of the RBI in 1935, the Clearing Houses in the Presidency towns were taken over by the RBI, and continued with it for more than five decades. It is noteworthy that the volume of paper-based clearing India handles is the sixth largest in the world and during the year April 2007 to March 2008 about 1.46 billion cheques were cleared in the country.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Objectives of the Payment System: The mission is the establishment of safe, secure, sound and efficient payment and settlement systems for the country . Whereas <strong>safety </strong>in payment and settlement systems relates to risk reduction measures, security pertains to confidence in the integrity of the payment systems. All payment systems are envisaged to be on <strong>sound footing </strong>with adequate legal backing for operational procedures and transparency norms. <strong>Efficiency </strong>enhancements are envisaged by leveraging the benefits of technology for cost-effective solutions. Thus, as part of its public policy objectives, the Reserve Bank has played a major role in the design, development and functioning of payment and settlement systems, and the multi-dimensional efforts of the RBI over the years have been geared to realise this vision.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Payment and Settlement Systems Act 2007: </strong>It is internationally acknowledged that payment and settlement systems should function on a well-founded legal basis. This entails among other things, proper authorisation requirement for setting up and payment systems, legal recognition for netting, settlement finality, providing for regulation and oversight of the payment and settlement systems. Many countries have either provided for these requirements in their central bank statutes or have drafted separate and comprehensive laws for this purpose. In India where the economy is growing at a fast pace increasingly large volumes and values are being handled by payment systems. Non-bank entities who are outside the explicit regulatory purview of the central bank are running/ are likely to run important payment systems. A number of innovative payment instruments/ systems have been introduced by unregulated entities. While large payment systems which are unregulated present risks to the stability of the financial systems, unauthorised retail payment systems without proper management and operational structures can undermine public confidence in the efficacy of the payment systems as a whole. The Reserve Bank and the Government felt that there should be an explicit law to regulate the payment and settlement systems. The Parliament has enacted the Payment and Settlement Systems Act in December 2007. This Act empowers the Reserve Bank to regulate and supervise the payment and settlement systems and provides a legal basis for multilateral netting and settlement finality. The Act empowers the Reserve Bank to lay down the policies for regulation and supervision of the payment and settlement systems, authorise their setting up/continuance, for issuing directions, laying down standards, calling for information/data, initiating prosecution/levying penalties for violation of the provisions of the Act, its regulations and directions etc.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Act is now operational...</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to V Leeladhar, Deputy Governor, Reserve Bank of India <em>, </em><font color="#FF0000">“The payment and settlement system constitutes the backbone of the financial sector and enables conclusion and settlement of financial contracts. The country has made phenomenal progress in enhancing the reach and improving the efficiency of the national payment system – in which the RBI and the banking system have been equal partners. Creating a world-class payment system in the country is a long, arduous but an exciting journey in which we have to constantly keep striving to better our past achievements.”</font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/paymentsettlementact.htm" target="_blank">RBI Press Release : 2008-2009/273 Dated 01 September, 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>Service Tax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Machinery given on lease - not liable for Service Tax under Banking and Financial service : CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee, engaged in the manufacture of excisable goods, had given an extrusion machine on lease under an agreement. The assessee was paid monthly user charges for the machine. The Department considered this as Banking and Financial service and it culminated into usual confirmation of demand with interest and penalties under different sections. On appeal filed by the assessee, the Commissioner (Appeals) set aside the order and allowed the appeal. The order of the Commissioner (Appeals) is under challenge before the Tribunal.</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>Interest for delayed refund of CENVAT Credit - Provisions of Section 11BB are also applicable for delayed refund of CENVAT Credit under Rule 5 of CENVAT Credit Rules: CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REVENUE </strong>officials get jittery when it comes to sanctioning refunds. Even in eligible cases they come up with lame excuses to reject the claims. Of course, it's not an easy task to find lame excuses when the law is clearly laid down by the legislature. But officials have the knack of twisting the law and turning a blind eye to the prevailing provisions. The end result is delay in sanctioning the refund claims. When there is a delay interest provisions kick in automatically and if the officials have to sanction the refund with interest they know for sure that they are inviting trouble. Board or CERA will pounce on them for the lapses in not sanctioning the refunds in time and thereby draining the exchequer with interest payouts. </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>Payment to non-resident for software is deemed to accrue and arise in India and liable to deduction of tax at source: ITAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TWO </strong>assessees approached the Tribunal aggrieved by the orders of the AO and CIT(A) for assessment years 2002-03 and 2003-04. The assessees paid certain sums to non residents in USA for acquiring the right to use equipment and acquiring the right to use software. These payments were regarded as royalties by the lower authorities and therefore by virtue of their deeming accrual in India, it was held that they are liable for TDS under the IT Act at the time of payments to the non-residents. Aggrieved by these orders, both the assessee's approached the Tribunal but with no success.</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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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/ganesh.jpg" alt="Legal Corner Icon" width="113" height="130" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Today is Ganesh Chaturthi –</font></strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Vinayaka has Large Ears and a Small Mouth, which means, “you should listen more and talk less”</strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Happy Ganesh Chaturthi!</strong></font></p> <p align="justify"> </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>