TIOL-DDT 945 · 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 945</font><br> 05.09.2008<br> Friday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Contract hatching of eggs would not fall in any of the taxable service – Board clarifies</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC has clarified to the DGST and of course the field formations that contract hatching of eggs would not fall under either Business Auxiliary Service or under Business Support Service. While the Board is quick on the issue of eggs and the BAS, it is still under intoxication in respect of service tax on bottling of Alcohol on behalf of the brand owners under BAS. It is nearly two years since the draft circular was issued and nobody knows what has happened to the Draft Circular. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the Board has clarified that contract hatching of eggs would not fall under any of the taxable service, it has not explained, why it would not. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More than two years ago, in <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3323" target="_blank"><strong>DDT 308</strong> </a>- 22 02 2006, we had raised the question, <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3323">The Bird Flu - the taxman not chickening - Are poultry Farms covered under Service Tax ambit? </a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Board has clarified that contract hatching of eggs is not taxable, but what about the mother of the eggs – yet another clarification on the way?</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/2008/cbecclarification.htm" target="_blank">CBEC Letter F. No. 137/92/2008-CX.4 , Dated: 29 th July, 08 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India's External Debt: Status Report, 2007-2008 </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India's external debt stock at end-March 2008 amounted to US$ 221.2 billion (Rs. 8,84,516 Crores), reflecting an increase of 30.4 per cent over the previous year. Valuation change due to weakening of the US dollar vis-à-vis other major international currencies accounted for almost 20 per cent of the increment in total external debt during the year. In terms of rupees, the increase in India's external debt during 2007-08 was lower at 19.6 per cent due to the appreciation of Indian rupee essentially against the US dollar. The escalation in external debt during the year could be ascribed mainly to rise in external commercial borrowings (39.5 per cent) and short-term debt (34.8 per cent). Between end-March 2007 and end-March 2008, Government debt as a proportion of total external debt declined from 28.4 per cent to 25.6 per cent and as a percentage of GDP, it dropped from 5.3 per cent to 4.8 per cent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the major solvency and liquidity indicators of external debt continued to remain in the comfort zone: foreign exchange reserve cover of external debt continued to be at a high level, up from 117.4 per cent during 2006-07 to 140.0 per cent during 2007-08; debt service ratio remained low at 5.4 per cent during 2007-08, though this was marginally higher by 0.6 percentage points over the previous year; other indicators, such as the ratio of external debt to Gross Domestic Product which measures the burden of external debt, was 18.8 per cent during 2007-08; the ratio of short-term debt to foreign exchange reserves stood at 14.3 per cent; and the ratio of short-term debt to total external debt was 20 per cent at end-March 2008. <br> <br> A cross-country comparison based on the data given in World Bank's ‘Global Development Finance, 2008' shows that India's position among the top ten debtor countries of the developing world was fifth in 2006 in terms of the stock of external debt. India's debt service ratio was the second best after that of China. The element of concessionality in India's external debt portfolio was the second highest after that of Indonesia. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">From: “India's External Debt: A Status Report, 2007-2008” </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Inflation – not alarming – Really? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Finance Ministry, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Annual rate of inflation further moderated to 12.34 per cent for the week ending August 23, 2008 compared to 12.40 per cent reported a week earlier and 12.63 per cent for the week ending August 9, 2008.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> In the ‘primary articles' group, the annual point-to-point inflation declined to 10.79 per cent, as compared to 11.63 per cent reported last week and 11.83 per cent for the week ending August 9, 2008. Out of a total of 98 articles, 18 articles have shown a decline in prices in the current week as compared to August 16, 2008. These included among others, rice, jowar, moong, masur, arhar and urad, tomatoes, groundnut, mustard, caster and linseed, marine fish and raw rubber. Another 54 articles have shown no increase in prices. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> In the commodity group ‘fuel and power', the rate of inflation declined from 17.99 per cent as on August 9, 2008 to 16.69 per cent in the week ending August 23, 2008. Prices of all the 19 commodities in this group remained unchanged in the current week. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> In the case of ‘manufactured products', rate of inflation in the current week increased to 11.28 per cent, as compared to 11.02 per cent in previous weeks. Out of 318 commodities, a large number, 294 in all, have shown no increase in prices over the last week. In the case of 7 commodities, there has been a decline in prices. These commodities include edible oils (rice bran, cottonseed, mustard and gingelly oils), groundnut oil cake, zinc and synthetic yarn. Only 17 products, particularly sugar, hessian bags, mustard and groundnut oil, zinc and lead ingots, deoiled and mustard cake, caustic soda, nylon filament yarn, cast iron spun pipes, newsprint and white printing paper and acids witnessed an increase in prices. <br> <br> Inflation of 30 essential commodities also declined to 6.90 per cent as on the week ending August 23, 2008 from 7.24 per cent reported in the earlier week. Decline in the prices of rice, most of the pulses and mustard oil resulted in moderation of inflation rate for essential commodities. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Recent Economic Developments</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Indian economy continued to record robust growth in 2007-08, although marginally lower than the last year. The overall growth momentum, which moderated particularly during the second half of the year, was on account of industry and services, offset partially by recovery in agriculture. On account of increased kharif food grain production, the overall food grain production during 2007-08 was placed at an all-time high of 230.7 million tonnes. Barring sugarcane and jute & mesta, all food grains and non-food grains were estimated to reach an all-time record production during 2007-08. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During 2008-09 so far (up to August 13, 2008), monsoon conditions have been favourable, barring the deficient/scanty rainfall in some regions. The index of industrial production (IIP) recorded year-on-year expansion of 5.2 per cent during April-June 2008 as compared with 10.3 per cent during April-June 2007. The overall deceleration in industry was mainly on account of the manufacturing and electricity sectors. Leading indicators of services sector activity for 2008-09 so far (up to May/June) suggest acceleration in growth in respect of some indicators and deceleration in some others. The First Quarter Review of the Annual Statement on Monetary Policy for 2008-09 placed the real GDP growth at around 8.0 per cent for 2008-09. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mirroring inflation trends in many advanced as well as emerging economies, various measures of inflation in India also hardened significantly since the beginning 2008, reflecting the impact of some pass-through of higher international crude oil prices to domestic prices and increase in the prices of iron and steel, among others. According to the First Quarter Review of Monetary Policy, the policy endeavour would be to bring down inflation to around 7 per cent by end-March 2009. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indian financial markets remained largely orderly during 2008-09 so far. The Reserve Bank managed liquidity with a judicious mix of the available tools, viz, open market operations (OMO), including LAF and issuances of securities under MSS and increases in the CRR. Interest rates in the money market remained mostly within the informal corridor set by the reverse repo and repo rates. Interest rates in the collateralised segment of the money market remained below the call rate. In the foreign exchange market, the Indian rupee generally depreciated against major currencies during 2008-09 so far as against the appreciation during 2007-08. During 2008-09 (April to July 2008), yields remained range bound in the first two months but hardened significantly during June–July 2008 due to hardening of inflation and soaring international oil prices. The Indian equity markets recovered somewhat during April-May 2008, but declined thereafter in tandem with the trends in major international equity markets. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The key deficit indicators of the Central and State Governments are budgeted to decline significantly during 2008-09. However, information on Central Government finances for April-June 2008 indicates some stress on Centre's fiscal position, particularly in the revenue account. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India's balance of payments position remained comfortable during 2007-08, notwithstanding a sharp increase in merchandise trade deficit. However, the current account deficit was contained at 1.5 per cent of GDP during the year. Significantly larger net capital inflows over the current account deficit resulted in an accretion of US $ 110.5 billion to the foreign exchange reserves during 2007-08 (US $ 47.6 billion during 2006-07). Trade deficit during April-June 2008-09 was higher by US $ 8.9 billion over April-June 2007-08.</font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">From RBI's <strong>Report on Currency and Finance- 2007-08 </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax Commissioner Ajay Mankotia joins NDTV </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Broadcaster NDTV Network has appointed Ajay Mankotia as the company's president of corporate planning and operations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ajay was an Income Tax Commissioner before joining NDTV and will now assist the media in policy, ethics and governance. </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">– Monday's cases</font></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/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></strong></font><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>Import of goods from China - When certificate of origin clearly mentions that goods are porcelain tiles, there is no need to re-classify them - Evidence of clear mis-declaration of the goods - Anti-dumping duty leviable - Appeal dismissed: CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants strongly contended that the said certificate relied on by the Adjudicating Authority cannot be the basis for classification. We are unable to agree with the appellants. The certificate clearly mentions the goods as “Porcelain Tiles”. There is clear mis-declaration of the description of the goods, which are leviable to anti-dumping duty.</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>Re-assessment - It is not belief per se that is a pre-condition for invoking Section 147 of the Act but a belief founded on reasons: Delhi High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Merely because the Assessing Officer felt that the issue required much deeper scrutiny, is not ground enough for invoking Section 147. It is not belief per se that is a pre-condition for invoking Section 147 of the said Act but a belief founded on reasons. The expression used in Section 147 is ‘If the Assessing Officer has reason to believe' and not if the Assessing Officer believes. There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend.</font></p> <p align="justify"><font color="#FF6633" 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> </body> </html>