TIOL-DDT 953 · 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 953</font><br>
17.09.2008<br>
Wednesday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Collect Service Tax from SEZ - CBEC exhorts the field</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There were news reports that Commerce Minister Kamal Nath had laid the blame squarely on Finance minister Chidambaram for the road blocks against India's export journey – we deliberately refrained from covering such rumours. But the latest missive from the CBEC would make it appear that the Finance Ministry is not exactly in favour of the SEZs getting too many benefits. It looks as if they are more with Mamta behn than with Tata bhai.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The latest Service Tax Circular from CBEC tersely admits that “ there has been <strong><font color="#FF6633">lack of clarity</font> </strong> in the field formations administering service tax as regards the applicability of service tax levy on units located in Special Economic Zones. This lack of clarity has resulted in certain problems especially with respect to service tax administration.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Who is responsible for this lack of clarity? In government, you can't really fix responsibility; but who is going to be punished? On this, there is no dispute – <strong>IT IS ALWAYS THE ASSESSEE.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has clarified that SEZ units providing service in the DTA are liable to pay Service Tax and has to be under the jurisdiction of the local Central Excise Authorities. They have instructed the jurisdictional Central Excise Officers to conduct a survey immediately and to discipline all the truant SEZ units. All the talk of the SEZ units being deemed to be outside India has gone for a toss.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Who will pay the Tax? </strong> Now, if clearance of steel from DTA to SEZ is treated as exports and export duty has to be paid, isn't receipt of <strong>SERVICE </strong>from SEZ , import of service and thus tax is to be paid by the DTA recipient and not the SEZ unit?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And as per Rule 48(1) of the SEZ Rules , the <font color="#FF6633">“Domestic Tariff Area buyer shall file Bill of Entry for home consumption giving therein complete description of the goods and/or <strong>services </strong> namely, make and model number and serial number and specification along with invoice and packing list with the Authorised Officers”</font>. So before any service, a Bill of Entry has to be filed by the DTA buyer – Doesn't it mean that he has to pay the tax?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is the value? </strong>As per Rule 48(2) of the SEZ Rules, <font color="#FF6633">“Valuation of the goods and/or services cleared into Domestic Tariff Area shall be determined in accordance with provisions of Customs Act and rules made there-under as applicable to goods when imported into India”</font> So valuation for Service Tax has to be under the Customs Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What if</strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Service is partly in SEZ and partly in DTA?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The service is wholly performed in SEZ but the recipient is in DTA?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The service is wholly performed in DTA but the recipient is in the SEZ?</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Indian Businessman is an incorrigible optimist – with this kind of confusion and admitted lack of clarity, it's a miracle that somebody wants to invest his money in an SEZ. Well if the TATAs can make a mistake by going to West Bengal with their NANO , anyone can do so.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It's time the Commerce Ministry and Finance Ministry patch up their egoistic differences and ensure some clarity so that some business can be done from the SEZs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally
the Board has also clarified that SEZ units wanting refund on service tax
exports should approach the local Central Excise or Service Tax officers.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also
see <strong>TIOL-DDT 936</strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7770">-
Services provided in DTA by SEZ units - who has to pay service tax?</a></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/sercir105.htm" target="_blank">CBEC Service Tax Circular No. 105/08/2008 Dated: September 16, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DFIA – transfer of duty free materials – DGFT clarification</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 4.5 of the HOP of the FTP, “Transfer of any duty free material imported or procured against Advance Authorisation from one unit of company to another for manufacturing purpose shall be done with prior intimation to
jurisdictional Excise Authorities with a clear understanding that no
benefit of CENVAT shall be claimed on such transferred inputs. However, such transfers shall not be allowed to units located in areas covered by Central Excise Notification No. 39/2003 and other area based exemptionsl.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Representations have been received from trade and industry to clarify whether the restriction is applicable for DFIAs with ‘No BG/LUT ' endorsement or endorsement of transferability. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT now clarifies that the restrictions on such transfer is limited to advance authorization and DFIA Scheme issued and operated under Actual User condition. Once transferability is endorsed on the DFIA , transfer of the imported/domestically procured input(s) against such DFIA shall not be covered by the restrictive clause.</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=46&filename=notification/dgft/2008/dgft08cir031.htm" target="_blank">DGFT POLICY CIRCULAR No. 31 (RE-2008)/2004-2009 Dated: September 8, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT amends SION</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DGFT has amended the SION for Product Group: Chemicals and Allied Products SION entry at Sl . No. <strong>A 3016 </strong>as follows:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Note No. (iii) below SION A-3016 is deleted ab initio</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Note No. (iv) is added from the date of present Public Notice as under:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Note No. (iv) - Under the import item at S.No .7 i.e. Formers-the quantity of Borax/Boric Acid should not exceed 0.10 Kg under the overall quantity of Formers allowed</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=47&filename=notification/dgft/2008/dgft08pn079.htm" target="_blank">DGFT Public Notice No. 79 (RE: 2008)/2004-2009, Dated: September 15, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Consideration of cases against lost EP copy of the Shipping Bills and/or Bank Realisation Certificate</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 4.30A of the HOP, “In case where Original EP copy of Shipping Bill/original BRC has been lost, request for EODC, “No BG/LUT condition” under Advance Authorisation/DFIA scheme, or endorsement of transferability under DFIA scheme can be considered, subject to submission of following documents in lieu of those original documents: -</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) A duplicate/certified copy of concerned document issued by Customs Authority/Bank in lieu of original; [<font color="#FF6633">This is now changed to, <strong>“A duplicate/Customs Certified/Self-attested copy of the shipping Bill in lieu of the original; Duplicate/Bank certified copy of BRC in lieu of original;</strong></font>]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) An application fee equivalent to 1% of duty saved amount. However, no fee shall be charged when such document is lost by Government agencies and a documentary proof to this effect is submitted;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) An affidavit by exporter about loss of document and an undertaking to surrender it immediately to concerned RA, if found subsequently;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d) An indemnity bond by exporter to the effect that he would indemnify Government for financial loss, if any, on account of duty free import entitlement availed/allowed against lost Shipping Bills/BRC. Customs Authority, before allowing redemption of BG/LUT or clearance after endorsement of “No BG/LUT condition” or endorsement of transferability, shall ensure that no double benefit against such shipping bill has been availed. [<font color="#FF6633">This is now changed to,</font> <strong><font color="#FF6633">“ An indemnity bond by exporter to the effect that he would indemnify Government for financial loss, if any, on account of duty free import entitlement availed/allowed against lost Shipping Bills/BRC</font></strong>.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs Authority, before allowing redemption of BG/LUT or clearance after endorsement of “No BG/LUT condition” or endorsement of transferability, shall verify the genuineness of such shipping bill (s) and ensure that no double benefit against such shipping bill has been availed. This specific condition shall be endorsed by RA concerned on the EODC.”</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in case of submission of reconstructed copy of shipping bill in lieu of original shipping bill, conditions at b, c and d above shall not be applicable.</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=47&filename=notification/dgft/2008/dgft08pn080.htm" target="_blank">DGFT Public Notice No. 80 (RE: 2008)/2004-2009, Dated: September 15, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT
- Section 80 HHC - Foreign exchange fluctuation gain is part of export
turnover of the year in which export is made and not the year of realization</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 80 HHC seems to be one of the most litigated provisions in the Income Tax Act. Many of us in the Edit Team have become experts in the field just by covering the large number of 80 HHC cases. In our small library of case laws, we have more than a hundred cases on 80 HHC and here is another case with the Special Bench.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the order we bring you today, the ITAT observed,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Irrespective of the fact that the Indian currency has assumed northward or southward sojourn vis-à-vis the other foreign currency, the amount realized in Indian rupees remains attributable to the exports made in foreign currency.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no effect on the computation of deduction in the year of export, whether the difference in export realisation due to fluctuation in the foreign currency rate is received in the same year or within six months from the end of the previous year or within such further period as may be allowed by the competent authority <strong>. </strong>Once the amount be so received, it would relate to export turnover of the year in which the export was actually made. We further note that when the definition of export turnover was amended by the Finance Act, 1990, by which the words 'received in or brought into India" were substituted for the word "receivable" The effect is that the assessee can claim deduction on the foreign exchange fluctuation gain in the year of export and not the subsequent year in which the income has been realized and recognized in the books of account.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See Breaking News</strong></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="#663399" 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>Central Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refund – interest - if the claim of interest is on equitable ground, a written demand is imperative – interest entitled only from three months after filing claim – Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INTEREST</strong> can be awarded in terms of an agreement or statutory provisions. It can also be awarded by reason of usage or trade having the force of law or on equitable considerations. Interest cannot be awarded by way of damages except in cases where money due is wrongfully withheld and there are equitable grounds therefor , for which a written demand is mandatory.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In absence of any agreement or statutory provision or a mercantile usage, interest payable can be only at the market rate. Such interest is payable upon establishment of totality of circumstances justifying exercise of such equitable jurisdiction. If the claim of interest is on equitable ground, a written demand therefor is imperative.</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>Online computer training is not taxable under 'online information and database access service' but classifiable under 'Commercial coaching service' - Only difference between online coaching and traditional coaching is medium - Huge demand including penalty amounting to Rs 9.21 Cr against Dewsoft overseas fails: CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BURDEN</strong> is imposed on the Revenue to prove whether the appellant has fulfilled all the conditions in the definition to hold them liable to pay service tax and not the other way round. If the appellants have not come forward with any evidence, nothing stopped Revenue from investigating the case and gather evidence to nail the appellant. In the absence of any material evidence, it was held that the Revenue's proposition to levy service tax fails.</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>Misclassification of imported 'Vertical Automated Storage and Retrieval system' in the Bill of Entry is an error rectifiable under sections 149 and 154 of Customs Act, 1962 - Matter remanded to adjudicating authority by Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITHOUT </strong>expressing any opinion on the merits of the case, but holding that the matter needs to be looked into by the adjudicating authority from the angle of provisions of Section 149 and 154 of the Customs Act 1962 on the inadvertent mistake that has crept into the Bill of Entry as was filed, the matter was remitted by the Tribunal to the adjudicating authority to reconsider the issue afresh and after allowing the appellant to marshal evidence as was at the time of import and <strong>decide the issue expeditiously</strong>.</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>Violation of TDS provisions - tax deducted at source but not deposited - Proceedings u/s 278B - Offence for TDS purpose is one-time offence and not continuing in nature; Assessees' appeal allowed: Delhi High Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IS</strong> an offence for the purpose of Sec 201(1) and Sec 201(1A) read with Sec 278B continuing in nature in the Income Tax Act? In simple words, once an assessee fails to comply with the TDS provisions, does such an offence acquire the skin of continuing nature until it is complied with? This was the question before the Delhi High Court which has held that the provision of Sec 278 which is a penal provision does not itself state that the offence could be continuing one. The language of the provision itself indicate the contrary. The wordings of the provision clearly indicate that in case of a failure to deduct TDS, it is a one-time offence and not continuing in nature.</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 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>
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