TIOL-DDT 970 · 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 970 </font><br> 14.10.2008 <br> Tuesday </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Area Based exemption – value addition rates and inputs - cement and clinker separated; tapioca starch added as input; value addition rate of 75% fixed for fatty acids and Ferro alloys </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember the confusing “value addition” based; refund based; region biased; exemption Notifications? Have a look at <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7428" target="_blank">TIOL-DDT-885-12.06.2008 </a>and </strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7096" target="_blank"><strong>DDT- 835-31.03.2008</strong></a> and our story <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7089">Ceiling in rate - Sealing of fate.</a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise Notifications 32/1999, 33/1999, 39/2001, 56/2002, 57/2002, 56/2003, 71/2003, 20/2007 allow a strange exemption to goods produced in different areas like North-East, Kutch, J&K etc,. The exemption is the duty paid on value addition norms fixed by the government, on the goods manufactured <strong>starting </strong> from <strong>inputs </strong> specified in the notification.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For example, for Cement or Cement Clinker, the value addition rate is 75 and the input is Limestone and gypsum. Now how can you manufacture cement clinker starting from gypsum? This impossible situation is now corrected.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Cement and Cement clinker are separated as two items and the input for cement is Lime stone and gypsum and for cement clinker, it is limestone. But this raises another question – how can somebody manufacture cement <strong><font color="#FF6633">starting</font> </strong> from both Lime stone <strong><font color="#FF6633">and</font> </strong> gypsum? Is the exemption not available if the starting point is either limestone <strong><font color="#FF6633">or</font> </strong> gypsum or does the <strong><font color="#FF6633">and</font> </strong> in the notification mean <strong><font color="#FF6633">or</font></strong>?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maize was the only specified input for Modified starch or Glucose; now <em>maize starch or tapioca starch </em> are added. Please note here it is <strong><font color="#FF6633">or</font> </strong> not <strong><font color="#FF6633">and</font></strong>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Two more items are added to the list:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Fatty acids or Glycerine falling under Chapter 29 or 38 with Crude palm kernel, coconut, mustard or rapeseed oil as inputs, and</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Ferro alloys, namely, ferro chrome, ferro manganese or silico manganese falling under Chapter 72 with Chrome ore or manganese ore as inputs.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Both the items will have a 75% rate.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the above mentioned notifications are amended as above.</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=30&filename=notification/excise/2008/etariff08_49.htm" target="_blank">NOTIFICATION NOs 49</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_50.htm" target="_blank">,50,</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_51.htm" target="_blank">51,</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_52.htm" target="_blank">52,</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_53.htm" target="_blank">53,</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_54.htm" target="_blank">54,</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_55.htm" target="_blank">55</a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_56.htm" target="_blank"> to 56/2008 - CX ., Dated: October 3, 2008</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refund of 4% Additional Duty of Customs – CBEC issues further clarifications</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board had earlier issued a Circular 6/2008 on this issue. Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7230" target="_blank">TIOL-DDT-854-29.04.2008</a></strong> and <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7674" target="_blank">TIOL-DDT-923-05.08.2008</a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has now issued further clarifications.</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) <strong>Time-limit for filing of refund claim </strong>: Notification No.93/2008-Customs dated 1.8.2008 was issued fixing a time limit of one year.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) <strong>Early processing of refund claims </strong>: The jurisdictional Commissioners and Chief Commissioners at respective Custom Houses/zones may ensure that there is no delay in the disposal of the 4% CVD refund claims. In case of refund claim not being disposed of in three months, the matter should be reported to the Board within a fortnight mentioning the reason for delay and any area of doubt which needs to be clarified. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) <strong>Sale invoices to be submitted in soft form for claiming refund </strong>: Importers could submit the copy of invoices in electronic form (including the form of CD) as prescribed in Information Technology Act, 2000.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) <strong>Declaration for non-admission of Cenvat Credit: </strong>The request for dispensation of such declaration by certain importers who are not registered with Central Excise authorities and to allow 4% CVD refund to these importers on the basis of their status of registration with Central Excise, as non-registered dealer is not found to be acceptable.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) <strong>Payment of ST/VAT by cash or input tax credit: </strong>Discharge of ST/VAT liability by the importer, through cash or other authorised form of payment to the concerned ST/VAT authority or input tax credit adjustment, could be accepted by Customs field formations for the purpose of fulfillment of the condition in para 2 (d) considering sanction of refund of 4% CVD.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) <strong>Submission of original copy of ST/VAT Challan : </strong>Keeping in view the difficulties faced in submitting original challans , it has been decided that alternatively, the importers may submit copies of ST/VAT challan or copies of ST/VAT payment document in different forms evidencing payment made to the bank or ST/VAT Department towards ST/VAT along with a certificate from the Chartered Accountant, who either certifies the importer's financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961, confirming the payment against the aforesaid documents.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) <strong>Unjust enrichment and its Certification by Chartered Accountants: </strong>Customs field formations shall accept the certificate given only by such a Chartered Accountant who either certifies the importer's financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961, in order to fulfill the requirement of the condition that the incidence of duty burden has not been passed on by the importer to any other person for the purpose of refund of 4% CVD. <strong>A certificate by any other independent Chartered Accountant would not be acceptable for this purpose.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii) <strong>Consignment Agents: </strong>In case of sale of imported goods by importer through consignment agent/stockist , refund of 4% CVD shall be granted by Customs field formations, subject to the condition that the Consignment agent/stockist has been authorised to sell the imported goods in terms of the agreement entered into between the importer and consignment agent/stockist and that each of the sale invoices issued by the consignment agent/ stockist indicates that the sale is made by him on behalf of the importer in the capacity of consignment agent/ stockist.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ix) <strong>Submission of refund claim for part of goods in a consignment: </strong>The filing of refund claim for part quantity shall be accepted by the Customs field formations during the same month and such cases need not wait till the end of the one year period.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the Chief Commissioners to ensure that all pending claims are cleared promptly and Board has noticed the resentment in the trade.</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=25&filename=notification/custom/2008/cuscir08_16.htm" target="_blank">CBEC Circular No. 16/2008-Customs, Dated: October 13, 2008</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India Japan Double Tax Avoidance - JBIC Replaced</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the CONVENTION BETWEEN THE GOVERNMENT OF JAPAN AND THE GOVERNMENT OF THE REPUBLIC OF INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, <strong>interest arising in a Contracting State and derived by the Government of the other Contracting State, a political sub-division or a local authority thereof, the Central Bank of that other Contracting State or any financial institution wholly owned by that Government, or by any resident of the other Contracting State with respect to debt-claims guaranteed or indirectly financed by the Government of that other Contracting State, a political sub-division or a local authority thereof, the Central Bank of that other Contracting State or any financial institution wholly owned by that Government shall be exempt from tax in the first-mentioned Contracting State.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now "Japan Bank for International Cooperation" is omitted from the list and “International business unit of Japan Finance Corporation" is substituted.</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=35&filename=notification/cbdt/2008/it08not096.htm" target="_blank">Income Tax Notification No. 96/2008 , Dated: October 08, 2008</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BABY-SITTING THE ECONOMY</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A group of people (in this case about 150 young couples with congressional connections) agrees to baby-sit for one another, obviating the need for cash payments to adolescents. It's a mutually beneficial arrangement: A couple that already has children around may find that watching another couple's kids for an evening is not that much of an additional burden, certainly compared with the benefit of receiving the same service some other evening. But there must be a system for making sure each couple does its fair share.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Capitol Hill co-op adopted one fairly natural solution. It issued scrip-pieces of paper equivalent to one hour of baby-sitting time. Baby sitters would receive the appropriate number of coupons directly from the baby sittees . This made the system self-enforcing: Over time, each couple would automatically do as much baby-sitting as it received in return. As long as the people were reliable--and these young professionals certainly were-what could go wrong?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, it turned out that there was a small technical problem. Think about the coupon holdings of a typical couple. During periods when it had few occasions to go out, a couple would probably try to build up a reserve--then run that reserve down when the occasions arose. There would be an averaging out of these demands. One couple would be going out when another was staying at home. But since many couples would be holding reserves of coupons at any given time, the co-op needed to have a fairly large amount of scrip in circulation.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what happened, for complicated reasons involving the collection and use of dues (paid in scrip), the number of coupons in circulation became quite low. As a result, most couples were anxious to add to their reserves by baby-sitting, reluctant to run them down by going out. But one couple's decision to go out was another's chance to baby-sit; so it became difficult to earn coupons. Knowing this, couples became even more reluctant to use their reserves except on special occasions, reducing baby-sitting opportunities still further.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In short, the co-op had fallen into a recession.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since most of the co-op's members were lawyers, it was difficult to convince them the problem was monetary. They tried to legislate recovery-passing a rule requiring each couple to go out at least twice a month. But eventually the economists prevailed. More coupons were issued, couples became more willing to go out, opportunities to baby-sit multiplied, and everyone was happy. Eventually, of course, the co-op issued too much scrip, leading to different problems.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What the Capitol Hill Baby-Sitting Co-op experienced was a real recession. Its story tells you more about what economic slumps are and why they happen than you will get from reading 500 pages of William Greider and a year's worth of Wall Street Journal editorials.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For example, suppose that the U.S. stock market was to crash, threatening to undermine consumer confidence. Would this inevitably mean a disastrous recession? Think of it this way: When consumer confidence declines, it is as if, for some reason, the typical member of the co-op had become less willing to go out, more anxious to accumulate coupons for a rainy day. This could indeed lead to a slump-but need not if the management were alert and responded by simply issuing more coupons.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Above all, the story of the co-op tells you that economic slumps are not punishments for our sins, pains that we are fated to suffer. The Capitol Hill co-op did not get into trouble because its members were bad, inefficient baby sitters; its troubles did not reveal the fundamental flaws of "Capitol Hill values" or "crony baby-sittingism." It had a technical problem-too many people chasing too little scrip-which could be, and was, solved with a little clear thinking.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the story of the baby-sitting co-op is not a mere amusement. If people would only take it seriously-if they could only understand that when great economic issues are at stake, whimsical parables are not a waste of time but the key to enlightenment-it is a story that could save the world. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Excerpts from an article by Paul Krugman, who was yesterday, awarded the Nobel Prize for Economics</strong><em>. </em>Also see our <strong>Special Column</strong><em>. </em></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="#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></strong></font>CESTAT</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Accepting the order-in-original passed by the Commissioner - Chief Commissioner committed mistake in taking decision at his own level for which the interest of the Revenue cannot suffer - conduct of the Chief Commissioner may warrant inquiry at the appropriate level – CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HERE</strong> is good News for Revenue – the <strong>acceptance</strong> by Chief Commissioners, of orders–in–original, prior to 11.5.2007 are declared to have no legal sanctity – so all of them can now be reviewed by the Committee of Chief Commissioners and appeals filed in the Tribunal – what more, delay will be condoned.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The major work done by the Chief Commissioners was reviewing the orders of the Commissioners and sending the appealable orders with “draft Review orders” to the Board. Now the Tribunal says that all the orders should have been sent to the Board and it was for the Board to accept or reject an order and not the Chief Commissioner.</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>Non-resident Co - organising golf tournament in India - India- UAE DTAA - Income generated from sponsorship and management fee not taxable in India as applicant has no PE in India; Key phrase in definition of PE in treaty is business 'carried on' which means continuity but same is missing in this case: Advance Ruling - AAR</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> latest Advance Ruling which was argued, elaborated, contested and commented upon eruditely on the sole point of PE (Permanent Establishment) in India- UAE DTAA , has finally gone against the Revenue. However, since the case was decided predominantly on the issue of facts, its outcome could be different in future when some of the factual variables may change if the non-resident company continues to do business in India. Another glaring flaw which has come out in the open in the DTAA is that our policy-makers while thrashing out the nitty-gritty of the treaty text, perhaps did not pay adequate attention to the need to tax fees for technical services (FTS). And thus, the receipt arising out of management fee which could have been taxed as FTS , escaped the levy.</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>Service Tax- Sale and Purchase of Mutual Fund Units – Units are goods – not liable for Service Tax – CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> would appear that where a person is engaged in sale or purchase of, among other things, 'stock and shares' on behalf of another person for a consideration and, therefore, a commission agent, he would be entitled to the benefit of exemption under Notification No. 13/2003-ST. It is true that Section 2(7) of the Sale of Goods Act does not specifically refer to 'mutual fund units', but that is apparently because when the Act was enacted in 1930, the concept of mutual fund schemes was not known.</font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements</font></strong></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> </body> </html>