TIOL-DDT 971 · 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 971</font> <br>
15.10.2008 <br>
Wednesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pan Masala And Gutkha Put Up In Tin Packages – Applicability of Section 3A - Board corrects its earlier letter </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not making official letters, public, has its rewards! CBEC had by a letter F. No. 341/49/2008-TRU–dated 1.7.2008 issued a clarification as follows:- </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">"3. Levy under section 3A is not applicable to,- </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">( i ) pan masala , not containing tobacco, with betel nut content not exceeding 15%</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) pan masala containing tobacco or gutkha, packed manually or put up in a form of packing other than pouches such as, tin packs."</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems some representations have been received that in view of the above clarification, a view is being taken that levy under section 3A is applicable to pan masala (tariff item 2106 9020) packed in tin packs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board issues a revised detailed clarification. First the Statement of Facts:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Notification No.29/2008-CE(NT), dated 01.07.2008 specifies pan masala falling under tariff item 2106 90 20 and pan masala containing tobacco, commonly known as gutkha , falling under tariff item 2403 99 90, manufactured with the aid of packing machine and packed in pouches, as notified goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Further as per rule 11 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) rules, 2008, every manufacturer is required to declare the retail sale price of the notified goods on the package of such goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Explanation 3 to the opening paragraph in the notification No.42/2008-CE., dated 01.07.2008, defines the "retail sale price" as the "maximum price at which the specified goods in packaged form may be sold to the ultimate consumer and includes all taxes.........."</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. These provisions, especially the use of expression "packed in pouches" in notification No.29/2008-CE (NT), dated 01.07.2008, make it clear that the intention is to cover only pan masala and pan masala containing tobacco if these are packed in pouches with the aid of a packing machine and cleared in that form.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Therefore, pan masala or pan masala containing tobacco cleared in tin packs cannot be considered as notified goods under Section 3A , and hence will be outside the scope of Section 3A levy.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Even where such goods packed in tin packs are wrapped in an inner packing of paper or plastic, so as to maintain the freshness of the product, these goods cannot be considered as notified goods because the goods are not being presented and sold to the ultimate consumer in the form of pouches.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. The declaration of retail sale price under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, or other similar declarations concerning ingredients, health hazard, manufacturer's name, date, etc. under various other statutes are not printed on such inner wrapping.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. This position was intended to be clarified vide F. No. 341/49/2008- TRU, dated 01.07.2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Inadvertently, however, para 3(ii) of the letter did not make a reference to "pan masala , not containing tobacco" but only to "pan masala containing tobacco or gutkha.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the Board had inadvertently gave a an unintended clarification, it is now corrected. The Board letter F. No. 341/49/2008-TRU, dated 01.07.2008, is corrected and para 3 would now read as,</font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">"3. Levy under section 3A is not applicable to,-</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) pan masala , not containing tobacco, with betel nut content not exceeding 15%</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) pan masala or pan masala containing tobacco, commonly known as gutkha, packed manually or put up in a form of packing other than pouches such as, tin packs."</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It requires courage to admit a mistake and correct it and the Board richly deserves praise for correcting the mistake before the field started its manufacturing of mass SCNs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what beats logic is why the Board is shy of public circulars – what is the point in hiding such vital information from the stake holders and sending such letters to Chief Commissioners which do not reach the field formations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT spoke to several field officers who were blissfully ignorant about the Board's inadvertent mistake as well as the gracious correction.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2008/trugutkha02.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No. F. No. 341/49/2008- TRU (Pt.I) Dated: August 04, 2008 </font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notional Exchange Rate Certificate – Validity Extended to 7 Days</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 6.5.2 of the Handbook of Procedures (Vol I) of the FTP, “ EOUs shall be permitted to export jewellery on basis of a notional rate certificate issued by nominated agency. This rate will be based on prevailing Gold/US$ rate and US$/INR rate in notional rate certificate. Certificate issued by nominated agency should not be older than <strong>3 </strong> working days of date of shipment.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this certificate can be not older than 7 days.</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/dgft08pn092.htm" target="_blank">DGFT Public Notice No. 92/(RE 2008) 2004-09 Dated: October 13, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ban On Export of Non-Basmati Rice – Not to Apply to Certain Countries</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ban on export of non-basmati rice shall not be applicable to export of rice to the following countries:-</font></p>
<div align="justify">
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td width="227"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Name of the country </strong></font></p></td>
<td width="104"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Quantity </strong></font></p></td>
</tr>
<tr>
<td width="227"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Nigeria </font></p></td>
<td width="104"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15,000 MT </font></p></td>
</tr>
<tr>
<td width="227"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Senegal </font></p></td>
<td width="104"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15,000 MT </font></p></td>
</tr>
<tr>
<td width="227"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Ghana </font></p></td>
<td width="104"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15,000 MT </font></p></td>
</tr>
<tr>
<td width="227"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) Cameron </font></p></td>
<td width="104"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10,000 MT </font></p></td>
</tr>
</table>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above export shall be subject to the following conditions:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) The above quantity shall be exported through State Trading Corporation (STC) of India during September/October, 2008;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii) STC shall procure rice from such rice mills who have surplus rice/paddy in their stock;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii) The rice to be exported shall be with a minimum of 25% of brokens; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iv) STC shall ensure that their entry into market for this export does not affect the overall price situation of rice; and</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">v) STC shall source the rice to be exported from more than one State and in four different tranches.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2008/dgft08not048.htm" target="_blank">DGFT Notification No. 48 (RE-2008)/2004-2009 Dated: October 13, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is the meaning of <font color="#FF6633">‘deferred'</font> ? Cabinet Secretary Clarifies</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You thought it means <strong>postponed</strong> as do many dictionaries and legal and academic luminaries? But the Cabinet secretary has a different opinion. The CabSec , as he is <font color="#FF6633">deferentially </font>referred to, is the top bureaucrat of the Country and what he thinks is binding on all the babus.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministries have expressed doubts as to what could be the meaning of the word, “deferred” used in the context of the proceedings of the Cabinet/Cabinet Committees. It seems in many cases, the term, “deferred” is <strong>misconstrued </strong> to be synonymous with the term, “postponed”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is there to be misconstrued?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Black's Law Dictionary defines “defer” as “to postpone; to delay;”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A deferred judgement is a judgement which places a convict on probation;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under Section 80C of the Income Tax Act, there is a deduction for <strong>deferred </strong> annuity; Under Section 216, an assessee is liable to pay interest on the delayed payment of advance tax for the period during which the payment of advance tax was so <strong>deferred</strong><em>.</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So everybody seems to be under the mistaken impression that<strong> deferred means postponed</strong><em>.</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not so the Cabinet Secretary who clarifies that</font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">With a view to ensure that there is no confusion in this regard, it is clarified that the term "Deferred" in the context of the proceedings of the Cabinet/Cabinet Committees, connotes that the Cabinet/Cabinet Committee has disposed of the matter and the note on the subject no longer remains pending with the Cabinet Secretariat or with the Cabinet/Cabinet Committees. The concerned Ministry/Department will, therefore, have to bring up a fresh note for the consideration of the Cabinet/Cabinet Committee in case it is considered necessary to do so. The decision recorded as “ <strong>Deferred </strong>”, is therefore, not the same as a decision recorded as <strong>'Postponed' </strong>. In the latter case, i.e. where the decision recorded is “Postponed ” , the matter remains pending and will be placed before the Cabinet/Cabinet Committee again and there would be no need for a fresh note on the subject being brought by the concerned Ministry/Department.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Amen</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Cabinet Secretariat wants all the ministries to note this.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So according to the Cabsec, <strong>deferred </strong> means decided or dismissed or denied, but certainly not <strong>postponed.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The linguist-scholar-Prime Minister PV Narasimha Rao once said that he could keep his sanity intact in spite of being subjected to atrocious literature churned out by IAS officers in their note sheets, for more than three decades! They would have convinced him that as per some office order issued by the Queen, ‘deferred' means disposed.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what does the queen's English think about it?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT has collected these from minutes of Cabinet meetings in England – mother of perhaps cabinet and English.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RESOLVED:</font></p>
<div align="justify">
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That this item be <strong>deferred </strong> until Cabinet on 15 June 2005.</font></li>
</ul>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That, at the request of Woburn Sands Town Council, consideration of the proposed designation of a Woburn Sands Conservation Area be <strong>deferred </strong> until the Cabinet Meeting on 3 June 2002.</font></li>
</ul>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That consideration of the Health Promotion heading be <strong>deferred </strong> to a future meeting of the Cabinet.</font></li>
</ul>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif">That consideration of all other items be <strong>deferred </strong> to the Cabinet meeting of 4 May 2004.</font></div>
<div align="justify">
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This item was <strong>deferred </strong> to 14th October Cabinet meeting to allow time to look at the concerns raised.</font></li>
</ul>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this from Australia, yet another country where reasonably good English prevails.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Cabinet considered procedures to deal with the hijacking of aircraft at five meetings in 1973. Hon Allen Hodges (the Minister for Works and Housing) submitted a proposal on 5th March 1973 for ‘adequate' equipment to be supplied to the police force. The equipment included bomb blankets, mobile bullet proof shields, sniper rifles and ammunition, a trailer with a specially constructed ‘Bomb Transportation Box', body armour and walkie-talkie radio transceivers. A decision on this matter was <strong>deferred </strong> until 12th March 1973, and again on that date until 19th March 1973 when approval was given for the purchase of this equipment as ‘Unforeseen Expenditure'.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In all the above cases, deferred appears to mean postponed, but for the Indian Cabinet, it has a different meaning. So be it. Who are we to question the wisdom and language of the Cabinet and the Secretary? But try substituting this meaning in the Income Tax Act; it will be interesting to know how Mr. Chidambaram will explain <strong>deferred </strong> taxes.</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>Port Services – CENVAT Credit - Steel and cement used for construction of jetty, not entitled; Credit entitled for mobile phone, rent a cab, CHA & Surveyor charges. Air-conditioners are capital goods, entitled for credit – CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> cement and steel have undoubtedly been used in the construction of jetty and port building by the contractor, which service is itself liable to service tax, though the same is exempted under the Notification. As such, it can be safely concluded that the cement and steel stand used for providing the output service of construction of building and not used in providing the port service, such an interpretation would lead to unwarranted results and the definition cannot be so stretched so as to include the use of cement and steel as used for providing the output service of port services. If such a wide meaning is given to the above expression then the cement and steel used for construction of any building which houses the office etc. would become eligible inputs for the purposes of providing output services.</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>Expenditure billed in the name of sister company; rent on garden; capitalised advertisement expenditure; - eligible for deduction: No personal expenditure in the hands of the company - ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Expenditure billed in the name of sister company; </strong> the disallowance cannot be made only on the technical ground that the bill was raised in the name of its sister concern for certain business considerations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rent on garden: </strong> The assessing Officer has disallowed the rent of garden space simply on the ground that the nature of assessee's business did not necessitate any garden space.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Capitalised advertisement expenditure; </strong> the real question for determining the deductibility or otherwise of any expenditure is its nature and not the treatment given in the books of account.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No personal expenditure in the hands of the company; </strong>The assessee is a private limited company and in such a situation, there cannot be any question of a personal use of the facilities by the Directors of the company.</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>If credit cannot be denied and an amount equal to 10% is not required to be paid in respect of exempted goods exported under bond, equal credit cannot <em>prima facie </em>be denied and amount equal to 10% is not required to be paid under Rule 6(3)(b) of the CCR, 2004 in respect of exempted goods cleared for export under rebate – Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a Stay petition filed against the Order of the Commissioner who held that the process of packing different medicine in blister packs does not amount to manufacture and accordingly confirmed the demand of an amount of Rs.1,65,45,396/- in terms of rule 6(3)(b) of the Cenvat Credit Rules, 2004 along with interest and imposed equivalent penalty of Rs.1,65,45,396/-</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>
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