TIOL-DDT 994 · 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 994</font><br> 18.11.2008<br> Tuesday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise – Trade Discount – Reversal of Credit – Board Clarifies</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A manufacturer avails credit of the amount of duty paid by supplier as reflected in the excise invoice; subsequently the supplier allows some trade discount or reduces the price, without reducing the duty paid by him.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In such a situation, is the manufacturer required to reverse the proportionate credit?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was the question before the Board. For once, CBEC has given a clarification favourable to the trade. (But then Board clarifications are no more binding – Commissioners can still say the Board is wrong.) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway the Board has analysed the issue as,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Since, the discount in such cases are given in respect of the value of inputs and not in respect of the duty paid by the supplier, the effect of reduction of value of inputs may be that the duty required to be paid on the inputs was less than what has been actually paid by the inputs manufacturer. However, the fact remains that the inputs manufacturer had paid the higher duty. Rule 3 of Cenvat Credit Rules, 2004 allows credit of duty “paid” by the inputs manufacturer and not duty “payable” by the said manufacturer. There are many judgements of Hon'ble Tribunal in this regard which have confirmed this view.”</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Board clarifies that</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. In such cases, the entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. However, if the duty paid is also reduced, along with the reduction in price, the reduced excise duty would only be available as credit.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. It may however be confirmed that the supplier, who has paid duty, has not filed/claimed the refund on account of reduction in price.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2008/excircular877.htm" target="_blank">CBEC Circular No. 877/15/2008- CX ., Dated: November 17, 2008</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tariff Value of Brass Scrap and Poppy seeds reduced</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has reduced the Tariff Value of Brass Scrap from 3832 US Dollars to 3525 and the Tariff Value of Poppy Seeds from 6190 Dollars to 5206 Dollars. There is no change in the Tariff Values of other items.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2008/cnt08_127.htm" target="_blank">Notification NO. 127/2008 – Cus ( N.T.) Dated: November 17, 2008</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ITAT and CESTAT Members can now become CBDT/CBEC Members</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue Department has invited applications for the posts of Members in the CBDT and CBEC.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Officers of the Central Government appointed on a regular basis in the Grade of Rs. 22,400-24,500/- (pre-revised scale); (Revised scale Pay Band 4 - Rs.37400 - 67000 with grade pay of Rs.12,000 /- )</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">and possessing the following essential qualifications :- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) Having at least 15 years of experience</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Having high professional merit and excellence; and</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) Having impeccable reputation of integrity</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">are eligible to apply.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The letter is also sent to President, ITAT/CESTAT with a request to circulate this amongst all Members of ITAT/CESTAT to enable them to send their applications. So now CESTAT/ITAT may be a good route to join the Board, but if you join the Board, you have to retire at 60 instead of 62 in the Tribunal – Choose your option.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cbdt_member_vacancy.htm" target="_blank">DOR F.No.A -12026/11/2008- Ad.I </a></strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cbdt_member_vacancy.htm"><strong>and</strong> <strong>F.No.A -12026/11/2008- Ad.I dated the 10th November, 2008</strong></a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Only Income Tax Officers can become CBEC Members?</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC web site informs that one of the essential qualifications to become a Member of the CBEC is 15 years experience in administering and running the <strong><font color="#FF6633" size="3">direct tax</font> </strong> administration in the Central Government ...</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is apparently a simple mistake – but what one wonders is how could they change ‘indirect' to ‘direct' in the original letter received from DOR ? It needs a lot of ingenuity.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Check out this <em>faux pas </em> at <a href="http://www.cbec.gov.in/deptt_offcr/member-cbec0910.pdf"><strong>http://www.cbec.gov.in/deptt_offcr/member-cbec0910.pdf</strong></a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Twists and turns in <em>Daelim </em> tale continues ………where do we go from here?</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the infamous Daelim Industrial Co case - <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2003/2003-TIOL-110-CESTAT-DEL.htm" target="_blank"><strong>2003-TIOL-110-CESTAT-DEL</strong></a></font>, the Tribunal held that a composite contract cannot be dissected rather vivisected to levy service tax on the service component. This decision was affirmed by the Supreme Court. Then came the decision of the now famous <em>Larsen & Toubro case - </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2006/2006-TIOL-490-CESTAT-MUM.htm" target="_blank"><strong><font size="1">2006-TIOL-490-CESTAT-MUM</font></strong></a> where the Tribunal went further and held that even if there are amounts attributable to individual services, the settled position of law is that a works contract cannot be vivisected. The Apex Court decision in <em>BSNL Ltd - </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2006/2006-TIOL-15-SC-CT-LB.htm" target="_blank"><strong><font size="1">2006-TIOL-15-SC-CT-LB</font></strong></a> and Kerala High Court's decision in <em>Kerala Colour Lab Association </em> - <font size="1"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2003/2003-TIOL-19-HC-KERALA-ST.htm" target="_blank">2003-TIOL-19-HC-KERALA-ST</a></strong></font> were distinguished by the Tribunal in the <em>Larsen & Toubro case.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Just when everybody thought that the issue had gained finality, like a bolt from the blue came the decision of Delhi bench of the Tribunal in <em>BSBK Pvt Ltd - </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2006/2006-TIOL-1538-CESTAT-DEL.htm" target="_blank"><font size="1"><strong>2006-TIOL-1538-CESTAT-DEL</strong></font></a> wherein the Tribunal distinguished the <em>Daelim Industrial Co case </em> and held that when separate bills are raised by the assessees the turnkey contracts become divisible and service tax is payable on the service component.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of these two conflicting decisions of the Tribunals, in <em>Indian Oil Tanking Ltd - </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2007/2007-TIOL-1600-CESTAT-MUM.htm" target="_blank"><strong><font size="1">2007-TIOL-1600-CESTAT-MUM</font></strong></a> , the Tribunal referred the matter to a Larger Bench for resolution of this dilemma. In the interim, the <em>BSBK Pvt Ltd </em> case travelled to the Supreme Court where the decision of the Tribunal was set aside and matter remanded as the issue was decided ex-parte by the Tribunal.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the time came for the Larger Bench to decide the issue in <em>Indian Oil Tanking Ltd case, </em> only the decisions of <em>Daelim Industrial Co (affirmed by the Supreme Court) </em>and <em>Larsen & Toubro </em>were available for reference as the Tribunal decision in <em>BSBK Pvt Ltd </em>had become infructous. As there were no conflicting decisions as on the date of the order, the case was returned to the Division Bench for a fresh decision.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is more or less a repeat of our story in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7540" target="_blank">DDT 902 dated July 7, 2008</a></strong>. Here cometh the twist in the tale. In pursuance of the Supreme Court's directive, the Tribunal took up the case in <em>BSBK Pvt Ltd </em>de novo. In round two of this episode before the Tribunal, the assessee took shelter under the <em>Daelim Industrial Co </em>decision to contend that work contracts in turnkey projects cannot be vivisected.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal veered off the beaten track and observed as follows:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In the case of 'turnkey contract', if they are not split only on the ground that the contract is on turnkey project basis, a question may arise as to whether the entire contract will be sale contract. The answer apparently would be in the negative. Only that part of the contract which falls under clause (b) of Article 366(29-A) - amounting to 'deemed sale' will constitute sale contract on which sales tax can be levied. What will happen to the rest of the contract? Whether it will go out of the net of the service tax? Answer again, will be in the negative. No doubt, as observed above, and it goes without saying, the 'service' will have to qualify as taxable service”.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal therefore, held that the decision in <em>Daelim Industrial Co </em> is not in accordance with the Apex Court's ruling in <em>BSNL Ltd - </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2006/2006-TIOL-15-SC-CT-LB.htm" target="_blank"><font size="1"><strong>2006-TIOL-15-SC-CT-LB</strong></font></a>. Finally, in view of the divergent view taken by the Tribunal, the matter once again goes to the Larger Bench.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See ‘<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8165" target="_blank">ST se GST Tak</a> ' for the latest twist in the tale . The following stories may also be interesting.</strong></font></p> <blockquote> <p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">1. Post CBEC Circular on Service Tax - Are works contractors liable at all?</font></strong></font></p> <p align="left"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>2. Service Tax : The fine dividing line between indivisible contract and composite contract</strong></font></p> <p align="left"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>3. Growing ambit of Works Contract as a taxable service</strong></font></p> </blockquote> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI announces further measures for liquidity management and improving credit flow</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In its Mid-Term Review of Monetary Policy on October 24, 2008, the Reserve Bank of India indicated that it will closely and continuously monitor the liquidity and monetary situation and respond swiftly and effectively to the impact of the global developments on Indian financial markets. The Reserve Bank also indicated that the challenge for the conduct of monetary policy is to strike an optimal balance among preserving financial stability, maintaining price stability and sustaining the growth momentum.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In response to emerging global developments, the Reserve Bank has taken a number of measures since mid-September 2008. The aim of these measures was to augment domestic and forex liquidity and to enable banks to continue to lend for productive purpose while maintaining credit quality so as to sustain the growth momentum.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For a catalogue of measures announced by the RBI for liquidity management and improving credit flow in the financial system see RBI's press release.</font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbipressrelease.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI Press Release Dated: November 15, 2008</strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Indian Income Tax Rate Not Very High – KPMG Survey</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You think the 30% Income Tax (highest rate) in India is very high – It really is not so as a survey by KPMG Canada revealed. It is 50% in Austria and Japan and 59% in Denmark! Even in USA it is higher at 35%.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you don't like to pay Income Tax you should be living in Bahamas, Bahrain, Bermuda, Cayman Islands, Oman or United Arab Emirates. The average Tax rate is 28.8%.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can see more details on the tax analysis at</font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.kpmg.ca/en/news/documents/Incometaxratesurveyweb.pdf">http://www.kpmg.ca/en/news/documents/Incometaxratesurveyweb.pdf</a></font></strong></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="left"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service tax on port services – <em>Homa Engineering </em> differed with – matter goes to Larger Bench</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> terms of Section 65(82) of the Finance Act, 1994, ‘Port Service' means any service rendered by a port or other port or any person authorized by such port or other port, in any manner, in relation to a vessel or goods. The expression “authorized by such port” has become the epicentre of the disputes on the taxability of port service . However, in a recent case before the Tribunal (SZB) involving as many as 13 appeals, Tribunal examined the issue afresh and differed with the ratio of <em>Homa Engineering </em> with an approach from a totally different dimension.</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>Taxpayer is non-resident - employer agrees to bear tax liability in India minus hypo-tax of home country - Hypo-tax withheld from salary of taxpayer is not income, and is therefore not taxable: ITAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MANAGING </strong>pressure of globalisation is a big challenge for transnational companies. Though a foreign assignment may sound enticing for a high-quality professional in India but the same need not be the case for such professionals in developed economies. So, here comes a stiff challenge to persuade such professionals to accept relocation or international assignments. And one of the ways it is done is to provide attractive incentives. And what can be a better component of any such package than the assurance of taking care of one's tax liabilities.</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>'Theft' or 'dacoity' involves forcible removal of goods from factory by non-violent or violent means - Cannot be regarded as a natural cause or unavoidable accident – Remission of duty not available – CESTAT Larger Bench</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN </strong>dacoits do away with the finished goods from your factory be prepared to part with excise duty on such goods as well because such loss of finished goods by a manufacturer cannot be regarded as loss by natural causes as contemplated in the erstwhile Rule 49 of Central Excise Rules, 1944 or its equivalent in Rule 21 in Central Excise Rules, 2002.</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> </body> </html>