TIOL-DDT 996 · 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 996</font><br>
20.11.2008<br>
Thursday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs Compounding of Offences – Rules Amended – Compounding only if duty, penalty and interest paid</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has amended the ‘Customs (Compounding of Offences) Rules, 2005'. Now compounding will be allowed only if the <em>duty, penalty and interest liable to be paid have been paid for the case for which application has been made</em>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, the compounding amount has also been reduced , perhaps to make the scheme more attractive.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But should there be no similar amendment in the Central Excise (Compounding of Offences) Rules, 2005?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yes, it was done by Notification No. 42 /2007- Cx .( N.T. ), Dated: December 27, 2007.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then why did it take so long, nearly a year for the changes to be made in Customs? Well, that is how the Government works – the Customs Section would not know what the Excise Section is up to.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even the present Notification is dated 12 th November 2008 and it actually went missing for a week and was available only yesterday. And strangely the note to the notification dated 12.11.2008, mentions a corrigendum dated 18.11.2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Compounding amounts for various offences:</font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr valign="top">
<td rowspan="2"><div align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>S. No. </strong></font></div></td>
<td rowspan="2"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Offence </strong></font></p> <p> </p></td>
<td colspan="3"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Compounding amount </strong></font></p></td>
</tr>
<tr>
<td><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prior to 12.11.2008 </strong></font></p></td>
<td colspan="2"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>From 12.11.2008 </strong></font></p></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 132 of the Act </font></p></td>
<td rowspan="2"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rupees fifty thousand for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></div></td>
<td colspan="2" rowspan="2"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifty thousand rupees for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></div></td>
</tr>
<tr valign="top">
<td><div align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">False declaration, false documents, etc <strong>. </strong></font></div></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 133 of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rupees fifty thousand for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifty thousand rupees for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></p></td>
</tr>
<tr>
<td valign="top"><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Obstruction of officer of customs </font></p></td>
</tr>
<tr>
<td rowspan="2" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 134 of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rupees fifty thousand for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifty thousand rupees for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. </font></p></td>
</tr>
<tr>
<td valign="top"><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refusal to be X-rayed </font></p></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 135(1)(a) of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto twenty per cent. of market value of the goods or Rupees ten lakhs whichever is higher. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto ten per cent. of the amount of market value of the goods, subject to a minimum of one lakh rupees. </font></p></td>
</tr>
<tr valign="top">
<td><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">misdeclaration of value or in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition </font></p></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 135(1)(b) of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto twenty per cent. of market value of the goods or Rupees ten lakhs whichever is higher. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto five per cent. of the amount of market value of the goods, subject to a minimum of one lakh rupees. </font></p></td>
</tr>
<tr valign="top">
<td><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation </font></p></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 135(1)(c) of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto twenty per cent. of market value of the goods or Rupees ten lakhs whichever is higher. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto ten per cent. of the amount of market value of the goods, subject to a minimum of one lakh rupees. </font></p></td>
</tr>
<tr valign="top">
<td><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">attempts to export any goods which he knows or has reason to believe are liable to confiscation </font></p></td>
</tr>
<tr valign="top">
<td rowspan="2"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7.</font></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under Section 135(1) (d) of the Act </font></p></td>
<td rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This offence was not mentioned in the pre-amended Rules. </font></p></td>
<td colspan="2" rowspan="2"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto ten per cent. of the amount of market value of the goods, subject to a minimum of one lakh rupees. </font></p></td>
</tr>
<tr valign="top">
<td><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under this Act in connection with export of goods </font></p></td>
</tr>
<tr>
<td rowspan="2" valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8.</font></td>
<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Offence specified under section 135A of the Act </font></p>
<p> </p></td>
<td rowspan="2"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto twenty per cent. of market value of the goods or Rupees ten lakhs whichever is higher.
</font></div> <p> </p></td>
<td colspan="2" rowspan="2"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Upto five per cent. of the amount of market value of the goods, subject to a minimum of one lakh rupees.
</font></div> <p> </p></td>
</tr>
<tr>
<td valign="top"><p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">preparation to export any goods in contravention of the provisions of this Act </font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=3105" target="_blank">TIOL-DDT 274 - 02 01 2006</a> </strong>and <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5962" target="_blank">TIOL-DDT 684- 23.08.2007 </a></strong>for more details on the Scheme.</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_118.htm" target="_self">Notification NO. 118/2008 – Cus ( N.T. ) Dated: November 12, 2008</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exchange Rates again Amended mid-month</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With a volatile world economy and fluctuating exchange rates, CBEC cannot wait till the end of the month to notify the exchange rates. There was a similar mid-month change last month. The rate for Pound Sterling has been reduced from 79.75 to 74.03 and Yen from 53.90 to 51.22, for imports.</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_128.htm" target="_blank">Notification NO. 128/2008 – Cus (N.T) Dated: November 18, 2008</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No CENVAT Credit on Customs duty paid on Aircraft hired out – CBEC clarifies</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Facts: </strong> Hindustan Construction Company Limited (HCCL) imported an aircraft last year, which was cleared on payment of appropriate Customs duty (i.e., CVD ). After its import, the aircraft was being let out by HCCL on hire basis without transferring right of possession and effective control. From 16-5-2008, 'supply of tangible goods for use, without transferring right of possession and effective control' was brought under taxable service. After 16-5-2008, such activity attracts service tax on the hire charges received by HCCL. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Plea: </strong>it has been requested that HCCL should be allowed to take credit of the CVD paid on the aircraft and utilize it for paying service tax. The modality suggested is to amend the Cenvat Credit Rules, 2004 so as to specifically include aircraft within the definition of capital goods, as has been done in case of motor vehicles for providing specified services.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Verdict </strong> (of the Board): It is noticed that in this specific case, the aircraft was imported last year and till 15-5-2008, the service provided by HCCL was outside the scope of the Section 66 of the Finance Act and thus was covered under the definition of the term "exempted services" under the Cenvat Credit Rules, 2004. As per Rule 6(4), no Cenvat Credit can be taken on capital goods, which are used in providing only exempted services. Therefore, <em>ab initio </em>, HCCL was not eligible to take credit of CVD. Such being the case, the credit which was <em>ab initio </em> ineligible, does not become eligible, after the service tax is imposed on the service at a later date. It is therefore clarified that no Cenvat credit of the CVD paid on the said aircraft should be taken, even if it is specifically included within the definition of 'capital goods'.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>But </strong>why can't it be included, so that in future credit can be availed? Board is silent on this.</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=41&filename=notification/servicetax/2008/cvdletter.htm" target="_blank">CBEC Letter F. No. 137/120/2008- CX.4 dated 24-6-2008</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pay Commission Scales; good salary - no incentive against corruption</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Corruption is not need based but often greed based and so just by giving a good salary, you can't expect the Government Servants to be honest, of course some of them can be weaned away by good pay packets. It's not even a month since the Government employees got a fairly good Pay Commission arrears and about 40% hike in salary – and already two Central Excise officers are in the CBI net. This week the CBI arrested an Assistant Commissioner and a Superintendent in Ahmedabad while accepting a bribe of Rs. 2500/-. It seems the officers demanded a bribe of Rs. 5,000/- for issuing a Central Excise Registration! Seems pretty cheap – it seems in other places the going rate for registration certificate is upwards of Rs. 50,000</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>Central Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Inputs on which credit taken could not be cleared to EOUs without reversal of Credit or payment of duty - Clearance to EOU cannot be equated with export under bond: CESTAT Larger Bench</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> inputs cleared as such by the appellants to 100% EOUs cannot be deemed to have been manufactured by the appellants; the supplies (which are deemed exports) cannot be treated on par with export under bond for the purpose of Rule 57F; There is no warrant or justification to extend the instructions dated 31-12 1996 issued by the Ministry/Board to cover supplies to 100% EOU which are treated as deemed exports for certain purposes under EXIM Policy; The appellants are not entitled to remove the inputs without reversal of the credit or payment of equivalent amount of 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>Double Taxation treaty with Canada - Consultancy for National Highway Authority of India- fees to be treated as for included services; taxable at 15%; tax payable by the assessee does not exceed the tax deductible at source – no interest: ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INTEREST</strong> u/s 234B is chargeable provided the assessee, who is liable to pay advance tax u/s 208 has failed to pay such tax. Thus, the pre-condition for levy of interest u/s 234B is the liability to pay advance tax u/s 208. Under Section 208 of the Act, advance tax shall be payable where the amount of such advance tax payable as computed in accordance with provisions of Chapter XVII is Rs.5000 /- or more. The advance tax will be computed as per Section 209 on the Act. Under section 209, the assessee is to estimate his current income and find out the tax payable therein as per sub clause (1) of Section 209(1) Under clause (d) of sub section (1) of Section 209, the income-tax calculated under clause (a) is to be reduced by amount of income-tax, which would be deductible at source during the said financial year. Thus, the assessee can take credit of the tax deductible at source. Whether the tax is deductible @ 15% or 20% is to be decided by the payer and not the payee i.e. the assessee.</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>Dispute in availment of CENVAT credit on input services by a manufacturer – whether appeal required to be filed in form EA-3 or ST-5</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue involved is regarding denial of CENVAT credit on input services and therefore an appeal in ST-5 format appears to be maintainable more-so when an appeal in ST-4 form was admitted by Commissioner(Appeals). The show cause notices are therefore discharged. It is however made clear that no view is being expressed on the merits of the case as to whether a demand relating to denial of credit on input services is required to be raised under section 11A of Central Excise Act, 1944 or section 73 of the Finance Act, 1994.</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 - acquires stocks - pays interest for delayed offer as per SEBI diktat - capital gains - expression 'cost of acquisition' need not be construed in narrow sense - also to include interest payment made for shares prior to actual transfer</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> anybody, making capital gains is a pleasant experience. But its computation for income tax purpose is a painful one. It is a ticklish subject in the Income Tax Act. What makes it more complex is the number of variables which may be added to the cost of acquisition of the asset.</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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"></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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