Potatoes at Rs. 50/- a kg – inflation under control (See 'DDT')

Institute of Chartered Accountants of India issues exposure draft of revised Accounting Standard-3;

Stock market indices not only indicators of health of Indian Economy: FM;

TRAI's regulations on unsolicited commercial calls complete one year - A case of marginal impact;

Delhi DRI seizes FICNs worth Rs 11 lakh with five pistols; One person held in Amritsar corridor;

ddt 13 oct.pdf

Income Tax – Payment of more than Rs 20,000/- in cash – Rule 6DD Amended;

tiol exclusive.pdf

Lessons from global financial crisis for emerging markets in India;

guest article.pdf

Export promotion schemes vs Cenvat Credit or Rebate under Rule 18: The myth and the reality;

mbuzz1056.pdf

Institute of Chartered Accountants of India issues exposure draft of revised Accounting Standard-3;

mbuzz1055.pdf

TRAI's regulation on unsolicited commercial call - A case of marginal impact;

mbuzz1054.pdf

Stock market indices not only indicators of health of Indian Economy: FM;

mbuzz1053.pdf

Delhi DRI seizes FICNs worth Rs 11 lakh with five pistols; One person held;

mbuzz1052.pdf

Our banking system is strong; we need not worry: RBI Governor;

NOTIFICATION

it08not097.pdf

Income Tax – Payment of more than Rs 20,000/- in cash – Rule 6DD Amended;

it08not096.pdf

Tax exemption: DTAA with Japan amended to replace Japan Bank for International Corporation by International Business unit of Japan Finance Corporation;

CASE LAWS

2008-TIOL-191-SC-IT.pdf + sc it story.pdf

Shreyans Industries Ltd Vs CIT, Ludhiana ( Dated: September 23, 2008 )

Income Tax - construction of open drain for disposal of effluents – whether Revenue Expenditure or Capital Expenditure - High Court did not formulate a correct substantial question of law – matter remanded: The basic question which the High Court was required to answer was whether the assessee (appellant) had acquired assets of enduring benefit? For that purpose the High Court was required to examine the terms and conditions on which the Forest Department had permitted the appellant to construct an open drain. The High Court was required to consider the effect of diversion of forest land.: SUPREME COURT;

2008-TIOL-501-HC-DEL-IT.pdf

CIT, New Delhi Vs M/s Societex ( Dated: September 22, 2008 )

Income Tax - Penalty u/s 271(1)(c) - Assessee claims deduction of a substantial sum which was later admitted to be mistakenly claimed - AO imposes penalty for intentionally furnishing false information - Although the Tribunal found the case in favour of revenue on merit as the assessee had not deposited advance tax for the said sum but set aside the order on the ground that the satisfaction for levying penalty was not recorded - Held, in view of the assessee's plea that it had deposited advance tax and the same was not taken note of by the Tribunal, it would be proper for the Tribunal to go for fresh consideration and decide the issue on merits: DELHI HIGH COURT;

2008-TIOL-500-HC-DEL-IT.pdf

CIT, Delhi Vs Shrimati Ram Devi ( Dated: August 6, 2008 )

Income Tax - Block assessment - assessee owns two fruit orchards - dispute over non-disclosure of income from second orchard - Tribunal restores the matter to AO for detailed inquiry - in second round the Tribunal allows the assessee's appeal - Held, since the assessee's stand causes a great deal of confusion and the Tribunal's order also does not throw much light on the income from the second orchard, the case is once again remanded to the Tribunal for fresh consideraion : DELHI HIGH COURT;

2008-TIOL-499-HC-DEL-IT.pdf

CIT, Delhi Vs Goyal M G Gases Pvt Ltd ( Dated: September 10, 2008 )

Income Tax - CIT invokes powers u/s 263 and directs AO to wrap up assessment within three months - Since the Revenue fails to do it within the limitation set by the CIT order, Tribunal holds the Revenue's appeal infructuous - Held, the direction to pass a consequential order would certainly fall within the expression such order thereon as the circumstances of the case justify appearing in Section 263(1). That  where no period of limitation is prescribed then, in any event, a reasonable period of limitation ought to be adopted. The non-specification of a period of limitation does mean that the AO can wait interminably or for an infinite period before passing the consequential order. Tribunal has come to the correct conclusion.  Revenue Appeal dismissed : DELHI HIGH COURT;

2008-TIOL-498-HC-DEL-IT.pdf

CIT, Delhi Vs Encon International (P) Ltd ( Dated: September 24, 2008 )

Income Tax - Sec 80HHC benefits - Assessee exports goods to a Jordanian company as well as non-Jordan companies - AO disallows benefits on the ground that the sale of goods was a part of contract and cannot form part of trading activity - Tribunal allows the appeal as the goods were found to be exported outside the contractual sales - Since the Tribunal's order is based on facts, no substantial point of law involved - Revenue's appeal dismissed: DELHI HIGH COURT;

CENTRAL EXCISE SECTION

NOTIFICATION

etariff08_56.pdf +etariff08_55.pdf +etariff08_54.pdf +etariff08_53.pdf +etariff08_52.pdf

+etariff08_51.pdf +etariff08_50.pdf +etariff08_49.pdf

Region based exemptions – value addition rates – cement and clinker separated; tapioca starch added as input; value addition rate of 75% fixed for fatty acids and Ferro alloys;

CASE LAWS

2008-TIOL-1668-CESTAT-AHM-LB.pdf + LB story.pdf

M/s Cadila Pharmaceuticals Vs CCE, Ahmedabad-II (Dated: September 26, 2008)

Larger Bench of Tribunal holds that Physician Samples are to be valued in terms of Rule 4 of the Valuation Rules from 8th January 2005 even though P&P medicaments are notified u/s 4A of the CEA'44. - Held by Member(Judicial)

For the period post January 2005 when the retail sale pack medicines were specified under Section 4A and their normal sale price in terms of Section 4 was not available, the provisions of Rule 4 cannot be resorted to. Supreme Court decision in the case of Jayanti Food Processing (P) Ltd. vs. C.C.E., Rajasthan ( 2007-TIOL-150-SC-CX ) relied upon. It can be safely observed and held that if there is no normal price of the retail packs (except MRP), there can be no value as per definition of value in terms of provisions of Rule 2(c) of the Valuation Rules, 2000 and if there is no value, the provisions of Rule 4 will not be attracted and hence cannot be applied.

Having held that Rule 4 is not applicable , it is also seen Rule 8 is applicable only when excisable goods are not sold by the assessee but are used for consumption in the production or manufacture or other articles. As already observed in terms of Rule 11, 'reasonable' means consistent with the principles and general provisions of these Rules has to be used. Said Rule provides for adoption of assessable value as 110% of the cost of the production or manufacture of such goods. In other words, the cost of the goods and margin of profit at the rate of 10% is required to be adopted for arriving at the assessable value. In the earlier decision of the Larger Bench of the Tribunal in the case of Blue Cross Laboratories, the basis for adoption of cost of production was not accepted, as contained in the erstwhile provisions of Rule 6(b)(ii) of the Central Excise Valuation Rules, inasmuch as, the provisions as contained in Rule 6(b)(i) providing for adoption of comparable goods , price was found to be applicable. If that was so. the provisions of Rule 6(b)(ii) were held to be inapplicable, which were later in seriatim. In new Central Excise Rules, no Rule deals with determining the value on the basis of the value of comparable goods. Rule 8 only provides for arriving at the value on the basis of 110% of the cost of production. Whether such adoption of value on the basis of cost would be reasonable or not, is required to be examined. Apart from the fact that having ruled out the applicability of Rule 4, Rule 8 is the only left Rule required to be adopted, we note that adoption of the cost of manufacture with addition of margin of profit, which would have been normally earned by the manufacturer on such goods, has been adopted for arriving at the assessable value of the goods by various decisions as also by the Board's itself by way of issuance of various Circulars. Reference in this regard is made to Board's Circular No.643/34/2002-CX dated 1.7.2002, which provides for assessment of duty in respect of free - supplied items on the basis of 115% of cost of production. Though the above Circular was subsequently withdrawn and new Circular providing applicability of Rule 4 was issued (which was the subject matter of Mumbai High Court's decision), but as the same was for the period prior to January, 2005 and having held as not applicable, support can be drawn from the earlier Circular. As such, adoption of the assessable value of the physician's samples based upon the cost of production along with margin of profit, in terms of the said Rules (now quantified at 10%) is the reasonable method and consistent with the principles of valuation as reflected in Section 4 and various Rules. Held that the assessable value of physician's samples supplied free of cost is to be arrived at in terms of the provisions of Rule 8 of Central Excise Valuation Rules, 2000.

Held by President and which is the majority decision as the Member(Technical) agreed with the President's decision

Member (Judicial) noticed the decision of the Bombay High Court but distinguished it observing that "the issue before the Hon'ble High Court of Mumbai was for the period when the medicines were-not specified under Section 4A and their value under Section 4 of the Act was available". She also observed that in view of the definition of 'value' under Rule 2(c) of the Valuation Rules - 'value' means "the value under Section 4 of the Act" - where the value of excisable goods under Section 4 is available, the same can be picked up for arriving at the value of the physician's free samples in terms of rule 4, but where such value is not available, the value of regular retail price in terms of Section 4A cannot be applied for the purpose of rule 4. Member (Judicial), overlooked that in terms of Section 4A, the retail sale price i.e MRP is treated as the deemed value of the goods. To quote the relevant part of Section 4A(2), "such value shall be deemed to be the retail sale price declared on such goods". In my opinion, the restricted meaning of the term 'value' based on rule 2(c) of the Valuation Rules would militate against the express mandate of Section 4A. It is well known that the words "deemed to be" are used to create legal fiction and on a plain reading it is clear that Section 4A(2) creates a legal fiction to treat the retain sale price i.e MRP on the value of the goods, Legal fiction is created for a purpose and it is the duty of Courts to, first, ascertain the purpose and, then, give full effect to the fiction assuming all facts and consequences which are incidental or inevitable corollaries to its giving effect.

It is clear that purpose of creating the legal fiction in Section 4A(2) of the Act was to provide the basis of valuation of the 'specified' goods - being their MRP. If thus the MRP is regarded, statutorily, as deemed value of the goods, then, certainly, the value has to be understood in the wider sense as including 'deemed value' as per Section 4A(2) of the Act. It cannot be given a meaning in conflict or inconsistent with Section 4A(2). In any case, it is well settled that a rule being subordinate piece of legislation has to be interpreted as subservient to and in consonance with the primary legislation.

In order to attract rule 4 there need not be another sale. The rule has been quoted above but in order to bring home the point, the relevant part of it may be quoted again as under:

"The value of the excisable goods" (read physician's sample) "shall be based on the value of such goods sold by the assessee.....".

It would thus appear that there need be another sale of the goods, that is, medicines in the present case. The expression 'such goods' must necessarily be understood as referring to the goods which are subject matter of assessment, that is to say, physician's sample in the instant case. It cannot be contended that physician's samples are different from the goods (medicines) sold notwithstanding that they may be sold in lesser quantities or in a different pack having different label, colour, etc. As held by the Bombay High Court, physician's samples are physically, chemically and functionally the same goods (medicines) which are sold in the market. Rule 4 is the general rule and unless found to be inapplicable, would govern valuation of physician's samples. It is to be kept in mind that even if certain ingredients of rule 4 are found lacking, it would make no difference, for, by virtue of rule 11 of the Valuation Rules, it is the principle underlying the rule which needs to be applied consistent with other statutory provisions. The situation contemplated in Rule 8 on the other hand is completely different and alien. Rule 8 applies to cases where goods are cleared for use and consumption in the production or manufacture of other articles i.e for captive consumption. Physician's samples are not supplied for being captively used for production or manufacture of any article; they are final products like any 'medicine' sold in regular packs, and, therefore, the method of valuation provided in rule 8 cannot be applied for valuation of physician's samples.

The fact that medicines/medicaments are specified goods within the meaning of Section 4A of the Act since January, 2005, does not appear to have been brought to the notice of the Bombay High Court but this would hardly make any difference, for, the MRP is to be treated as value of the goods i.e deemed value in place of the transaction value under Section 4(1)(a) and it does not take the goods out of the pale of rule 4. Besides, it is to be kept in mind that the Bombay High Court was seized of a legal issue in the context of challenge to the validity of a circular issued on 25.04.2005, that is, in the aftermath of the notification under Section 4A(1).

In view of the above discussions, notwithstanding the non-availability of the normal sale price under Section 4(1)(a) of the Act, by reason of the goods being specified under Section 4A(1) making the retail sale price i.e MRP as its deemed value, the appropriate rule governing the valuation of physician's samples would continue to be rule 4 and the decision of the Larger Bench in Blue Cross Laboratories Ltd.'s [ 2006-TIOL-1142-CESTAT-MUM-LB ] case mutatis mutandis continues to be good law.

Reference is accordingly answered in the affirmative in favour of the Revenue and against theappellant/assessee. : AHMEDABAD CESTAT (LARGER BENCH );

2008-TIOL-1667-CESTAT-DEL.pdf

M/s North India Pipes Ltd Vs CCE, Ludhiana (Dated: August 14, 2008)

Central Excise - refund - assessee files refund claim and avails credit suo moto - As per larger bench decision an assessee cannot avail credit suo moto and the levy of interest by the Revenue is justified - Penalty set aside:DELHI CESTAT;

2008-TIOL-1666-CESTAT-MAD.pdf

M/s Sudhir Papers Limited Vs CCE, Bangalore (Dated: July 24, 2008)

Central Excise – refund – bar of unjust enrichment- duty burden passed on at the time of clearance of goods and subsequently credit notes issued – rejection on the ground of unjust enrichment is sustained.:CHENNAI CESTAT;

SERVICE TAX SECTION

2008-TIOL-1665-CESTAT-MAD.pdf + st story.pdf

Indian Hume Pipe Co Ltd Vs CCE, Trichy (Dated: July 23, 2008)

Service Tax - demanding duty on the activity of laying of pipeline interpreting it to be erection, commissioning and installation of a plant is totally misconceived and unacceptable: The Commissioner's interpretation of a plant would cover a long distance pipeline. Difficult to accept the above reading of the word plant in the context it is used. It is an inappropriate selection of the various meanings of this simple word. Plant' in popular usage means a cluster of buildings or a building in which machinery are installed usually for manufacture of goods. Long distance pipeline is not even remotely associated with this common understanding of the word plant. A water supply project is an infrastructure facility and a civic amenity the State provides in public interest and not an activity of commerce or industry. The impugned order also did not hold it to come under a service of commercial or industrial nature as submitted by the Consultant for the Revenue.

'Erection, commissioning and installation': It is elementary that 'erection' connotes construction or building of a structure and laying of pipeline does not involve erection. No ambiguity in the expression installation. It applies to machinery already made which are formally made ready to operate at the site. Installation implies setting up the machinery ready for use, like giving power connections or installing driver software in the case of a machine run with the aid computer software. Commissioning involves the operationalisation of the machinery after which it starts functioning regularly. In laying of long distance pipeline, earth is dug and pipes laid and jointed, and the pipes pass through sumps with boosters at intervals, if necessary. This activity will not involve erection.. : CHENNAI CESTAT;

2008-TIOL-1664-CESTAT-MUM.pdf

M/s Pragati Services Station & Auto Parts Vs CCE & CC, Nashik (Dated: August 1, 2008)

Service tax - penalty - enhancement of penalty by the Commissioner by order-in-revision- service tax paid before issue of show cause notice - revision order enhancing penalty is not sustainable. : MUMBAI CESTAT;

2008-TIOL-1663-CESTAT-DEL.pdf

M/s Nestle India Limited Vs CST, New Delhi (Dated: September 4, 2008)

resident holding company - Revenue raises demand - Since the period of the case is covered by the Larger Bench decision in the case of Hindustan Zinc, the assessee is not liable to pay service tax prior to 1.1.2005 - Assessee's appeal allowed : DELHI CESTAT;

2008-TIOL-1662-CESTAT-DEL.pdf

M/s Amitdeep Motors Vs CCE, Allahabad (Dated: August 8, 2008)

ST - Cargo handling service - Assessee is a dealer of Maruti Udyog Ltd - sells spare parts - Revenue treats 2% of value of inventory as cargo handling charge - Assessee argues sales tax has been paid on the entire price, including the value on which service tax is demanded - a fit case for waiver of pre-deposit : DELHI CESTAT;

CUSTOMS SECTION

NOTIFICATION

dgft08pn091.pdf

Piston Engines (Diesel) upto 20 HP capacity added to Focus Products list;

dgft08pn090.pdf

DGFT empowers DCs of SEZs to issue certificate for trading units;

CIRCULAR

cuscir08_16.pdf

CBEC clarifies on refund on 4% CVD in case of Notification 102/07;

CASE LAWS

2008-TIOL-1661-CESTAT-MAD.pdf

Associated Electronic & Electrical Industries ( Bangalore ) Pvt Ltd Vs CC, Chennai (Dated: July 17, 2008)

Customs – classification – cordless phone with answering machine is classifiable under sub-heading 8517.11 as line telephone sets with cordless handsets – contention of the appellant that the same are classifiable under sub-heading 8520.20 as telephone answering machines is not acceptable - Note (3) to Section XVI of the Tariff Schedule - a machine designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. : CHENNAI CESTAT;