TIOL-DDT 1853
09.05.2012
Wednesday

THE Lok Sabha yesterday passed the Finance Bill 2012 with the Finance Minister strongly defending retrospective amendments to tax laws. The FM said,

“I have explained that retrospective effect, to clarify the legislative intention, must be with reference to the date of enactment. How can the intentions of the legislature have any other reference point than the date of enactment, whether it is 1961 or 1951 or 1948? If clarificatory retrospective arrangement is to be made, it will be with reference to the date of enactment. But, the effect of the retrospective amendment in respect of the taxation will be covered by other laws. Here, the Income Tax Act Section 161 says that no tax can be levied beyond six years. Therefore, the mention of 1961 is academic, but the tax liability will arise retrospectively, six years before, from the current date of assessment.

We cannot declare India as a tax haven simply to attract the foreign investment. I want foreign investment for technology, for development, for resources. Please remember that when the investment was also not there, we did not eat lizards. Till today, the investment requirement is substantially met by the rate of our domestic savings. Today it has come down to 33 per cent or 34 per cent, but it had reached as high as 35 per cent or 36 per cent of GDP. The rate of investment was 37 per cent or 38 per cent. Therefore, we are not in that distressed a situation that a country of 121 crore people will be treated as tax haven like Cayman Island, The Isle of Man or Virgin Islands. We cannot be equated with them. Either you pay tax here or you pay tax in your own country with which we have a Double Taxation Avoidance Agreement. It is as simple as that.”

Judiciary vs Legislature: Our Supreme Court has given a verdict. Somebody has said how we could go against the judgement of the Supreme Court. I am fully aware of my right as a legislator. Law-making power only vests with the Parliament. The Supreme Court may interpret law, but equally the Parliament has the right, Legislature has the right to express its intention by making amendment to correct the judgement of the Supreme Court. The very first amendment to Constitution of India, which is not an ordinary law, for insertion of Article 35A and introducing certain other relevant changes, was done in 1951. It arose out of the judgement of the then Supreme Court. Parliament considered that the Supreme Court did not reflect the intention of the law-makers. So, the Constitution, the basic document, was changed. When did we not fight with the Supreme Court? Did we not fight against it in Golaknath case and Keshvanand Bharati case? From 1950 to 1968, the general perception was that Indian Parliament can make any amendment to the Constitution. In Golaknath case, the verdict came that Parliament cannot alter Fundamental Rights, and a series of legal enactments, social legislations, were declared null and void by the Supreme Court, including the Banks Nationalisation Act, Privy Purses (Abolition) Act. Then, Lok Sabha was dissolved in 1970. The then Prime Minister, Shrimati Indira Gandhi, went to the electorate saying ‘I want to bring social legislations. I want to transform the society. I want the power to amend the Constitution.' She said, “I do not have two-thirds majority, give me two-thirds majority.” The Indian electorate gave her two-thirds majority, and there came the Twenty-fourth Amendment to the Constitution where the ‘constituent power' was vested in Parliament. If you read the text of the Constitution from 1950, before the Twenty fourth Amendment made to Article 368, you will not find the word ‘constituent power'. ‘Constituent power' of Parliament was first invented and put in the text of the Article 368 of the Constitution through that Twenty-fourth Amendment.

Not only in India but everywhere, in all developed societies, Legislature's intention is what matters because we are representing more than 70-crore people of this country. Each constituency has 1.5 million or 1.6 million voters. Therefore, their intention is what matters. Yes, as far as the Supreme Court and the Judiciary is concerned, the Constitution has given them the power to interpret the law. However, the law is to be framed by us. If we find that there is a conflict between the ‘intent' of the Legislature and the ‘interpretation' of the Constitution, most respectfully I submit that by interpretation of the law, our right of amending it or asserting our right is not taken away. That is the power of the Constitution, which is vested in us”.

Excise and Customs Concessions

THE Finance Minister announced concessions in Central Excise Duty to chassis for commercial vehicles, ballpoint pen ink, polyester fibre and yarn made from waste, and certain parts of footwear. Among the major reliefs in the customs side, are exemptions to wood pulp, goods required for the setting up of solar power projects and certain raw materials for the manufacture of the solar cells. Notifications to give effect to these changes would be issued in due course. He also announced certain other minor changes, which we will come to know from the notifications.

Service Tax – Clarification on Rate of Tax

SERVICE Tax rate is 12% with effect from 1st April 2012. Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1st April 2012 and the payments made after 1 st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

Board clarifies that,

1. The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28th March 2012 has also clarified the same. Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1st April 2012, the service tax needs to be paid @12%.

2. The invoices issued before 1st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan. Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.

Is the Government penny wise? Why are they so particular about collecting a few chips from a few assessees for the invoices issued in March 2012?

We bring you today a short article on the issue from one of our regular contributors. Please see ST se GST Tak

Circular No. 158/9/2012-S.T Dated: May 08 2012

Customs - Parallel Imports - Intellectual Property Rights - CBEC Clarifies

NOTIFICATION No. 51/2010-Customs (N.T.) dated 30.6.2010 prohibits import of goods for sale or use in India, which are covered under specified legal provisions of the following statutes that regulate products with false trade mark, fraudulent or obvious imitation of design, patent obtained without consent, false Geographical indication or product which infringe registered copyright etc.

(i) Trade Marks Act, 1999

(ii) Designs Act, 2000

(iii) Patents Act, 1970

(iv) Geographical Indications of Goods (Registration and Protection) Act, 1999 and

(v) Copyright Act, 1957.

In terms of the legal provisions under the IPR (Imported Goods) Enforcement Rules, 2007 read with notifications and circulars issued in this regard, the determination of the fact that whether particular consignment of imported goods infringes the rights of the IPR holder would be done by the Customs authorities taking into account the provisions of the above mentioned parent Acts.

In this context, the issue of permitting import of original/genuine products (not counterfeit or pirated) which are sold/ acquired legally abroad and imported into the country, by persons other than the intellectual property right holder without permission/ authorisation of the IPR holder, known in the trade as 'parallel imports' was referred to the administrative Ministry i.e., Department of Industrial Policy and Promotion (DIP&P), Ministry of Commerce & Industries, seeking their clarification.

Board wants the field formations to decide cases of ‘parallel imports' on the basis of aforesaid legal provisions of parent Acts, the provisions of Notification No. 51/2010-Customs (N.T.) dated 30.6.2010 and the clarification given by the administrative Ministry.

Circular No. 13/2012 - Cus, Dated: May 08, 2012

FTP - Export Policy of Onions – No MEP

EXPORT of onions will now be allowed without any MEP( Minimum Export Price) for the period upto 2nd July 2012. Any consignment for which LEO (Let Export order) is not issued till midnight of 2nd July 2012, will be allowed for export at applicable MEP, which will be as per notification to be issued subsequently.

DGFT Notification No. 116/(RE-2010)/2009-2014, Dated: May 08, 2012

FTP - Procedure for Obtaining Cotton RCs

AS per Notification No.113 dated 4th May, 2012 application for registration of contracts for export of raw cotton would be submitted to the 7 designated RAs namely: - Ahmadabad, CLA, New Delhi, Bangalore, Kolkata, Hyderabad, Chennai and Mumbai. To streamline the process of registration the following procedure would be adopted in addition to those provided in the Notification No.113 of 4 th May 2012.

(1) E-mail to precede the application

Each intending exporter has to first send an e-mail addressed to cottonexport-dgft@nic.in before filing hard copy of the application to the concerned RA for issue of RC.

(2) The content of the e-mail would be a brief description of where the exporter wants to export and such other details that he may like to give. But it must contain the name, address, telephone number and other contact details and IEC Number of the applicant;

(3) A printout of the e-mail sent to cottonexport-dgft@nic.in shall be enclosed to the hard copy of the application to be submitted to the RA in the proforma prescribed earlier in Notification No.63 dated 4th August 2011.

(4) If an exporter wants to export through multiple ports then it has the liberty to seek split RCs as long as the overall quantity limit is within the eligibility given in para 2 of the Notification No.113 dated 4th May 2012. Similarly for export to different buyer, split RC's can be issued within the overall entitlement of an applicant.

DGFT Trade Notice No. 1/2012, Dated: May 08, 2012

Jurisprudentiol – Thursday's cases

Central Excise

Once a manufacturing activity is undertaken for manufacture of excisable goods, manufacturer is required to obtain a licence from Central Excise department under Rule 174 of Central Excise Rules and if any manufacturing activity is undertaken without a licence from department, there is a contravention of Central Excise Rules and excisable goods so manufactured are liable for confiscation: CESTAT

THE assembly of car from the component parts amounts to manufacture under Section 2(f) of the Central Excise of the Act and excise duty is liable to be charged on such assembly. There is no dispute on this point that the activity of assembling of the car by the appellant amounts to manufacture. Once a manufacturing activity is undertaken for manufacture of excisable goods, the manufacturer is required to obtain a licence from the Central Excise department under Rule 174 of the Central Excise Rules and if any manufacturing activity is undertaken without a licence from the department, there is a contravention of the Central Excise Rules and the excisable goods so manufactured are liable for confiscation under Rule 173Q(1)(c) as existing at that time.

Income Tax

Whether when assessee incurs heavy litigation expenses to remove encroachment, income from sale of such land is to be taxed as capital gains or income from business - Capital gains, rules Bombay HC

LATE F.E.Dinshaw, who was a partner in a firm of Solicitors and a financial adviser to the Princely State of Gwalior, purchased large tracts of land admeasuring about 2500 acres at Malad and Borivali in or about 1923. He died in 1936 and was survived by a son, E.F. Dinshaw, and a daughter, Bachoobai Woronzow, both of whom were non-residents and were citizens of a foreign country. Upon the death of F.E.Dinshaw, his son and daughter became joint owners of the lands. No physical division was carried out. Under the last will and testament of F.E. Dinshaw, a life interest was created in half his share in the land in favour of his daughter, Bachoobai, a reversionary interest being created in favour of two U.S. based charities. By a judgment of the Court dated 21 December 1972, Mr.Nusli Wadia was appointed as sole administrator of the estate. The other half share was bequeathed to E.F.Dinshaw.

The AO in the course of the assessment held that there was a steady, systematic and continuous process of selling portions of the property for making profits in real estate.

Customs

For levy of Customs duty goods have to be assessed "as presented before Customs": CESTAT

THE case under consideration is one of re-importation, i.e whether the goods exported were re-imported as such or the goods re-imported were different from those exported. The goods under export were chassis fitted with engine, while the goods imported were fully built buses along with standard fittings and equipments. These two goods are not one and the same and therefore the condition for availing benefit of notification 94/96 that the goods are the same which were exported is not satisfied.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day

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