TIOL-DDT 2423
26.08.2014
Tuesday

THE CBEC informs that although there is in existence a Circular no. 20/2009-Cus dated 19.06.2009 on the subject matter, the field formations are facing difficulties in disposal of refrigerant gases and, therefore, a fresh circular is proposed to be issued.

Accordingly, CBEC has issued a Draft Circular soliciting feedback/suggestions from the stakeholders for improvement/amendment in the same to make the Circular effective for speedy disposal of hazardous refrigerant gases.

As per the proposed circular, the following criteria/guidelines are prescribed for disposing of the seized/ confiscated refrigerant CFC empty/full cylinders:-

1. They should have specific permission to decant such cylinder in approved cylinders.

2. They should have facility to decant the gas, purify it and repack the gas for export.

3. The Custom authorities must take an undertaking from the producers of refrigerant gas (who are approved by CCOE to purchase and sale such material) that the gas purchased from the Customs is only for export with a valid licence and should not be delivered for domestic sales.

4. In case the CFC producers are not able to export the entire stock, they should take measures to ensure that the stockpile is destroyed as per the guidelines/procedure of Montreal Protocol. The disposal of refrigerant gases (CFCs) by incineration would also require clearance from State Pollution Control Boards and/or Central Pollution Control Board on which the Director, Ozone Cell has agreed to facilitate the approval process subject to the proposal being received through the Customs field formations/CBEC.

5. Name of the countries from where the cylinder containing such refrigerant gases were illegally imported should be intimated to the Ozone Cell, so that the National Ozone Units (NOUs) of those countries may be informed of the same to prevent further illegal import to India.

Your comments/suggestions may be sent at acmallick@nic. in

By the way, what happened to the Draft Disposal Manual? Please See DDT 2215 23.10.2013.

Also please read Customs - Draft Disposal Manual 2013

CBEC F.No. 711/20/2013-Cus (AS) , Dated: August 14, 2014

Tamil Nadu CM against Area Based Exemptions

THE Tamil Nadu Chief Minister Jayalalithaa has written to the Prime Minister expressing her strong reservations against extending area based excise duty exemption to the newly created States of Telangana and Andhra Pradesh.

In her letter Madam Chief Minister told the PM,

As you are aware, the general direction of taxation reforms in India has been towards rationalization and simplification of various exemptions. A conscious attempt has been consistently made at harmonizing indirect tax rates amongst States and to eliminate harmful tax competition. This led to the introduction of the Value Added Tax regime which substituted the earlier Sales Tax regime at the State level. The Centre, over the last two decades, has also attempted to reduce and eliminate various exemptions. A major aberration in this regard was the introduction of area based exemptions from income tax and central excise for new industrial units located in certain parts of Himachal Pradesh and Uttaranchal in 2003.

I recall that there was a spirited debate on this issue in the meeting of the National Development Council held in June, 2005, and I had also written to the then Prime Minister seeking withdrawal of such exemptions in August 2005. In the NDC meeting, almost all the Chief Ministers had even then favoured the scrapping of such exemptions as they significantly distorted the investment decisions of companies and corporate houses, thereby drastically affecting the investment climate in their own States.

Independent analysis has also acknowledged that the area-based exemption scheme was not calibrated properly and did not take into account the possibility of flight of capital and relocation of units from other States in the country. Any extension of such area based concessions to Andhra Pradesh or Telangana would cause a huge flight of capital and relocation of industries, in particular from neighbouring States. It would also make the neighbouring States totally uncompetitive. In fact, such concessions to new industries would render existing industries, both in neighbouring States and even in the States where such concessions are granted, completely uncompetitive. These are grave risks which cannot be ignored.

It must also be pointed out that when a bifurcation of three States took place in 2000, neither Jharkhand and Chattisgarh, two of the newly created States nor the residual States of Bihar, Madhya Pradesh and Uttar Pradesh received any such fiscal incentive.

A very limited, time bound exemption may be justified to enable an area to recover from a natural disaster. An area based exemption was granted for a limited period of 3 years for the Kutch area of Gujarat in 2001 soon after the devastating earthquake that struck the area. However, when I made a similar request on 6th June, 2005, for a limited excise duty holiday for the areas affected by the catastrophic tsunami in Tamil Nadu in December 2004, no such concession was provided by the then UPA Government even when adequate justification existed.

Hence, I strongly urge you to adopt a cautious approach to the complex issue of providing area based tax concessions in the name of encouraging economic development in these two States. Such exemptions run counter to one of the basic thrusts of economic reforms - a rational tax policy that is neutral, encourages a common market in the country, rewards competitive efficiency, and exploits comparative advantage. Any shift of investments from States with a strong infrastructure and trained manpower to other States motivated by tax reliefs alone would undo the two decade long work of rationalisation of tax structures.

Despite having put in place sunset clauses on area based exemptions during their two terms in office, the previous UPA Government, on grounds of sheer short term political expediency, offered this vaguely worded promise of taking appropriate fiscal measures including distortionary tax incentives. This reflects the moral bankruptcy of the previous UPA Government.

Your Government must exercise the greatest care in approaching this issue. Nothing should be done which would distort economic incentives or a level playing field and render States like Tamil Nadu uncompetitive vis a vis their neighbours. It would be highly ill- advised to offer across the board area based tax concessions.

Read Full Text of the CM's letter here.

Economy in use of paper - FinMin Directions

MINISTRY of Finance has been issuing instructions from time to time on expenditure management, fiscal discipline and on the need for economy and rationalisation of Government expenditure. Government is one of the major consumers of paper. Injudicious use of paper not only leads to infructuous expenditure but also impacts the environment as trees are the major source of paper pulp production. Instructions on judicious use of paper have been issued by the Department of expenditure in the past and similar instructions are also contained in the Manual of Office Procedure (MOP) published by Department of Administrative Reforms and Public Grievances. With a view to further stress the importance of economy in use of paper in Government offices, following instructions are issued for strict compliance by all concerned:-

(i) Notes should be typed/written on both sides of the paper/note sheet;

(ii) Typing should be done in single space;

(iii) Policy instructions/guidelines issued through Orders, OMs, etc. may be uploaded on the official website of the Ministry/Department/Organization, Number of hard copies of such communications may be limited to the required minimum;

(iv) Office copies should not be typed again where the draft itself is legible and does not contain many corrections.

(v) Forms, proformas, returns etc., if any, stipulated by Ministries/ Departments/ Organizations in connection the organizational mandate may be reviewed in relation to their size and format and should be recast and simplified/shortened in keeping with the recent directives from Cabinet Secretariat. Manual submission of forms, returns, etc., wherever stipulated, either under statutory obligations or otherwise, should be discouraged. Switching over to e-forms, online submission of forms/returns, etc., may be encouraged.

All the Ministries/Departments, attached, subordinate offices and autonomous or statutory bodies funded by GOI may comply with the directives.

These instructions have not come a day too soon. But what is going to happen? Thousands of copies of these instructions will be printed on foolscap paper and circulated among all the field formations and some offices may even ask for compliance reports - again on paper.

DDT had been crusading the cause of saving paper. DDT 116-17-05-2005, observed, "The great babus of North Block who use only government stationery have absolutely no idea as to the cost of paper. The CBEC must have been responsible for a large chunk of forest wealth being depleted. The frequent notifications and amendments they bring out cost this nation tons and tons of paper.  The latest contribution to the destruction of forests is the new form for monthly returns."

Let us hope the latest directive from the FinMin will encourage the babus to save paper.

Also read Time to do away with a couple of provisos and make the earth Greener

FinMin Dept of Expenditure Office Memorandum in No.25(6)/E.Coord-2014, Dated: August 22, 2014

CBDT needs a Director (Budget)

POST of Director (Budget) in CBDT is likely to fall vacant soon. This post is to be filled up from the IRS-IT Cadre.

CBDT has invited applications of willing officers, belonging to 1999-2004 batches of the IRS Officers, having aptitude for statistical inclination.

Is Budget a statisticians' paradise?

CBDT FTS No. 152469/2014,Dated: August 22, 2014

Jurisprudentiol - Wednesday's cases

Central Excise

Refund - Payment deduced by client for failing to supply specified quantity of goods during a specified period - whatever amount the appellant had received less from the buyer they are entitled to take refund of the duty component involved in the deducted amount - Appeal allowed: CESTAT

THE appellant manufactured and cleared transformers to M/s. U.P. Power Corporation Ltd. on payment of duty. In terms of the agreement the appellant was required to supply a particular quantity during a particular period at a particular price. But there was a clause in the agreement that if the appellant failed to supply the particular quantity during a particular period, the buyer shall have a right to deduct or required to pay lesser amount as per the agreed price. As the appellant failed to supply the specified quantity during a specified period, therefore, the payments were deducted by M/s. U.P. Power Corporation.

Consequently, since the appellant had not received full payment against the invoice raised for the clearance of the transformers, they filed a refund claim of the duty component involved in the less amount received from M/s. U.P. Power Corporation.

The lower authorities rejected the claim on the premise that since the appellant had paid duty on the invoice price the same is to be taken as agreed price and no deduction shall be allowed thereafter.

Income Tax

Whether provisions of Sec 41(1) come into play only when there is cessation of a liability - YES: ITAT

ASSESSEE derives income from construction of civil work of commercial and residential buildings. AO found that there are sundry creditors amounting to Rs.25.92 crores as on 31st March, 2009. It observed that in respect of four creditors, no transaction took place since 1.4.2008 to 31.03.2011. In respect of 19 creditors, notice was issued u/s 133(6) which return back as unserved. Thus, AO presumed that the liability in respect of four persons and 19 persons to whom notice u/s 133(6) sent which return back, ceased to exist and applied the provisions of section 41(1). In four cases, where reply was received there was difference in confirmation and thus, the addition was made for the difference. 

The issue before the Bench is - Whether provisions of Sec 41(1) come into play only when there is cessation of a liability. And the answer is YES.

Service Tax

Support services provided by appellant to run business of their clients by way of assistance in marketing, in obtaining loans from financial institutions, liaisoning with government agencies for getting various permissions, training of their personnel. do not fall within category of 'Consultancy Service' let alone 'Management Consultancy Service' - Appeal allowed: CESTAT

FROM a perusal of the agreements entered into with various clients it is seen that the appellant is rendering administrative support services. They do not give any advice or consultancy as to how to run an organization. The services rendered by them mainly relates to support services to run the business of their clients by way of assistance in marketing assistance, in obtaining loans from financial institutions, liaisoning with the government agencies for getting various permissions, training of their personnel and so on. These services which are support services for the business do not fall within the category of “Consultancy Service” let alone “Management Consultancy Service”.

See our Columns Tomorrow for the judgements.

Until Tomorrow with more DDT

Have a nice day.

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