TIOL-DDT 786
21.01.2008
Monday

Notification Nos. 49/2003-C.E. and 50/2003-C.E., dated 10.06.2003, provide full exemption from excise duty to the units located in specified areas of Uttarakhand and Himachal Pradesh .

These exemptions are intended to encourage industrial development by creation of basic infrastructural facilities and to generate employment opportunities for the local people of these states. In order to ensure genuine industrial activities in these regions, it has been decided that benefits of duty exemption should not be admissible to goods in respect of which only peripheral activities like preservation during storage, cleaning operations, packing, re-packing, labeling or re-labeling, sorting, alteration of retail sale price etc. take place. This will ensure that the intended purpose of promoting substantial industrial/manufacturing activities through grant of fiscal incentives is fully met.

Even in respect of special category states in the North-east (States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh and Sikkim ), the benefit of excise duty exemption has been disallowed to units carrying out only such peripheral activities. For these states, this had been done in April 2007, but did they forget about Himachal at that time?

Accordingly Notification Nos. 49/2003-CE and 50/2003-CE have been amended vide notification No. 1/2008-CE dated the 18th January, 2008 so as to exclude certain peripheral activities from the operation of these notifications. The benefit of the notifications will not, therefore, be available to goods which have been subjected to only one or more of the following processes

1. packing or re-packing of such goods in a unit container or

2. labeling or re-labeling of containers,

3. declaration or alteration of retail sale price, etc.

Units carrying out only such processes would not be eligible for exemption benefit and would be required to pay duty as per normal procedure.

It has also been decided to prescribe a simple quarterly return for assesses availing exemptions under the said notifications in order to create a database about the actual impact of exemptions on the industrial activities in these regions.

Accordingly, rule 12 of Central Excise Rules, 2002 has been amended vide notification No.3/2008-CE[ N.T. ] dated the 18th January, 2008 to prescribe for a Quarterly Return.

This Form has been notified as Form – A, vide notification No. 4/2008-CE[ N.T. ] dated the 18th January, 2008.

This return is to be filed with the jurisdictional Central Excise Commissionerate by the 20th of the subsequent month of the quarter to which the return relates. For the quarter ending 31st day of December, 2007, the units have been allowed to file the return by the 20th February, 2008. The return can be filed electronically or by post.

These changes have already come into force on 18 th January 2008 and already clearances affected during the last three days are illegal. For love or money, the notifications are not available anywhere. When the Board has taken the trouble of troubling the tax payers with all kinds of notifications, clarifications, circulars – why can't they take the trouble of making them public? We in TIOL have offered several times to do this service for the Board. Just give us the notifications and we will publish them for you in a minute and for free!

Service Tax – freight charges paid by Postal department – clarification

The Postal Department asked the DGST for a clarification as follows:-

It is to intimate that this office has engaged several shipping companies for conveyance of outward surface India Postal Mails to the various ports of foreign countries.

Recently some shipping companies are charging service tax @ 12.24% in their freight bills for following services –

1. Delivery charges

2. Terminal handling charges

Kindly intimate whether Indian Postal outward surface mail bags are subject to levy of Service Tax or otherwise. Further, it is to add that these shipping companies are liable to pay Service Tax @ Rs. 12.24% of the amount payable to them as mail conveyance charges.

No, the Postal authorities were not confused about the rate of Service Tax – when they wrote this letter in January 2007, it was 12.24%.

The Directorate forwarded this letter to the Board in March 2007. The Board clarified the matter to the DGST in December 2007. And the DGST has sent the Board clarification to the field on 14 January 2008, with a direction to issue a trade notice.

And this is the clarification given by the Board.

As stated, Postal Department has engaged shipping companies for conveyance of outward surface Indian Postal Mails to various ports of foreign countries and handling of export cargo or passenger baggage etc. From the facts mentioned it appears that the service provided by shipping companies is in the nature of 'distribution, management and logistics' and delivery order charges and inland haulage charges collected by shipping companies are for such 'distribution, management and logistics' service. Such service is specifically covered under 'business support services' and is liable to service tax. However, in case there are facts which indicate that the appropriate classification of the service provided is 'cargo handling service' the same may be brought to the notice of this office.

F.No. 137/131/2007-CX.4 Dated : December 12, 2007

Review of Economy – 2007 -08

The Economic Advisory council to the Prime Minister has released the Review of Economy – 2007 -08.

The Highlights:

++ Economic Growth in 2007-08 likely to be 8.9%

++ Agriculture growth at 3.6%

++ Industry growth at 9.7%

++ Services growth at 10.3%

++ Rising domestic savings and investment – chief engines of growth

++ Capital inflow of 103 billion dollars almost double the projected 58 billion.

Jurispruden tiol  – Tomorrow's cases

Income Tax

Sales from one STP to another is not deemed export for Income Tax deductions : ITAT

Sale of software by one STP to another STP within the country would be treated as deemed export only for the purpose of duty draw back and exempt from terminal excise duty. sec. 10A, with relevant proviso, stood during the relevant time itself provides that when domestic sales of STP unit do not exceed 25%, such sale should be deemed to be the profits and gains derived from the export of such articles or things or computer software. Thus the provisions of sec. 10A as it stood specifically provide how much benefit to be given to the assessee if sales to another STP when not exceeded 25% of the total products.

Service Tax

Free After Sales Service – Service Tax not payable by dealers as it is 'Free' and the same has already been subjected to Sales Tax : CESTAT

ALL said and done, it was after all a bad idea to give the administrative controls of Service Tax to the Central Excise department, complained a netizen .  When enquired the reason for such a contemptuous comment, he said – whenever the Central Excise officers are compelled (legally) to let go of an issue under Central Excise, they scamper and try their luck to get it covered under Service Tax.

A dejected Board had vide Circular No. 681/72/2002-CX., dated 12-12-2002 communicated that PDI (Pre-Delivery Inspection) and free after sales service provided by the dealer of vehicle, during the warranty period will not be included in the assessable value of the motor vehicle.  However, at the same time it had the gumption to mention that these instructions will apply to past cases only as the provisions of the new section 4 introduced w.e.f. 1-7-2000 were not the subject matter of dispute before the Apex Court & that as regards the current status, the same have been amply clarified in Board's Circular 643/34/2002-CX dated 01.07.2002 viz. that they are includible. 

So, what's new?

Just that the Department now wants the Authorized dealer to pay Service Tax on this “ free after sales service” provided by them to the customers.

Customs

Commissioner of Central Excise has no jurisdiction to demand customs duty payable on goods imported under Not No 25/99-Cus : Tribunal

IN terms of Section 35E of the CE Act, the power to review the order passed by the Executive Commissioner of Central Excise is vested with the Central Board of Customs & Excise and not with the Commissioner of Customs. We are surprised about the conduct of the Commissioner of Customs who has transgressed the powers vested in the Central Board of Excise & Customs. The action of the Commissioner of Customs shows total non-application of mind and utter disregard of the law laid down by the Statute on the subject. It also shows that the Commissioner of customs does not appear to know even the rudimentary knowledge of Central Excise & Customs Law.

There were the remarks of the CESTAT in the decision reported in 2004-TIOL-109-CESTAT-MAD

But why the Tribunal thought so?

See our columns tomorrow for the judgements

DDT's cartoon from Dr. Gopalakrishnanan, IAS (rtd)

DDT is now addicted to Dr. Gopal 's cartoons and somehow I cannot start the week without a cartoon from Dr. Gopal . Start the week with a smile.

Until tomorrow with more DDT

Have a nice Day.

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