TIOL-DDT 1931
30.08.2012
Thursday

FIAT'S Uno which really didn't make the mark in the Indian Car market had the biggest accident in the Supreme Court yesterday. The Commissioner of Central Excise won a massive Valuation case against the loss making car - the liability of the car manufacturer may run into about 600 crores of rupees.

The Supreme Court held that under the old Section 4 or the new one, the normal price or transaction value is acceptable only when the price is the sole and only consideration for sale. In this case, the Fiat Uno cars were sold at much below their manufacturing cost to capture the Indian market. If they chose to sell their cars at a loss, it is their problem, but Revenue should get its legitimate share - not on the loss-making price.

The Revenue won hands down on every issue, including valuation in the Transaction Value era after the year 2000.

The Supreme Court emphatically held that merely because theassessee has not sold the cars to the related person and the element of flow back directly from the buyer to the seller is not the allegation in the show cause notices issued, the price at which the assessees had sold its goods to the whole sale trader cannot be accepted as 'normal price' for the sale of cars.

They sold their cars at a huge loss and now they are stuck with a huge excise bill! The Department's contention was that when they can incur a huge loss to penetrate the market, they can as well incur a further loss and pay more duty.

When this issue was reported in 2003, a reader wrote to a newspaper that the Income Tax Department should learn from Central Excise. If a person is earning 10,000 rupees, his earning capacity should be determined at 20,000 rupees and he should be taxed on the additional 10,000 rupees which he would have got had he utilised his full abilities!!

Please see Breaking News.

Customs - disposal of unclaimed/ uncleared cargo - Board Clarifies

CBEC feels that its earlier instructions in 2005 in respect of disposal of car and items of negative list has not been implemented in right perspective which has resulted in accumulation of unclaimed, uncleared and confiscated cargo and blockage of substantial Government revenue.

So, now Board has decided that the concerned Commissioner of Customs should ensure that early investigation, issue of Show Cause Notice and adjudication, if required, in respect of such goods (motor cars and goods of negative list) are taken up on priority so that the goods are not allowed to remain uncleared for longer period blocking substantial Government revenue. These goods may be disposed of by auction after adjudication subject to condition that they are not prohibited in nature. Board also desires noticeable improvement in disposal of such goods unclaimed / uncleared.

CBEC Instruction in F.No. 442/12/2004-Cus.IV (Pt.), Dated: August 28, 2012

FTP - Import of Night Vision Binoculars - Authorisation Required

AT present, the import policy for Binoculars (HS Code: 9005.10.00) is free. Night Vision Binoculars/ Passive Night Vision Devices (PNVs) are classified under the same HS Code: 9005.10.00.

Government has amended Schedule - I (Imports) of the ITC(HS) Classifications of Export and Import Items, 2009-14, Chapter-90 to make these items ‘restricted' for import.

Now, they will require an Import Authorisation.

DGFT Notification No. 15 (RE-2012)/2009-2014, Dated: August 29, 2012

FEMA - Non-resident guarantee for non-fund based facilities entered between two resident entities

BORROWING and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999. In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank had granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

On a review, it has been decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) ) entered into between two persons resident in India.

It has also been decided to introduce a reporting format to capture such guarantees issued and invoked.

RBI AP (DIR Series) Circular No. 20, Dated: August 29, 2012

Maharashtra VAT on Builders - Constitutional Validity - Supreme Court Interim Order

THE Hon. Bombay High court has delivered judgement in case of Maharashtra Chamber of Housing Industry (MCHI) vs. State of Maharashtra in respect of the writ petition no. 2022 of 2007. The constitutional validity of the amendment to section 2(24) of the Maharashtra Value Added Tax Act, 2002 Notification dated 9-7-2010 notifying a composition scheme for Builders, Developers was upheld. The Promoters and Builders Association has filed special leave petition No. 17738 and 17709 of 2012 before the Hon' Supreme Court of India. Hon' Apex Court admitted the petition but no stay is granted to the judgement of Hon Bombay High Court.

As a result, the developers are liable to pay tax under Maharashtra Value Added Tax Act, 2002 with effect from 20th June, 2006.

The Maharashtra State Government had issued a VAT Trade Circular No. 14T dated 6 August 2012, which inter alia stipulated that:

l) The developers who have still not obtained registration shall obtain registration on or before 16th August, 2012. In such cases penalty under sub-section (2A) of section 29 of MVAT Act will not be attracted.

m) Those developers who had obtained registration and paid taxes for period after 01-04-2010 should apply for administrative relief for previous period and file returns for previous periods on or before 31st August, 2012.

The Bombay High Court judgement is already under challenge before the Supreme Court.

The Supreme Court in an order on 28.08.2012 issued the following directions:-

1. The time for registration by the developersas per clause (l) of the Trade Circular dated August 6, 2012 shall stand extended up to October 15, 2012 and the time for filing returns by the developers as per clause (m) of the said circular shall stand extended up to October 31,2012.

2. In case the concerned developers pay tax under the Maharashtra Value Added Tax Act, 2002 (for short¶2002 Act¶) as amended vide Section 2(24) w.e.f. June 20 2006 on or before October 31, 2012, the coercive process for recovery of interest or penalty shall remain stayed. This shall however not preclude the assessing officer to complete the assessment.

3. The above payment of tax by the concerned developers shall be subject to the final decision in the matter before this Court.

4. In case the amendment in Section 2(24) of the 2002 Act is held to be unconstitutional and the tax so deposited/paid by the developers is ordered to be returned by the State Government to the developers, the same shall be returned along with interest at such rate that may be ordered by the court finally at the time of disposal of the matter.

Jurisprudentiol - Friday's cases

Customs

CHA Licence Examination - Those who passed Examination under 1984 Regulations need not again write examination under 2004 Regulations: HC

SUPREME Court, in Sunil Kohli and Ors. Vs. Union of India and Ors (2012-TIOL-45-SC-CUS) held, ¶The language of that section and other provisions of the Customs Act do not indicate that the Board is empowered to make Regulations with retrospective effect. Therefore, the 2004 Regulations would operate prospectively and would not in any manner effect the eligibility and entitlement of those who had qualified the examination held under the 1984 Regulations for rant of licences to act as Custom House Agents¶. In view of the submissions made by the learned counsels appearing for the parties concerned and in view of the decision of the Supreme Court cited supra, the writ petition is allowed.

Income Tax

Whether when society is once granted registration u/s 12A, same cannot be withdrawn with retrospective effect even if there is tangible evidence to establish that society has entered into commercial agreement with profit motive - YES: ITAT

ASSESSEE, Mumbai Cricket Association (MCA), is a Society registered under Societies Registration Act. It has been enjoying registration of section 12A since 1975. For the year under consideration, the DIT (Exemption) denied the registration of section 12A on the ground that assessee was no more charitable as it had entered into commercial activities, with some other concern namely (SI), such as running of Banquet Halls, recreation clubs Etc. Aggrieved with the order of the DIT, assessee filed appeal before the Tribunal and raised a plea that provision of section 12AA(3) was prospective and could not be applied for those years when the same was not in the statute book. The DR pointed out that though the assessee has delegated the commercial activities to some other entity however, the assessee was fully controlling the commercial activities as was evident from the clauses of the agreement. It was also pointed out that the MMRDA had allotted land only for carrying out charitable activities.

Service Tax

Since 'cargo handling services' were being provided by appellants as an extension to services of beneficiation of coal, there could be a doubt on part of appellants that ST is not payable - penalty waived in terms of s.80 of FA, 1994: CESTAT

THE appellant entered into an agreement with Gujarat State Electricity Corporation Ltd., Maharashtra Electricity Generating Company and Reliance Energy Ltd., Mumbai for executing the work of beneficiation/washing of raw coal at its coal washery. After washing of raw coal, the cleaned coal and rejects are returned to the said parties for their captive consumption. The department felt that this ¶washing¶ activity is a taxable service classifiable in the category of ¶Business Auxiliary Services¶.

Central Excise

Commissioner (A) passing an order in favour of assessee on three counts - Revenue while filing appeal before CESTAT challenging the order only on one count - deciding the only issue raised in grounds of appeal is merely academic - Appeal dismissed: CESTAT

FROM the grounds of appeal, the Revenue challenged the order only on one count i.e. the input-output norms are fixed and as per the norms waste and scrap @ 24% of the inputs in respect of the 100% EOU and is authorized to clear the goods to DTA. However, in this case the generation of the scrap is 24.46%. The Revenue has not challenged the impugned order in respect of the other two findings. Therefore, deciding the only issue raised in the ground of appeal is merely academic. No merit in the appeal. The appeal is therefore dismissed.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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