DGEP had through a letter dated 18.5.2010 notified the decision of the Board on the issue of shifting of administrative control over EOUs/EHTPs/STPs to the Central Excise formations across the country and circulated this letter to all the Chief Commissioners/Director Generals working under CBEC for appropriate action before July 31, 2010.

In   TIOL-DDT 1410   dated 27.07.2010, we brought forth this aspect to light by reporting the Trade Notices (and the corrigendum) issued by Bangalore I Commissionerate, since the said DGEP letter was not in the public domain.

Now, the Board desires that this DGEP letter may be read as   Circular No. 932/22/2010-CX dated 04/8/2010   so as to put this decision of the Board in the public domain.

For the last fifteen years, Board had been periodically giving clarifications about the jurisdictional control over EOUs – let us hope at least now there is some finality.

CIRCULAR NO. 932/22/2010-CX., Dated: August 4, 2010

Draft Point of Taxation (for Services Provided or Received in India) Rules Notified for Public Comments

THE Government of India proposes to issue Point of Taxation (for Services Provided or Received in India) Rules, 2010 in exercise of the powers conferred under Sec. 94 (2) (hhh) of the Finance Act, 1994.

CBEC states that the purpose of these rules is to introduce clarity and certainty in the matter of levy and collection of Service Tax particularly in situations of change of rate of service tax or imposition of service tax on new services. At present there is lack of clarity as to the date from which the changed rate or a new levy of service tax become payable and tax payers as well as tax officials face uncertainty in this regard as the provisions are not explicit. Similar uncertainty prevails in regard to cases of continuous supply of services. So far these issues have been addressed by the Board through clarificatory circulars that accompany such changes. Now the Board feels that there is a need to put the regulatory frame work on a transparent, clear and durable basis and hence these rules.

The other major change proposed to be brought about through these rules is to link the payment of tax to provision of service, raising   of the invoice or payment for service provided or to be provided, whichever is the earliest. Currently the payment of service tax is linked to receipt of payment for the service, which is at odds with regime in force in Central Excise and VAT laws implemented by the states. In both Central Excise and VAT, tax payment is required on accrual basis – upon manufacture and clearance of goods in the former and issue of invoice in the latter. In neither case is the tax payment linked actual receipt of payment for the goods. The GST regime is likely to follow this practice and CBEC has felt it necessary to align the service tax regime with it so that transition to GST will be smooth. The change in the point of payment of tax will also simplify accounting for the taxpayers. The proposed changes are broadly on lines of best international practices.

Consistent with the CBEC's practice of wide consultation with all stakeholders, the draft of these rules is being published on its web site for public scrutiny, comments and suggestions. The draft is also accompanied by explanatory notes for each of the clauses. The Board welcomes responses from all who wish to comment on the proposals and will give careful consideration to all suggestions and comments while finalizing the rule (whether it is a promise on paper or not will be known when the final Rules are notified).  

Please send your responses at   roopamkapoor@gmail.com   latest by September 1, 2010. Why are the government officers using private email ids and not the government ones?

Click here for Draft Rules and Explanatory Clauses

GST - No Super FM - Without Prince of Denmark, I cannot stage Hamlet - Pranab

THE Finance Minister Pranab babu, yesterday told Parliament that he had no intention of becoming a Super FM, but he did not want to be crowded.

Yesterday, he told the Rajya Sabha,

The BJP, in its Manifesto, had stated two things in this regard. It said, "If we come back to power, then, we will abolish Central Sales Tax, and we will introduce GST at the rate of 12-14 per cent. I entirely agree; I am ready to do that, provided I get support from all cross- sections of the House. In the other House, my colleague, the former Finance Minister, Mr. Sinha, was saying that he had set up the institution of Empowered Committee of State Finance Ministers. I am maintaining it. Shri Chidambaram retained it, and I am retaining it. I am utilizing their services. We have covered a large area, and if we can introduce the GST from 1st April, 2011, then, that will be a major tax reform after independence.

I would request the leadership of various political spectrums. Please talk to your State Finance Ministers and State Chief Ministers, wherever you are empowered, because the time is running out. If I want to introduce it from 1st April, 2011, I must have the Constitution (Amendment) Bill ready and introduce it in this Session of Parliament. If I can introduce it in this Session of Parliament, then and then only, after sending it to the Standing Committee, and after the Standing Committee making its recommendations, we can get it passed in the Winter Session. And, after we get it passed in the Winter Session, 15 out of 28 States will have to ratify that Constitution Amendment. Then, it can be effectively introduced from 1st April, 2011.

On rest of the matters, now, somebody was saying, "You have to take the States on board." Of course, without taking the States on board, I cannot do it. I have no intention of being the super Finance Minister. I want to be one of the Finance Ministers. That is why I am contemplating, in the constitutional machinery, a Council of Finance Ministers. I am going to circulate the Amendment, which I am going to propose, which we have given to State Finance Ministers; I am waiting for the recommendations of the Empowered Committee, which has met yesterday. Then, I will circulate it to the political parties to formulate their views before it is introduced in the House.

But if we can do that, that will be a major task. There will be no super Finance Minister. Collective decisions will be taken but, surely, you will appreciate, in a Council, where the Finance Minister of the federal Government would be the Chairman and where he would be assisted by only one MoS and the Council would consist of 28 State Finance Ministers, there should be some mechanism through which the Central Finance Minister is not completely crowded out. Because it is a matter of money and finance, I shall have to come to you to seek your approval to impose the duties and taxes. Therefore, if I do not have a final say in that matter, you will not allow me to improve any of the taxes and proposals. Similarly, I understand, the States should have their right to impose taxes and get the approval of their State Assemblies. That compromise we would be able to make. It would not be difficult with the collective thinking, collective decision, of all of us. But we shall have to expedite this process.

Speaking in the Lok sabha, the Finance Minister said,

Without taking the States on board, how can I have the GST? Without Prince of Denmark, I cannot stage Hamlet. They are the Prince of Denmark. They are the main actors. What I appeal to you that the Central leadership should have discussions with them and if we can find a viewpoint of convergence. I have no intention of becoming the Super Finance Minister to interfere with the State GST. They will have their rights as I shall have my right because I am accountable to you. No tax can be levied without your approval; no expenditure can be made without your approval. Similarly, they have accountability to their States. That basic structure cannot be altered. So, what we can do for the practical purpose? I quoted your manifesto (referring to BJP) not for scoring a brownie point but only to say that I entirely agree with it that it should be desirable if it is around 12 to 14 per cent. It would be desirable if I can completely abolish the Central Sales Tax. But I cannot do it alone. That can be done collectively by all the political parties who are running the State Governments who have representation in both the Houses of Parliament. The short point which I was trying to drive at, if we can do right now because in the remaining three-four weeks, if I can place the Constitution (Amendment) Bill for the consideration of this House, then, it can be sent to the Standing Committee; after scrutiny by the Standing Committee, in the Winter Session we can discuss. And then, it may be possible to have it.

About the rate of taxes, in respect of the convergence of the other areas, that with the Empowered Committee of the State Finance Ministers, I am engaged with them. That is a good institution you have established. I congratulate you and I appreciate it. I am using it. It is not that I have abandoned it. I am waiting for their Report and their comments on the Draft Constitution Amendment, which I have given to them. After that, I will circulate to the political parties for their comments because here I would require their support. But, I am waiting to have their views first.

Yesterday, the Empowered Committee met. Tomorrow, the Chairman of the Empowered Committee would brief me as to what transpired there. Thereafter, I will have meeting with them, sometime later. But before that, if you can exercise your influence as a national leader, it would be beneficial to us.

Looks more like a statesman than a seasoned politician!

DGFT Amends Appendix 11B for Value addition

DIRECTOR General of Foreign Trade hereby made the following amendment in the HBP (Vol.1), 2009-14 with immediate effect.

In Appendix 11B in the HBP v.1, S. No. 2 shall be added as follows:

DGFT PUBLIC NOTICE NO. 88/2009-14, Dated: August 4, 2010

CBI case against Income Tax Commissioner - Petition for transfer of case from Mumbai to Jaipur - Not Accepted – Supreme Court

THE Supreme Court, on 3rd  August rejected a petition to transfer a CBI case relating to 'assets disproportionate to known income' case against an Income Tax Commissioner. The Supreme Court observed, “A perusal of the charge sheet containing all these details clearly shows that witnesses to be examined are not only from Jaipur, Rajasthan, but also from various other places including Mumbai. Though the petitioners may have a little inconvenience, the mere inconvenience may not be sufficient ground for the exercise of power of transfer but it must be shown that the trial in the chosen forum will result in failure of justice. We have already pointed out that except the plea of inconvenience on the ground that they have to come all the way from Rajasthan no other reason was pressed into service. Even, the request for transfer to Delhi cannot be accepted since it would not be beneficial either to the petitioners or to the prosecution. In fact, the main accused, respondent Nos. 3 & 4 have not filed any petition seeking transfer. In such circumstances, the plea of the petitioners for transfer of the case from the Court of Special Judge, CBI, Greater Mumbai to Special Judge, CBI, Jaipur on the ground of inconvenience cannot be accepted .”

Click here for the Order

Jurisprudentiol – Monday's cases

Central Excise

Members of CESTAT who had expressed dissenting opinions were not justified in referring entire appeal instead of making a statement referring point or points of difference – Gujarat HC

It is apparent that the two members who recorded dissenting opinions having referred the entire appeal instead of making a statement referring the point or points of difference between the members, in the circumstances, the reference itself is invalid and as such deserves to be set aside. Accordingly, in the light of decision of this Court in the case of Colourtex v. Union of India (supra), the question is answered in the negative. It is held that the Members of the Customs, Excise and Service Tax Appellate Tribunal who had expressed dissenting opinions were not justified in referring the entire appeal instead of making a statement referring the point or points of difference.

Income Tax

FBT - In absence of proximate purpose of expenses incurred by assessee company for agencies cannot be treated as fringe benefit under deeming provision of Sec 115WB(2): ITAT

THE issue is - When there is no proximate purpose of the expenses paid by the assessee company for its agencies other than the employees then whether the same can be considered as fringe benefit under the deeming provision of section 115WB(2) of Act. And the answer is NO.

Service Tax

Automobile dealer providing table space in his premises to lending institutions/banks to set up financial assistance counters cannot be called promoting and marketing business of bank/lending institution so as to be charged to Service Tax under BAS – Demand set aside with consequential relief: CESTAT

In this case, the appellant had provided table space to the financial institutions for which they were getting some money from them. Hence, the issue involved in this case is squarely covered by the decision of   Silicon Honda   wherein it was held that the activity for providing the table space to the financial institutions cannot be brought within the definition of “Business Auxiliary Service”. Hence, in this case also, the activity taken over by the appellant is not a “Business Auxiliary Service”.

See our columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend

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