DUE to the recent earthquake in Japan and concerns of possible radiation leakage from the affected nuclear plants, CBEC is of the view that there is a need to increase surveillance of food imports from Japan to ensure that they are safe for consumption.

It has been decided that Food Safety and Standards Authority of India (FSSAI) would test samples of food articles, particularly fresh produce such as sea food, fruits, vegetables and meat exported from Japan after March 11, 2011, for radioactive contamination. FSSAI has directed their Authorised Officers to have the food articles tested for radioactive contamination from BRIT (Board of Radiation and Isotope Technology), Navi Mumbai before issuing ‘No Objection Certificate' to Customs.

In view of this, CBEC has directed all officers in charge of Ports, Airports, ICDs / CFSs, Land Customs Stations to ensure that clearance of such food items imported from Japan after 11.3.2011 is allowed only after complying with the above requirements and obtaining ‘No Objection Certificate' from FSSAI.

F.No.450 /22/2011-Cus.IV Dated March 17, 2011

Rule 6 Confusion - Will Option for Works Contract Composition Scheme be regarded as Exempted Service

IN the amended version of Rule 6 of the CENVAT Credit Rules, 2004, the word ‘value' for the purpose of sub-rules 3 and 3A was defined in Explanation I (b) under sub-rule 3D of Rule 6 as follows:

“(b) in the case of a taxable service, when the option available under sub-rules (7), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, or the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 has been availed, shall be the value on which the rate of service tax under section 66 of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed;”

A concerned netizen read this definition in the context of amended definition of ‘exempted services' in Rule 2(e) of CENVAT Credit Rules, 2004 and wondered if service providers engaged in providing ‘works contract service' and opting for composition scheme in terms of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, would be regarded as providers of ‘exempted service'.

In this regard, TRU in its D.O. Letter D.O.F.No.334/3/2011-TRUdated 28.03.2011 at paragraph 1.15 of Annexure C thereto clarified that the value in respect of services covered by a composition scheme will be tax amount divided by the rate of service tax applicable under section 66 read with any general exemption. As the prevalent rate is 10% the value shall be ten times the amount of service paid or payable.

So, the definition of ‘value' w.r.t to taxable service where composition scheme is availed is only for the limited purpose of its application in terms of sub-rule (3) and (3A) of Rule 6 of CENVAT Credit Rules, 2004. It does not in any way connote that 'work contract service' would also be regarded as 'exempted service' when composition scheme is availed because 'works contract composition scheme' itself provides for availment of CENVAT credit on capital goods and input services subject to restrictions imposed in sub-rule 2A of Rule 3 of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007.

Indian Customs Chief in TIOL's Workshop today in Mumbai

TIOL is organizing a one day workshop on the direct and indirect tax proposals in Budget 2011. Mr. S Dutt Mazumder, Chairman, CBEC has consented to grace the ocassion as the Chief Guest and Keynote Speaker. Mr. Roopam Kapoor, OSD, TRU, Mr. B. Ravichandran, Commissioner of Service Tax, Mumbai, Mr. Laurence E. ‘Larry' Lipsher, China based International Tax Expert and Ms. Bhavana Doshi, Vice President, Indian Merchant's Chamber, Mumbai are the other notable speakers.

The work shop is organized today at the Presidential Ballroom, Taj President, Mumbai from 9.45 A.M. to 5.00 P.M. We will provide you with updates on the proceedings through the day.

Jurisprudentiol – Monday's cases

Customs

Where determination of moisture content was imperative in context of ascertaining whether garlic imported by appellant was fresh or dried, it was necessary to get sample tested - Visual examination of garlic by Commissioner to hold that it is not dried is erroneous - Confiscation and penalty set aside: CESTAT

THE Commissioner, after referring to Policy Circular no. 32/RE-99)/2000 dated 17.09.1999 issued by the DGFT, which clarified that garlic containing water content more than 10% would not be treated as dried garlic, took the view that the goods in question had “sufficient water content” and hence could not be imported without licence. He referred to certain Explanatory Notes contained in Chapter 7 of the HSN (edible vegetables, certain roots and tubers) and claimed support there from to hold that the goods in question was not dried garlic.

Income Tax

Income tax - Whether sum received on transfer of IPRs constitutes receipt of capital nature and hence, taxable as capital gains and not business income – It is capital gains: ITAT

THE main issues before the Tribunal are - Whether the amount received by assessee on transfer of IPRs such as trade secrets and goodwill constitutes receipt of capital in nature and hence taxable as capital gains and Whether non-compete fee received by the assessee is capital receipt particularly when such fee debars assessee from continuing business. The verdict has gone against the Revenue.

Service Tax

Service Tax – Eligibility of CENVAT credit of service tax paid on sales promotion service availed for promotion of goods manufactured by appellant - Sales promotion specifically covered in definition of ‘input service' – Full waiver of pre-deposit of Rs. 61.44 crores ordered and stay granted – CESTAT

THE Appellants entered into a sole selling agreement with Larsen & Toubro Ltd (‘L&T') wherein L&T was appointed as the exclusive agent to market various products manufactured by them and paid commission for rendering such service to the appellant. The department issued a show cause notice on the ground that the sales promotion service received by the appellant did not constitute any input service and therefore they were not entitled to avail credit of service tax paid by L&T on the commission received by them from the appellants. An amount of Rs. 61.44 crores was confirmed as irregular availment of CENVAT credit.

See our columns Monday for the judgements

Until Monday with more DDT

Have a Nice Weekend.

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