TIOL-DDT 541
29.01.2007
Monday

"When the inputs on which credit has been availed are used for the manufacture of final products and if such final products are destroyed due to fire and such loss of finished goods has been adequately compensated by the Insurance (minus excise duty), is the attributable modvat credit (on such inputs) be reversed, when remission of duty is granted on the finished goods destroyed in fire/accident."

This was the question before the Larger Bench of the CESTAT.

Board had in Circular No. 800/2004 clarified,

It is clarified that the credit of the excise duty paid on inputs used in the manufacture of the finished goods on which the duty has been remitted due to damage or destruction etc. is not permissible and the dues with interest should be recovered.

We had carried an article analyzing the issue in CBEC: THE PHOENIX SANCTUARY!

Now the Larger Bench has decided that the credit need not be reversed after all. Please see the Grasim case we are carrying today. 2007-TIOL-135-CESTAT-DEL-LB

Cancellation of air tickets – refund of Service Tax and supply of stationery in Central Excise offices – DGST’s initiative

There was a time when a letter from the DG, Service Tax used to create terror in the country, but things have changed and now the DGST seems to be rational and judicious.

Have you observed that when you cancel your air tickets, you get a refund of the fare but not the Service Tax. The DG, Service Tax in a circular to the Chief Commissioners remarked,

It is reported that in respect of the taxable service provided by an aircraft operator, i.e., air transport of any passenger embarking in India for international journey, in any class other than economy classification, the Airlines collect Service Tax, as applicable, at the time of booking of tickets, but do not refund it when tickets are cancelled. In such cases, the passenger ends up paying up the service tax without receiving any service. In this regard, please advise airlines that upon cancellation of tickets, there is an obligation on the part of the airline company not to collect service tax, and, therefore, the amount of service tax already collected must also be refunded to the passenger in such cases.

The DGST has raised another important issue – the availability of TR-6 forms in government offices. The DG remarks,

Another issue raised is that it is difficult to obtain statutory Forms (TR-6) for paying service tax. In this regard, the Hon’ble Finance Minister has observed that it is not enough that the statutory Forms are available on the official website. While this aspect should be publicized by the Service Tax Commissioners, it is also necessary to make material forms available to those who wish to use those forms for paying service tax or for filing in their returns.

The DG has requested the Chief Commissioners to

advise the Commissioners to ensure that sufficient quantity of TR-6, ST-3 forms and other statutory forms are made available to the assessees at the Commissionerate/Division/Range offices.

DGST’sF.No.V/DGST/30-Misc-58/2006/4383  dt.12-12-2006.

Excise duty on ships for breaking – do they manufacture ships just for breaking up?

Today we are carrying, in our guest column, a nostalgic story from the man who notified the Alang ship breaking yard. Do you know ship breaking is excisable? But what is excise duty on ships for breaking up? Nobody manufactures ships for breaking up and the duty on ships is nil as per the tariff. Is it that passenger and cargo ships are charged to nil duty while ships for breaking up are to attract 16% duty? Certainly old ships sold for breaking up cannot suffer excise duty. What then is the mystery?

The whole purpose seems to be to tax imported ships for breaking up. Ships are routinely imported for breaking up and in addition to the basic customs duty they are required to pay an additional customs duty equal to the excise duty, commonly known as CVD. For this purpose ships for breaking up had to figure in the excise tariff and so it did though there was no excise duty collected at all.

Inconsistent orders and disregard for Tribunal – hallmark of Income Tax department?

The Income Tax department was at the receiving end of the High Court’s anguish. The High Court noted that the principle of consistency must apply and on the same facts, unless there is some warrant for doing so, the Assessing Officer must follow a consistent pattern. For the first nine assessment years, the Assessing Officer assessed the income as salary income and then for the next 10 assessment years, the income was assessed as business income. The Tribunal, however, found this to be salary income. Thereafter, again for the next two assessment years, the income was assessed as salary income and then for the next two assessment years as business income and again for the next three assessment years as salary income.

See 2007-TIOL-53-HC-DEL-IT + 2007-TIOL-52-HC-DEL-IT which we are carrying today.

Until  tomorrow with more DDT

Have a nice day.

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