TIOL-DDT 790
25.01.2008
Friday

The Retail sale Price based assessment is extended to the following goods: The prices of all these items are now bound to go up. It is a practice in the market that these goods are sold below the printed MRP on them.

The notification was issued yesterday, but for some strange reason, it is applicable only from today.

NOTIFICATION NO. 5/ 2008- CX ., ( N.T. ), Dated: January 24, 2008

All these items included in the Third Schedule to the Central Excise Act

Do you know that the Central Excise Act has three schedules?   The First Schedule was the Central Excise Tariff and with the Tariff Act in 1986, this First Schedule was omitted. But the Second Schedule continued without a first one. The Second schedule actually deals with tobacco and should have been deleted long before the Tariff Act came into force. But it merrily continues in the statute. And in 2003, a new schedule christened as Third Schedule was inserted. When there is no first schedule, why can't they at least re-number these schedules? There is no first schedule, the second schedule is irrelevant and what is the sanctity of the Third schedule?

The Third Schedule gets its right to exist from section 2(f) (iii) of the Central Excise Act, which defines manufacture as, "manufacture" includes any process,—

(i) Xxxxx

(ii) Xxxxxx

(iii) which, in relation to any goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer

So, for the products listed in the Third Schedule, packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, would amount to manufacture.

The 3 rd Schedule itself is a big confusion and is best deleted from the statute. The 3 rd Schedule consists of about 100 and odd items which are also the same items as notified under Section 4A for MRP valuation.  Now for the items listed under Section 4A , MRP based assessment is required only if those goods are covered under the Standards of Weights and Measures Act or any other Act requiring mandatory printing of MRP on the package.  There is no such requirement for the goods mentioned under the Third Schedule .

To cite a specific example, Paint under Chapter 32 is covered under MRP ( Standards of Weights & Measures Act)  and is also covered under Notification issued under Section 4A as well as under the Third Schedule.  Now Paint in bulk packing for industrial use is not covered by SW&M Act and so is automatically out of Section 4A . But it does not go out of the Third Schedule as Schedule 3 does not mention about SM&W Act. 

The result is, if you re-pack or re-label a drum containing 500 Ltrs of paint, the activity amounts to manufacture simply because the item finds a place in 3 rd Schedule. This could not have been the intention of the Government.  The easiest thing the Government could have done was to mention in Section 2f (iii) that for the goods assessed to duty under Section 4A , packing, re-packing, alteration of retail price etc. would amount to manufacture.  Instead of doing this simple thing, the Government has inserted a new Schedule to the Central Excise Act and lands itself and trade in confusion. Every time a new product is brought under Section 4A , it should remember to amend the 3 rd Schedule, which the Government is sure to forget.  Why, but why this confusion?

But to be fair to the bright boys of TRU , this time around they did not forget to amend the Third Schedule – actually they amended it nearly a year ago. In the Budget 2007, to be precise!

The Finance Act, 2007 had amended the Third Schedule to include the items now brought under MRP valuation, but this was to be effective from a date to be notified by the Government. Now the Government has notified today that is 25 th day of January 2008 as the effective date.

Just imagine the tremendous amount of work our poor babus have to do to draft, administer and manage such complicated laws. The best professional organisations in the world would have failed miserably in keeping track of these provisions, but then they would not have such complicated procedures.

NOTIFICATION NO. 6/ 2008- CX ., ( N.T. ), Dated: January 24, 2008

Anti-Dumping Duty on PVC

The Government has imposed Anti dumping duty on the import of Homopolymer of vinyl chloride monomer (PVC) suspension grade originating in, or exported from, Taiwan , People's Republic of China , Indonesia , Japan , Korea RP, Malaysia , Thailand and USA

Notification No. 11/2008- Cus ., Dated: January 23, 2008

Jurispruden tiol  – Monday's cases

Income Tax

Depreciation and amortization on investments held in permanent category cannot be allowed to be deducted while computing taxable income : ITAT

Since RBI guidelines as held by Madras High Court in the case of TN Power Finance and Infrastructure Development Corporation Ltd. cannot override the mandatory provisions of Income Tax Act, 1961, the depreciation and amortization claimed by assessee on investments held in the permanent category cannot be allowed to be deducted while computing the taxable income. We may also like to state that income is to be computed as per the mandatory provisions of section 145 of the Act and not in accordance with guidelines issued by RBI .

Central Excise

Cenvatted Master cartons cleared from factory to depots for packing excisable goods cleared from factory in primary cartons eligible for Credit after 14.05.2003 when 'depot' was notified as place of removal : Tribunal

HARAKIRI at its best was exhibited by the Central Government when it substituted the earlier provisions of Section 4 of the Central Excise Act, 1944 by the Finance Act, 2000 [ w.e.f 01.07.2000]. The earlier concept of ‘normal price' was replaced by the new generation “Transaction Value” in an effort to garner more revenue and avoid the embarrassment suffered on account of the earlier provisions which had failed to weather the cyclonic valuation storms. Just prior to this substitution, the Finance Act, 1996 [ w.e.f 28.09.1996] saw the advent of “extended place of removal in the form of depots, consignment agents etc. ”.

The significance of this change was that sale price at any of these “places of removal” will be the normal price for levy of excise duty and there could be different assessable values for the same excisable goods depending upon the place of removal. It also meant that duty will be required to be paid at the time of clearance of goods from the factory for those goods which are sold by the manufacturer at depot, consignment agents or any other place etc. at a sale price of the place of removal i.e. depot, consignment agents etc. [Board Circular No. 251/85/96- CX , dated 14-10-1996].

All this good deed was turned upside down when the new Section 4 saw its birth. The reason being that the new definition of “place of removal” failed to incorporate in it a reference to depot, premises of a consignment agent or any other place or premises. Anyways, this inadvertent omission was set right by the Finance Act, 2003, by re-insertion in the definition of place of removal a clause (iii) w.e.f 14.05.2003.

Customs

CHA – resignation of a qualified employee would not automatically cancel Custom House Agent licence – in worst situation, it becomes inoperational until a qualified person is appointed : Bombay High Court

A Commissioner is determined to cancel the licence of a CHA that he is before the High Court against a Tribunal decision which set aside his decision.

The respondent was having a CHA License valid upto 31st December, 2006. It appears from the record that they have appointed one Shri Girish P. Manjeshwar , who was a Regulation 9 Pass holder (now Regulation 8 as per CHALR , 2004). The said employee tendered his resignation. The respondents by letter dated 10th August, 2004 accepted the resignation with effect from 14th August, 2004 and relieved him from the services of the Company as per the terms and conditions of the appointment letter. As the respondents did not have a Regulation 9 pass holder they surrendered his pass on 18th November, 2004 as though they had made attempts to get a qualified person they were not in a position to get one. The Commissioner of Customs (General) vide notice No.116 /06 dated 8th August, 2006 made the license of the respondents inoperative. The respondents vide their letter dated 17th August, 2006 wrote to the Commissioner of Customs (General) that they were shortly employing a qualified person and would continue to work as CHA and requested to condone the delay. They were informed by letter dated 30th August, 2006 that their request to continue the license as CHA cannot be considered in terms of the provisions of Regulation 15(2) of the CHALR , 2004. On 1st September, 2006 the Respondents intimated the Commissioner of Customs that they have appointed Shri S.Subhash , a Rule 9 qualified person under CHALR , 2004 and he would join in the first week of October, 2006. Various other representations were made.

See our columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend. .

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