PLEASE refer to our story India may be one but service tax has two Indias : one for export of services another for import of services!

We had reported,

The definition of India appearing in Import of Services has been amended vide Notification No 22/09 dt . 7/07/2009 on similar lines of Notification No. 21/2009 i.e as constituting “installations, structures and vessels in the continental shelf of India and the exclusive economic zone of India”. However the definition of ‘India' appearing in Export of Services rules (Notification No. 9/2005-ST) is left untouched. Thus ‘India” has one meaning for import of services and another meaning for export of services.

We are happy to report that the lapse has now been rectified. The omission is made good in the Export of Services Rules, 2005 to include the installations, structures and vessels in the continental shelf of India and the exclusive economic zone of India in the definition of India.

Service Tax Notification No. 25/2009-S.T., Dated: August 19, 2009

Removal of liquid gases – No pre-authentication

Liquid gases are of exceptional nature because the quantity of removal can be ascertained only after goods are actually delivered from the specialised cryogenic tankers into the special tanks of the buyers. As a result, the Central Excise duty cannot be determined at the time of clearance and the CENVATABLE invoice can also not be prepared at that point of time. Considering this special nature of removal, Board had prescribed a Special Procedure vide Circular No. 569/6/2001- CX dated 09.02.2001.

The Procedure requires pre-authentication of the pass-out documents by the departmental officers.

Departmental pre-authentication is an archaic and anarchic procedure. So the Board has relaxed and instructs that:

“an assessee desirous of exemption from the pre-authentication by the Central Excise Officer may submit a written request to the jurisdictional AC/DC of the Division, who may grant the exemption for a period of one year at a time after satisfying that the internal control system followed by the assessee is reasonable and adequate to ensure determination of correct quantity of liquid gases sold to customer, subject to the condition that the permission is liable to be withdrawn in case of misuse of the facility by the assessee.”

Why again this permission from the Assistant Commissioner? It is very difficult to satisfy some Assistant Commissioners, especially the ones who do not recognise the Board or the Tribunal!

CBEC Circular No. 894 /14 /2009- CX ., Dated: August 20, 2009

Advance Ruling for Some Indians too

Way back in DDT 143 24 06 2005 - Andolan for Swadeshi Advance Ruling, we suggested that Advance Ruling facility should be extended to Resident Indians also.

Facility of advance ruling for a foreigner only, by definition implies lack of clarity in our laws and an offer to clarify them in advance to a foreigner so that he is not burdened with a demand later. Denial of the same facility to an Indian investor clearly implies that though the laws are not clear, we don't believe our taxpaying citizens deserve any clarification and demands can be struck on them at sweet will. This is demeaning, discriminating, insulting and tragic. Even the British government would have been a little embarrassed to make such laws for the Indians.

TIOL brought this to the notice of the Parliamentary Standing Committee on Finance and the Hon'ble Committee accepted our suggestion and reported to Parliament – “in case it is decided to continue with the system of Advance Rulings, there should be a provision enabling any resident assessee to seek a ruling on matters of interpretation involving substantial question of law.” -Please see DDT 978 - 24.10.2008.

Now the Government has extended the facility to some Resident Indians also.

Customs: This facility is extended to Project Imports and PSUs . - Notification No. 124 /2009- Cus (N.T), Dated: August 20, 2009

Central Excise: This facility is extended to PSUs - Notification No. 21/2009- CX .,(N.T. ), Dated: August 20, 2009

Service Tax: This facility is extended to PSUs - Notification No. 27/2009-ST., Dated: August 20, 2009

But this extension of facility to only PSUs in the realm of excise and service tax is baffling. Why should only the PSUs be the chosen ones? Does it mean that the rest of Indians/Indian entities are children of lesser God? We will be shortly entering into the third decade post liberalization but the bureaucratic thinking is still mired in the sixties, the heydays of PSUs .

Use of duty free raw material for capital goods manufactured within EOU for captive use – CBEC Clarifies

An Export Oriented Unit has represented regarding difficulties faced in grant of exemption from Customs & Central Excise duty on raw materials common for manufacture of both finished goods and capital goods (e.g. jigs, moulds, dies etc) within the EOU for captive use.

CBEC Clarifies:

Raw materials for making capital goods for use within the unit is allowed vide Sl. No. 16 of Annexure-I of notification No. 52/2003- Cus dated 31.03.2003. Capital goods manufactured out of duty free inputs for use within the EOU are required to be accounted for and bonded as per the usual bonding procedure. While following the into-bond procedure, the value of such capital goods would be assessed by following the computed value method in terms of the Customs valuation Rules, which would inter alia account for the raw material captively consumed in manufacture of capital goods. Such goods would be liable to duty as applicable in case of clearance outside the unit or debonding or exit from EOU scheme. Exemption from payment of duty of excise leviable under section 3 of the Central Excise Act, 1944 vide notification No. 24/2003-CE dated 31.03.2003 shall not be applicable in such cases.

The Board has prescribed that the value of the capital goods should be assessed by computed value method under Customs Valuation rules. What will be the value of the capital goods removed after, say 10 years of their use? Duty has to be paid on the full value assessed without any depreciation? When an issue is clarified, why don't they foresee such simple issues?

CBEC Circular No. 22/2009- Cus ., Dated: August 19, 2009

Service Tax – New Provisions in Finance Act to be effective from 1st September.

Now the official secret is officially out. Madam President has signed the Finance Bill and the Finance (No.2) Act, 2009 (33 of 2009) is legally LAW.

The Government has notified that the provisions of the Finance Act will be effective from 1st September 2009. Plastic Surgery, Water Transport, Rail Transport and Legal Consultancy will be under Service Tax net from 1st September.

DDT asked a senior Railway officer whether they were ready to collect Service Tax on goods transport. He told us that the Finance Ministry has no right to levy Service Tax on Rail freight and he had no instructions to collect the tax. He said his Board does not recognise this tax. We tried to explain to him that this was an Act passed by Parliament, but he was not impressed. He was sure that it requires approval by his Board and as of now his Board was not too keen to approve the Finance Act. He was aghast that somebody is trying to tax the Railways! When told that Railways are already paying Service Tax on catering, he said it was paid by IRCTC and not by Indian Railways. We really don't know whether Mamata Didi has the same views.

Board has to issue abatement notifications.

Notification No. 26/2009-S.T., Dated: August 19, 2009

Jurisprudentiol – Monday's cases

Income Tax

Computation of deduction u/ s80 HHC - entire amount received on sale DEPB not to be taken – only profit on sale of DEPB to be considered – The subsequent sale of DEPB is a step divorced from export and such profits are not export profits -  ITAT Sp. Bench

It is noticed that export incentive is provided by way of face value of DEPB . It is this value, which has relation with export business. The subsequent sale of DEPB is a step divorced from export. The relation between act of exporting goods and DEPB exists only upto the stage of its acquisition and not thereafter. Once the DEPB is acquired pursuant to exports, the subsequent events of its utilization for self consumption or making imports for resale or sale of DEPB as such, are independent transactions unrelated to export.

Service Tax

No provision under CESTAT Rules directing Principal Officer filing appeals to attach requisite authorization to file appeals before CESTAT – Preliminary objection of Revenue to dismiss appeal for lack of proof of authorization in favour of person filing appeal, liable for rejection: CESTAT

THE Revenue raised a preliminary objection that the person who filed the appeals on behalf of the assessee as its principal officer has not filed the requisite authorization from company that he is the authorized person to files such an appeal before CESTAT. The assessee, on other hand contended that such a provision does not exist in CESTAT (Procedure) Rules, 1982 and that the appeal filed before the CESTAT was duly processed by the Registry and placed before the Bench for consideration.

Central Excise

Refund of unutilized amount in PLA - money is that of assessee and can be claimed by him without attracting provisions of refund claim: CESTAT

The money lying in PLA is actually the money belonging to the assessee. The fact that the same was re-credited in PLA will not make a difference, inasmuch as the same was originally paid by the assessee and utilized at the time of first clearance of the goods. The same has been again credited in terms of the Notification. The fact that Notification allows re-credit of duty paid is not to be interpreted in a manner that the re-credit amount would not belong to the assessee. Undisputedly, the re-credited amount is owned by the assessee and the Provisions of Para 2A of Notification are only to the effect that the said re-credited amount may be utilized for further payment of duty in the subsequent months. Where the appellant is not in a position to utilize the credit, the balance lying in PLA can be refunded to him in cash, inasmuch as the Notification does not bar such refund.

See our columns Monday for the judgements

Until Monday with more DDT

Have a nice Weekend.

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