TMI Tax Updates - e-Newsletter
August 1, 2014
Case Laws in this Newsletter:
Articles
By: Pradeep Jain
Summary: The 2014 budget introduced significant amendments to the Cenvat Credit Rules, 2004, specifically Rule 4. The amendments impose a six-month time limit for availing Cenvat credit from the date of the duty-paying document, altering the previous practice where no upper limit was set. This change nullifies prior tribunal judgments allowing credit after several years. For input services, the rules now specify conditions under full and partial reverse charge mechanisms, with credit allowed post-payment of service tax. The amendments may complicate matters for sectors with recurring services or retention money practices, potentially leading to increased litigation.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses a legal case involving a service tax demand issued to a company by the tax authorities. The demand was for service tax on cold storage charges, which the authorities claimed were part of a clearing and forwarding services agreement. The Tribunal initially upheld the demand but later ruled it time-barred, as the authorities were aware of the non-payment in 2002, exceeding the statutory period for issuing a notice. The High Court supported this view, stating that once a demand is deemed time-barred, the Tribunal should not assess the merits of the case.
News
Summary: The Central Board of Excise and Customs (CBEC) has amended the tariff values for various commodities under the Customs Act, 1962. The revised values are applicable to crude palm oil, RBD palm oil, other palm oils, crude palmolein, RBD palmolein, other palmolein, crude soybean oil, brass scrap, poppy seeds, areca nuts, gold, and silver. The updated tariff values in US dollars per metric tonne or per specified unit are detailed in the notification, affecting the import duties on these goods. This change aims to adjust the valuation for customs purposes in line with current market conditions.
Summary: The government is set to launch a comprehensive Financial Inclusion program aimed at providing households with savings, credit, remittances, insurance, and pension services. Unlike previous efforts focused solely on account opening, this initiative targets individual households, aiming for every household to have a bank account within a year. The program emphasizes financial literacy and leverages technology, including mobile services, to overcome challenges like connectivity issues. It involves two phases, with the first ending in August 2015 and the second by August 2018. The government plans to use Business Correspondents and direct subsidy transfers to facilitate banking access, involving state and district administrations for oversight.
Summary: Shri S. S. Mundra has been appointed as the Deputy Governor of the Reserve Bank of India (RBI) for a three-year term starting July 31, 2014. Previously, he was the Chairman and Managing Director of Bank of Baroda. In his new role, he will oversee banking supervision, currency management, financial stability, rural credit, and the RBI's human resources and security. Mundra's 37-year banking career includes leadership roles in Bank of Baroda's European operations and Union Bank of India. He has also served on various corporate boards and committees, contributing to his expertise in corporate governance and financial inclusion.
Summary: The Central Government of India has identified illegal acquisitions of immovable property by foreign nationals, prompting concerns from various organizations. Under the Foreign Exchange Management Act (FEMA) regulations, only Indian citizens residing abroad, Persons of Indian Origin, and certain foreign companies can acquire property in India, excluding agricultural land. Foreign nationals residing in India for over 182 days with intentions to stay indefinitely may also qualify. Authorities are advised to ensure compliance with FEMA before registering property transactions, verifying documents and visa types. State authorities are urged to review past registrations for legal adherence, consulting the Department of Economic Affairs if needed.
Summary: The Index of Eight Core Industries, which constitutes 37.90% of the Index of Industrial Production, rose by 7.3% in June 2014 compared to June 2013, reaching 163.9. From April to June 2014-15, the cumulative growth was 4.6%. Coal production increased by 8.1%, while crude oil saw a marginal rise of 0.1%. Natural gas production declined by 1.7%, and petroleum refinery products increased by 1.2%. Fertilizer production dropped by 1.0%, whereas steel, cement, and electricity production increased by 4.2%, 13.6%, and 15.7%, respectively. The data is provisional and subject to revisions.
Summary: The Reserve Bank of India is set to announce the Third Bi-monthly Monetary Policy Review for the fiscal year 2014-15 on Tuesday, August 5, 2014, at 11:00 a.m.
Summary: The Reserve Bank of India set the reference rate for the US dollar at Rs. 60.2460 and the Euro at Rs. 80.6985 on July 31, 2014. The previous day's rates were Rs. 60.1485 for the US dollar and Rs. 80.6360 for the Euro. The exchange rates for the British Pound and Japanese Yen against the Rupee were 101.9242 and 58.61, respectively, on July 31, 2014, compared to 101.9216 and 58.90 on July 30, 2014. The SDR-Rupee rate will be determined based on these reference rates.
Notifications
Customs
1.
55/2014 - dated
31-7-2014
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Cus (NT)
Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001
Summary: The Government of India's Ministry of Finance, through the Central Board of Excise & Customs, has amended Notification No. 36/2001-Customs (N.T.) dated August 3, 2001. This amendment, effective from July 31, 2014, revises tariff values for various goods under the Customs Act, 1962. The updated tables specify new tariff values in US dollars for items such as crude palm oil, RBD palm oil, crude soyabean oil, brass scrap, poppy seeds, gold, silver, and areca nuts. This amendment is published in the Gazette of India and is part of ongoing adjustments to customs tariff values.
FEMA
2.
313/2014-RB - dated
2-7-2014
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FEMA
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2014
Summary: The Reserve Bank of India issued the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2014, effective from July 2, 2014. This amendment modifies the Foreign Exchange Management Regulations, 2000, particularly Schedule 5, by updating the language regarding the purchase and sale of securities on a repatriation basis. These changes ensure that transactions comply with terms specified by the Securities and Exchange Board of India (SEBI) and the Reserve Bank. The amendment clarifies that no adverse effects will result from its retrospective application.
Highlights / Catch Notes
Income Tax
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Assessing Officer Fails to Prove Foreign Exchange Hedging Loss as Speculative Due to Lack of Evidence.
Case-Laws - AT : Foreign exchange hedging loss - AO has failed to bring any material evidence on record to support its stand that the loss suffered by the Assessee was speculative loss - AT
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Assessing Officer's Income Division Overturned: Partner's Salary Claim u/s 40(b) Upheld as Business Income.
Case-Laws - AT : Claim of partner’s salary u/s 40(b) against income disclosed during survey – at the time of survey, assessee disclosed the entire income as business income, the AO was not justified in bifurcating the same into income from other sources and income from business or profession - AT
Customs
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Micropipettes Imported with Auto Analyser Qualify for Tax Exemption as Medical Equipment Accessories Under Notification.
Case-Laws - HC : Import of accessory of medical equipments - Micropipettes, as an accessory of the Auto Analyser - held as accessory and eligible for exemption notification - HC
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Immediate Refund Granted Post-Provisional Assessment Finalization; No Need for Refund Claim u/s 27, Customs Act 1962.
Case-Laws - AT : When an amount becomes refundable to an assessee upon finalization of provisional assessment by the appropriate authority, the same has to be refunded immediately and appellant was not required to file any refund claim under Section 27 of the Customs Act, 1962 - AT
Service Tax
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Goods Transport Agency Service: 75% abatement allowed; Board's Circular guidelines are non-mandatory, cannot deny substantive rights.
Case-Laws - AT : Goods Transport Agency Service - abatement of 75% of the gross amount - requirements prescribed by the Board’s Circular was not mandatory and it was working out modality for implementing provisions of law for denial of substantive rights, use of the same cannot be made - AT
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Goods Manufacturing and Transport as Business Support Services; Stay Granted Due to No Payment Received for Services.
Case-Laws - AT : Manufacture of goods on Job work basis - Post Job work activity being transportation of goods - Business Support Services - prima facie case is against the assessee, but since no payment received, stay granted - AT
Central Excise
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CT-3 Procedure: Duty-Free Raw Materials from EOUs Are Not Classified as Imported Goods in India.
Case-Laws - AT : 100% EOU - procuring duty free raw materials from other 100% EOUs by following CT-3 procedure - will not make the goods manufactured in India as imported goods. - AT
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CENVAT Credit Reversal: Furnace Oil for Electricity to 100% EOU Not Exempted Goods.
Case-Laws - AT : Reversal of cenvat credit - ‘furnace oil’ used to generate electricity - supplies made to a 100% EOU cannot be considered as exempted goods - AT
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Illicit Removal Charge Dismissed: Appellant's Payment Under Compounded Levy Scheme Negates Allegations.
Case-Laws - AT : The charge of illicit removal cannot be confirmed against the appellant on this factual matrix, which indicate that the appellant to his subsequent application made on 18.05.2001 has paid the duty under the compounded levy scheme - AT
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Orthopedic Heating Belts Correctly Classified Under Chapter Heading 9021 for Central Excise Compliance.
Case-Laws - AT : Classification of orthopaedic heating belts - classification as done by the assessee under Chapter Heading No.9021 is correct - AT
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CENVAT Credit Eligibility for SAD u/s 3(5) of Customs Tariff Act Confirmed; No Justification for Denial.
Case-Laws - AT : Eligibility of CENVAT Credit of SAD paid u/s 3(5) of CTA - No reason for denying the Cenvat credit of the amount of SAD/special CVD paid by the importer and mentioned in the respective dealer's invoices - AT
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