TMI Tax Updates - e-Newsletter
August 3, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Bimal jain
Summary: The Hon'ble CESTAT, Delhi ruled that denial of refund claims for accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004, based on non-realization of export proceeds, is unsustainable as no such condition exists in the rules or related notifications. The tribunal also dismissed the argument that certain input services were ineligible for Cenvat credit, referencing a prior favorable decision for the appellant. Consequently, the tribunal allowed the refund claims. Amendments to Rule 5 and subsequent notifications have introduced new procedures and conditions for claiming refunds, impacting the treatment of deemed exports and other transactions.
By: Dr. Sanjiv Agarwal
Summary: The Central Board of Excise and Customs established monetary thresholds for departmental appeals, stating that appeals to the Tribunal should not be filed if the amount involved is 1 lakh or below, and for high courts, 2 lakh or below. Revised limits effective from September 1, 2011, set minimum amounts of 5 lakh for CESTAT, 10 lakh for high courts, and 25 lakh for the Supreme Court. Exceptions include cases challenging constitutional validity or where a notification is deemed illegal. The policy aims to reduce litigation, applying limits to all cases except those specified. Appeals below these limits are subject to dismissal.
News
Summary: The government has announced a four-year plan to capitalize public sector banks with Rs. 70,000 crore from budgetary allocations, aiming to boost investment and growth in India. An immediate provision of Rs. 12,000 crore for bank capitalization has been made in the supplementary demand for grants for 2015-16. The plan addresses legacy issues affecting banks, including low demand and project delays, impacting profitability due to provisioning for restructured projects and NPAs. The government aims to maintain a buffer above Basel III norms, with the total capital requirement estimated at Rs. 1,80,000 crore by FY 2019. The plan includes governance reforms, NPA management, and market fundraising.
Summary: The Ministry of Finance received requests from the Karnataka and Andhra Pradesh state governments to increase the import duty on raw silk from 10% to 30% or at least 15%. Previously, the Ministry of Textiles had proposed reducing the basic customs duty on raw silk from 15% to 10%, which was implemented on April 30, 2015. The Ministry of Textiles oversees silk-related matters, with the Central Silk Board monitoring market conditions and imports. Silk prices fluctuate based on demand, supply, and other market factors. This information was provided by the Minister of State in a written reply to the Lok Sabha.
Summary: The report details the export and import statistics of dry fruits, including cashews, over recent years, highlighting the top five countries involved. Vietnam, Pakistan, and Saudi Arabia are significant export destinations, while C^ote d'Ivoire, Tanzania, and Pakistan are major import sources. The Agricultural Processed and Export Development Authority (APEDA) supports exporters through financial assistance schemes. Additionally, the government has introduced the Merchandize Exports from India Scheme (MEIS) and other initiatives to boost agricultural exports. Import duties on various nuts are specified, with cashew nuts having a nil duty for in-shell imports but higher duties for processed forms.
Summary: India's manufacturing sector is set for a boost through the "Make in India" program, targeting 25 key sectors to enhance manufacturing capabilities. The initiative aims to simplify business processes and improve investor sentiment, supported by an Investor Facilitation Cell. Recent measures include easing industrial licensing requirements and promoting technological upgrades. Schemes like the Export Promotion Capital Goods Scheme and the Technology Upgradation Fund Scheme are designed to enhance export competitiveness and add value to manufacturing. Various government ministries are also implementing sector-specific schemes to support this growth.
Summary: The government is enhancing interland connectivity with sea ports and export logistics through improved road and rail networks. To boost competitiveness of exports, especially from landlocked states, the Director General of Foreign Trade (DGFT) supports exporters via its regional offices by developing international trade and implementing the Foreign Trade Policy. This includes issuing Import-Export Codes, licenses, and incentives. Additionally, the DGFT's Niryat Bandhu Scheme mentors new and prospective exporters through training and seminars. This information was disclosed by the Minister of State for Commerce and Industry in a written statement to the Lok Sabha.
Summary: The Comptroller and Auditor General of India's report on Special Economic Zones (SEZs) for 2012-13 noted that 47 files were initially missing during an audit. Of these, 42 were later found and provided, while five files related to Central Government SEZs, aged 30-50 years, remain unlocated due to expired retention periods. Land for SEZs is managed by State Governments, as it is a State subject under the Constitution of India. The Board of Approval considers SEZ proposals recommended by State Governments, which have the autonomy to create relevant laws. Violations are addressed under SEZ laws. This was disclosed by the Minister of State for Commerce in a Lok Sabha reply.
Notifications
Customs
1.
36/2015 - dated
31-7-2015
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ADD
Seeks to Rescind notification No.109/2011-Customs, dated the 15th December, 2011
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has issued Notification No. 36/2015-Customs (ADD) under the powers granted by the Customs Tariff Act, 1975. This notification rescinds the previous Notification No. 109/2011-Customs dated December 15, 2011, concerning anti-dumping duties. The revocation applies to all matters except those actions already completed or omitted before this rescission. The notification is intended to be published in the Gazette of India, marking the official annulment of the earlier anti-dumping duty regulations.
2.
35/2015 - dated
31-7-2015
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ADD
Seeks to finalize provisional assessments of all imports of ceramic glazed tiles falling under tariff item 6908 90 90 , by M/s Gaoyao Marshal Ceramics Co. Ltd., China PR (producer) through M/s Foshan Dihai Trading Development Co.Ltd., China PR (exporter) which have been subjected to provisional assessment pursuant to the Notification No.109/2011-Customs, dated the 15th December, 2011
Summary: The notification finalizes the provisional assessments of ceramic glazed tile imports from a Chinese producer and exporter under tariff item 6908 90 90. These imports were initially subjected to provisional assessment following Notification No. 109/2011-Customs. The designated authority concluded that no individual dumping margin is justified, recommending the imposition of anti-dumping duties as per the earlier Notification No. 127/2009-Customs. Consequently, the Central Government orders that these imports undergo final assessment with the payment of anti-dumping duties, as previously imposed, to protect the domestic industry from injury.
Highlights / Catch Notes
Income Tax
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Court Criticizes Revenue Department for Unfair Tax Assessment Practices; Emphasizes Fair Play in Tax Collection.
Case-Laws - HC : Reopening of the assessment - The assessee is not an enemy. The attitude of the revenue seems to be that the assessee has to be taxed and to achieve that object, fair play could be jettisoned. The revenue is certainly expected to ensure that every paisa due to the State is collected but the same has to be only in accordance with law and in compliance with rules of fair play. - HC
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Loan Waivers for Machinery or Fixed Assets Not Affected by Income Tax Act Sections 41(1) and 28(iv).
Case-Laws - HC : Principal amount of loans waived off by the financial institutions / banks - Loan amount had been taken for the purchase of machinery / fixed assets being on capital account and not on trading account would not be hit by Section 41(1) r.w. section 28(iv) of the Act - HC
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Court Rules Trustee's Land Use for Trust Doesn't Void Tax Exemption Under Sec 13(1)(c) Income Tax Act.
Case-Laws - HC : Exemption u/s 11 - construction activity on the land belong to the trustee and used by the trust - whether application of income for the benefit of trustee u/s 13 (1)(c) - Held No - Exemption allowed - HC
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Rebate u/s 88E allowed even when income is assessed u/s 115JB of the Income Tax Act.
Case-Laws - AT : MAT - rebate u/s. 88E of the Act will be allowed even though the income is to be assessed u/s. 115JB of the Act. - AT
Service Tax
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Service Tax Imposed on Park and Roadside Plantation Management; Tree Supply Costs May Be Reduced Upon Verification.
Case-Laws - AT : Management and maintenance of parks and road side plantation and maintenance - levy of service tax confirmed - However, amount towards supply of different trees, for which specific rates have been mentioned, allowed to be reduced subject to verification - AT
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Appellant's Lack of Service Tax Charge Doesn't Mean Services Were Exempt; Revenue Could Pursue Non-Payment.
Case-Laws - AT : Reversal of cenvat credit - the appellant did not charge the service tax, does not mean that appellant has provided exempted services - At the most the case could have been booked against the appellant for non payment of service tax which Revenue failed to do so - AT
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Penalty Imposed for Failing to Deposit Collected Service Tax u/s 78; Single Penalty Deemed Sufficient Deterrent.
Case-Laws - AT : Appellant has collected the Service Tax amount from the customers and not deposited in Central Government account, therefore, penalty under Section 78 is warranted - Penalty only under one Section is sufficient and adequate deterrent - AT
Central Excise
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Rule 6 Cenvat Credit: Ensures Compliance by Restricting Credit on Inputs for Exempt Goods or Services. No Unjust Claims.
Case-Laws - AT : Reversal of Cenvat Credit - Rule 6 is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. - AT
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Section 11AC Penalty Upheld for Wilful Misstatement and Fact Suppression Despite Pre-SCN Duty Payment.
Case-Laws - AT : Penalty u/s 11AC - Duty was paid before issuance of SCN - This only points to wilful misstatement and suppression of facts on the part of the appellant - Penalty confirmed - AT
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Appellant Accused of Fraudulently Claiming CENVAT Credit with Potentially Fake Cenvatable Invoices.
Case-Laws - AT : CENVAT Credit - Duty paying documents - whether the Cenvatable invoices issued by M/s. SSMIPL o the appellant are genuine or fake/fraudulent invoices - All the evidences leads to conclusion that the appellant has fraudulently taken the Cenvat credit on the invoices issued by M/s. SSMIPL - AT
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Cenvat Credit Denied for Distributors' Activities Due to Lack of Sales Promotion Component.
Case-Laws - AT : Input services - activities undertaken by the distributors/ consignment stockists of the appellant are purely distribution/ sales and has no element of sales promotion - Cenvat Credit not allowed - AT
VAT
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Appellant's sale of packing cartons not an inter-state sale u/s 5(3) of Central Sales Tax Act.
Case-Laws - HC : Inter-state sale or not - What is described as sale by the appellant is only the packing cartons alone which were never exported as such and the goods exported are different. That will take out the case of the appellant from the purview of Section 5(3) of the CST Act - HC
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