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Bizsol UPDATE October - 2012

The world is turning left. In these columns a couple

of issues back it was predicted that the days of

romance with socialism shall become the order of the

day. So it is. From France to Indonesia, from India to

Venezuela the writing is on the wall. With people

running out of patience with capitalism it is not

surprising that it is happening now. Listen to the

electoral rhetoric coming out of the convention halls of

the US elections. Mitt Romney calls Barack Obama

an extreme liberal, a euphemism for a socialist. Welfare

state is the new buzzword replacing capitalism. Any

amount of lip service to capitalism with its semantic

variations can help revitalising a failed system

according to many. George Bush called the failed

system crony capitalism and called for compassionate

capitalism. Still the middle class in America is an angry

and unhappy lot. The communists of our land can take

heart from the fact that their day in the sun is once

again round the corner everywhere except in West

Bengal. In Bengal they have to contend with a firebrand

lady called Mamta Bannerjee who is more a communist

than the communists themselves.

Mitt Romney, whether he becomes the next President

of America or not, has at least made sure of making

his company Bain Capital famous. It is a multibillion

dollar company. But what many may not know is that

one of the Managing Directors of his company Mr.

Stephen Pagliuca is a Democrat with a track record of

having fought elections against Republican candidates!

That speaks something about professionalism or basic

value systems of individuals who can belong to different

and opposing political beliefs but still work together. It

must be a difficult time for Pagliuca working for his

boss Mitt Romney in Bain Capital but supporting

Barack Obama for President. Some democracy this.

In these days of hyper inflation nothing comes cheap -

democracy included. Sometimes you wonder how our

EDITORIAL

FROM DESK OF THE CHAIRMAN

democracy really functions; it does, nevertheless. They

say vision without action is delusion. So is criticism

without accountability which is akin to rumour

mongering. When you do not provide an alternate

solution to the one you are criticising, you are yourself

a part of the problem. Criticism of FDI in retail is a

case in point. I suspect, nay convinced, that those who

criticise the move hardly comprehend what it really is

and what it means to us. Politicians of all hues have

perfected the art of 'shoot-and-scoot' with impunity.

They know that they only need to criticise a move and

are not required either to buttress the criticism nor are

they called upon to give an alternative. The sad part of

the story is that the ruling dispensation is also not

equipped to sell economic reforms and the need for

such measures. I may be stating the obvious when I

say that even in the government or the ruling party a

vast majority of people do not even understand the

rudiments of these economic measures so as to defend

such initiatives. The educated elite in the government

and senior bureaucrats may be the only ones with the

wisdom to comprehend these measures for what they

are. That may not be surprising, however. What is

wrong is their obvious inability to articulate the vision

behind such policies and defend these initiatives

vigorously with conviction. As a result what we see

today is an aggressive Opposition tearing into the

government for policies on which the latter appears to

be hopelessly on the defensive. In a way history is

repeating itself. When Value Added Tax was

introduced, the BJP ruled states objected to it tooth

and nail only to quietly implement it when they saw

the advantage on a later date. When Indira Gandhi

decided on expanding the television network to the

whole country there were howls of protests from all

political parties. When Rajiv Gandhi even before

becoming the Prime Minister of the country wanted

television broadcast in colour he was hauled over the

2


coals. Can you today imagine a world without television

and that too in colour? Look at where the critics are.

They are in the studios making use of these facilities

to criticise and hold court (the kangaroo variety) on

television criticising without accountability. That is

Indian politics for you. Democracy may be all about

criticism and cacophony. Large population of the

country is illiterate lending itself to exploitation by even

those who are equally illiterate on matters of state to

score political brownie points. In the good old days

(there is no pun) those countries who did not want to

develop themselves were compared to Burma (now

Myanmar) as that country had consciously decided to

grow into an inward looking society with minimal GDP

growth for decades. Today even that country has

changed. Myanmar has opened up and other countries

are vying with each other to Yangon with investments

of magnitudes not seen recent times. That may give

an opportunity to India to benchmark itself to the

position vacated by Myanmar. I am not here holding a

brief for the government. But the irresponsible way in

which you criticise for the sake of criticism should stop.

Just imaging if you have half a dozen Mamtas in the

country! Imagine also what Congress would do after

2014 when they move over to the Opposition slot. The

first thing they would do would be to criticise FDI in

retail! A gullible population has become political fodder

for those who would do anything to grab and cling on

to power. It may sound pontificating; but the prospect

is alarming.

Politics in India has reached new levels with innovative

manoeuvres sometimes resembling a theatre of the

absurd. The story goes something like this. In order to

take the focus of the people away from the coal scam

the second generation of reforms are timed to hit the

headlines almost immediately after the CAG report is

published. NCP on its part want to divert the attention

of the people from its own irrigation scam at the state

level by staging a resignation drama of the deputy chief

minister at time when the Congress is battling one scam

after another. In order to take the heat away even from

the irrigation scandal they arrange for a whistleblower

to implicate the BJP President in the scam. But for the

fact that all these are happening in real time one would

have thought of juicy plot hatched for a Bollywood

movie. It is anybody's guess what tomorrow morning

will bring.

Mamta Bannerjee mimicked Manmohan Singh recently

and all the sycophants (there is no dearth of them in

Congress) cried foul and threatened to take Mamta to

court for defaming the prime minister of the country.

The irony, however, was hard to miss. One was that

she did such a lousy job of it that she has no chance

of getting even a petty role in a C grade Bengali play

for acting. Probably she has botched her chance of

having an alternate career post politics. The only

reason for which Manmohan Singh himself could object

to her doing the mimicry can be her bad Hinglish

spoken with a heavy Bengali accent. Yet another irony

in this was that it was she who ordered the arrest of a

cartoonist for his caricature of her only the other day!

Strange are the ways the politicians work.

The recent order of the Supreme Court on the

Presidential reference consequent to its earlier

judgment on 2G may have been a reprieve for the

Government and a disappointment for the Opposition.

It is a classic instance of bringing in clarity when you

look at issues clinically (read legally). It is not open to

the judiciary to lay down public policies. The caveat,

however, is that these policies shall not be whimsical

or flawed through corrupt practices. In one stroke the

Supreme Court drew a subtle yet clear demarcating

line between the Executive and the Judiciary as

envisaged by the Constitution.

When Anna Hazare came calling to Delhi recently, he

looked a poor caricature of himself of yore. With his

aura diminishing to the status of his diminutive physical

self, he appears to have given up on his cause. He

looks like a shadow of his fasting days. His movement,

however, should be an object lesson for all. It does

not happen all too often anywhere. India identified itself

with his noble goal. However, without being patient

and with a faulty strategy his movement faltered. He

could have taken a giant step in the process of

eradicating corruption when he, with the people of India

held the Government of the day to ransom. He could

have negotiated a decent compromise deal with the

Government. Even that would have been great victory

against corruption. Instead of taking that step he

wanted to take the establishment head-on perhaps with

an intention of leaving a personal legacy. That moment

we lost a golden opportunity in our fight against

corruption. After being hailed a Gandhian, Anna

wanted to be a Gandhi. His slogans reflected his

3


i i i

ambitions, however noble it might be. After forty long

years we had a chance to get a decent architecture of

a legal framework against corruption in high places.

By taking the stand 'all-or-nothing' Anna failed all of

us. Anna for a moment forgot that means are as

important as end. Gandhi's own long and arduous

struggle for independence should have provided the

all important lesson to Anna that the process is as

important as the goal. The Gandhian in Anna perhaps

thought that he was delivering a second independence

to India. That was not to be. Anna lost a struggle and

we lost a dream.

BJP is weighing the options of calling for a special

session of Parliament to pass a motion to vote the

Government out of power. When the Parliament is in

session the party does not want to have anything to

do with it. Now a special session to discuss exactly

the same issues! Every ally in UPA wants more and

more cabinet berths. After getting plum portfolios

leaders like Mamta Bannerjee do not want their

ministers to attend Cabinet meetings. What kind of

accountability criteria do we apply to ourselves? As

far as Mamta Bannerjee is concerned no one is equal

to her in her party and she does not what anyone to

make an attempt to match her. Dinesh Trivedi tried

and promptly lost his job despite being an able Minister.

Mukul Roy knows his priorities better. The party office

in Kolkata is his headquarters; not Rail Bhavan in Delhi.

A recent report commissioned by the UN has some

uncomfortable conclusions especially for developing

nations like India. By 2050 there will be more people

above the age of 60 than those below the age of 15.

The population above 60 would cross one billion by

2050, a majority of them in the developing countries.

This actually means an enormous amount of focus on

affordable healthcare which is in a shambles even as

of now. With public healthcare plagued by corruption

and apathy it is indeed going to be a daunting task.

Even in developed nations healthcare issues are the

most predominant concern areas. In India with

governance standards being what it is what the future

holds remains to be seen. It is not an easy task even

for a well governed state.

The Supreme Court in a recent landmark judgment in

the case of Fiat India decreed that a commercially

justifiable price need not necessarily be a commercially

prudent price thanks to some convoluted logic

ingrained in certain legal fictions associated with the

valuation rules in Central Excise. Hold on to your

inventories and incur a loss or sell them incurring a

loss and pay excise duty on that loss also. Damn if

you do and damn if you don't - a classic case where

primacy of commerce is given a go-by in a business

situation. I shudder to think what could happen if the

Income Tax department take a cue from this case. You

could be taxed based on your earning capacity and

not based on your earnings. Be prepared for a midnight

knock by the taxman.

Varghese Kurien, father of the Indian White Revolution

died at Anand recently. With his death India lost one

of the most famous indigenously made icons. There

was a time when two stalwarts from two entirely

different rural parts of the country with different

personal backgrounds dominated the headlines for all

the right reasons. One was Kurien from the West and

the other was Piloo Modi from the Tata Empire in

Jamshedpur in the eastern part of the country -

extraordinary men who inspired ordinary men to do

extraordinary things. Kurien, the less flamboyant of the

two was a genius in peasant's clothes. This man who

preferred a peg of scotch to a glass of milk (he hated

milk other than as a commodity for sale) showed the

country what self-reliance really means and how to

sustain one's self-esteem. May his soul rest in peace.

Before signing off let me welcome the new entrant to

the Bizsol stable. Bizsol Projects & Infrastructure

Solutions LLP is the new arrival. The LLP is in the

business of infrastructure consultancy and project

management services in the field of real estate across

all sectors. On behalf of all Bizolites here are the good

wishes to the new entrant. Welcome and Good Luck.

Thank you

Venkat R. Venkitachalam

4


CUSTOMS

NOTIFICATIONS

Anti Dumping

• Anti-dumping duty on imports of 'phosphoric acid,

technical or food grade (including industrial

grade), falling under 280920, originating in, or

exported from, China PR-imposed vide

notification number 17/2008 - Cus. Dt: 19th

February, 2008 has been extended up to 12th

September, 2013. (Notification No. 45/2012 Dt:

25th September, 2012)

• Anti-dumping duty on imports of Pre-sensitized

positive Offset Aluminum Plates/PS Plates,

originating in, or exported from, China PR-

imposed vide notification number 108/2007 - Cus.

Dt: 25th September, 2007 has been extended up

to 23rd September, 2013. (Notification No. 44/

2012 Dt: 25th September, 2012)

• Anti-dumping duty on imports of Resin or other

organic substances bonded wood or ligneous

fiber boards of thickness below 6mm, except

insulation boards, laminated fiber boards and

boards which are not bonded either by resin or

other organic substances, originating in, or

exported from, China PR, Indonesia, Malaysia

and Sri Lanka has been imposed. The anti-

dumping duty imposed under this notification shall

be effective for a period of 6 months. (Notification

No. 43/2012 Dt:21st September, 2012)

• Anti-dumping duty on imports of 'Paracetamol'

falling under heading 2922, originating in, or

exported from, China PR-imposed vide

notification number 99/2007 - Cus. Dt: 3rd

September, 2007 has been extended up to 3rd

September, 2013. (Notification No. 42/2012 Dt:

19th September, 2012)

• Anti-dumping duty on imports of Ductile iron pipes,

originating in, or exported from, China PR-

imposed vide notification number 103/2007 - Cus.

Dt: 14th September, 2007 has been extended up

to 12th September, 2013. (Notification No.

41/2012 Dt. 13th September, 2012)

Safeguard Duty

• No new notification!!

Tariff

• Indian Oil Corporation Limited, Hindustan

Petroleum Corporation Limited or Bharat

Petroleum Corporation Limited can import the

LPG @ 'NIL' rate of customs duty on import of

LPG for supply to household domestic

consumers. Earlier it was restricted to import of

LPG for supply to household domestic consumers

at subsidized prices only. (Notification No. 55/

2012 Dt:18th September, 2012)

• Maize bran under Chapter heading 23021010 is

exempted from basic custom duty (Notification

No. 54/2012 Dt:17th September, 2012)

• Following list of goods has been exempted from

payment of basic custom duty subject to the

conditions as specified in the said notification.

Entry No. Description of goods

(zc) Bobbin elastic

(zd) Textile flowers

(ze) Water soluble lining, poly pouch, high

density sticker, heat transfer steaker

(zf) Anglets on draw strings-hooded jacket

(zg) Bra cup, bust cup, moulded cups for bra

and metal underwire for bra

(zh) Hook and bar, extra button covers plain,

ribbons, waist bands, shooter pin, O ring,

thermo strips and metal clip

(zj) Pin bullets for packing, plastic tags, bows,

ring & slider and rings

5


(Notification No. 51/2012 Dt: 13th September, 2012)

• The port Irungattukattai, SIPCOT Industrial Park,

Kattrambakkam village, Sriperumbudur Taluk,

Kanchipuram District, Tamil Nadu has been

added along with Tondiarpet (TNPM), Chennai &

accordingly notification no. 53/2003,54/2003,90/

2004 to 97/2004, 32/2005, 41/2005, 89/2005 40/

2006, 73/2006, 90/2006, 91/2006, 14/2009, 91/

2009 to 112/2009 has been amended to include

the port. (Notification No.50/2012 Dt:10th

September, 2012)

• BCD will be exempted on import of Goods

required specified Mega Power project (list 32A

of the Notification) certified by an officer not below

the rank of Joint Secretary to the Govt. of India in

the Ministry of Power before the 19th day July,

2012 only.

Also BCD exemption on the goods required for

the expansion of any existing Mega Power project

has been now restricted expansion of only two

specified Mega Power Projects namely

Vindhyachal Power Project and UNOSUGEN

CCPP, Gujarat. [Notification No. 49/2012

Dt:10Th September, 2012]

• Notification 125/2011 Cus dated 30.12.2012

providing partial exemption on goods imported

from Pakistan & Srilanka has been amended and

exemption limit modified for certain goods .

[Notification No. 48/2012 Dt: 6th September,

2012]

EOU / SEZ

• Duty Free Re- import of goods rejected by buyer

and exported by EOU/EHTP/BTP is permitted.

Earlier the condition restrictive was covering

cases only where the foreign buyer has failed to

take the delivery. (Notification No. 53/2012

Dt:13th September, 2012)

• Import of parts, components of aircraft replaced

or removed during the course of maintenance,

repair or overhaul of the aircraft in SEZ are

exempted from payment of custom duty even

when the aircraft pertains to domestic unit.

(Notification No.52/2012 Dt.13th September,

2012)

Non-Tariff Notification

• The new All Industries Drawback Rates 2012-13

has been notified effective from 10.10.2012 with

certain clarification and conditions. Please visit

www.bizsolindia.com for new DBK rates with

comparison. [Notification No. 92 / 2012-

Customs (N.T.), dated 4th October, 2012]

• Tariff value for RBD Palmolein, Brass Scrap (all

grades), Poppy Seeds, Gold and Silver has been

revised to USD 1012/MT, USD 4103/MT, USD

5346/MT, USD 573 per 10grams, and USD

1102.50per kilogram respectively. [Notification

90/2012-CUS (N.T.) Dt:28th September, 2012]

• E-payment of custom duty made mandatory for

importers registered under Accredited Clients

Programme & importers paying customs duty of

one lakh or more per bill of entry. (Notification

No.83/2012 Dt: 17th September, 2012)

• Kattupalli of Tamil Nadu State is notified to be

used for the purpose of unloading of imported

goods and loading of export goods or any class

of such goods. Earlier this Port was permitted to

use for the purpose of Unloading of imported

goods in containers for trans-shipment and

loading of goods transshipped in containers for

export. (Notification No. 82/2012 Dt. 14th

September, 2012)

CIRCULARS

Broad aspects of changes notified in All Industries

Drawback Rates 2012-13 has been provided.

a) In continuation of a transitory arrangement, most

of the items incorporated in last years (2011-12)

duty drawback schedule, from the erstwhile DEPB

scheme, will see a reduction in the AIR rates.

b) The existing residuary rate of 1% ad valorem (all

customs) will now be either 1% composite rate

with 0.3% customs component, or it will see an

increase to 1.5% (customs component) or 2%

(customs component).

c) With certain exceptions, the drawback caps have

not been assigned where the higher of the

composite rate/customs component of the rate is

3.5% or lower. Where the AIR will be above 3.5%,

not every entry has been assigned the drawback

6


caps. Where drawback caps have been assigned,

these will by and large see a relative increase.

d) In certain cases separate tariff entries have been

created, as for calcined bauxite, silicon dioxide,

gauze swabs, dairies with leather covers, leather

insoles, sarees with or without blouse piece under

chapters 50, 52 and 54, womens/girls blouses

with tightening at the bottom, footwear with TPR/

PU soles and canvas uppers, worked human hair,

imitation jewellery made up of iron, motor cars

with manual transmission, motor cars with

automatic transmission, multi-speed bicycles etc.

Under heading 3004 (medicaments), dosage and

pack-size specifications for many items have been

removed. Composite rates have been assigned

in a few cases such as under heading 7321, 7415

and 8535.

e) The unit for the drawback cap has been changed

from litre to kilogram for printing inks of heading

3215.

f) Drawback has been restored for export of Guar

Gum (Tariff Item No. 130201) by providing a

specific composite rate with a specific customs

component.

g) In order to continue with the existing classification

of sports gloves under the drawback schedule,

an appropriate exception, to the principle of

alignment at four digit level with the First Schedule

to the Customs Tariff Act, 1975, has been

specified in the Notes and Conditions in the

Notification.[Circular No. 27 / 2012-Cus dated

05th October, 2012]

• All Central and State Public Sector Undertakings

shall be exempt from furnishing Bank guarantee

or other form of security for storing sensitive goods

in the duty free shops operated by them for storing

sensitive goods in private bonded warehouses.

[Circular No. 26 /2012-Cus Dt. 10th Sept. 2012]

• Central Excise Department has been instructed

to verify the periodical utility bills (containing the

address) as one of the means for verification of

installation/operation/license premises for

address verifications or Installation Certificate

verifications requested by the Customs

authorities. [Circular No. 25 /2012-Cus dated 6th

September, 2012]

INSTRUCTIONS

• The procedures laid down in the Hon'ble Supreme

Court Orders dated 6th September, 2007 shall

be followed until the code comes into play. All

concerned authorities shall ensure strict

compliance of the said order before permitting

entry any vessel into Indian Territorial Waters for

breaking purposes and shall oversee the ship

breaking arrangements and implementation of

recommendations of CTE. (F. No. 405/2/2001-

Cus.III Dt:4th September, 2012)

CENTRAL EXCISE

NOTIFICATIONS

Tariff

• Now Indian Oil Corporation Limited, Hindustan

Petroleum Corporation Limited or Bharat

Petroleum Corporation Limited supplying the

Liquefied Propane and Butane mixture, Liquefied

Propane, Liquefied Butane and Liquefied

Petroleum Gases (LPG) to the household

domestic consumers will attract Nil rate of Excise

duty. [Notification No. 36/2012 CE dated 18th

September, 2012]

• Central Excise Duty on Motor Spirit (petrol)

intended for sale without brand name has been

reduced upto Rs. 1.20 per liter and now High

Speed Diesel intended for sale without brand will

attract the duty rate Rs. 1.46 per liter. [Notification

No. 35/2012 CE dated 14th September, 2012]

• Now only Ultra-Mega Power Projects and Mega

Power Projects as specified in the notification and

approved upto 19th July 2012 is entitled for

exemption of Excise Duty. Further, expansion of

Mega Power Projects namely, Vindhyachal STPP

Stage-V (Expansion Unit) - 500 MW (NTPC) and

UNOSUGEN CCPP, Gujarat (An expansion unit

of Sugen CCPP of 1147.5 MW)- 382.5(1) MW (M/

s. Torrent Power Ltd.) so certified before the 19th

day of July, 2012 is only entitled for Excise Duty

exemption as compared to exemption to

expansion of all the mega power projects earlier.

[Notification No. 34/2012 CE dated 10th

September, 2012]

7


Non-Tariff

No new Notifications.

CIRCULARS

No new Circulars

SERVICE TAX

NOTIFICATIONS

• Form 'ST-3' required to be submitted by the 25th

day of October, 2012 shall cover the period

between 1st April to 30th June, 2012 only.

(Notification 47/2012 Dt:28th September 2012)

INSTRUCTION

• Service Tax return for the period 1-7-2012 to 30-

9-2012 will have to be furnished in a revised

format. The revised format of the return and the

last date for filing it will be indicated separately.

(Instruction F.No.137/22/2012 Dt. 28th

September 2012).

FOREIGN TRADE POLICY

NOTIFICATION

• Export of 5,000 bales of Assam Comilla Cotton

will be exempted from any export restrictions

subject to registration with DGFT. Registration

Certificate for such exports will be valid for 30 days

only. [NOTIFICATION NO. 18 /(RE-2012) / 2009-

2014 Dt: 1st October 2012]

• The Procedure and conditions for export of cotton

w.e.f 1st October 2012 have been notified.

[NOTIFICATION NO. 17 /(RE-2012) / 2009-2014

Dt: 1st October 2012]

• Following goods under the India-Sri Lanka Free

Trade Agreement (ISFTA) can be imported from

any EDI Port.

ITCHS Description of Goods

25151100 Crude of roughly trimmed

25151220 Slabs of marble, travertine, building stone

etc.

25151210 Blocks of marble, travertine, building

stone etc.

25151290 Other

68021000 Tiles, cubes and similar articles, whether

or not rectangular (including square), the

largest surface area of which is capable

of being enclosed in a square the side of

which is less than 7 cm.; artificially

coloured granules, chippings and powder

68022110 Marble blocks or tiles

68022120 Marble monumental stone

68022190 Other

68022200 Other calcareous stone (ITCHS deleted)

68029100 Marble, travertine and alabaster

68029200 Other calcareous stone

Earlier the above goods can be imported only from

Kolkata Port.

[NOTIFICATION NO. 16 /(RE-2012) / 2009-2014

Dt. 26th September 2012]

TRADE NOTICE

• Allocation of Import quantity of 6 Lakh MT of

Rough Marble and Travertine Blocks for Financial

Year 2012-13 has been done and accordingly the

DGFT has notified list of 449 applicants with the

quantity that can be imported by such applicant.

[Trade notice No 4/2012 dt. 14th September,

2012].

PUBLIC NOTICE

• Format and Guidelines for applicants of export

license in the ANF 2 D have been amended to

make it more user friendly. [Public Notice No.

18 (RE-2012) / 2009-14 Dt: 28th September,

2012]

• SION No. A-1691 has been amended to reflect a

more specific name for the export product i.e. from

'Nylon Fabric' to "Relevant Nylon Tyre Cord

Fabric. In case of two SIONs No. H-207 (Export

Product : Polyester Chips (Textile Grade) PTA

Route) and H-278 (export product: PVC Rigid

Film/Sheet (General purpose/Stationary Grade),

permissible quantities of some inputs have been

changed. [PUBLIC NOTICE NO.17/(RE-2012)/

2009-2014 Dt: 20/09/2012]

8


28 28 53050020 53050010 COIR MATTRESS FIBRE 08.07.2010

COIR BRISTLES FIBRE, COIR MATTRESS

FIBRE, COIR SHORT FIBRE, COIR BIT FIBRE,

DECORTICATED COIR FIBRE

08.07.2010

29 29 53051130 53050030 CURLED / MACHINE TWISTED COIR FIBRE 02.03.2009

31 31 53051190 53050090 OTHER: FIBRE PRODUCED FROM

COCONUT HUSK BY MECHANICAL /

MANUAL PROCESS

02.03.2009

34 34 53110029 53110015 OTHERS: WOVEN GEOTEXTILES OF COIR 08.07.2010

35 35 53079010 56079010 COIR, CORDAGES & ROPES, OTHER THAN

OF COTTON

02.03.2009

Sr.No.

VKGUYProduct

Code

ExistingITC (HS)

Code

RevisedITC (HS)

Code

DescriptionEffective

DateRemark

1 1 060310 06031100

06031200

06031300

06031400

06031900

CUT FLWRS &

FLOWER BUDS

SUITABLE FOR

BOQETS OR

ORNAMENTAL

PURPOSES, FRESH

02.03.2009 Shipping Bill containing the

existing/revised ITC (HS)

Codes would be eligible to

claim benefit.

Sr.

No.

FPS

Product

Code

Existing

ITC (HS)

Code

Revised

ITC (HS)

CodeDescription Effective Date

27 27 53051110 53050010 COIR BRISTLE FIBRE 02.03.2009

COIR BRISTLES FIBRE, COIR MATTRESS

FIBRE, COIR SHORT FIBRE, COIR BIT FIBRE,

DECORTICATED COIR FIBRE

08.07.2010

28 28 53051120 53050020 COIR MATTRESS FIBRE 02.03.2009

• Certain errors have been noticed in terms of Sr.

No., Product Description etc for the items eligible

for benefit under Chapter 3 of FTP. These errors

have been rectified vide this notification.

Secondly, due to harmonization of ITC (HS)

Codes, new Codes with description have been

mentioned which would be eligible for incentives

under Appendix 37A & 37D; those are as under.

a. In Appendix 37A (VKGUY), the ITC (HS)

Codes are being revised at column 4 of table

below [existing codes are at column 3]:

9


Note: Shipping Bill containing the existing/revised

ITC (HS) Codes would be eligible to claim benefit.

[PUBLIC NOTICE NO. 16 (RE2012)/2009-14

Dt. 6th September, 2012]

• The spelling error in the name of import item for

SION A2337 - [Plaster of Paris (Dental Grade)]

presently appearing as Hydrocol Cement is

corrected to read as Hydrocal Cement. There is

no other change. [PUBLIC NOTICE NO: 15 (RE

2012) /2009-2014 Dt: 6th Sept., 2012]

CIRCULARS

• It is reiterated that requests for clubbing of

advance authorizations filed by the exporters on

or before 31st March 2012 should be disposed of

as per the provision of the Handbook of Procedure

prior to the revised edition/annual supplement

dated 05.06.2012. (Policy Circular No. 05

(RE-2012)/2009-1 Dt. 21st October 2012)

INCOME TAX

NOTIFICATIONS

• Now income of a Charitable Trust if invested in

Debt Instruments issued by any Infrastructure

Finance Company registered with Reserve Bank

of India shall not be included in the Total Income

of the previous year of the Charitable Trust in

which the Investment is made. [NOTIFICATION

NO. 40/2012 DATED 20/09/2012]

• An assessee not being a resident of India,

required to obtain a certificate reffered to in section

90(4) and 90A(4) shall be in the form specified in

Rule 21(AB) of the Income Tax Rules, 1962. An

assessee, being a resident of India, for the

purpose of an agreement reffered to in Section

90 and section 90A shall make an application in

Form 10FA and receive the certificate in Form

10FB, format for both of which are now specified

in Apppendix-II after Form 10F. [NOTIFICATION

NO. 39/2012 DATED 17/09/2012]

• Cost- Inflation Index for the Financial year 2012-

13 will be "852". [NOTIFICATION NO. 38/2012

DATED 17/09/2012]

• Shri H.L.Karwa Vice-president of Income tax

Appellate Tribunal is appointed as President of

that Tribunal in officiating capacity till the post is

filled on regular basis. [NOTIFICATION NO.

12023/2/2011-ADMIN. III (LA) DATED 13/9/2012]

CIRCULARS

• The Central government have notified conditions

with respect to Loan agreement, issue of Bonds

and the rate of interest which should be complied

with, in place of obtaining approval from Central

Government in respect of each Loan Agreement/

Bond issue and the rate of interest, to be eligible

for lower rate of withholding tax @ 5% for monies

borrowed by Indian Companies in foreign

currency from a source outside India. [CIRCULAR

No. 7/2012 dated 21/09/2012]

MVAT (MAHARASHTRA VAT)

CIRCULARS

• Land Developers will now have to file year wise

annexures for all the return periods upto 31-10-

2012 and will be in addition to return to be filed by

the dealers. [CIRCULAR NO. 18T OF 2012

DATED26/09/2012]

• Extension is provided to Developer required to

take registration under MVAT to pay MVAT on

sale of under construction flat to 15th Oct for

obtaining registration and 31st Oct for filing of

return and payment of Tax. [CIRCULAR NO. 17T

OF 2012 DATED 25/09/2012]

GVAT (Gujarat Vat)

NOTIFICATIONS

• Taxability of the following class or purchase of

sale is changed w.e.f 17/09/2012:

ä Now exemption from VAT to the extent to

which the amount of tax exceeds five paise

including additional tax at the rate of one

paisa in the rupee is available for Rail

coaches, Engines and Wagons and parts

thereof sold to any dealer. Earlier such

exemption was available only on sales to

Indian Railways.

ä Further, class of sales or purchases of Metro

rail coaches and parts of Metro rail coaches

10


when sold to any Metro rail company is now

taxable @ 2% for the sales made till 31st

March 2014 which was exempt from whole

of tax w.e.f. 14/07/2007.

[NOTIFICATION NO. (GHN-21)VAT-2012-

S.5(2)(35) DATED 17/09/2012]

KVAT (KARNATAKA VAT)

NOTIFICATIONS

• Now exemption from entry tax to SEZ Developer

or Co-Developer & SEZ Unit under Karnataka Tax

on Entry of Goods Act, 1979 (Karnataka Act 29

of 2004) on entry of any specified goods,

excluding petroleum products is restricted to

goods intended to be used in processing area of

Special Economic Zone.

[NOTIFICATION NO. FD 116 CSL 2012 DATED

12/09/2012 (NOTIFICATION-I)]

• Now exemption from special entry tax to SEZ

Developer or Co-Developer & SEZ Unit under

Karnataka Special Tax on Entry of Certain Goods

Act, 2004 (Karnataka Act 29 of 2004) on entry of

any notified goods, excluding petroleum products

is restricted to goods intended to be used in the

processing area of Special Economic Zone.

[NOTIFICATION NO. FD 116 CSL 2012 DATED

12/09/2012 (NOTIFICATION-II)]

COMPANY LAW

NOTIFICATIONS

• E-form 23AC (for filing Balance Sheet & other

documents with the registrar) and e-Form 23ACA

(for filing Profit & Loss Account and other

documents with registrar) has been revised taking

effect of revised Schedule VI as applicable from

01.04.2011.[Notification No. GSR -(E) dated

21st Sept 2012]]

CIRCULARS

• Further extension for imposition of filling fee for

e-form 23B (Information by Statutory Auditor to

the Registrar) without fees is provided upto 23rd

December 2012.[Genereal Circular No.31/2012

dated 28th Sept 2012]

• Due date for filing of e-form 23AC and e-form

23ACA in Non-XBLR format as per new schedule

VI is extended in following manner:

Particulars Time limit

The Co's whose due date 03.11.2012 or within

of AGM on or before 30 days from the date

20.09.12 of AGM whichever is

later.

The Co's whose due 22.11.2012 or within

date of AGM on or after 30 days from the date

21.09.12 of AGM whichever is

later

[General Circular No.30/2012 dated 28th Sept 2012]

• In case of Conversion of a Co-operative Society

(not registered as Multi State Society) in to a

Producer Company under Section 581 J(5) of

Companies Act, 1956 the ROC will seek a written

consent from the Local Co-Operative Department

of the concerned State certifying that the society

desirous of being converted into producer

company has 'no dues' payable to the State and

the Co-Operative department has 'no objection'

for such conversion. [General Circular No.29/

2012 dated 10th Sept 2012]

Circular NumberDate of

Issue

RBI/2012-2013/229

D B O D . N o . R e t . B C . 4 8 /

12.02.001/2012-13

28.9.2012 Department of

Banking

Operations and

Development

Department Subject Meant for

Section 24 of the Bank-

ing Regulation Act, 1949

Maintenance of Statu-

tory Liquidity Ratio

(SLR) - Local Area

Banks

All Local Area Banks

FEMA / RBI

RBI Circulars October-2012

11


Circular NumberDate ofIssue


RBI/2012-2013/228R P C D . N o . F S D . B C . 3 1 /

05.04.02/2012-13

28.9.2012 Rural Planning

and Credit De-

partment

Union Budget - 2012-13

- Interest Subvention

Scheme - 2 per cent in-

terest subvention and 3

per cent additional sub-

vention for short-term

crop loans in 2012-13

The Chairman/Manag-

ing Director All Public

Sector Banks

RBI/2012-2013/227

DBOD.DIR.No.46/04.02.001/

2012-13


Banking Opera-

tions and Devel-

opment

Interest Rate Ceiling on

Lines of Credit with

Overseas Banks

All Scheduled Commer-

cial Banks (excluding

RRBs)

RBI/2012-2013/226

UBD.BPD (PCB) Cir. No.13/

14.01.062/2012-13

27.9.2012 Urban Banks

Department

Uploading of Reports in

'Test Mode' on FINnet

Gateway

The Chief Executive Of-

ficer of All Primary (Ur-

ban) Co-operative

Banks

RBI/2012-2013/225

A.P. (DIR Series) Circular

No. 37

26.9.2012 Foreign

Exchange

Department

Deferred Payment Pro-

tocols dated April 30,

1981 and December 23,

1985 between Govern-

ment of India and erst-

while USSR

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/224

UBD.BPD.(PCB) Cir No.12/

09.16.900/2012-13


Department

Financial Restructuring

of UCBs


ficers All Primary (Ur-

ban) Co-operative

Banks

RBI/2012-2013/223


No. 36

26.9.2012 Foreign

Exchange

Department

Foreign Direct Invest-

ment (FDI) in India - Al-

lotment of Shares to per-

son resident outside In-

dia under Memorandum

of Association (MoA) of

an Indian company -

Pricing guidelines

All Category - I

Authorised Dealer banks

RBI/2012-2013/222

A.P. (DIR Series) Circular No.

35

25.9.2012 Foreign

Exchange

Department

Establishment of Liaison

Offices (LO) /Branch Of-

fices (BO) / Project Of-

fices (PO) in India by

Foreign Entities - Re-

porting requirement

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/221

FMD.MSRG. No.71/

02.02.001/2012-13

25.9.2012 Financial Markets

Department

Reporting of OTC Call/

Notice/Term Money

transactions

The Chairmen/Chief Ex-

ecutives of All Sched-

uled Commercial Banks

(excluding RRBs)/ Co-

operative Banks / Pri-

mary Dealers

12




RBI/2012-2013/220


No. 34

24.9.2012 Foreign

Exchange

Department

Foreign Exchange Man-

agement Act, 1999-Im-

port of gold in any form

including jeweller y

made of gold/precious

metals or / and studded

with diamonds / semi

precious / precious

stones - clarification

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/219

A. P. (DIR Series)Circular No.

33

24.9.2012 Foreign

Exchange

Department

Know Your Customer

(KYC) norms/Anti-Money

Laundering (AML) stan-

dards / Combating the Fi-

nancing of Terrorism

(CFT) Obligation of

Authorised Persons un-

der Prevention of Money

Laundering Act, (PMLA),

2002, as amended by

Prevention of Money

Laundering (Amend-

ment) Act, 2009 - Money

changing activities

All Authorised Persons

in Foreign Exchange

RBI/2012-2013/218

UBD.BPD (PCB) Cir. No.11/

14.01.062/2012-13


Department

Implementation of Sec-

tion 51-A of UAPA,

1967- Updates of the

UNSCR 1267 (1999) /

1989 (2011) Sanctions

List - Primary (Urban)

Co-operative Banks

The Chief Executive

Officer of All Primary

(Urban) Co-operative

Banks

RBI/2012-2013/217

A.P.(DIR Series) Circular

No. 32

21.9.2012 Foreign

Exchange

Department

Foreign investment in

Single-Brand Product

Retail Trading/ Multi-

Brand Retail Trading /

Civil Aviation Sector /

Broadcasting Sector /

Power Exchanges -

Amendment to the For-

eign Direct Investment

Scheme

All Category-I

Authorised Dealer

Banks

RBI/2012-2013/216

RPCD.CO.RCB.RRB.BC.No.

28/07.02.01/2012-13


and Credit

Department

Section 42(1) of the Re-

serve Bank of India Act,

1934 - Maintenance of

Cash Reserve Ratio

(CRR)

All Scheduled State Co-

operative Banks/ Re-

gional Rural Banks

13




RBI/2012-2013/215

UBD.BPD (PCB) Cir. No. 10/

14.01.062/2012-13


Department


tion 51-A of UAPA,

1967- Updates of the

UNSCR 1267 (1999)/

1989 (2011) Commi-

ttee's Al Qaida Sanc-

tions List-Primary (Ur-

ban) Co-operative

Banks



ban) Co-operative

Banks

RBI/2012-2013/214

RPCD.MSME&NFS.BC.No.30/

06.11.01/2012-13


and Credit

Department

The Scheme of 1% Inter-

est Subvention on Hous-

ing Loans up to Rs.

15.00 lakh

The Chairman/Manag-

ing Director/Chief Ex-

ecutive Officer All

Scheduled Commercial

Banks (excluding Re-

gional Rural Banks)

RBI/2012-2013/213

RPCD.CO RRB. RCB. AML.

BC. No. 29 /03.05.33 (E)/2012-

13


and Credit

Department



Gateway

The Chairmen / CEOs of

all Regional Rural Banks

and State and Central

Co-operative Banks

RBI/2012-2013/212

UBD.BPD. (SCB). CIR.No. 4 /

12.03.000/2012-13


Department

Section 42(1) of Reserve

Bank of India Act, 1934

- Maintenance of Cash

Reserve Ratio (CRR)


ficers of All Scheduled

Primary (Urban) Co-op-

erative Banks

RBI/2012-2013/211

A. P.(DIR Series) Circular No.

31

17.9.2012 Foreign

Exchange

Department

Establishment of Liaison

Office (LO) / Branch Of-

fice (BO) / Project Office

(PO) in India by Foreign

Entities - Clarification.

All Category-I

Authorised Dealer

Banks

RBI/2012-2013/210

D N B S ( P D ) . C C . N o 3 0 4 /

03.10.42/2012-13


Non Banking

Supervision

Anti-Money Laundering

(AML)/Combating of Fi-


(CFT) - Standards

All Non Banking Finan-

cial Companies /Residu-

ary Non Banking Com-

panies

RBI/2012-2013/209

D B O D . N o . R e t . B C . 4 4 /

12.01.001/2012-13


Banking

Operations and

Development

Section 42(1) of the Re-

serve Bank of India Act,

1934 - Maintenance of

Cash Reserve Ratio

(CRR)


cial Banks (Excluding

Regional Rural Banks)

RBI/2012-2013/208

D B O D . N o . B P . B C / 4 2 /

21.04.048/2012-13


Banking

Operations and

Development

NPA Management - Re-

quirement of an Effective

Mechanism and Granu-

lar Data

The Chairman and Man-

aging Director/Chief Ex-

ecutive Officer of All


Banks (Excluding RRBs)

RBI/2012-2013/207

DNBS (PD) CC. No.303/

Factor / 22.10.91/ 2012-13


Non Banking

Supervision

The Non-Banking Finan-

cial Company -Factors

(Reserve Bank) Direc-

tions, 2012

All NBFCs

14




RBI/2012-2013/206

UBD.BPD (PCB) Cir. No. 8/

14.01.062/2012-13


Department

Know Your Customer

(KYC)/Anti-Money Laun-

dering (AML)/Combating

of Financing of Terrorism

(CFT) - Risk Categoriza-

tion and Updation of Cus-

tomer Profiles - Primary

(Urban) Co-operative

Banks



ban) Co-operative

Banks

RBI/2012-2013/205

D B O D . N o . B P . B C . 4 1 /

21.06.009 / 2012-13


Banking

Operations and

Development

Prudential Guidelines on

Capital Adequacy and

Market Discipline- New

Capital Adequacy

Framework (NCAF) - Eli-

gible Credit Rating

Agencies - SME Rating

Agency of India Ltd.

(SMERA)

The Chairman / CMD /

MD / CEO All Scheduled

Commercial Banks (Ex-

cluding Local Area

Banks and Regional Ru-

ral Banks)

RBI/2012-2013/204

A.P.(DIR Series) Circular No.

30

12.9.2012 Foreign

Exchange

Department

Comprehensive Guide-

lines on Over the

Counter (OTC) Foreign

Exchange Derivatives -

Cost Reduction Struc-

tures

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/203

A.P. (DIR Series) Circular No.

29

12.9.2012 Foreign Ex-

change Depart-

ment

Overseas Direct Invest-

ments by Indian Party -

Rationalisation

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/202


No. 28


change Depart-

ment

Trade Credits for Import

into India

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/201


No. 27


change Depart-

ment

External Commercial

Borrowings (ECB)

Policy - Bridge Finance

for infrastructure sector

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/200

A.P.(DIR Series)Circular No.

26


change Depart-

ment

External Commercial

Borrowings(ECB) Policy

- Repayment of Rupee

loans and/or fresh Ru-

pee capital expenditure

- USD 10 billion scheme

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/199

D B O D . B P . B C . N o . 4 0 /

21.04.172/2012-13


Banking Opera-

tions and Devel-

opment

Bank Finance to Factor-

ing Companies



RRBs)

RBI/2012-2013/198

A. P. (DIR Series) Circular

No. 25


change Depart-

ment

Overseas Investment by

Indian Parties in Paki-

stan

All Category - I

Authorised Dealer

Banks

15




RBI/2012-2013/197

DBOD. AML.BC.No.39/

14.01.001/2012-13


B a n k i n g

Operations and

Development



Gateway

The Chairmen/CEOs of

all Scheduled Commer-

cial Banks(Excluding

RRBs)/ Local Area

Banks / All India Finan-

cial Institutions

RBI/2012-2013/196

DNBS (PD).CC. No 302 /

03.10.42 /2012-13


Non Banking Su-

pervision


tion 51-A of UAPA, 1967

- Updates of the UNSCR

1267 (1999) /1989

(2011) Committee's Al

Qaida Sanctions

All Non Banking Finan-

cial Companies / Re-

siduary Non Banking

Companies

RBI//2012-2013/195

A. P. (DIR Series) Circular

No. 24


change Depart-

ment

Exim Bank's Line of

Credit of USD 20 million

to the Government of

Mongolia

All Category - I

Authorised Dealer

Banks

RBI/2012-2013/194

DPSS. CO. AD. No. 427 /

02.27.005/2012-13


Payment and

Settlement Sys-

tems


tion 51-A of UAPA, 1967

- Updates of the UNSCR

1267 (1999) and 1989

(2011) Committee's Al

Qaida Sanctions List

CEOs of all the Payment

System Operators

Authorised under the

PSS Act, 2007

RBI/2012-2013/193

DPSS. CO. AD. No. 426/

02.27.005/2012-13


Payment and

Settlement Sys-

tem

Anti- Money Laundering

(AML) / Combating of Fi-


(CFT) - Standards

Chief Executive Officers

of All the Payment

S y s t e m O p e r a t o r s

Authorised under the

PSS Act, 2007

RBI/2012-2013/192

UBD.BPD.Cir.No.7/13.01.000

/ 2012-13

6.9.2012 Urban Banks De-

partment

Interest Rate on Depos-

its


ficer All Primary (Urban)

Co-operative Banks

RBI /2012-2013/191

DBOD.No. Leg.BC. 38/

09.07.005/2012-13


Banking Opera-

tions and Devel-

opment

Banking facilities to visu-

ally challenged / persons

with disabilities



RRBs)

RBI/2012-2013/190

DPSS.CO.CHD.No .399 /

04.07.05 / 2012-13


Payment and

Settlement Sys-

tem

Standardisation and En-

hancement of Security

Features in Cheque

Forms-Migrating to CTS

2010 standards

The Chairman and Man-

aging Director / Chief

Executive OfficerAll


Banks including RRBs /

Urban Co-operative

Banks / State Co-opera-

tive Banks / District Cen-

tral Co-operative Banks/

Local Area Banks

RBI/2012-2013/189

IDMD.PCD.No.718/14.03.05/

2012-13

3.9.2012 Internal Debt

Management De-

partment

Applicability of credit ex-

posure norms for bonds

guaranteed by the Gov-

ernment of India

All Standalone Primary

Dealers

16


FEMA Circulars

A.P.(Dir Series) Date Title

Circular No. 37 26.09.2012 Deferred Payment Protocols between Government of India and erstwhile USSR

Circular No. 36 26.09.2012 Foreign Direct Investment (FDI) in India - Allotment of Shares to person resident

outside India under Memorandum of Association (MoA) of an Indian company -

Pricing guidelines

Circular No. 35 25.09.2012 Establishment of LO /BO / PO in India by Foreign Entities - Reporting requirement

Circular No. 34 24.09.2012 FEMA 1999-Import of gold in any form including jewellery - clarification

Circular No. 33 24.09.2012 KYC norms/AML standards/CFT Obligation of Authorised Persons under PMLA

2002, as amended by PML Amendment Act, 2009 - Money changing activities

Circular No. 32 21.09.2012 Foreign investment in Single-Brand Product Retail Trading/ Multi-Brand Retail Trad-

ing / Civil Aviation Sector / Broadcasting Sector / Power Exchanges - Amendment

to the Foreign Direct Investment Scheme

Circular No. 31 17.09.2012 Establishment of Liaison Office (LO) / Branch Office (BO) / Project Office (PO) in

India by Foreign Entities - Clarification

Circular No. 30 12.09.2012 Comprehensive Guidelines on OTC Foreign Exchange Derivatives - Cost Reduction

Structures

Circular No. 29 12.09.2012 Overseas Direct Investments by Indian Party - Rationalisation

Circular No. 28 11.09.2012 Trade Credits for Import into India

Circular No. 27 11.09.2012 ECB Policy - Bridge Finance for Infrastructure Sector

Circular No. 26 11.09.2012 ECB Policy - Repayment of Rupee loans and/or fresh Rupee capital expenditure -

USD 10 billion scheme

Circular No. 25 07.09.2012 Overseas Investment by Indian Parties in Pakistan

Circular No. 24 06.09.2012 Exim Bank's Line of Credit to the Government of Mongolia

17


CBEC Notified Exchange Rate for Conversion of Foreign Currency

w.e.f. 05/10/2012 (Notification 91/2012-Customs (NT) dated 04/10/2012)

SCHEDULE-I

S.No. Foreign Currency

Rate of exchange of one unit of foreign currency

equivalent to Indian rupees

(For Imported Goods) (For Export Goods)

1. Australian Dollar 54.30 52.80

2. Bahrain Dinar 143.05 134.85

3. Canadian Dollar 53.90 52.55

4. Danish Kroner 9.20 8.90

5. EURO 68.45 66.65

6. Hong Kong Dollar 6.80 6.70

7. Kenya Shilling 63.50 59.55

8. Kuwait Dinar 192.00 180.60

9. New Zealand Dollar 43.75 42.40

10. Norwegian Kroner 9.30 9.00

11. Pound Sterling 85.45 83.40

12. Singapore Dollar 43.05 41.90

13. South African Rand 6.45 6.05

14. Saudi Arabian Riyal 14.40 13.55

15. Swedish Kroner 8.00 7.75

16. Swiss Franc 56.65 55.05

17. UAE Dirham 14.70 13.85

18. US Dollar 52.85 51.85

S.No. Foreign Currency

Rate of exchange of 100 units of foreign currency

equivalent to Indian rupees

SCHEDULE-II

(For Imported Goods) (For Export Goods)

1. Japanese Yen 67.95 66.00

18


ROLES & RESPONSIBILITIES OF OFFICERS' DEALING

IN SERVICE TAX & AUDITORS OF THE COMPANY

By CMA Ashok Nawal,E-mail: [email protected] • Mobile: +91 98901 65001

In the New Era of Negative List of Services, all activities

carried out by one person for another for consideration

including declared services are covered under ambit

of Service tax except for :

I- Immovable Goods

M- Money

A - Actionable Claims

G- Goods

E - Employee providing services to employers

In other words, if activities not covered under "IMAGE"

and fees paid to Court are covered under the ambit of

service tax.

Declared services includes service portion of deemed

sales and more so, "Agreeing to the obligation to refrain

from an act, or to tolerate an act or a situation, or to do

an act" will cover most of the activity in day-to-day

business irrespective whether manufacturing, trading

or services.

It is important to understand the followings:

• What is service?

• What is consideration?

• Money, Actionable Claim and Securities

• Important Definitions

• Taxability of Services including exemptions

• Negative List

• Declared Services

• Exempted Services

• Reverse Charge

• Works Contract

• Valuation

• Abatement

• Rules of Interpretation (Bundled Services)

• Point of Taxation

• Service Tax Rules / Cenvat Credit Rules

Amendment

• Place of Provision of Services

• Accounting transactions and Implications on

Service Tax

There is a need to analyze the transaction with respect

to :

• Purchase

• Sales

• Expenses

• Income

• Capital Expenditure and also analyze all

expenditures and income from Source - Invoice /

Debit Notes, Service Provider, Nature of Contract,

Account Head

Moreover, it is necessary to take the following actions:

• Creation of Matrix - Service Provider, Nature of

Expense and A/c Head

• Creation of New accounting codes

• Standard Accounting Entries

• Inter Group / Inter Unit Transaction Analysis

• Identification of Transactions between Taxable

Territory and Non Taxable Territory

• Analysis of Transactions for Import of services

and taxability in view of Place of Provision of

Service Rules, 2012

• Analysis of Transactions for Export of Service and

taxability in view of Rule 6A of Service Tax Rules,

1994

• Analysis of Ageing of Service Creditors and

entitlement of Cenvat Credit thereto

• Aging Analysis of Service Debtors and decision

of credit notes and adjustment of the service tax

payment

• Rebate of Service and Linkage with Input Services

/ Inputs

19


It is also pertinent to note as an effective deterrence

against tax evasion and for ensuring high level of

compliance, prosecution provisions were introduced

in the year 2011 in Service Tax law by way of section

89 in the Finance Act, 1994.

Let us understand the provisions under Section

89(1)(a) as it then existed is extracted below -

(a) provides any taxable service chargeable to service

tax under sub-section (1) of section 68 or receives any

taxable service chargeable to tax under subsection

(2) of said section, without an invoice issued in

accordance with the provisions of this Chapter or the

rules made there under; or"

Pursuant to the above, it has been clarified by CBE&C

vide Circular No. 140/9/2011 -ST, dated 12.05.2011

that clause (a) of section 89(1) of Finance Act, 1994,

is meant to apply, inter alia , where services have been

provided without issuance of invoice in accordance with

the prescribed provisions and invoice is required to be

issued within 14 days from the date of completion of

the taxable service.

The said clause (a) of section 89 (1) of the Finance

Act, 1994 has been substituted by the Finance Act,

2012 effective from 28th May, 2012 and it reads as

under:

[(a) knowingly evades the payment of service tax under

this Chapter; or]"

The CBE&C vide letter D. O. F. No 334/1/2012- TRU

dated 16th March, 2012 mentions the following about

the aforesaid amendment:

"Clause (a) of section 89 relating to prosecution for

non-issue of invoice is being replaced with the words

"knowingly evades payment of service tax". This will

meet the demand of business that mere non-issue of

invoices should not be made punishable with

prosecution, while giving a comprehensive coverage

to offences and also aligning with other indirect laws .

Simultaneously process of compounding of offences

will be operationalized and the enabling rule making

power has been obtained in the Act."

Thus, the said clause (a) of section 89(1) post

amendment has cast a huge uncertainty on the

applicability of prosecution provision for want of specific

narrative. Though, it has been clarified that mere non-

issuance of invoice would not be punishable with

prosecution but indication of comprehensive coverage

in line with other indirect tax laws may have far-

reaching impact on the future transactions and

apprehension may loom large in the trade.

Since the CBE&C clarification dated 16th March, 2012

is indicative of giving a comprehensive coverage to

offences aligning with other indirect tax laws,

apprehension of the trade is justified that the difficulties

arising out of such ambiguous wording may take an

ugly shape under the new negative-list based regime

which is in a nascent stage. I n these challenging times,

there is a pressing need to draw a clear intended scope

of the said clause (a) of section 89(1) in order to

achieve the broad objective of compliance.

Though the Board has in its Circular No. 140/9/2011 -

ST dated 12.05.2011 clarified that the provisions

relating to prosecution are to be exercised with due

diligence, caution and responsibility on the part of

departmental officers but such expansion of provision

without proper narrative or outline may expose the

assessee to the threat of unnecessary prosecution.

It has also mentioned in paragraph 9 of the aforesaid

Circular that each offence described in section 89(1)

of the Finance Act, 1994 has an inherent mens rea;

delinquency by the defaulter of service tax itself

establishes his 'guilt'; if the accused claims that he did

not have guilty mind, it is for him to prove the same

beyond reasonable doubt; thus, burden of proof

regarding non-existence of ' mens rea' is on the

accused.

So, the department has smartly positioned itself to

plead for every evasion having inherent mens rea to

be covered under the terms "knowingly evades" and

liable for prosecution .

In such a situation, it is expected that the Departmental

officers exercise the provisions of prosecution with due

diligence, caution and responsibility.

It is also important to understand the following

important provisions of Finance Act,1994 :

Sections Provisions

72A Special Audi t by Pract ic ing Chartered

Accountant and Cost Accountants if assessee

fails to declare or determine value of taxable

services correctly or Cenvat availment and

utilization are not in the normal limit or availed

20


by fraud/ collusion / suppression of facts /

willful misstatement or where operation of the

company are spread out at multiple locations

Sec 73(1) Time limit for issue of Show Cause notice

extended to 18 months

Sec 73(2) Deeming provision for issuance of Show

Cause Notice for subsequent period has been

introduced if grounds relied upon remain the

same for the earlier period - Limitation of 18

months will not apply in such cases.

Sec 73(4A) Provision of payment of service tax, interest

and penal ty equal to 1% each month

maximum to 25% will not be applicable in the

case where service tax not levied or paid or

short levied or short paid or erroneously

refunded will not be applicable if it is on

account of fraud / collusion / suppression of

facts / willful misstatement.

In other words, issuance of Show Cause Notices and

invoking extended larger period will not be at all difficult

to the Revenue Department considering the nature of

disclosures and reply to the communications which is

generally made by the Assessees' and as stated

above, invoking the provisions of prosecution will be

easy if, proper controls and systems are not been set-

up.

One has to undertake the following exercises so as to

be 100% Statutory complaint and also to avail correct

Cenvat of "Capital goods, Input and Input Services"

and also " Reverse Cenvat Amount " in accordance

with Rule 6 (3A) of Cenvat Credit Rules, 2004.

• Review of the Trial Balance and identification of

the Accounts for further review and analysis of

each transactions reflecting in Books of Accounts

• Review of Contracts with various Service

Providers including job-workers, WCT,

transportation, etc

• Review of each of the identified Accounts and the

transactions there under

• Mapping the transactions in the Ledger Accounts,

linking it with Service Provider Master and

identifying the coverage under Service and impact

on the service Tax liability

• Review of the mechanism for availment of Service

Tax Credit

• Providing Guidelines for change in system of

Accounting entries, required if any to facilitate the

identification of the Service Tax Liability as

mentioned above

• Providing guidelines for changes in system of

Credit Availment, taking into account the revised

reverse charge scenario

• Amending Contract terms of the various contracts

with Service Providers to have minimum impact

of service tax within the Legal framework and

reduce the complexities under Reverse Charge

Mechanism and Cenvat Credit Reversal

Mechanism

• Continuous Training to the Accounts team and

Indirect Tax team for implementation of the new

system in the New Era of Negative List of Services

The actions needs to be initiated not only for the

Officers' of Accounts Department and Indirect Tax

Team of company but also to the Statutory Auditor and

Tax Auditor who will be certifying the correctness of

Payment of Government dues and also of Cost

Accountant who will be doing the Cost Audit and report

Indirect Tax Reconciliation in his Audit report.

i i i

21


CENTRAL EXCISEä CENVAT/MODVAT Credit on Inputs: Notification

No.14/97-CE(NT) restricting users of specified

petroleum products from local refineries to take

Modvat credit only to the extent of 10% ad

valorem. HC held. it is ultra vires to the Articles

14 and 19(1) (g) of Constitution of India. Same

rules of law and remedies should be applicable

to all persons within India territory, irrespective of

difference of circumstances, all persons similarly

circumstanced shall be treated alike, both in

privileges conferred and liabilities imposed. No

action should treat uneuqals as equals.

[2012(282) E.L.T. 33 (Guj. HC)]

ä Practice and Procedure- Person whose case

is based on falsehood, has no right to

approach court,: One who comes to court, must

come with clean hands, process of court can not

be allowed to be abused by unscrupulous persons

as convenient lever to retain illegal gains

indefinitely and person whose case is based on

falsehood, has no right to approach court, he can

be summarily thrown out at any stage of the

litigation. [2012(282) E.L.T. 67(Tri. Chennai)]

ä Exports Rebate not admissible as no proof for

use of inputs in exported goods: Fundamental

requirement for claiming rebate of duty paid on

inputs is that the use of duty paid inputs in the

manufacture of export goods. Applicant failed to

submit any records proving use of said duty paid

inputs in manufacture of export goods; said lapse

cannot be treated as a procedural lapse, rebate

claim not admissible under Rule 18 of Central

Excise Rules, 2002. [2012(282) E.L.T. 153 (GOI)]

ä Exports Rebate allowed when duty paid under

Rule 3(4) or (5): rebate claims on exported used

aluminium engraved (printing) cylinders after

payment of duty discharged under Rule 3(5) of

CCR, 2004 on the 'transaction value'. These

claims had been rejected inter alia on the grounds

that i) the goods were exported directly from

factory / warehouse of their manufacturer but from

applicant's own factory, ii) the cenvatable export

goods were exported after use and not as such

and iii) duty paid under Cenvat Credit is not

covered under definition of duty for rebate

purpose. But Government set aside the impugned

orders and confirmed that an amount reversed

under Rule 3(4) when inputs are removed as such

is to be treated as payment of excise duty. Further

when exporter has submitted proof of actual

export, the substantial benefit of due rebates

should not be denied. [2012(282) E.L.T. 137

(GOI)]

ä Undervaluation of few clearances cannot be

applied to all: It cannot be applied to all

clearances of assessee as evidence of

undervaluation has to be available for each

removal. Demand cannot be confirmed when

there is probability that in all cases assessee may

not be guilty of same transgression, however

extrapolation is justified if reliable pattern shows

beyond doubt a probability that same level of

undervaluation was there in respect of all

impugned clearances. [2012(282) E.L.T. 112 (Tri.

Bang.)]

ä Export rebate: Time limit of one year under

Section 11B applicable: Where the statute

provides a period of limitation, the provision has

to be complied with as a mandatory requirement

of law. In the present case petitioner had filed an

application for rebate on 17th July 2007 which

was beyond the period of one year from 12th

February 2006 being the relevant date on which

the goods were exported. Since, section 11B of

Central Excise Act, 1944 specifically

comprehends an application for rebate of excise

duty on goods exported or materials used in their

manufacture, hence Rule 18 of Central Excise

Rules, 2002 cannot be read independent of

requirement of limitation prescribed in section 11B

22


ibid. Mere presentation of ARE-1 form does not

constitute the filling of a valid application for

rebate. [2012 (282) E.L.T. 481 (Bom.)]

ä Cenvat Credit is admissible in relation to tool

kit and first aid kit sold as accessories

alongwith two wheelers: Clause 4(b) of Rule 138

of Central Motor Vehicle Rules, 1989 makes it

incumbent on driver of every vehicle to carry the

tool kit prescribed by the manufacturer. Since,

carrying of the tool kit and first aid kit are

necessary accessories of the motor vehicle

because driving of the vehicle without those

accessories would be violative of Rule 138 ibid

hence, kits supplied to the buyers as per statutory

requirements are squarely covered under

definition of 'input' under section 2(k) of Cenvat

Credit Rules, 2004 and therefore, cenvat credit

availed by the assessee in relation to tool kit and

first aid kit is rightly admissible to them. [2012

(282) E.L.T. 533 (Tr. Del.)]

ä Cenvat credit on insurance of plant and

machinary, company's vehicles, finished

goods in stock: Main part of "Input Service"

definition in Rule 2(l) of Cenvat Credit Rules, 2004

cover all services having nexus with manufacture

whether directly or indirectly and services availed

in compliance with statutory provisions without

which manufacturing activity not allowed also

covered. Inclusive portion of the 'input service'

definition does not specifically cover insurance

of plant and machinery, company's vehicles,

finished goods in stock or transit, it does cover

'activities relating to business such as accounting,

auditing, financing' because of use of the words

"such as" the scope of "activities relating to

business" is very wide and the list of services

covered by this definition is not exhaustive.

Hence, services integrally connected, treatable

as 'activities relating to business' and therefore

covered by definition of 'input service. [2012(282)

E.L.T. 541 (Tri.Del.)]

ä Exemption from MRP based assessment to

packaged commodity: Rule 2(A) of Standards

of Weights and Measures (Packaged

Commodities) Rules, 1977 grants exemption from

applicability of chapter II of Rules ibid i.e.

exemption from MRP based assessment to

imported packaged commodity in cases of goods

sold to institutional consumers or industrial

consumers but burden to prove that the provisions

of Chapter -II ibid are not applicable to packaged

commodity imported by them lies on the

aseessee. In the present matter since the

assessee fulfills all the conditions to be covered

under exemption from MRP based assessment,

matter remanded back to original authority for

deciding afresh. [2012(282) E.L.T. 566

(Tri.Mum)].

ä Coal Exemption: if there is availment of cenvat

credit of duty on inputs under the provisions of

Cenvat Credit Rules, 2004 the exemption

provided under Notification No.1/2011-CE will not

be applicable, excise duty @ 5% would be liveable

on Coal. Excise duty limited to the extent of 1%

ad valorem plus cess, in the event only if credit of

duty on inputs has not been taken. [2012(283)

E.L.T. 330 (Gau. HC)]

ä Cenvat Credit utilized in the manufacture of

exempted goods liable to be reversed

immediately: Credit of duty utilized in the

manufacture of exempted goods is required to

be reversed without any reference of time-limit.

[2012(283)ELT 336 (Allah HC)]

ä Re-export of un-utilized goods imported under

exemption notification: Re-export under

Notification No.93/2004-Cus is permitted only

when the materials are found defective or unfit

for use. In this case assessee imported raw

material as per Notification No.93/2004-Cus which

can not be considered to be the goods of

assessee as the assessee was doing only job

work and ownership of the goods remains with

foreign company for whose benefit the job work

is undertaken. Importer would be entitled to claim

the benefit of exemption from payment of duty

only as per the terms of the Notification and not

otherwise. [2012(283)ELT 346 (Mad HC)]

ä Recovery Limitation:Secyion 11D of the Central

Excise Act, 1944 does not provide any rigid time

limit. In such cases, as so long as the recovery

proceedings are initiated within reasonable time,

the same cannot be struck down only as time

barred. The reasonable period of time is

essentially a question of fact and to be judged on

23


the basis of each individual case. [2012(283)ELT

359 (Guj. HC)]

ä Exemption cannot be denied due to clerical

mistake: Clerical mistake in mentioning wrong

Notification Number for availing area based

exemption, it is immaterial where even the

department was treating claim of exemption under

correct Notification. [2012 (283)ELT 390 (Tri-Del)]

ä Cenvat Credit on Canteen Service: To provide

canteen facility is the statutory liability under

Section 46 of Factories Act does not exist in case

where assessee does not have 250 or more

employees or workers during the material period

in view of this assessee is not entitled to take credit

of service tax paid. [2012(283)ELT 415 (Tri.

Bang)]

ä Bogus Transaction Evidence: The Revenue has

not bothered to conduct inquiries either from the

assessee or from the transporters or the actual

manufacturer of the goods or from the recipient

of the goods. In the absence of any such

investigation, reliance on the sole statement of

one dealer which in any case does not apply to

the goods dealt with by the present assessee

cannot be appreciated. Penalty set aside. [2012-

TIOL-1267-CESTAT-DEL]

ä Suo Motu credit not allowed: Duty paid wrongly

and credit taken suo moto by the appellants -

Followed the Larger bench decision of BDH

Industries Ltd. (2008-TIOL-1211-CESTAT-MUM-

LB) - There is no provision in Central Excise Act

and Rules allowing suo motu taking of credit -

Appeal Dismissed [2012-TIOL-1297-CESTAT-

BANG]

ä Principles of natural justice: Adjudicating

authority called for a report from the jurisdictional

Superintendent after personal hearing and

recorded a finding against the assessee - Copy

of the said report was not supplied to the assessee

- There is gross violation of principles of natural

justice - Matter remanded with a direction to

supply copy of the said report to the appellants. -

Matter remanded [2012-TIOL-1329-CESTAT-

AHM]

ä Cenvat Credit on vehicle Insurance: Service

Tax paid on insurance in respect of vehicles

owned and used by the appellant is an Input

Service as defined in rule 2(l) of the CCR, 2004 -

Appeal allowed with consequential relief [2012-

TIOL-1322-CESTAT-MUM]

ä COD application dismissed: Negligence of the

employee of the applicant cannot be considered

as a sufficient cause for not filing the appeal within

the period of limitation - appellant although

receiving order in January 2010 failing to file

appeal within the period of limitation and shifting

blame on employee - [2012-TIOL-1193-CESTAT-

BANG]

CUSTOMSä Strictures against Department - Negligence of

Revenue Officers involved in case against State:

Such officers to be proceeded against with sternly

so that it may serve as a lesson to others.

Democratic Government does not mean lax

Government. Rules or procedure and / or

principals of Natural Justice are not meant to

enable guilty to defeat objects of Customs Act,

1962. In case involving fraudulent TRA obtained

for use of DEPB scrips for imports from a port

other than the port of exports, investigation

ordered by DG (Vigilance), CBEC so that

appropriate disciplinary action is taken against

officials of Customs House and DRI due to whose

involvement or negligence fraud was

perpetuated.[2012(282) E.L.T. 67(Tri. Chennai)]

ä Reimbursement by ECGC not be constituted

as export realization in foreign exchange -

Drawback benefit denied: Department does not

find reimbursement by ECGC (Export Credit

Guarantee Corporation) as equivalent to

realization of due sale proceeds in foreign

exchange and the same is clarified by CBEC

Circular No.7/2010-Cus dated 23.03.2010 as well

as RBI Master Circular No.6/2010-11 dated

01.07.2010 stipulates that claims settled by ECGC

should not be constituted as export realization in

foreign exchange therefore exporter not entitled

to any drawback benefit and demand confirmed.

[2012(282) E.L.T. 145 (GOI)]

ä Drawback fixation of brand rate: Application filed

for fixation of drawback under Rule 6(1)(a) (Brand

Rate) and under Rule 7(i) (Special Brand rate) of

24


Customs, Central Excise Duties and Service Tax

Drawback Rules, 1995 are treated as one and

the same as the information required to be

furnished for both are identical. Purpose of

drawback is to relieve the burden of taxes on the

export goods and to make our exports competitive

in the international market for achieving this object

department has to interpret and implement the

rules in a meaningful way so that the exporter

gets the maximum benefit eligible as prescribed

under the law. Adjudicating authority should have

considered the claim made by applicant under

Rule 7 ibid instead of Rule 6. Matter remanded

for a fresh consideration. [2012(282) E.L.T.

92(Tri. Mumbai)]

ä Drawback allowed: in respect of re-export of

defective goods & drawback claim, deficiency

memo raised asking to submit certificate of non-

availment of Cenvat credit and Bank Realization

and the same are submitted after lapse of 30 days

as stated in defect memo but there was nothing

on record that the same are submitted them after

30 days, in that view drawback claim allowed, the

departments plea that it was time barred was

rejected. [2012(282) E.L.T. 59 (Mad. HC)]

ä Duty free procurement for supply to SEZ: Duty

free goods procured by a DTA unit for

manufacture of finished goods and cleared to a

unit in SEZ without payment of duty in terms of

provisions of Rule 19(2) of Central Excise Rules,

2002 read with Notification No.43/2001-CE NT

dated 26.06.2001. Supply of goods to SEZ has

to be equated with exports as the same also

clarified in Board Circular No.29/2006-Cus dated

27.12.2006 the said benefit of non payment of

duty is available. [2012(282) E.L.T. 108 (Tri. Del.)]

ä Writ Jurisdiction exercisable despite

alternative remedy when other availing the

benefit denied to the petitioner: Once the matter

is pending before tribunal and Order passed by

the Commissioner(Appeals) was not set aside by

the tribunal, petitioner-importer was bound to pay

duty imposed to clear the goods. Only remedy

for them was to get final order in their favour from

Tribunal or higher authority. There was no

alternative remedy for release of goods and

obtaining stay of duty. Since in the present case

also issue involved of violation of Articles 14 and

19 of Constitution of India on allegation of unequal

treatment as the assessee was forced to pay CVD

whereas their competitors in the same field placed

in another state were not required to bear this

burden, Hon'ble High Court placed reliance on

the precedent decision of State High Court and

allowed release of goods on payment of 25% of

duty and execution of bond on the same

conditions during pendency of appeal before

tribunal. [2012(282) E.L.T.487 9 Guj.)]

ä Waiver of pre-deposit not grantable when

fraud, evasion of taxes, wilful mis-statement,

suppression involved: Merchant exporter

purchased the goods under drawback claim from

traders but he has not produced details of

supporting manufacturers regarding non

availment of cenvat credit within due course and

declarations of name of supporting manufacturer

which was filed belatedly, found to be false.

Hence, it was held that Drawback claim was

contrary to Rule 3 of Drawback Rules and excise

portion of drawback is also not available as the

assessee failed to produce evidence showing

non-availement of input/input service cenvat

credit.

If person prima-facie founds to have evaded taxes

by fraud, evasion of taxes, wilful mis-statement,

suppression, contravention of law with intent to

evade tax does not deserve dispensation from

pre-deposit. [2012 (282) E.LT. 577 (Tri.Del.)]

ä Customs Refund - Unjust Enrichment: The

appellants have submitted an affidavit that they

have not passed on the extra duty burden to

anyone and have also undertaken to compensate

the department in case it is found that any amount

is passed on - They have produced necessary

Chartered Accountant's Certificate and their

balance sheet also indicates the amount as

'Receivables' from the department - Appellant

entitled for refund. - Appeal allowed: [2012-TIOL-

1303-CESTAT-MAD]

ä Strictures against department: Departmental

officers are not doing their duty properly before

filing application for early hearing - they are

advised to check the records as the appeal has

already been disposed of by the Bench by way of

25


remand in the year 2004: [para 2]- Revenue

Application dismissed as infructuous [2012-TIOL-

625-CESTAT-MUM]

ä Refund - While filing Bill of Entry, appellant did

not mention the unconditional exemption available

under notification 21/2002 - Cus - even assessing

officer did not consider this fact - refund claim filed

rejected on the ground that appellant had not

challenged the assessment - it is the duty of the

Customs officer while assessing the bill of entry

to assess in accordance with law - failure to do

so can be termed as accidental slip or omission

which can be corrected in terms of Section 154

of the Customs Act, 1962 - in such an eventuality

assessment need not be challenged - one cannot

blindly apply the ratio of Priya Blue Industries ad

LB decision in Eurotex case - order set aside with

consequential relief: [2012-TIOL-1134-CESTAT-

MUM]

ä Customs Notifications 52/2000-Cus & 43/2002-

Cus - Conversion work done through a job-worker

would not, prima facie, constitute transfer of the

imported raw materials, because, firstly there is

no bar for the manufacturer-exporter to get the

imported raw materials converted through a job-

worker and thereafter sell the same and secondly,

the assessee had sold the goods after its

conversion and not before - CESTAT order

directing applicant to make a pre-deposit of Rs.1

Crore quashed - bench directed to hear appeal

on merits: [2012-TIOL-703-HC-MUM-CUS]

SERVICE TAXä Delhi HC on 27.07.2012 has stayed the collection

of differential demand of Service Tax of 2% on

service provided and invoices raised prior to

01.04.2012 for which payment is received by

service provider on or after 01.04.2012. The order

was passed on a petition filed by Delhi Chartered

Accountant's Society and final hearing in this

matter is pending.

ä Penalty under Section 76 and 78 not imposable-

SCN issued imposing penalty u/s. 76 & 78 of

Finance Act, 1994 after 3.5 years of

commencement of investigation. On pointing out

at the time of investigation Appellant paid the full

amount of service tax with interest without even

checking up whether they have received all the

bills or not from the service recipients. In absence

of any findings that service tax is collected from

all the customers and not paid to government.

Therefore government itself has taken a view that

procedural lapses leading to evasion of service

tax should be treated leniently. It is the fit case

for invocation of provisions of section 73(3) of

Finance Act, 1994, penalty set aside.

[2012(27)STR 290(Tri.-Ahmd.)]

ä Penalty waived though delay in payment of

Service Tax and not filing of ST-3 returns on time-

Appellant are small businessman and not in a

position to appoint Chartered Accountant and

other staff to look after the day to day work of

Service Tax and due to this the payment was

made late. Though appellant paid service tax late

and filed the Service Tax returns late but he has

paid the service tax and filed the returns on his

own penalty under section 76 & 77 of Finance

Act, 1994 not imposable. [2012(27)STR 265 (Tri.-

Mumbai.)]

ä Composite Contract - Issue of 4 separate invoices

does not make as 4 separate contracts- Main

object of agreement was to provide all of service

required for erection, installation and

commissioning of Wind Farm Projects / Wind

Turbine Generators (WTG). Material provided by

assessee in relation to electrical work were

incidental thereto. Electrical Installation was part

of WTG as without that evacuation of electricity

from WTG to State Electricity grid was not

possible. Further establishment of Wind Farm

Project became complete only after

commissioning of WTGs. In that view by showing

four separate invoices for (i) construction of civil

foundation etc. (ii) supply and installation of

transmission line from windmill to grid

interconnection, (iii) erection and installation of

windmill and (iv) final testing and commissioning

of wind mills, it cannot be said that assessee has

executed four separate and distinct contracts with

its customers. Confirmation of demand is upheld

under Erection, Commissioning or Installation

service. [2012(27)STR 242 (Tri.-Mumbai.)]

ä CMC charges to be included in assessable

value of taxable service provided by CHA-

26


CMC charges which are levied by computer

centre for filing of bill of entry and shipping bills

electronically to be included in the assessable

value of taxable service provided by CHA.

[2012(27)STR 285(Tri.-Chennai.)]

ä Service Tax Credit on air travel allowed- Credit

of service tax paid on air travel denied on the

ground of having no relation with manufacture but

Chartered Accountant certificate indicates that

these expenses are revenue expenditure relating

to final product and included in assessable value

and this issue is already covered in Tribunal

decision in case of Dr. Reddy Lab. Ltd.

[2012(27)STR 285(Tri.-Chennai.)]

ä Service Tax Credit on Insurance for

Workmen's Compensation allowed- Cenvat

Credit in respect of service tax paid on workmen's

insurance compensation on the amount of

insurance paid admissible as the Insurance

premium relatable to business activity and

obligatory under law. [2012(27)STR 270 (Tri.-

Ahmd.)]

ä Cenvat Credit on services rendered on repair

and maintenance of windmills for generation

of electricity- Electricity so generated in the

factory to manufacture final product, services

rendered to up keep windmill to generate

electricity in nexus with manufacturing of final

product hence service covered rightly under

definition of input service. [2012(27)STR 320(Tri.-

Mumbai.)]

ä Interest not demandable if not calculated by

adjudication authorities in OIO / thereafter: If

adjudicating authority did not calculated interest

in Order-In Original or thereafter in such case it is

too much to expect assessee to pay it along with

duty amount in such circumstances no interest is

chargeable. [2012(27)STR 314(Tri.-Mumbai.)]

ä No liability of Interest: Cenvat Credit availed on

inputs used in exempted products and if the same

is reversed without utilization, there is no liability

for interest as interest is compensatory in

character imposed on assessee withholding tax

as and when due. [2012(27)STR 337(Kar HC)]

ä Cenvat Credit of Service Tax paid for Rent-a-

Cab Service is allowed: Transportation service

provided in the factory of assessee to their staff

for pick up and drop from their residence to the

factory and vice versa, is an input service used in

or in relation to manufacture, whether directly or

infdirectly of the final products within the meaning

of comprehension of Rule 2 (l) of Cenvat Credit

Rules, 2004 therefore service tax so paid for

receiving the transportation services eligible for

availment and utilization.[2012(27)STR 338(Kar

HC)]

ä Advertising services credit available: payment

of service tax on hotel rent for chief executive of

business and client meeting the issue directly

relatable to assessee's business therefore credit

admissible. [2012(27)STR 344 (Tri.-Ahmd.)]

ä Abatement not deniable for mentioning different

description of services in ST-3 return and payment

challan therefore denial to claim classification

under either heads due to mistake in assessment

is unfair, demand not sustainable. [2012(27)STR

364 (Tri.-Ahmd.)]

ä Excess payment of service tax be adjusted

against subsequent service tax liability: On

facts there is no dispute that there is excess

payment of service tax by assessee which was

due to their impression that they had a centralized

registration, but atually no centralized registration

therefore adjustment of excess tax paid cannot

be denied and the excess payment should be

adjusted against subsequent service tax liabilities.

[2012(27)STR 372 (Tri.-Ahmd.)]

ä When there are different views regarding

taxability of services penalty not imposable:

On the basis of favorable judg ements assessee

not paying tax under the bonafide belief and

whereas afterwards the judgements are gone

against on this basis assessee could have

entertained bona fide belief that their services

were not liable to tax during relevant period

therefore penalty not imposable. [2012(27)STR

375 (Tri.-Ahmd.)]

ä Strictures against Department: Supplementary

appeal to Appellate Tribunal filed after mone than

5 months though there is specific direction from

Tribunal to file it within 3 months. Revenue treated

the direction of Tribunal in cavalier manner and

27


showed their lackadaisical approach it is nothing

but the Callous approach of the department.

[2012(27)STR 436 (Tri.-Bang.)]

ä Cash refund of unutilized Cenvat Credit

permissible: pre-deposit amount deposited

through cenvat credit amount and appellant not

in a position to utilize the credit on account of

opting out from Modat scheme on 09.07.2004.

Refund of pre-deposit in cash allowed.

[2012(27)STR 447(Tri.-Mum.)]

ä Cenvat/Modvat on Outdoor Catering Service:

Maintaining of canteen for workers being

requirement under applicable provisions of the

Factories Act, 1948, same has to be held as

activity related to manufacturing business. Cenvat

credit allowed as the service is rightly covered by

the definition of 'Input Service'. [2012(27)STR

440(Tri.-Del.)]

ä Exemption for Training and Coaching to the

persons who have educated at least up to 12th

standard: It is clarified that Training and Coaching

in the fields of 1) Business 2) Fashion Technology

3) Advertisement and Graphic Design 4) Media

5) Hospitality and 6) Hospital Administration are

vocational trainings entitled to benefit of

exemption under Notification No.09/2003-ST and

Notification No.24/2004-ST. Revenues plea that

only trainings in areas like welding, carpentry etc.

where level of education requires is low, qualifies

vocational training is rejected. [2012(27)STR

377(Tri.-Del.)]

ä Revenue Neutrality: 100% EOU import the

services from foreign based commission agent,

service tax was payable as deemed service

provider. Assessee is eligible to Service Tax

Credit if tax paid as services clearly are input

service, also as wll as assessee is eligible to

Refund under Rule 5 of Cenvat Credit Rules

20004. Therefore there is a claim for revenue

neutrality and absence of intention to evade tax,

no penalty is imposable. [2012(27)STR 342 (Tri.-

Bang.)]

ä Permission to use trade mark covered by

definition of 'Intellectual Property Right and

'Intellectual Property Services': appellant M/s.

Hero Honda Motors Ltd entered in to an

agreement with M/s. Bharat Petroleum Corpn Ltd,

M/s.TIDE Water Oil Co. Ltd and M/s. Savita

Chemicals Ltd. In terms of said agreement BPCL,

Tide Water and Savita chemicals were permitted

to use the brand name of 'Hero Honda' and 'Hero

Honda 40T' on the containers of the products

manufactured by them for the purpose of

marketing and promoting their said products. In

terms of said agreement the appellants were

receiving royalty as per terms and conditions of

the said agreements. Department raised the

demand of service tax against appellant to treat

the royalty received for Intellectual Property

Services. And it is held that Permission to use

trade mark covered by definition of 'Intellectual

Property Right and 'Intellectual Property Services.

[2012(27)STR 409 (Tri.- Del.)]

ä ST Refund as per Notfn. 17/2009-ST - Supplier

discharging service tax liability on 'documentation

charges' under the category of 'Clearing &

Forwarding Agency service' - officers in-charge

of appellant's factory (recipient of service) have

no jurisdiction to deny the refund claim on the

ground that the 'documentation charges' are not

covered under "C&F Agency service". Appeal

allowed with consequential relief. [2012-TIOL-

1264-CESTAT-MUM]

ä Principles of Natural Justice - SCN alleges that

the appellant was rendering BAS to Royal

Challengers by sporting the Logo/Mark/Sign

which, according to the Department, were in the

nature of advertising the products of the

commercial establishments - It is evident from the

records of the case, the contentions raised by the

assessee were not heeded by the adjudicating

authority, which chose to rely on Wikipedia and

other materials - It appears, Wikipedia was

elaborately referred to in the impugned order

without putting the assessee on notice, which, by

all means, amounts to violation of natural justice

- The case of department was mainly based on

the MOUs executed by Royal Challengers with

the owners of logo/mark/sign which were

displayed by the cricketer on his uniform during

the course of the tournaments, but no copy of

any such MOU was supplied to the assessee, nor

even mentioned in the list of relied-upon

28


documents attached to the SCNs - This is yet

another instance of denial of natural justice -

Matter remanded for de novo adjudication [2012-

TIOL-1132-CESTAT-BANG]

EOUä When goods on which credit was taken is

removed as such, the credit is required to be

reversed: Appellant is having two units (one DTA

Unit and one 100% EOU Unit) - DTA unit imported

capital goods by availing the benefits of

Notification No.25/2002-Customs dated 1.3.2002

and removed such goods to EOU unit without

reversing the credit taken and without invoice -

Plea of Revenue neutrality - substantial provision

in Rule 3(5) of CENVAT Credit Rules is clear that

when goods on which credit was taken is removed

as such, the credit is required to be reversed -

The reference to mode of clearance using a

document referred to in Rule 9 is procedural in

nature - the DTA unit having taken the credit on

the capital goods, are required to reverse the

credit in terms of Rule 3(5) of CENVAT Credit

Rules - Ordered for reversal of CENVAT credit of

Rs.28,96,982/- which is equal to CENVAT Credit

taken. Pre-deposit Ordered: [2012-TIOL-1261-

CESTAT-BANG]

ä Clearance by 100% EOU of goods into DTA -

Provisions of notfn. 23/2003-CE are applicable

and not that of 30/2004-CE since the notification

issued u/s 5A(1) of the CEA, 1944 does not

specifically provide for applicability to EOU - not

a fit case for waiver - Pre-deposit ordered: [2012-

TIOL-1171-CESTAT-MUM]

INCOME TAXä Accounting of Excise Duty payable - Excise

duty payable on goods manufactured is neither

an expense nor is a constitutient of stock. The

Excise Duty can be accounted for in the books of

accounts at the time of clearance of goods from

the factory. Further, non provision of liabilities in

respect of finished product lying in stock at the

close of the year will have no impact on the profit

of the year. [2012-TIOL-88-SC-IT]

ä Various disallowance by the Revenue -

Entertainment expenditure incurred on employees

of the assessee while they were entertaining

assessee's customers cannot be disallowed u/s

37. When cost of machinery acquired from outside

India is enhanced on account of foreign exchange

rate fluctuation, depreciation can be charged on

such enhanced costs, irrespective of date of

payment of such purchase price. Payments made

to State Electricity Board for laying of electricity

transmission lines, which did not become the

property of the assessee, does not have enduring

benefits to the assessee and is not allowable as

revenue expenditure. When the method of

valuation of the stock has been uniformly

accepted for the past Ays, the same cannot be

upset for a particular year, when such method

did not conceal any income. Expenditure incurred

by a subsidiary on brand building and dealer

royalty cannot be partially dis-allowed, merely

because a part of the expenditure inured for the

benefit of the parent company. [2012-TIOL-787-

HC-DEL-IT]

ä Disallowance of expenditure - The R & D

expenses incurred by the Head Office can be

allocated among the four manufacturing units

even when such research has no connection with

the business of the said units, nor any benefit is

received by them from the said research. [2012-

TIOL-784-HC-MUM-IT]

ä When to impose Penalty - Penalty u/s 271D

cannot be imposed if there were two possible

views and that too one directly in favour of the

assessee. [2012-TIOL-786-HC-DEL-IT]

ä Deductions u/s 80HHC - While computing the

profits for the purpose of deduction u/s. 80HHC,

interest income earned by the assessee is

required to be excluded. [2012-TIOL-785-HC-

MUM-IT]

ä HC Ruling-for the purpose of Section 10A of the

Income Tax Act, 1961 the losses suffered in the

Non-EPZ Unit need not be set off from the profit/

income of the EPZ Unit. For computing deduction

under Section 10A of the Income Tax Act, 1961

in respect of EPZ Unit, the brought forward losses

of the Non-EPZ Unit should not be deducted or

reduced- AIT-2012-257-HC

29


• New procedure for Single / Centralized

Registration under Rule 4 of Service Tax Rules,

1994 has been devised - Trade Notice No. 16/

ST/2012 dated 18.06.2012 ST Commissionerate

Delhi. [2012 (27) STR (C189)]

• Legal Metrology (Pachaged Commodities) Rules,

2011- Second Amendment of 2012 issued [2012

(282) ELT(N10)]

• More than 260 officers working with two crucial

boards of the Department of Revanue, CBDT &

C.B.E. & C., faced raids and investigation in

curruption by the CBI in the last three years for

their alleged involvement in corruption.

• Fiat India loses Rs.432 crores excise case.

• It is clarified that in case of finished goods cleared

in DTA as stock transfer, if exempts from payment

of Sales Tax / VAT the additional duty of customs

shall be leviable at the prescribed rate.

• Apex Court asks Bharti Airtel to deposit Rs. 215

Crores in Customs Case

• An amount of Rs.86,000 Crores indirect tax

revenue of CBEC has been locked up in litigation.

• Customs Official gets 3 months jail: The Patna

High Court on 06.09.2012 ordered three months

simple imprisonment to the Assistant

Commissioner, Customs (Prevention Division),

Forbesganj, Shiv Shankar for Contempt of Court

and slapped a fine of Rs.2000 on him for non

complying with the court order for releasing a truck

laden with betel nuts.

• CBI starts probe against Mr. Anup Kumar

Srivastava, the Central Excise Commissioner

Delhi-I for allegedly taking bribe for shielding two

businessman in a tax evasion case.

• Standing orders issued for Verification

mechanism and monitoring of export obligation

under duty exemption / reward scheme.

• A former Assistant Commissioner of Customs Mr.

Kulwaran Singh was sentenced to 3 years in jail

by Delhi Court for possessing disproportionate

assets whereas his wife and six accomplices were

sentenced with varying jail terms.

• Delhi HC on 27.07.2012 has stayed the collection

of differential demand of Service Tax of 2% on

service provided and invoices raised prior to

01.04.2012 for which payment is recived by

service provider on or after 01.04.2012. The order

was passed on a petition filed by Delhi Chartered

Accountant's Society and final hearing in this

matter is pending

• CDR CESTAT B. S. Vasudev to be Chief

Commissioner of Customs Mumbai.

• Jeetendra Chaturvedi to be Director-General of

Central Excise Intelligence.

• Punjab Government hikes VAT rate by 0.5 per

cent w.e.f. 3rd September-VAT Rate on Schedule

B goods is 5.5 per cent, on Schedule C-1 goods

4.5 per cent, on Schedule D goods 20.5 per

cent,On Schedule F goods 13 per cent, Rates on

Schedule E goods also changed, No VAT on

Sugar

• Justice Kapadia recommends name of Justice

Altamas Kabir as next Chief Justice of Supreme

Court

• Paras Kuhad & Rakesh Khanna appointed as

Additional Solicitor General in SC

• Hosewives to get salary from their husbands for

household work according to proposed law

• Tenure of CESTAT President fixed to 5 year &

Retirement Age hiked to 68 years.

• CESTAT Members to be appointed for 5 years

only which can be extended for another 5 years-

Maximum tenure of Member fixed to 10 years or

65 years of age whichever is earlier.

• Maximum permissible limit of ECB hiked to 75

per cent of the average foreign exchange earnings

realized during the immediate past 3 financial

years or 50 per cent of the highest foreign

30


exchange earnings realized in any of the

immediate past 3 financial years, whichever is

higher;

• In case of SPVs, which have completed at least

one year of existence from the date of

incorporation and do not have sufficient track

record/past performance for 3 financial years, the

maximum permissible ECB that can be availed

of limited to 50 per cent of the annual export

earnings realized during the past financial year.

• The maximum ECB that can be availed by an

individual company or group, as a whole restricted

to USD 3 billion-RBI Circular No.26

• Income Tax Officer of Kakinada P Venkateswara

Rao booked by CBI for demanding bribe of Rs 65

Lakh-Bribe conduit & Uncle of ITO arrested while

taking bribe.

• VAT Officer GK Raval arrested by ACB at

Gandhigram Railway Station in Gujarat while

taking bribe of Rs 45 Lakh from owner of Techno

Industries Ltd for settling notice of Labour VAT

dues.

• Ex-MD & COO of Reebok arrested for fraud.

• Jayant Misra appointed as Development

Commissioner of Noida SEZ

• President of CESTAT Justice Ajit Bharihoke tipped

to join National Consumer Forum.

• Najib Shah takes over as Director-General of

Revenue Intelligence

• RS Sidhu joins as Member of Settlement

Commission(Customs & Excise) in Delhi

• RK Jain elected as President of CESTAT Bar

Association- RKJ got 160 votes while rival Piyush

Kumar got 125 votes. Kamaljeet Singh elected

as Secretary-Singh got 146 votes against 136

votes of Somesh Arora. Rajesh Kumar elected

as Treasurer. RK Jain's Team captures 10 out of

13 seats in Executive Committee.

i i i

31


Office Order No. 151/2012 Dt. 29th August 2012

Consequent upon the appointment of Ms. Shobha L.Chary as Member of CBEC, the Competent Authority has

re-allocated the work amongst the Members in the Central Board of Excise & Customs (CBEC) as under, until

further orders:

A. Charges of Members:

Sr No. Name Charge

1. Ms. Sheila Sangwan Member (Budget) & Service Tax (additional charge)

2. Shri M. S. Badhan Member (Customs)

3. Ms J. M. Shanti Sundharam Member (Central Excise and omputerization)

4. Ms Sandhya Baliga Member (Legal & Judicial)

5. Ms Shobha L. Chary Member (Personnel & Vigilance)

B. The administrative control and supervision of Members over the charge of Chief Commissioners of

Customs & Central Excise and Directorates will be as under:-

Sr.No. Name Zones/ DGs to be supervised

1. Ms. Sheila Sangwan Chief Commissioner, CX, Mumbai-I

Chief Commissioner, CX, Mumbai-II

Chief Commissioner, Customs, Mumbai-I

Chief Commissioner, Customs, Mumbai-II

Chief Commissioner, Customs (P), Mumbai-III

Chief Commissioner, Customs & CX, Pune.

Director General (Service Tax)

2. Shri M. S. Badhan Chief Commissioner, CX, Delhi.

Chief Commissioner, Customs, Delhi.

Chief Commissioner, Customs (Prev.), Delhi.

Chief Commissioner, Customs & CX, Meerut.

Chief Commissioner, CX, Lucknow.

DG, DRI/DG (Export Promotion)/DG (Valuation)/DG

(Safeguards)/Directorate of Logistics/CRCL.

Additional Charge-

Chief Commissioner, CX, Bhubaneswar.

Chief Commissioner, CX, Kolkata.

Chief Commissioner, Customs, Kolkata.

Chief Commissioner, CX, Ranchi (HQ. at Patna).

Chief Commissioner, Customs (P), Patna.

Chief Commissioner, CX, Shillong.

3. Ms J. M. Shanti Sundharam Chief Commissioner, CX, Bangalore

Chief Commissioner, Customs, Bangalore

Chief Commissioner, CX, Chennai

32


Chief Commissioner, Customs, Chennai

Chief Commissioner, Customs (Prev.), Chennai

Chief Commissioner, CX, Cochin

Chief Commissioner, CX, Coimbatore

Chief Commissioner, CX, Mysore.

DGCEI/DGICCE/DG(Audit)/ CC(TAR)

DG (Systems)

4. Ms Sandhya Baliga Chief Commissioner, CX, Customs and ST, Hyderabad

Chief Commissioner, CX, Customs, Visakhapatnam

Chief Commissioner, CX and Customs, Bhopal

Chief Commissioner, CX, Customs and Nagpur.

CDR/Directorate of Legal Affairs

Work relating to Settlement Commission, CESTAT and

Authority for Advance Rulings.

5. Ms Shobha L. Chary Chief Commissioner, CX, Ahmedabad

Chief Commissioner, Customs, Ahmedabad

Chief Commissioner, CX, Vadodara

Chief Commissioner, CX, Jaipur

Chief Commissioner, CX, Chandigarh.

DG (Vigilance)/DG(NACEN)/DG(HRD)

The charge of GST and DPPR will be looked after by Chairperson (E&C).

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