A) Direct Tax Announcements
B) Other Announcements :
HC grants interim stay on notification
on tax tribunal
Kolkata, Nov. 6 ... The Calcutta High
Court has stayed, till November 11, the notification of the National
Tax Tribunal (NTT), constituted by the Union Government through
an Ordinance promulgated by the President on October 16.
On an application filed by Mr Amar Nath Sen, an advocate of the
Calcutta High Court, challenging the constitutional validity of
the National Tax Tribunal Ordinance, 2003, Mr Justice Kalyan Jyoti
Sengupta, after hearing the matter, today granted an interim injunction,
restraining the Central Government from issuing any notification
till November 11, when the matter will be heard again.
The Ordinance provides for adjudication by the tribunal of disputes
with regard to levy, assessment, collection and enforcement of direct
taxes, and the determination of rates of duties on Customs and Central
excise on goods for the purpose of assessment of such duties as
well as in matters relating to levy of service tax.
Most importantly, the NTT takes away completely the jurisdiction
of the High Court in matters of revenue, raising the hackles of
the legal fraternity and tax practitioners alike. Talking to Business
Line soon after the stay was granted, Dr Debiprosad Pal, senior
counsel arguing the case for the petitioner, said the Ordinance
was taking away the jurisdiction of the High Courts in all matters
of revenue like income-tax, gift tax, Customs, Central excise and
service taxes.
Describing the Ordinance as an attempt to undermine the independence
of the judiciary, which was one of the basic structures of the Indian
Constitution, he said it was therefore "invalid and violates the
Constitutional guarantee of independence of judiciary". He said
there was also a question over whether such a Tribunal could actually
retain its independence as it could be controlled by the Executive.
Describing the judiciary as one of the pillars of democracy, Prof
N.P.Jain of the West Bengal National University for Juridical Sciences,
said the growing trend of attempts to bypass the judiciary by setting
up more and more tribunals should be arrested.
In a sense, such Ordinances may give the common people the idea
that the Executive was fast losing faith in the judiciary, he pointed
out. He said there existed no emergent circumstance, which warranted
the promulgation of the Ordinance, taking away the power and jurisdiction
of the high courts.
He said the stay should be viewed in the background of the recent
Supreme Court comment on attempts at direct encroachment into the
judicial functions by the bureaucracy. He said a petition challenging
the Ordinance was also being filed by the All-India Federation of
Tax Practitioners (AIFTP) in the Mumbai High Court on Friday.
Source : The Hindu Business Line dtd.
7.11.2003
Exporters get more options to file
rebate claims
Exporters can now file rebate claims
and execute bonds or a letter of undertaking at all Central excise
commission rates in the country. The facility has so far been available
only in eight or 10 locations. The facility of filing rebate claims
by exporters has been extended to all commission rates where ports,
airports, land customs stations or export post offices are located,
a finance ministry release said. This has been done taking into
account the growing international trade through minor ports. Exporters
will now have more options to file claims for rebate of Central
excise paid from the place where the export takes place. This is
in addition to the facility of filing the rebate claims before the
jurisdictional assistant or deputy commissioners where export goods
are manufactured or warehoused. Exporters who export goods under
bond or letter of undertaking without payment of excise duty will
also benefit. The government has been taking steps for trade facilitation
with a view to reducing the transaction cost of exports, which is
estimated at as high as 14 per cent in some cases.
[Source: Economic Times. October 30,
2003]
Date For Filing Of TDS Returns On
Computer Media Extended To 31.01.2004
F. No. 385/30/2003-IT (B) Government
of India Ministry of Finance Department of Revenue Central Board
of Direct Taxes New Delhi 28th October 2003 ORDER UNDER SECTION
119(2)(a) OF THE INCOME TAX ACTS, 1961 In exercise of the powers
conferred under clause (a) of Sub-section (2) of Section 119 of
the Income Tax Act, 1961, the Central Board of Direct Taxes, hereby
extends the last date of filing of TDS return on computer media
as per the provisions of sub-section (2) of Section 206 of the Income
Tax Act in respect of previous year 2002-2003 to 31st January, 2004.
The due date of filing of TDS returns other than returns on computer
media shall remain to be 30th November 2003. Sd/- (Anand Jha) Deputy
Secretary (Budget) Central Board of Direct Taxes.
I-T dept to focus on top taxpayers instead of random scrutiny
The CBDT has issued new guidelines on 17th October 2003 for selection
of returns for scrutiny. With a view to remove arbitrariness in the
selection of tax returns for scrutiny, CBDT have instructed the CITs
to select one third of the top 1,000 tax payers under their jurisdiction
for compulsory scrutiny. However, these norms are meant for personal
taxpayers and firms and not for corporates and salaried taxpayers.
The CBDT issued these instructions to ensure that high-income returns
do not escape scrutiny. With this instruction, one out of every three
cases figuring in the list of top 1,000 taxpayers under the jurisdiction
of a CIT will be subjected to scrutiny.
The instructions also specify that once the selection is made from
the 1,000 top taxpayers under the jurisdiction of a CIT, more returns
will be selected for scrutiny at the rate of one out of every five
cases, from the next lot of top 5,000 cases.
Then from the remaining cases, one out of 100 cases will be selected.
According to the instruction, the list of top taxpayers under the
jurisdiction of a CIT should be arranged in a descending order. The
new norms of scrutiny replace the prevailing system of random selection
of Income-tax returns. The IT department is expected to finalise the
process of selection by October 31. The final list so selected shall
be certified by the CCIT.
The instruction also states that-
a) All cases where the CIT (appeal) has sustained a disallowance or
addition of Rs one lakh and above in the preceding year should be
subjected to scrutiny.
b) All search and seizure cases, all survey cases, cases in which
department received information on tax evasion, and cases where the
value of international transaction to the tune of Rs 5 crore or above
are to be scrutinised compulsorily.
Amendments
to search and seizure regulations
VIMAL PUNMIYA
[TUESDAY, SEPTEMBER 30, 2003 03:21:21 PM]
It was in 1956 that the provisions of search and seizure made its
first entry into the Income Tax Act. After Section 132 underwent
a thorough overhaul in the year 1976, two committees have made certain
recommendations on search and seizure provisions. These committees
were the Raja Chellaiah Committee and the Kelkar Committee. However,
though the recommendations affecting the substantive law have been
given effect to in respect of majority of such recommendations,
the assessee- friendly measures recommended by these committees
have not been given any serious consideration.
Current position:
The Finance Act, 2003 has changed the method
of assessment of income in respect of search & requisition cases.
The new method of assessment is made applicable to searches initiated,
or requisitions made after 31/5/03. The new procedure for assessment
is laid down in the three sections, viz. Sections 153A, 153B, and
153C, inserted by the Finance Act, 2003 with effect from 1.6.03.
The Amended provisions of the newly inserted sections are outlined
below:
Sections 153A, 1538 and 153C deal specifically with search and seizure.
Section 153 a
The Assessing Officer would issue a notice to
furnish returns of income for each of the six preceding years within
the specified time limit. Thereby, the assessee will have to file
separate returns for each of the years in the prescribed form within
the time limit specified in the notice. There is no maximum time
limit for filing the returns.
The notice issued under provision 153A can be issued even if the
conditions laid down in sections 147 to 149,151 and 153 are not
satisfied. We can interpret then, that even if 4 years from the
end of the assessment year, for which sections 143(3) has been made,
had expired and the assessee had disclosed all material facts at
the original assessment for the year, notice u/s 153A can be issued
for that year. In normal circumstances, such notice for reassessment
cannot be issued u/s 148 in view of the provision to Section 147.
With regards to the year(s) in respect of which the assessment or
re-assessment is pending, as per the second proviso to section 153A
(b), the same shall abate. In other words, the assessment or re-assessment
shall not be made by regular assessment under section 143(3) or
re-assessment under section 143, but it shall be under section 153A(b).
If the returns are filled, the Assessing Officer shall re-assess
the income under section 153A (b) in respect of the year(s) in respect
of which the assessment is complete.
Thus, the assessee will have to include the income already assessed
earlier or income declared in the returns for which assessments
are pending in the respective years while filing returns for the
above 6 years for which notice u/s 153A is issued. If no returns
are filed, the Assessing Officer shall proceed to make assessment
under Section 144.
Section 153 B
Under section 1538 the assessment proceeding
shall be completed within a period of two years from the end of
the financial year in which the authorization of the search was
executed. Provisions have been made for extending this time limit
where special tax audit u/s 142(2A) has been ordered or where stay
orders by court has been issued.
Section 153 C
Sections 153 C states that, if during the course
of the search it is noticed that any books of accounts, documents,
assets etc. are found or seized belonging to any other person, the
Assessing Officer shall transfer the same to the officer who has
jurisdiction over that other person. Then, the officer shall proceed
against that other person as provided in section 153A and 153B.
Section 234 A & 234 B
The provisions of section 234A and 234B for the
levy of interest on the demand raised under the above proceedings
will apply. Therefore, the assessee who is subjected to assessment
or reassessment u/s 153A, 153B and 153C will have to pay interest
for the delay in filing the return of income and short fall in payment
of advance tax at the applicable rates for each of the above six
years.
Section 271
With regards to the provisions of Section 271
for the levy of penalty for concealment of income, penalty will
range between 100% to 300% of tax, which can also be levied.
Section 276 CC
It should be noted here that the provisions for
prosecution u/s 276CC will be applicable when the assessments are
made u/s 153A, 153B and 153C.
Section 246 A
The Finance Act, 2003 has amended section 246A
so that the assessee can file an appeal to the C1T (A) against the
order of assessment or re-assessment under the above section. Further,
an appeal to the ITA Tribunal can also be filed against the order
of CIT (A). Also appeals to High Court on substantial question of
law can also be filed. The assessee can also refer the case to the
settlement commission.
FAQS
What remedy does the assessee have in case of misbehaviour of
the officers?
Misbehaviour may lead to some injury, damage
or harm to the interest of the assessee or his reputation or it
may only hurt his feelings and sentiments, religious or otherwise,
Depending on facts, the action will lie by way of challenge of the
proceedings under article 226 if the search is done in an irregular
and illegal manner.
If it is a case of misbehaviour, leading to hurt of sentiments and
feelings, the best course would be to lodge a complaint with the
Director or Commissioner concerned or with the Director General
or Chief Commissioner concerned or with the Member (Investigation),
In extreme cases, the action may lie in TORTS. There, of course,
it will have to be established that it was covered by the immunity
of sovereign act.
What remedies are available to the assessee if,
during search, his belongings and property are destroyed?
No remedy lies against such actions if they are
done bona fide and in good faith in carrying out the object of the
search. Action may lie only if these acts are done mala fide and
there was no reason to suspect that items broken or destroyed contained
any concealed income or assets hidden therein.
Can the assessee contract superior officer when
search is in progress to explain the difficulties being faced?
Yes, but the superior may not interfere with
the judicial discretion of the authorised officer. However, He may
take administrative action and such corrective measures as may relieve
the assessee of avoidable harassment and to make the search operation
less painful.
Can a legal advisor be present?
Yes, he can be present.
What remedy is available to a person whose cash
has been seized from the possession of his employee who was carrying
it in connection with business?
Such a person should immediately lodge his claim
before the authorised officer who has seized the cash and produce
necessary evidence to explain the source. If the proceedings, under
Section 132(5), have already commenced, he should lodge his claim
under Section 132(7). In case he does not succeed there, he may
file an appeal under Section 132(11) before the Commissioner.
What remedy lies with regard to seizure of cash
whose sources are also explained?
Efforts should first be made to prevent the seizure
because once the seizure is made; the department may pass an order.
If cash or any other asset is wrongly seized, the authorised officer
should pass an order under section 154 to release such an asset.
Provisions of Section 132(i) empower seizure of only such assets,
which represent fully or partly undisclosed income. Therefore, seizure
of any assets, which does not satisfy the basic condition, involves
an illegality in the act of seizure. The officer should correct
this as if he has committed mistake of fact and/or of law apparent
from the record. Since this kind of seizure would be without jurisdiction,
it will be a fit case for filing a writ petition under Article 226
of the Constitution.
Can the assessee ask for the identity cards of the
officers?
Yes. Sometimes the authorised officers or the
person accompanying them do not possess the identity card. As an
alternative, they should carry and produce some other documents
to prove their identity, e.g, a certificate attesting their signatures,
The certificate should be issued by a senior officer in charge of
the search or by an immediate superior. In a case where there is
no proof of identity, the assessee would be within his right to
refuse the ingress.
Can an assessee ask for a copy of warrant?
No. Warrant of authorisation is meant and addressed
to the authorised officer and it has to be executed by him. It is
an instrument to arm him with the authority to search. After execution
of the warrant, it is to be returned to the issuing authority.
The assessee is, however, entitled to go through the warrant. In
fact, the authorised officer is duty bound to produce it and in
evidence of production thereof, he may obtain the signatures of
the assessee or his representative along with the signatures of
two witnesses.
The assessee should inspect it carefully to see that (a) it is not
blank (b) irrelevant portions are struck off, etc. If these defects
are found, he should bring them on record by filing a letter before
the authorised officer. If the warrant is blank and the name and
address is not correctly recorded, he may as well not allow the
ingress. In case of other defects, validity may be challenged under
article 226 may be considered.
Can the authorised officer refuse permission to
the assessee or any other person to be present on his behalf during
search?
No. Sub-rule (8) of rule 112 provides that the
occupant of the building, place, vessel, vehicle or aircraft which
is searched, as also the person in charge of such vessel, etc.,
or any other person on his behalf, shall be permitted to attend
during the search and a copy of seizure memo prepared under sub-rule
(7) shall be delivered to the occupant or to such other person.
Can the authorised officer enter and search any
building belonging to the assesee once the warrant of authorisation
is issued against him?
No, he can enter and search only such building
in relation to which the warrant of authorisation is specifically
issued.
Can the assessee call his relatives to assist him
during the course of search?
Yes, he can do so but the authorised officer
may carry out their personal search before allowing them entry.
However, he may order such persons, who may be creating obstruction
in the proper and smooth conduct of the search, to leave the premises
or he may not grant the permission if he apprehends any obstruction
in the smooth conduct of the search proceedings.
Can an authorised officer prevent the assessee from
receiving or making telephone calls and telex messages?
No, unless he believes that such permission will
defeat the very object of the search and that the assessee may use
his messages to fabricate false evidence, remove the assets or make
other manipulation.
Is it advisable to answer every question by saying,
‘I do not remember because of the confused state of my mind?’
It is neither advisable nor in the interest of
the assessee to deliberately answer every question by repeating
“I do not remember” or “I do not know”.
He may lose the opportunity of explaining several items of assets,
which may be possible.
Besides, he may run the risk of prosecution in case, on the basis
of contemporaneous evidence recovered subsequently during the search,
it appears that the facts were within the knowledge of the assessee.
On the other hand, it would be advisable to take
the help of the books of account and other documents and give all
possible information, which is readily available.
However, in genuine cases where it is not practicable to remember
certain facts with certainty or minute details of transactions particularly
those of several past years, the assessee may only explain their
nature, if possible and add that he would be able to furnish the
details and explanations after looking into records. A statement
made on the spot in support of his explanation has greater evidentiary
value.
Can the assessee be arrested during the course of
search?
No, the authorised officer does not have the
power to arrest an assessee for an offence under the Income-tax
Act or other Direct Tax Laws while acting under section 132. However,
in case of offences like destruction of documents, attack on the
search party, an authorised officer can lodge a complaint with the
police and the appropriate police authority may take cognizance
of the offence and order an arrest.
An important fact to note is that any seizure of a genuine or disclosed
amount will be ‘without jurisdiction’ and, in any case,
illegal. Therefore, the assessee can approach the authorised officer
either during the course of search itself with the necessary evidence
and claim that no seizure is called for.
Or else, they may approach the authorised officer even after seizure.
However, this must be done within 15 days of the time limit prescribed
under Section 132(9A) so that the amount that has been wrongly seized
may be released by rectifying the order of seizure under Section
154. However, release should be made in the presence of two witnesses.
In our forthcoming article, we will discuss the role and duties
of the assessee in relation to search and seizure…. however;
If you have any other issues you may please post your queries on
economictimes.com.
CBDT simplifies settlement of tax
offences
PTI [MONDAY, SEPTEMBER 29, 2003 04:09:04
PM]
NEW DELHI: The government has simplified and reduced the compounding
fees for tax offences in recent amendments to tax laws.
The new guidelines for compounding of offences under direct tax
laws have been brought into effect from July 29, 2003, the Central
Board of Direct Taxes said in a release.
According to the new norms, the compounding fee in respect of the
offences related to Section 276B, Section 276DD, Section 276E, Section
276CC, Section 276C(1), has been substantially reduced.
The measure has been taken to encourage assessees to get their offences
compounded.
The CBDT has also made procedural amendments in tax laws.
Accordingly, all types of cases relating to technical offences are
to be compounded by Chief Commission or Director General of Income
Taxes.
Moreover, distinction between the first offence and subsequent offences
has been removed.
THE TAXATION LAWS (AMENDMENT) ORDINANCE,
2003
Dated 8th September, 2003
Inserting new provisions in sections
10(15), introducing new section 10BA amending sections 115P, 115-S,
132B, 158BFA, 201, 206C, 220, 230, 234A, 234B, 234C, 234D, 244A,
272A and Second Schedule Rule 68A of the Income tax Act, 1961 and
Section 17B, 31 and 34A of the Wealth Tax Act, 1957 as also Section
14 of the Expenditure Tax Act, 1987.
CHAPTER I
PRELIMINARY
1.(1) This Ordinance may be called the Taxation Laws (amendment)ordinance,
2003.
(2)Save as otherwise provided in this ordinance, it shall come into
force at once.
CHAPTER II
AMENDMENTS TO THE INCOME-TAX ACT, 1961
Amendment of section 10
2. In section 10 of the Income-tax Act, 1961 (hereinafter referred
to as the Income-tax Act), in clause (15), -
(A) After sub-clause (iiia) the following shall
be inserted and shall be deemed to have been inserted with effect
from the 1st day of April, 2001 namely: -"(iiib) interest payable
to the Nordic Investment bank being a multilateral financial institution
constituted by the Government of Denmark, Finland, Iceland, Norway
and Sweden, on a loan advanced by it to a project approved by the
Central Government in terms of the Memorandum of Understanding entered
into by the Central Government with that Bank on the 25th day of
November, 1986";
(B) In sub-clause (iv)-
(a) In item (c), the existing Explanation shall be numbered as Explanation
I thereof and after Explanation I as so numbered the following Explanation
shall be inserted and shall be deemed to have been inserted with
effect from the 1st day of April, 1962, namely: -
"Explanation 2. - For the removal of doubts, it is hereby declared
that the usance interest payable outside India by an undertaking
engaged in the business of ship-breaking in respect of purchase
of a ship from outside India shall be deemed to be the interest
payable on a debt incurred in a foreign country in respect of the
purchase outside India;"
(b) In the Explanation 1 occurring below item (i) after clause (d),
the following clause shall be inserted and shall be deemed to have
been inserted with effect from the 1st day of April, 1991 namely:
-
"(da) the business of ship-breaking ;or"
Insertion of new section 10BA
Special Provisions in respect of certain articles or things
3. After section 10B of the income-tax Act, the following section
shall be inserted with effect from the 1st day of April 2004 namely:-
10BA (1) Subject to the provisions of this section, a deduction
of such profits and gains as are derived by an undertaking fro the
export out of India of eligible articles or things, shall be allowed
from the total income of the assessee:
Provided that where in computing the total income of the undertaking
for any assessment year, deduction under section 10A or section
10B has been claimed, the undertaking shall not be entitled to the
deduction under this section:
Provided further that no deduction under this section shall
be allowed to any undertaking for the assessment year beginning
on the 1st day of April, 2010 and subsequent years.
(2) This section applies to any undertaking which fulfils the following
conditions, namely:-
(a) it manufacturers or produces the eligible articles or things
without the use of imported raw materials;
(b) it is not formed by the splitting up, or the reconstruction
of a business already in existence;
Provided that this condition shall not apply in respect of any undertaking
which is formed as a result of the re-establishment, reconstruction
or revival by the assessee of the business of any such undertaking
as is referred to in section 33B, in the circumstances and within
the period specified in that section;
(c) it is not formed by the transfer to a new business of machinery
or plant previously used for any purpose.
Explanation - the provisions of Explanation 1 and Explanation 2
to sub-section 80(I) shall for the purposes of this clause as they
apply for the purposes of clause (ii) of sub-section (2) of that
section.
(d) ninety per cent, or more of its sales during the previous year
relevant to the assessment year are by way of exports of the
eligible articles or things;
(e) it employs twenty or more workers during the previous year in
the process of manufacture or production.
(3) This section applies to the undertaking if the sale proceeds
of the eligible articles or things exported out of India are received
in or brought into, India by the assessee in Convertible foreign
exchange within a period of six months from the end of the previous
year or, within such further period as the competent authority may
allow in this behalf.
Explanation - For the purposes of this sub-section, the expression
"competent authority" means the Reserve Bank of India or such other
authority as is authorised under any law for the time being
in force for regulating payments and dealings in foreign exchange.
(4) For the purposes of sub-section (1) the profits derived from
export out of India of the eligible articles or things shall be
the amount which bears to the profits of the business of the undertaking,
the same proportion as the export turnover in respect of such articles
or things bears to the total turnover of the business carried
on by the undertaking.
(5)The deduction under sub-section(1) shall not be admissible, unless
the assessee furnishes in the prescribed form , along with the return
of income, the report of an accountant , as defined in the Explanation
below sub-section (2) of section 288 certifying that the deduction
has been correctly claimed in accordance with the provisions of
this section.
(6) Notwithstanding anything contained in any other provision of
this Act, where a deduction is allowed under this section in computing
the total income of the assessee, no deduction shall be allowed
under any other section in respect of its export profits.
(7) The provisions of sub-section
(8) and sub-section (10) of section 80-IA shall, so far as may be,
apply in relation to the undertaking referred to in this section
as they apply, for the purposes of the undertaking referred to in
section 80-IA.
Explanation- For the purposes of this section,-
(a) 'convertible foreign exchange' means foreign exchange which
is for the time being treated by the Reserve bank of India as convertible
foreign exchange for the purposes of the Foreign Exchange Management
Act, 1999 and any rules made thereunder or any other corresponding
law for the time being in force;
(b) "eligible articles or things" means all hand-made articles or
things, which are of artistic value and which requires the use of
wood as the main raw material.
(c) "export turnover" means the consideration in respect of
export by the undertaking of eligible articles or things received
in, or brought into India by the assessee in convertible foreign
exchange in accordance with sub-section(3), but does not include
freight, telecommunication charges or insurance attributable to
the delivery of the articles or things outside India;
(d) "export out of India" shall not include any transaction by way
of sale or otherwise, in a shop, emporium or any other establishment
situate in India not involving clearance or any customs station
as defined in the Customs Act, 1962.
Amendment of section 115P
4. In section 115P of the Income-tax
Act, for the words "one and one-fourth per cent", the words "one
per cent' shall be substituted.
Amendment of section 115S
5. In section 115S of the Income-tax
Act for the words" one and one-fourth per cent"- the words " one
per cent" shall be substituted.
Amendment of section 132B
6. In section 132B of the Income-tax
Act, in sub-section (4) in clause (a) for the words "eight per cent
" the words "six per cent" shall be substituted.
Amendment of section 158BFA
7. In section 158 BFA of the Income-tax
Act, in sub-section (1) for the words "one and one-fourth per cent"
the words "one per cent" shall be substituted.
Amendment of section 201
8. In section 201 of the Income-tax
Act in sub-section(1A), for the words "fifteen peer cent"
the words "twelve per cent" shall be substituted.
Amendment of section 206C
9. In section 206C of the Income-tax
Act,- (a) in sub-section (1):- (i) for the Table, the following
Table shall be substituted, namely:-
Sl
No. |
Nature
of Goods |
Percentage |
| 1 |
2 |
3 |
| (i) |
Alcoholic Liquor for human
consumption |
One per cent |
| (ii) |
Tendu Leaves |
Five per cent |
| (iii) |
Timber obtained under a forest
lease |
Two and one-half per cent |
| (iv) |
Timber obtained by any mode other
an under a forest lease |
Two and one-half per cent |
| (v) |
Any other forest produce not being
timber or tendu leaves |
Two and one-half per cent |
| (vi) |
Scrap |
One per cent |
(ii) for the proviso below the Table,
the following proviso shall be substituted namely:-
"Provided that every person being a seller shall at the time during
the period beginning on the 1st day of June, 2003 and ending on
the day immediately preceding the date on which the Taxation laws
(Amendment) Ordinance ,2003 comes into force, of debiting
of the amount payable by the buyer to the account of the buyer or
of receipt of such amount from the said buyer in cash or by the
issue of a cheque or draft or by any other mode, whichever is earlier,
collect from the buyer of any goods of the nature specified in column
(2) of the Table as it stood immediately before the 1st day of June
2003 a sum equal to the percentage specified in the corresponding
entry on column (3) of the said Table of such amount as income-tax
in accordance with the provisions of this section as they
stood immediately before the 1st day of June,2003.
(b) After sub section (i), the following sub-sections shall be inserted,
namely:-
"(1A) Notwithstanding anything contained in sub-section(1) no collection
of tax shall be made in the case of a buyer, who is resident in
India if such buyer furnishes to the person responsible for
collecting tax, a declaration in writing in duplicate in the prescribed
form and verified in the prescribed manner to the effect that the
goods referred to in column (2) of the aforesaid Table are to be
utilised for the purposes of manufacturing , processing or producing
articles of things and not for trading pruposes.
(1B) The person responsible for collecting tax under this section
shall deliver or cause to be delivered to the chief Commissioner
or Commissioner one copy of the declaration referred to in sub-section
(1A) on or before the seventh day of the month next following the
month in which the declaration is furnished to him"
(c) In sub-section (3) for the words "seven day" the words "the
prescribed time" shall be substituted;
(d) in sub-section (5) for the words "ten days from the date of
debit" the words "such period as may be prescribed from the time
of debit" shall be substituted;
(e) in sub-section (7), for the words "one and one-fourth per cent"
the words "one per cent" shall be substituted";
(f) in the Explanation occurring at the end, in clause (a) for sub-clauses
(i) and (ii) the following sub-clauses shall be substituted namely
-
i) a public sector company,
the central Government. a State Government, and an embassy, a high
commission, legation, commission, consulate and the trade representation
of a foreign state and a club, or
ii) a buyer in the retail sale
of such goods purchased by him for personal consumption;"
10. In section 220 of the Income-tax Act, in sub-section(2); for
the words "one and one-fourth" per cent" the words "one per cent"
shall be substituted.
11. In section 230 of the Income-tax Act, in sub-section (20 after
the words brackets and figure "sub-section"(10 the words brackets
figure and letter or the first proviso to sub-section (1A0 shall
be inserted and shall be deemed to have been inserted with
effect from the 1st day of June 2003.
12. In section 234A of the Income-tax Act, in sub-sections (1) and
(3), for the words "one and one-fourth per cent" shall be substituted.
13. In section 234B of the Income-tax Act in sub-sections (1) and
(3) for the words "one and one-fourth per cent;" the words
'one per cent" shall be substituted.
14. In section 234C of the Income-tax Act, in sub-section (1), -
(i) in clause (a) in sub-clauses (i) and (ii) for the words "one
and one-fourth per cent": the words "one per cent" shall be substituted
(ii) in clause (a) in sub-clauses (i) and (ii) for the words
"one and one-fourth per cent" the words "one per cent" shall be
substituted;
15. In section 234D of the Income-tax Act in sub-section (1) for
the words "two-third per cent." the words "one-half per cent"
shall be substituted.
16 In section 24A of the Income-tax Act in sub-section (1)
in clauses (a0 and (b) for the words (two-third per cent" the words
"one half per cent." shall be substituted.
17. In section 272A of the Income-tax Act, in sub-section (2) after
clause (i) the following clause shall be inserted, namely:-
"(j) to deliver or cause to delivered in due time a copy of the
declaration referred to in sub-section (1A) of section 206C;"
18. Inthe second Schedule to the Income-tax Act, in rule 68A in
sub-rule (30 for the words "eight per cent", the words "six per
cent" shall be substituted.
CHAPTER III
AMENDMENTS TO THE WEALTH-TAX ACT,1957
19. In Section 17B of the Wealth-tax Act 1957 (hereinafter referred
to as the Wealth-tax Act) in sub-sections(1) and (3) for the words
"one and one-fourth per cent" , the words "one per cent" shall be
substituted.
20. in section 31 of the Wealth-tax Act, in sub-section (2).-
(a) for the words " one and one-fourth per cent" the words "one
per cent" shall be substituted;
(b) in the second proviso, for the words "one and one-fourth per
cent", the words "one per cent" shall be substituted.
21. In section 34A of the
Wealth-tax Act, - (a) in sub-section (3) for the words "eight per
cent' the words "six per cent" shall be substituted;
(b) in sub-section (4B) in clause (a) for the words "two-third per
cent" the words "one-half per cent" shall be substituted.
CHAPTER IV
AMENDMENT TO THE EXPENDITURE-TAX ACT,
1987.
22. in section 14 of the Expenditure
-tax Act, 1987 for the words "one and one-fourth per cent" the words
"one per cent" shall be substituted.
A.P. J. ABDUL KALAM AZAD
PRESIDENT
SUBHASH C. JAIN
SECY. TO THE GOVT. OF INDIA
New pension plan offers tax break
TIMES NEWS NETWORK [FRIDAY, AUGUST
29, 2003 05:46:52 AM]
NEW DELHI: New entrants to the government and individuals contributing
to the new pension scheme to be launched from January 1, ’04,
will be eligible for a tax rebate under Section 88 of the Income
Tax Act. Currently, contributions to provident fund, LIC premia,
besides investments in specified mutual funds and pension funds
qualify for tax rebate under Section 88 subject to an overall ceiling
of Rs 70,000 per annum, excluding the Rs 30,000 investment limit
for investment in infrastructure bonds.
The Central Board of Direct Taxes (CBDT) has recommended offering
a tax rebate under Section 88 for contributions made to the new
pension scheme, subject to the existing overall ceiling of Rs 70,000.
What this means is that individuals who voluntarily contribute to
the new scheme and fresh government recruits who mandatorily contribute
to the scheme will have to make a choice on the nature of investments
to avail of the tax rebate.
The Union Cabinet cleared operationalisation of the new pension
scheme and the setting up of an Interim Pension Fund Regulatory
Authority (PFRDA) last week.
The scheme will have two tiers — Tier I, in which withdrawals
will be disallowed, and Tier II, where withdrawals will be allowed.
Individuals will operate two pension accounts — a normal pension
account and a second account akin to savings bank account or a mutual
fund.
The tax benefits under the normal pension account will be on Exempt
Exempt Taxed (EET) method, officials said. Under this method, contributions
are deductible from gross income. Accumulations are exempt from
tax during accumulation. But the terminal amount received at the
time of exit — will be subject to tax.
An expert committee which devised a pension system for India, termed
Project Oasis, had recommended a concessional tax rate on the lines
of the long-term capital gains tax for all premature withdrawals,
as well as terminal accumulations withdrawn as a lumpsum from provident
funds. The amount which is used for buying annuities should be tax-free,
it said.
While exiting the scheme at the age of 60 years or above, individuals
would have to compulsorily invest 40% of the pension money to buy
annuity from an IRDA-regulated insurance company. The balance 60%
will be available to the contributor as a lumpsum amount, which
he would be free to utilise in any manner.
The CBDT is yet to give its views on the tax-treatment on lumpsum
withdrawals (which will be taxed in an EET method). Currently, an
annuity purchased by an individual is taxable year to year. The
Department of Economic Affairs (DEA) is likely to make out a case
for concessional tax treatment on the annuity, which will be purchased
by the individual while exiting the scheme and also on the lumpsum
amount.
IT to follow fresh rules to scrutinise
tax returns by cos
TIMES NEWS NETWORK [SUNDAY, AUGUST
24, 2003 11:09:56 PM]
NEW DELHI: The Finance Ministry has decided to release new guidelines
for scrutinising tax returns filed by corporate.
The guidelines will be different from those for non-corporate assessees.
The government will use the database available with the Centre For
Monitoring Indian Economy (CMIE) to select cases for scrutiny of
corporate assessees. The selection criteria may include book profits
(above a certain limit), paid-up capital, debt raised during a financial
year and so on.
The decision to have separate guidelines for these segments marks
a policy change, as there has been no such distinction till now.
The move comes six months after the FM’s announcement to abolish
the discretion-based system of selecting returns. A computer-generated
random selection of about 2% of the returns annually will be brought
in instead.
As it will take some more time to have a complete database on all
taxpayers, a small window will be open for manual selection (search
and seizure cases, surveys, frauds, scam cases and so on). Transfer
pricing cases will be picked up for scrutiny wherever the aggregate
value of the global transaction exceeds Rs 5 crore and reference
under the relevant section is made to the transfer-pricing officer.
For corporate assessees, 95% of the scrutiny cases will be computer
generated.
Tax on Income of Political Parties
- Narayan Jain
(Also published in The Asian Age on 16th June, 2003)
It is worthwhile to note that the provision
relating to the exemption of Capital Gains has been inserted
by the Finance Act, 2003 but with retrospective effect from 1.4.1979.
This amendment presumably is the outcome of litigation for charging tax
on capital gains in cases of political parties. In the case of Bharatiya
Janata Party v. Deputy CIT [2002] 258 ITR 1 (ITAT-Delhi), BJP
invested in Canstar Scheme, a mutual fund scheme of the Canara Bank. The
interest on the said investment accrued each year but there was no disbursal
as the income was ploughed back to it every year. The amount received
on maturity was in excess of original investment. It was decided in first
appeal by the CIT (Appeals) that it was capital gain subject to tax as
section 13A did not exempt capital gains. But the ITAT held by majority
that there was no extinguishment of right and there was no transfer of
capital asset in the instant case and the amount was not assessable as
capital gains. The ITAT further held that the gain was exempt being income
from other sources.
The amendment to exempt capital gains in the hands of political parties
was not proposed in original Finance Bill, 2003 but has been placed at
the last moment. There has been no debate, yet the exemption has been
granted.
The amended Section 13A now provides that any income
of a political party which is chargeable under the head "Income
from house property" or "Income from other
sources" or "Capital gains" or
any income by way of voluntary contributions received by a political
party from any person shall not be included in the total income
of the previous year of such political party if the following conditions
are satisfied:
(a) Such political party keeps and maintains such books of account and
other documents as would enable the Assessing Officer to properly deduce
the income therefrom;
(b) In respect of each such voluntary contribution in excess of Rs. 10,000
such political party keeps and maintains a record of such contribution
and the name and address of the person who has made such contribution;
and
(c) The accounts of such political party are audited by a chartered accountant.
For this purpose, "political party" means an association or
body of individual citizens of India registered with the Election Commission
of India as a political party under paragraph 3 of the Election Symbols
(Reservation and Allotment) Order, 1968, and includes a political party
deemed to be registered with that Commission under the proviso to sub-paragraph
(2) of that paragraph.
In the light of the above provisions it follows that, only income under
the head Salaries and the Income from Business or Profession of the Political
Parties are chargeable to tax.
The Departmental Circular F. No. 225/128/99/ITA.II (Pt.) dated
19th October, 2000 states that the income of the political parties
are governed by the special provisions of section 13A of the Income-tax
Act, 1961 and accordingly the provisions of Chapter IV-D which
are applicable for profits and gains of business or profession cannot
be applied in the cases of political parties. Income of political
parties from voluntary contributions cannot be said to be income from
profession so as to attract section 44AB or section 271B of the Income-tax
Act. However, the political parties will have to fulfil the requirement
of maintaining the accounts and getting them audited by an accountant,
as provided in section 13A of the Act to claim the benefit of exemption.
In respect of the voluntary contribution in excess of Rs. 10,000 [as stated
in (b) above], it is mandatory to maintain a record of such contribution
and the name and address of the person who has made such contribution.
However for the sake of transparency, the person making the contribution
should be required to give a letter mentioning his PAN.
The issue of maintenance of the books of account by political parties
came forth in the case of Janata Party v. Asst. CIT [2002] 76
TTJ (Delhi) 116 wherein it was observed that it would be wrong
to suggest that exhaustive books of account as normally understood in
commercial parlance ought compulsorily to be maintained to avail the exemption
u/s 13A.
In the decision of Common Cause, A Registered Society v. Union
of India [1996] 85 Taxman 600:222 ITR 260 (SC) it was held that
political parties are under a statutory obligation to file return of income
in respect of each assessment year in accordance with the provisions of
the Income-tax Act. It was further held that a political party which is
not maintaining audited and authenticated accounts and has not filed the
return of income for the relevant period, cannot, ordinarily, be permitted
to say that it has incurred or authorised expenditure in connection with
the election of its candidates in terms of Explanation 1 to section 77
of the Representation of the People Act, 1951.
In this regard section 13 9(4B) and Circular No. 412 [F.No. 200/84/79-IT(A-I)],
dated 2-3-1985 is also relevant which states that If the total
income of a political party computed without giving effect to the provisions
of section 13A exceeds the maximum amount which is not chargeable to tax,
the liability of the political party to file the return of income voluntarily
arises. As regards filing of returns by the units of a political party
at State or District levels is concerned, it will depend upon whether
these units are only branches of the national party and their receipts
and expenditure form part of the account of the national party. If so,
the units need not file separate returns of income. In the case where
units are separately registered as political parties with the Election
Commission of India, the requirement of filing of return by these units
will apply.
- Narayan Jain is a leading tax consultant. He can be contacted
by email at npjain@vsnl.com
General Circular No:32/2003
No.2/28/2002-CL.V
Government of India
Ministry of Finance
Department of Company Affairs
5th floor, `A’ Wing, Shastri Bhavan,
Dr. R.P. Road, New Delhi.
Dated: 10th November, 2003
To
All Regional Directors
All Registrars of Companies
Subject: Compliance of Companies (Auditor’s
Report) Order, 2003 effective from 1st July, 2003
Sir,
As you are aware, vide notification
number G.S.R. 480(E) dated 12th June 2003, Government have issued
the Companies (Auditor’s Report) Order, 2003 [Order] which
came into force on 1st July, 2003. The new Order replaces the Manufacturing
and Other Companies (Auditor’s Report) Order, 1988 (MAOCARO)
issued vide Notification No: G.S.R. 909(E) dated 7th September,
1988.
2. Subsequently the Government have
received representations stating the difficulty in complying with
the new Order at short notice, in view of the absence of a Guidance
Note from the Institute of Chartered Accountants of India, and in
view of the need for maintaining records of a company in a manner
that will ensure the compliance of the Order, Government have given
consideration to the difficulty expressed. It has been decided that
it is not possible, at this point of time, to review the Order,
or postpone the effective date as issued, for accounts prepared
in respect of financial year ending on the 1st July, 2003 or thereafter.
3. However, keeping in view the difficulties
of the companies as well as the professionals involved, it has also
been decided that while companies to whom the Order is applicable,
should make serious efforts to comply with the new Order from the
effective date, cases of non compliance for accounts pertaining
to financial year which closed on 31st December, 2003 or earlier,
Government would take a lenient view provided the accounts at least
carry MAOCARO Report, if required.
4. However, accounts in respect of
financial years ending on 1st January, 2004 or thereafter, will
have to strictly follow CARO, 2003. Companies and professionals
who do not comply with the Order will be liable for action as per
law.
5. Kindly acknowledge receipt of this
letter, a copy of which is being endorsed to the Institute of Chartered
Accountants of India and major Industry Associations.
Yours faithfully,
(E. Selvaraj)
Joint Director (Trg)
Ph: 2338 3452
| |
Latest
Developments in Excise Customs Service Tax
| 1.0 |
Introduction: |
| |
|
| 1.1 |
One of the major sources of income
for the Government is tax. Justice Holmes of U.S. Supreme Court,
has long ago, said, “Tax is the price which we pay for a civilized
society”. Taxes are conventionally broadly classified as Direct
Taxes and Indirect taxes. Direct Taxes include Income Tax and Wealth
Tax, whereas Indirect Taxes include Central Excise (tax on manufacture
of goods), Customs (tax on imports), Service Tax (tax on specified
services), Sales Tax & VAT (tax on sale of goods). |
| |
|
| 1.2 |
The indirect tax legislation is
a fast changing legislation and the stress has been towards simplification
of procedures and minimal statutory interface with the Department
particularly in Excise. The relevant Act and Rules have been amended;
new provisions have been introduced as a continuing effort for simplification
in Central Excise. A few such changes, which started from 1994,
are highlighted here in below: -
- Replacing erstwhile Gate Pass system with new Excise Invoice;
- Extending MODVAT credit to almost all inputs;
- Extending MODVAT credit facilities to Capital Goods;
- Abolishing the procedure of approval of classification lists
and introduction of Classification Declaration;
- Abolishing the procedure of approval of price lists and introduction
of price Declaration for specified purpose only;
- Accepting the invoice price as the declared price for clearances
for sale to unrelated buyers;
- Introduction of self assessment procedure while filing monthly
returns;
- Introduction of Valuation on the basis of MRP for some goods;
- Introduction of Settlement Commission for speedy disposal and
settlement of long pending disputes;
- Introduction of facilities for Advance Ruling;
- Introduction of new and separate CENVAT Rules in a simplified
form and replacing the erstwhile MODVAT rules;
- Replacing the erstwhile method of valuation on the basis of
normal price;
- Prescribing a uniform rate of excise for most of the goods in
order to avoid classification disputes;
- Introduction of a new and simplified Central Excise Rules to
replace the erstwhile rules.
- Introduction of Excise Audit 2000.
|
| |
|
| 1.3 |
As a major tax reform measure
to enable speedy disposal of pending cases, there is also a proposal
to setup a National Tax Tribunal (NTT), with as many as 25 benches,
to ease pressure on judicial system which has been burdened with
as many as 28,000 appeals. |
| |
|
| 2.0 |
Central Excise: |
| |
|
| 2.1 |
Amendment in the definition of the term ‘manufacture’
in Section 2(f) of the Central Excise Act, 1944 for goods valued on
the basis of Maximum Retail Price (MRP) under Section 4A of the Central
Excise Act, 1944. |
| |
|
| 2.1.1 |
In the Finance Bill, 2003, vide
clause 127(b), the definition of the term ‘manufacture’
as given in Section 2(f) of the Central Excise Act, 1944 (here-in-after
referred to as “CEA, 1944”) had been proposed to be
amended to include any process which, in relation to the goods specified
in the Third Schedule of the Central Excise Act, 1944 (i.e. goods
valued on the basis of MRP), involves packing or repacking of such
goods in a unit container or labeling or re-labelling of containers
including the declaration or alteration of retail sale price on
it or adoption of any other treatment on goods to render the product
marketable to the consumer. In the Finance Bill itself vide a Declaration
under the Provisional Collection of Taxes Act, 1931; immediate effect
from 1.3.2003 has been given by invoking the Provisional Collection
of Duties Act, 1930, instead of waiting for the enactment of the
Finance Bill on 14.5.2003. |
| |
|
| 2.1.2 |
It is also interesting to see
that in case of a more or less similar situation in the case of
United Repackaging -vs- CCE reported in 2000 (121) ELT 658
(T) where certain processes in relation to aluminium containers
had been brought under the definition of manufacture through an
amendment in the Chapter Note of the relevant chapter in the Budget
proposals, the question arose as to whether the date of effect of
such amendments should be immediate under the Provisional Collection
of Duties Act or it should be the date of enactment of the Finance
Bill. The Hon’ble Tribunal in the said case has held that
the date of effect of the amendments would be immediate. The said
matter is now pending before the Hon’ble Supreme Court in
the form of an appeal filed by the assessee as reported in 2001
(128) ELT A209 (SC). |
| |
|
| 2.2 |
Amendment made with
respect to valuation of goods for the purpose of charging excise
duty (cum-duty price). |
| |
|
| 2.2.1 |
After the judgement of the Hon’ble
Supreme Court in the case of Commissioner of Central Excise,
Delhi –vs- Maruti Udyog Ltd. reported in 2002 (141) E.L.T.
3 (S.C.) where it was held that the duty element should
be abated from the price of the goods in order to arrive at the
assessable value, specific amendment has been brought in the CEA,
1944 by way of explanation to Section 4(1) of the CEA, 1944 w.e.f.
14-05-2003 vide Section 136 of the Finance Act, 2003 to that effect.
|
| |
|
| 2.2.2 |
The said explanation clarifies
that the value of the excisable goods sold by the assessee shall
be the price actually paid to him for the goods sold and the money
value of the additional consideration, if any, flowing directly
or indirectly from the buyer to the assessee in connection with
the sale of such goods and such price cum duty, excluding sales
tax and other taxes if any, actually paid, shall be deemed to include
the duty payable on such goods. |
| |
|
| 2.3 |
Amendment in valuation of excisable goods with respect
to retail sale price (Section 4A) |
| |
|
| 2.3.1 |
The explanation given under Section
4A of the CEA, 1944 has been amended by insertion of a proviso so
as to extend the scope of Section 4A to cases where the governing
law requires declaration of retail price exclusive of taxes local
or otherwise and to construe the retail sale price accordingly.
|
| |
|
| 2.3.2 |
Further amendments have been carried
out in Section 4A so as to –
(a) adopt the higher retail sale price in case, such higher retail
price is altered subsequently to clearance of goods on payment
of duty on declared lower retail sale price vide clause (b) of
explanation (2) of Section 4A;
(b) confers power on Central Government to ascertain the retail
sale price of goods if they are the goods removed from the place
of manufacture without declaring the retail sale price or with
a declaration of retail sale price which is not the retail sale
price under the provisions of the Standard of Weight and Measures
Act, 1976 or the rules made there under or the declared retail
sale price is tampered, obliterated or altered after removal from
the place of manufacture. |
| |
|
| 2.4 |
Amendment brought in the list
of commodities included in the purview of Section 4A i.e valuation
on the basis of Maximum Retail Price (MRP) |
| |
|
| 2.4.1 |
Vide the Union Budget 2003, following
excisable goods have been brought under Section 4A of the CEA, 1944
for the purposes of valuing them on the basis of their Retail Selling
Price.
- Pesticides and insecticides falling under sub-heading No. 3808.10
- Chewing tobacco and preparations containing chewing tobacco
falling under sub-heading No. 2404.11
The following commodities have been excluded from the list covering
excisable goods under Section 4A.
- Sanitary-ware and fixtures falling under sub-heading No. 6908.10
|
| |
|
| 2.4.2 |
The rates of abatement available
for reducing the retail selling price have been reduced by 5% in
respect of the commodities viz., Boiled sweets, Sugar confectionery
excluding white chocolate (1704.90), Biscuits (1905.11), Scented
supari (21.07), Aerated Water (2210.20 and 2210.30), Pressure Cookers
(7323.10 and 7615.20), Air Conditioners (84.15), consequent to their
reduction in their rate of duties. |
| |
|
| 2.5 |
Amendments made in valuation rules
with respect to place of removal |
| |
|
| 2.5.1 |
Earlier when the excisable goods
are sold in the circumstances specified in Section 4(1)(a) of the
Central Excise Act, 1944, except for delivery at a place other than
the place of removal, Rules 5 of the Central Excise Valuation Rules,
2000 permitted exclusion of only the actual cost of transportation
from the place of removal to the place of delivery, subject to the
condition that the said exclusion was allowed only if the cost of
transportation is charged separately and such cost is shown separately
in the invoice. |
| |
|
| 2.5.2 |
The said rule has been amended
to omit the specific requirement of showing the transportation cost
separately in the invoice. Moreover, instead of the actual transportation
cost the said cost calculated on an average or equalized basis can
also be claimed as a deduction for the purposes of Central Excise.
For this purpose, the average transportation cost shall be computed
in accordance with the generally accepted principles of costing.
Where necessary, the assessee may be asked to furnish certification
from a Cost Accountant, inter alia, showing the computations separately
in respect of the exempted, non-excisable and specific rated products
and the basis for apportionment for arriving at the average cost
of transportation. |
| |
|
| 2.5.3 |
However, no deduction shall be
allowable whether on actual or equalized freight basis, for the
cost of transportation from the factory to the point of removal
(if other than the factory gate). |
| |
|
| 2.5.4 |
The definition of “place
of removal” has also been amended to include a depot, premises
of a consignment agent or any other place or premises from where
the excisable goods are to be sold after their clearance from the
factory within its ambit. |
| |
|
| 2.6 |
Non-inclusion of notional interest on advance received
in the value of the goods
The dispute whether the interest relatable to advances/deposits
received by the assessee would be includible in the value of goods
has been going on between the department and the assesses for
a long time. There is a genuine effort on the part of the department
to set the dispute at rest once and for all through an amendment
in the Valuation Rules (through an explanation in Rule 6). The
said Explanation provides that no notional interest on the advance
payments received by the assessee from the buyer against delivery
of excisable goods shall be added to the value unless the Central
Excise Officer has evidence to the effect that the advance received
has influenced the fixation of the price of the goods by way of
charging a lesser price from or by offering a special discount
to the buyer, who has made the advance deposit.
|
| |
|
| 2.7 |
Amendment with respect to valuation of goods for
the purpose of captive consumption
Rule 8 of the Valuation Rules earlier provided that
while valuing excisable goods cleared by the assessee for purposes
other than for sale or are used for consumption by him or in his
behalf in the production or manufacture of other articles, the
value of the goods would be 115% of the cost of production or
manufacture. The said rule has now been amended to prescribe the
value in such cases to be 110% of the cost of the production or
manufacture of such goods.
|
| |
|
| 2.8 |
Fortnightly payment of excise duty
is being replaced by monthly payment |
| |
|
| 2.8.1 |
With effect from 01-04-2003, the
present system of fortnightly payment of excise duty has been replaced
by monthly payment. Accordingly the assessee is required to pay
excise duty for a month by the 5th of next month except for in the
month of March, when the duty is to be paid by the 31st of the month.
For SSI units, the provisions are the same with the only change
that the duty pertaining to a month is to be discharged by the 15th
of the next month. |
| |
|
| 2.8.2 |
Accordingly CENVAT credit Rules
have been amended to allow credit only to the extent such credit
is available on the last day of the month for payment of duty relating
to the month. |
| |
|
| 2.9 |
Date of deposit
of cheque shall be deemed to be payment of excise duty (Explanation
(b) to Rule 8(1):
As regards the discharge of duty, Explanation to Rule 8 of the
Central Excise Rules, 2002 has been further amended to include
clause (b), wherein it has been stated that the date of presentation
of cheque in the bank designated by the CBE&C shall be deemed
to be the date on which the duty has been paid subject to realization
of that cheque.
|
| |
|
| 2.10 |
Provisions
relating to penalties in cases of default in payment of excise duty
made simpler but stringent (Rule 8(3))of the Central
Excise rules, 2002
The provisions relating to the penalties, etc., leviable in
case the assessee defaults in payment of excise duty have been
made simpler. In case of default, the facility of paying duty
in monthly installments will henceforth not be withdrawn nor will
the assessee be denied the use of CENVAT credit for payment of
duty. However the provisions have been made more stringent in
as much as there would be an interest of 2% per month or Rs. 1,000/-
per day, whichever is higher, payable for the period of default
subject to the amount of such interest payable not exceeding the
duty amount which was not paid by the due date.
|
| |
|
| 2.11 |
Removal of
inputs / capital goods as such from the factory – Duty payment
equivalent to the CENVAT credit availed
Previously under Rule 4 of the CENVAT Credit Rules, 2002, when
the inputs or capital goods are removed as such from the factory,
the manufacturer of final product had to pay duty of excise which
is leviable on such goods at the rate applicable to such goods
on the date of such removal. However under the amended Rules,
in cases of removal of inputs or capital goods as such from the
factory, duty is to be paid equivalent to the credit availed in
respect of such inputs or capital goods and such removal shall
be made under the cover of an invoice referred to in Rule 7.
|
| |
|
| 2.12 |
Credit of the
additional duty of excise may be utilised towards payment of duty
of excise leviable under the First Schedule or the Second Schedule
of the Central Excise Tariff Act, 1985.
Previously under sub-rule 6(b) of Rule 6 of the Cenvat Credit
Rules, 2002, credit of additional duty of excise leviable under
section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957 could be utilised only against the payment
of additional of additional duty of excise on the final product.
However sub-rule 6(b) has been so amended so as to allow the utilisation
of credit of additional duties of excise towards payment of duty
of excise leviable under First schedule or Second Schedule of
the Central Excise Tariff Act, 1985.
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| 2.13 |
Introduction
of New Rule 6A for storage of inputs outside the factory of the
manufacturer
The new Rule 6A has been introduced in the Cenvat Credit Rules,
2002 to provide for storage of inputs outside the factory with
the permission of Assistant Commissioner or Deputy Commissioner
having jurisdiction over the factory, who may having regard to
the nature of the goods and shortage of storage space may by an
order permit the manufacturer to store the inputs in respect of
which CENVAT credit has been taken outside such factory subject
to such conditions and limitations as he may specify.
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| 2.14 |
CENVAT credit
not to be denied on the ground that the CENVATable invoice does
not contain all the details required to be contained therein.
A new sub Rule 7(1A) has been inserted after Rule 7 in the Cenvat
Credit Rules, 2002, wherein it has been provided that the CENVAT
credit under Rule 3 shall not be denied on the grounds that any
of the documents mentioned in sub- rule(1) does not contain all
the particulars required to be contained therein under Rule 7,
if such document contains details of payment of duty, description
of the goods, assessable value, name and address of the factory
or warehouse. It has further been provided that if the Assistant
Commissioner or Deputy Commissioner is satisfied that duty on
inputs has been paid and such inputs have actually been used or
are to be used in the manufacture of final product the Assistant
Commissioner or Deputy Commissioner shall record the reason for
not denying the credit in such case.
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| 2.15 |
Adjudication/appellate
order to be passed within a specified period of personal hearing
Central Board of Excise & Customs had issued circular no.
732/48/2003-CX dated 05-08-2003 wherein the Board reiterated its
instructions as stated in Circular No. 32/80-CX. 6 dated 26-07-1980.
The Board in its circular dated 26-07-1980 had directed that in
cases where personal hearings have been concluded, it is necessary
to communicate the decision immediately or within a reasonable
time of 5 days. It has been further stated that, where for certain
reasons, the above time limit can not be adhered to in a particular
case, the order should be issued within 15 days or at most one
month from the date of conclusion of personal hearing.
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| 3.0 |
Developments in Customs: |
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| 3.1 |
Amendment with
respect to date for determination of rate of duty and tariff value
in respect of goods cleared from a warehouse
Section 15(1)(b) of the Customs Act, 1962
(here-in-after referred to as “CA, 1962”) has been
amended vide Section 106 of the Finance Act, 2003 with respect
to clearance of goods from a warehouse under Section 68 of the
CA, 1962 to provide that date for determination of rate of duty
and tariff valuation would be the date on which a bill of entry
for home consumption in respect of such goods is presented under
that section.
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| 3.2 |
Amendment made
in the definition of applicant for the purpose of Advance Ruling
The definition of an applicant for the purpose
of advance ruling has been amended to include a wholly owned subsidiary
Indian Company, of which the holding company is a foreign company,
who proposes to undertake any business activity in India.
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| 3.3 |
Amendment with
respect of delivery of import manifest
Sub-section (1) of Section 30 of the CA, 1962 has
been amended to provide for delivery of import manifest before
the arrival of vessel or aircraft and within 12 hours of arrival
of a vehicle and for levy of penalty not exceeding Rs. 50,000/-,
if there is no sufficient cause for the delay.
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| 3.4 |
Amendment with
respect to period of warehousing in respect of goods other than
capital goods by an 100% EOU
Section 61(1) of the CA, 1962 has been amended
vide Section 133 of the Finance Act, 2003 to provide that the
period of warehousing in respect of goods (other than Capital
goods) intended for use in 100% Export Oriented Undertakings will
be increased from 1 year to 3 years.
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| 3.5 |
Amendment with
respect to increase in interest free period for warehoused goods
Section 61(2) of the CA, 1962 has been amended
vide Section 133 of the Finance Act, 2003 so as to increase the
interest free period for warehoused goods from 30 days to 90 days.
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| 3.6 |
Amendment with
respect to clearance of warehoused goods for home consumption
Section 68 of the CA, 1962 has been amended so
as to enable the owner of the warehoused goods to relinquish his
title to the goods on payment, rent, etc. at any time before an
order for clearance of these goods for home consumption has been
made. On his relinquishing title, the importers will not be liable
to pay duty on such goods.
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| 4.0 |
Developments in Service Tax |
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| 4.1 |
Vide the Budget 2003-2004; the Finance Minister brought 8 (eight)
new services within the service tax net from a date to be notified.
The date on which they would be implemented was notified vide
notification no. 7/2003-ST dated 20-06-2003 and made effective
from 01-07-2003. The new services introduced along with various
amendments made in the year 2003 are discussed here in after.
1. Business Auxiliary Services:
Business auxiliary services are defined as those services, which
are rendered to a client in respect of:
a) The promotion or marketing of the goods sold by the client;
b) The promotion or marketing of the services rendered by the
client;
c) Customer care services provided on behalf of the client;
d) Any other incidental or auxiliary services such as billing,
collection of cheques, etc.
Business auxiliary services exclude services rendered in respect
of information technology, i.e. developing, designing or maintaining
computer software or computerized data processing or networking
system etc. It has been clarified vide circular no. 59/8/003 dated
20-06-2003 and no. 62/11/2003 dated 21-08-2003 that information
technology services would not come into picture when merely a
desktop computer or laptop is used for providing the services.
However, as regards ‘back office processing’, it has
been clarified that the term ‘back office processing’
has to be read with other terms such as data processing, networking,
computer facility management etc and thus, any service of back
office processing, primarily in relation to operation of computer
system would be covered as information technology services as
thus not taxable.
2. Commercial Training or Coaching Services:
Commercial training or coaching centres means any institute or
establishment for that matter, providing commercial training for
imparting knowledge on any subject (other than sports), but does
not include any institute which issues any certificate or diploma
or degree or any other educational qualification recognized by
any law for the time being in force.
The value of taxable service is the gross amount charged by such
commercial institute in respect of the said commercial training.
The following coaching services have been exempted vide notification
no. 10/2003-ST dated 20-06-2003 w.e.f. 01-07-2003:
a) Vocational training institute;
b) Computer training institute; and
c) Recreational training institute;
Thus, services like, coaching in typing, shorthand, TV/vehicle
repairing, tailoring, industrial training, foreign language, computer-training,
martial arts, painting, dancing, etc. would be exempt w.e.f. 01-07-2003
till 29-02-2004.
However, various institutes at time engage some other institutes
for training of their students with some special course, the fees
for which is paid by the former institute itself. In such cases,
these services rendered by the latter institutes would not be
chargeable to tax. This exemption has been brought out by notification
no. 10/2003-ST dated 20-06-2003 w.e.f. 01-07-2003 read with circular
no. 59/8/2003 dated 20-06-2003.
Certain doubts have been further clarified vide circular no.
59/8/2003 dated 20-06-2003, which are enlisted as follows:
a) Service Tax on Postal Coaching:
Since, the same is of a commercial nature, they would also be
chargeable to service tax.
b) Commercial training other than a recognized degree course:
Some colleges, other than providing coaching for degree courses,
also provide coaching for various competitive entrance examinations.
This coaching for various examinations is outside the scope of
service tax.
c) Individuals going to houses to impart private tuitions :
Service tax on coaching centres is a levy on establishments and
not on individuals; thus no service tax would be levied. However,
if an establishment sends persons to houses to impart knowledge,
it would be covered in the scope of service tax.
d) Free training to employees:
Free training provided by employer himself to employees is non-taxable.
However, if the employer hires someone to impart knowledge to
the employees, then service tax would be charged.
3. Commissioning or Installation Services:
Commissioning or installation services means any services provided
by an agency in relation to commissioning or installation of a
plant, machinery or equipment. Notification no. 18/2003-ST dated
21-08-2003 has exempted services in respect of commissioning or
installation, provided by a person other than a commercial concern,
hence services provided by an individual has been exempted from
tax.
Let us in the backdrop of the aforesaid definition, analyze the
applicability of service tax in certain practical situations.
In some cases, let us say, various mechanical contractors are
doing the work of fabrication & erection of steel sheets,
ducts, channels etc as per the design & drawings given by
the principal. The principal is supplying the material. There
is no handing over in such jobs. Payment to the contractors is
being made as per the measurement of work done on the basis of
specified scheduled rates, which comprises of fabrication cost,
handling cost of material within the factory and erection of duct,
chamber etc. The issue that arises is whether such activities
are subjected to service tax.
In this connection, reference may be made to circular bearing
no 59/8/2003 dated 20-06-2003 issued by TRU, wherein
it has been clarified that all activities other than commissioning
and installation of plant/machinery/equipment per se, will not
be chargeable to service tax. However, on a plain reading of the
Statute, it may be observed that all activities ‘in relation
to’ commissioning or installation of plant, machinery or
equipment are sought to be brought under the service tax net.
The expression ‘in relation to’ is a very broad expression,
as has been held in a number of judicial pronouncements, which
might both have a direct signifi | | |
