stpi sez echnology excise service tax ifrs … · strategy dtc growth update gst corporate laws...

EXCISE

• • • ISSUE - VII VOLUME - VI MAY - 2011

CO

MM

ER

CIA

L SER

VIC

ES

STR

ATE

GIC

MA

NA

GEM

EN

T W

ITH

IN L

EG

AL

FR

AM

EW

OR

K

IFRSDIRECT TAXES

EOU

FOREIGN TRADE

INFO

RM

ATI

ON

TEC

HN

OLO

GYSEZ

BUSINESS

EXPORT - IMPORT

ECONOMIC GROWTH

IND

USTR

Y W

ATC

H

STPIBTP

STRATEGY

DTCGROWTH

UPDATE

GST

CORPORATE LAWS

FEMA

COMMERCIAL LAWS

BENEFITS

www.bizsolindia.com

CUSTOMS

SERVICE TAX

We believe in C-2

This Month 4 U C-2

Editorial 1

By Ashok Nawal

By Ashok Nawal

What's New 22

Beyond the obvious 38

Breaking News 42

Did you miss this 43

Lighter Moments 44

Bizsol Services C-3

Greetings for New year C-4

Entitlement of Cenvat Credit of 2

various Input Services

Service Tax – Point of Taxation 15

& Cenvat Entitlement

A DEFINING DECADE IN THE 20

MAKING

Venkat R Venkitachalam

IN THIS ISSUE

• For important due dates please turn over

May - 2011

UPDATE

THISMONTH

4U

Payments Due Dates

Central Sales Tax –April 2011 Return-cum-Challan 21/05/2011

VAT – April 2011 Return 21/05/2011

ESI Contribution 21/05/2011

Profession Tax 31/05/2011

Excise Duties-May 2010 05/06/2011

Excise Duties- May 2010 By E-Payment 06/06/2011

Service Tax – May 2010 05/06/2011

Service Tax -May 2010–By E Payment 06/06/2011

TDS/TCS- May 2010 07/06/2011

Provident Fund- May 2010 15/06/2011

Returns

ER-1 and ER-2 Monthly return for May 2010 10/06/2011

ER-6- May 2010 10/06/2011

W E B E L I E V E I N

E D I T O R I A LBarack Obama must be a happy and relieved man. He has enough reason to be. After having slain the biggest enemy of the US he now has virtually and automatically re-elected himself to the White House for another term. It may be an irony that a man called Obama is the President of the US when another called Osama was the most wanted enemy of that country. With such homonymic names one may be pardoned for any proverbial slip-of-tongue for saying Osama is the President and Obama is the Enemy. The relief for Obama may be real in that introductory speeches and encomiums for him at felicitations can now be expected to go on smoothly with no embarrassment caused by misspelling of names. That is some relief indeed at a personal level for Obama. Remember one's own name is the sweetest word for any one in any language.

With so many conspiracy theories making the rounds, the script writers in Hollywood must be busy penning a new thriller featuring the two O'mas. The operation by the Navy Seal is perhaps the toast of the town except in the town of Islamabad. The Seal may have dethroned the Israeli Mossad for the most daring and adventurous state outfit to counter terror. Whether you agree with the Americans for violating the sovereignty of Pakistan or not, you have got to admire the operation, the way it is reported to have been executed. It may be a matter of debate as to when was Pakistan more embarrassed – when Bangladesh was freed by India or when Osama was killed right in the backyard of the Pakistani establishment. You violate Pakistan's air space and be their uninvited guests for well over forty minutes, conduct a coup of sorts and walk away with the trophy in the form of the dead body of Osama bin Laden. If true, these are stuff you find only in Hollywood movies. As we go to press rumours are afloat that the ISI Chief of Pakistan has fled the country completing the story of a failed state becoming an embarrassment for its own coutrymen.

Back home away from adventures and accolades the scene is pretty depressing. There is hardly any icon untouched by scams and scandals. If a Tata is arraigned for corruption and when the list of who-is-who in the corporate sector applying for anticipatory bail, either it heralds a new era where no one however high or mighty will be spared or is a symptom of a deeper malaise that the fundamental Indian national character has undergone a mutation. Look around. There are hardly any icons in left in the country. The powerful satraps of the land look like sad caricatures of their glorious past. While Sharad Pawar will be spending the rest of his life denying one allegation or other in some part of the country, Karunanidhi will be spending his autumn evenings as a sad man having perhaps to see his daughter go to jail for a crime the booty of which was shared by all in his own family. Yeddiyrappa has no time to govern the state as he is constantly busy dousing fires for clearing files for the benefit of his family. In Maharashtra the competition in the ministry is confined only to the extent of land (or flat) you can grab while you are in power. The signal contribution ironically of Anna Hazare's crusade against corruption has so far been to help expose his own comrades from the civil society in corrupt deals. It looks that the DNA of an Indian has already undergone serious mutation making propensity to corruption an integral personality trait.

With fake pilots on the loose your life is now on the line like unauthorised and unsafe constructions being certified for occupation. Corruption now threatens your life. The employees, particularly the Pilots of Air India go on strike periodically. No one so far appears to have gained anything from these strikes. In every strike situation Air India talks tough to start tough but capitulates before you could say 'oh no'. The employees almost always with growing pressure from the media and the Courts stop short of a long drawn out battle and eventually succumb. For the Government, whose money is it any way? With all lucrative routes having been given away to private players, programmed shoddy service to the passengers, rampant corruption right from the stage of procurement of aircraft and deliberate poor planning of available resources, it will not be too long before the closure of the organisation whose icon was the pride of the nation not too long ago.

There is one reform process which we will see for sure – the prison reforms. With so many high profile politicians, influential sports administrators and corporate honchos in jail and with so many more likely to visit the jails one can reasonably expect the conditions in the jails to improve. And it is high time. The Bureaucrats in Government and the Executives in the corporate sector have one thing in common. They have all the powers in the world on paper but nothing in practice. The corporate executives may have gone to jail for alleged corruption. But this episode is likely to change the way these high-flyers look at their own jobs. It is bound to put the fear of God into the management cadres. A formal certificate in corporate governance from the auditors is no longer sufficient. You will need to practice what you preach – literally.

Mahatma Gandhi never ceases to be a topic of controversy. It is possible that the two most written about people are Gandhi and Hitler. What a twosome! With new authors coming up with new profiles of Gandhi it is but natural that more opinions float around all the time, conjecture or otherwise. The recent controversy about his sex life is a case in point. The Congressmen are over-eager to do anything if the name 'Gandhi' is involved. For them it does not matter whether it is the original Gandhi or duplicate. The biggest disservice we do to Gandhi is to deify him. The moment we do so he ceases to be a man and what is so great about a God being able to do anything including getting independence for a country? Gandhi was a man and he achieved what he did despite being only a man. He may have had his own faults and foibles. So be it. After all he was a man like you and me. Then why this fuss?

The same over-enthusiasm of the Congressmen was in evidence in good measure when the irrepressible Shashi Tharoor came up with a repartee to the Kerala CM's comparison of Rahul Gandhi to an Amul Baby. His tweet did not go down well with the dyed-in-the-wool Congressmen for whom only set eulogies are acceptable. What Tharoor does not understand is that his nuanced humour in English is too much for the foot soldiers of the Congress whose very identity and livelihood depends entirely in pleasing those in the Gandhi household.

The flavour of the season is Cricket. And why not? We have just won the World Cup and the players are busy now making their fortune in the IPL. If Indians are accused of excesses I, for one, will not object. If we lose a Tournament we hunt down the players and haunt them. If we win we go to the other extreme. The BCCI started the ball rolling by announcing a booty of Rupees One Crore for each player (this was later increased to Two Crores when the players almost threatened to go on strike). Every State true to the competitive spirit of the game announced its own contributions. What largesse and at whose expense? But then whose money is it anyway? Every politician wants to have credit for the World Cup victory – if you cannot participate in the game, participate in the celebrations ! What a vicarious pleasure. Anyone daring to object is either unpatriotic or is accused of un-sportsman like behaviour.

Thank you.


May - 2011

1

Finance Bill has been approved by Parliament and has been given assent by Hon'ble President thereby it has

thbecome enactment w.e.f. 8 April 2011.

During the budget, definition of Input Services is totally changed and therefore, the doubts have been raised across w.r.t entitlement of Cenvat Credit on input services and therefore, attempt has been made to analyse the legal provisions.

Input Service has been defined as-

(l) “input service” means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,-

(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-

(a) construction of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or

(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;

The definition can be divided into 3 categories, mainly,

1. Category A - Services used directly or indirectly in relation to manufacture and clearance of excisable goods up to place of removal.

2. Category B - Inclusive

3. Category C - Specific exclusions

Therefore, first category is specified as

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal

Second category is for “inclusive” services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

Third category of “Specific exclusions” is specified as “but excludes-

)(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-

(i) construction of a building or a civil structure or a part thereof; or

— By CMA A. B. Nawal

May - 2011

2

Entitlement of Cenvat Credit of

various Input Services

functions” for entitlement of Cenvat Credit. However, it is recommended that such expenses should be considered by the service provider and charge the Service Tax considering the value inclusive of such reimbursement /expenditure which is otherwise also to be included in determining taxable value of services in accordance with “Service Tax (Determination of Value) Rules, 2006”. However, department may raise dispute on the expenditure or the reimbursement in connection with / or in relation with services availed for use of the person even though the same may be for business purpose.

As far as exclusion categories are concerned, there is absolute clarity on the following excluded services

A) Architect Services, Architect, Port & other Port Services, Airport Authorities, Commercial & Industrial Construction, Construction of complex, Execution of Works Contract used in relation to construction of a building or a civil structure or a part thereof, laying of foundation or making of structures for support of capital goods.

(B) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness center, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.

Consumed has been defined in the “Shorter Oxford English Dictionary Volume 1 as “to use up, to eat up, to drink up or to destroy or to accomplish or to complete”. However it has been stated in the Corpus Secundam Vol. 16 Page 1523 that the word “consumed” does not necessarily mean eat up or destruction but may often thus contemplate the ultimate use to which all intermediate ones lead.

Personal use means “private use”. Person includes a corporation, so goods purchased for a corporation could be goods purchased for the personal use of corporation as decided by the Bombay High Court (158-IC-703:1935 & 415:37 LR 703). It has been held by Honourable Tribunal in the case of Anand Jaisal v/s. CCE (1988 (37) ELT 320) that a VCR which has been cleared as baggage, on payment of duty, as it is used by proprietor in his business of running videotorium. It has to be considered as personal use and not as used for commercial purpose. Therefore, in view of the above, there may be some disputes for certain services even though it may relate to inclusive services used for the business.

We give below the categories of services and our opinion w.r.t entitlement of Cenvat Credit considering new definition of input services.

(ii) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or

(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.

There will be no disputes w.r.t services utilized whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal or used by a provider of taxable service for providing an output service since it can be related to each other in almost all the cases, except few cases like telephone.

The second category, there may be some disputes in relating the services w.r.t inclusive functions such as

1. advertisement or sales promotion,

2. market research

3. business exhibition

4. procurement of inputs

5. and the services utilized by persons / representatives / employees in relation to the functions as stated in “inclusive” definition e.g. reimbursement of travel of auditors by air - whether can be considered services utilized for performing auditing function or can be treated as services are used primarily for personal use.

Though it can be argued, exclusion is only for services which are used primarily for personal use or consumption for employees or the perquisites or benefits offered to employees for their personal use or compensated by the company which has no relationship with business of the company and normally required to be considered while calculating the TDS for salary and issuing Form 16. Any services for personal use cannot be treated as business expenditure and if it is accepted as business expenditure as per Indian Accounting Standard or under IFRS or any other generally accepted Accounting Standards, then it should be considered as “business purpose” and to be linked with “inclusive

May - 2011

3

Category of Service Category as mentioned above

Eligibility of Cenvat Credit Remarks

Architect's Services B & C The services for renovation / Modernization of factory premises or office premises of service provider will be allowed. Moreover these services for service provider are the Input services as per category A and cenvat will be allowed.

Services for construction, laying down the foundation for machines, structures for capital goods will not be allowed

Auction of property A Cenvat will be allowed only if it is input service in relation to output service.

For others cenvat will not be allowed.

Construction Services - Commercial or industrial

A & B Cenvat will be allowed only if it is input service in relation to output service. However Cenvat is restricted to 40% of total Cenvat. If Composition scheme is obtained no Cenvat is allowed.

The services for renovation / Modernization of factory premises or office premises of service provider will be allowed.

Construction Services – other than commercial and Industrial

A Cenvat will be allowed only if it is input service in relation to output service. However Cenvat is restricted to 40% of total Cenvat. If Composition scheme is obtained no Cenvat is allowed.

No Cenvat Credit will be allowed in other cases.

Dredging Services A Cenvat will be allowed only if it is input service in relation to output service. However Cenvat is restricted to 40% of total Cenvat. If Composition scheme is obtained no Cenvat is allowed.


General Insurance Services A & C Insurance premium for Fire Marine & other related policies of factory building, plant and machinery, capital assets, office premises, material handling equipment, etc. which is in relation to manufacture or clearance of manufacture goods up to the place of removal, and if it is input service for providing output service

No Cenvat will be allowed w.r.t. Services related to employee or person e.g. personal insurance, Group Insurance, Mediclaim, policy. However, if it is to cover statutory liability of employer, then it is not for personal benefit of employee but to cover employer's liability and should be eligible such as under Workmen Compensation. This may however be subject to litigation. Moreover no Cenvat will be allowed on insurance of motor vehicles or any office equipment which are having no relationship with manufacturing or clearance of excisable goods

Interior Decorators Services B & C The services for renovation / Modernization of factory premises or office premises of service provider will be allowed. Moreover these services for service provider are the Input services as per category A and cenvat will be allowed.

Services for construction, laying down the foundation will not be allowed

Legal Consultancy Services B Cenvat Credit will be allowed

Mandap Keeper Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

It has to be ensured in narration that relation is established as mentioned in category B

May - 2011

4

Mandap Keeper Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Mining of mineral, oil or gas A Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Provision of preferential location or external or internal development of complexes



Real Estate Agent Services A Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Cenvat Credit to real estate agent for procurement of land for hiring Flats for employee will not be allowed.

Renting of immovable property A Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Cenvat Credit to real estate agent for procurement of land for hiring Flats for employee will not be allowed. However Cenvat Credit w.r.t. factory taken on lease / rent Cenvat will be allowed but may be litigated.

Site formation and clearance, excavation and earth moving and demolishing services



Survey and Map making services A Cenvat Credit will be allowed only if it is input service in relation to output service.


Works Contract Service A Cenvat will be allowed only if it is input service in relation to output service. However Cenvat is restricted to 40% of total Cenvat. If Composition scheme is obtained no Cenvat is allowed.

Cenvat Credit will be allowed only if it is in relation to category of A & B subject to establishment of relationship.

Air Travel Agent's Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

It has to be ensured in narration that relation is established as mentioned in category B. However Air Travel agent generally books the tickets for persons, As explained above in the definition of Consumption & personal use, Credit may be litigated

Airport services A Cenvat Credit will be allowed for service charges paid on importation or exportation of goods. Port is the place of removal & hence Cenvat Credit on export of goods will be allowed

Assessee has two options either to claim refund under Notification. No. 17/ 2009 ST dt. 07.07.09 or claim Cenvat Credit.

Association engaged in assisting sale and purchase of any goods or forward contracts

A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


May - 2011

5

Authorized Service Station Services

C No Cenvat Credit will be allowed since there is specific exclusions

Beauty Treatment services C No Cenvat Credit will be allowed since there is specific exclusions

Business Exhibition Services B It is in relation to sales promotion hence Cenvat Credit is allowed subject to establishing the relationship with the functions mentioned in category B

Cargo Handling services A Cenvat Credit will be allowed for service charges paid on importation or exportation of goods. Port is the place of removal & hence Cenvat Credit on export of goods will be allowed

Assessee has two options either to claim refund under Notf. No. 17/ 2009 ST dt. 07.07.09 or claim Cenvat Credit.

Cleaning Activity Services A Cleaning with respect to category A will be allowed. Cenvat Credit will be allowed even if it is cleaning of container for import or export of goods

In any other case credit will not be allowed

Clearing and forwarding agents services

A Cenvat Credit will be allowed for services paid CFI agents or CHA since warehouse is also the place of removal.

Commercial Coaching & Training Services

B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Services in relation to personnel development which have no relationship with manufacturing will not be eligible for cenvat credit

Convention Services A & B The Convention w.r.t. training & development will be allowed subject to establishing the relationship with category A & functions of category B

It has to be ensured in narration that relation is established as mentioned in category B. However conventions are attended by the persons. As explained above in the definition of Consumption & personal use, Credit may be litigated

Cosmetic and Plastic Surgery Services


Courier Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Custom House Agency Services A Cenvat Credit will be allowed for service charges paid on importation or exportation of goods. Port is the place of removal & hence Cenvat Credit on export of goods will be allowed


Dry Cleaning Services C There is no specific mention of said service in category C the service for persons / employee hence Cenvat Credit will not be allowed

However if relationship is established with the functions in category A or B Cenvat Credit may be allowed subject to litigation.

May - 2011

6

Erection, Commissioning & Installation Services

A Cenvat will be allowed only if it is input service in relation to output service and if it is related to manufacturing like installation of plant and machinery. However Cenvat is restricted to 40% of total Cenvat. If Composition scheme is obtained no Cenvat is allowed.

Cenvat Credit will be allowed only if it is in relation to category of A & B subject to establishment of relationship.

Event Management Services A & B The Event Management managing the specific event w.r.t. training & development will be allowed subject to establishing relationship with category of A & functions of category B

It has to be ensured in narration that relation is established as mentioned in category B. However conventions are attended by the persons. As explained above in the definition of Consumption & personal use, Credit may be litigated

Fashion Designing Services C There is no specific mention of said service in category C the service for persons / employee hence Cenvat Credit will not be allowed

However if relationship is established with the functions in category A or B Cenvat Credit may be allowed subject to litigation.

Forward Contract Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Health and Fitness Services C No Cenvat Credit will be allowed since there is specific exclusions

Health Checkup and Treatment Services


Internet Cafe Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Management, Maintenance & Repairs Services

A, B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Management, Maintenance & Repairs Services with respect to motor vehicle will not be allowed

Membership of Club or Association Services


Other Port Services A Cenvat Credit will be allowed for service charges paid on importation or exportation of goods. Port is the place of removal & hence Cenvat Credit on export of goods will be allowed

Assessee has two options either to claim refund under Notification No. 17/ 2009 ST dt. 07.07.09 or claim Cenvat Credit.

Outdoor Catering Services C No Cenvat Credit will be allowed since there is specific exclusions

Outdoor catering service would be eligible if it is in connection with sales or finance (e.g. sales conference or shareholder's meeting) and have absolute relation with functions of category B. However it may be subject to litigation

Packaging Activity Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

It has to be ensured in narration that relation is established as mentioned in category B.

May - 2011

7

Pandal or Shamiana Contractor Services



Photography Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Port Services A Cenvat Credit will be allowed for service charges paid on importation or exportation of goods. Port is the place of removal & hence Cenvat Credit on export of goods will be allowed


Processing or Clearing House Services

B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Rail Travel Agent's Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

It has to be ensured in narration that relation is established as mentioned in category B. However Rail Travel agent generally books the tickets for persons, As explained above in the definition of Consumption & personal use, Credit may be litigated

Renting of Cab Scheme operators Services

B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

However Cenvat Credit may litigated considering definition of Consumption & personal use.

Security / Detective Agency Services


Sound Recording Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Steamer Agent's Services B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Stock Broker's Services B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Stock Exchange Services B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Storage & Warehousing Services A Cenvat Credit will be allowed subject to relationship with import or export of goods up to warehouse / depot of the Assessee, i.e. Place of removal.

Storage of inputs outside factory premises in a warehouse will also be allowed for cenvat credit

May - 2011

8

Survey and exploration of mineral A Cenvat Credit will be allowed only if it is input service in relation to output service.


Technical inspection and certification Services

A Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Tour Operator's Services B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

However Cenvat Credit may be litigated considering definition of Consumption & personal use.

Transportation of Coastal goods and goods transported through National Water ways and Inland water services


Travel Agent's Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

It has to be ensured in narration that relation is established as mentioned in category B. However Travel agent generally books the tickets for persons, As explained above in the definition of Consumption & personal use, Credit may be litigated

Underwriting Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Video tape production Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Credit Rating Agency's Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Promotion of “Brand” of Goods, Services, Events, Business Entity etc


Advertising Agency Service B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Air Craft Services for transport of passenger


It has to be ensured in narration that relation is established as mentioned in category B. However it is for persons, As explained above in the definition of Consumption & personal use, Credit may be litigated

Asset Management Service B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Automated Teller Machines Operations, Maintenance or Management Services


Banking and Financial Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

May - 2011

9

Broadcasting Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Business Auxiliary Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Business Support Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Cable Operator Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Commercial use or exploitation of any event


Consulting Engineer's Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Copyright Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Credit Card, Debit Card, Charge Card or Other payment card related services


However Cenvat may litigate considering definition of Consumption & personal use.

Design Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Development and supply of contents in Telecom Services etc.


Electricity Exchanges Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Facsimile Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Foreigner Exchange Broker B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Franchise Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

May - 2011

10

Hotel, guest house, inn, club or campsite services having tariff Rs 1000/- or more


However Cenvat Credit may be litigated considering definition of Consumption & personal use.

Information Technology Software services


Input credit on softwares for email communication, anti-virus, business reporting, etc. will be subject to litigation

Insurance Auxiliary Services A & C Insurance premium for Fire Marine & other related policies which is in relation to manufacture or clearance of manufacture goods up to the place of removal, and if it is input service for providing output service

No Cenvat will be allowed w.r.t. Services related to employee or person e.g. personal insurance, Group Insurance, Mediclaim, policy under Workmen Compensation.

Insurance Auxilliary Services concerning Life Insurance Business

A & C Insurance premium for Fire Marine & other related policies which is in relation to manufacture or clearance of manufacture goods upto the place of removal, and if it is input service for providing output service

No Cenvat will be allowed w.r.t. Services related to employee or person e.g. personal insurance, Group Insurance, Mediclaim, policy. However, if it is to cover statutory liability of employer, then it is not for personal benefit of employee but to cover employer's liability and should be eligible such as under Workmen Compensation. This may however be subject to litigation

Intellectual Property Services C Cenvat Credit will not be allowed though there is no specific exclusion in category C, generally royalty will be paid on sale hence may be considered as post removal activity.

Royalty may not be on sale of goods, but is computed on the value of the goods sold. Royalty is for transferring the rights to manufacture and sale of goods. It may include use of brand name, trade name etc. In some cases it is part of the payment for transferring the know-how. The manufactured products are marketed under the brand name. Cenvat is entitled but will be subject to definite litigation

Internet TelecommunicationServices


Leased Circuit Services A & B Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B

Life Insurance Services C No Cenvat Credit will be allowed since there is specific exclusions

Mailing List Compilation & Mailing Services



Management Consultant'sServices


May - 2011

11

Management of Investments in ULIP Services

B & C If with respect to financial activity then only allowed.

Managing Public Relations B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Manpower Recruitment or Supply Agency's Services


The inclusion part covers only recruitment and not supply. Therefore temporary manpower supplied for cleaning, office work, etc., cenvat credit will not be allowed. However, cenvat availed on contractual workmen deployed for production, packaging, will be allowed but gardening will be litigated.

Market Research Agency Services


Medical Records Maintenance Services


On Line Information & Data base Access / Retrieval Services through Computer Network


Opinion Poll Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Paging Services B & C Cenvat Credit will be allowed subject to establishing the relation to functions of category B

If it is in relation to personal use of employee then credit not allowed.

Practicing CharteredAccountant's Services


Practicing Company Secretary's Services


Practicing Cost Accountant's Services


Programme Producers Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Promotion , Marketing or Organising of Games of chance, including Lottery


Recovery Agent Services C No Cenvat Credit will be allowed since there is specific exclusions

Registrar to an Issue's Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

May - 2011

12

Restaurant Services having Air conditioner and licence to serve the beverages


Sale of space or time for advertisement


Scientific or TechnicalConsultancy Services


Share Transfer Agent's Service B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Ship Management Services A Cenvat Credit will be allowed subject to relationship with import or export of goods upto warehouse / depot of the assessee, i.e. Place of removal.

Sponsorship Services B Cenvat Credit will be allowed subject to establishing the relation to functions of category B

Supply of Tangible Goods Services



Technical testing and analysis Services

A Cenvat Credit will be allowed subject to relationship with import or export of goods upto warehouse / depot of the assessee. Technical Testing and analysis which is related to production, quality control, sales and marketing is also allowed

Telecommunication Services by Telegraph Authorities

A, B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Telegraph Services A, B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Telephone Services A, B & C Cenvat Credit will be allowed subject to establishing the relation to category A & functions of B


Transport of Goods by Air Services

A Cenvat Credit will be allowed subject to relationship with import or export of goods upto warehouse / depot of the assessee, i.e. Place of removal.

Transport of Goods by Pipeline or Other Conduit Services


May - 2011

13

Transport of goods by Rail Services


Transport of goods by Road Services


Transport of person by Cruise Ship within India


It is important to note that when service tax payment is made on reverse charge mechanism for import of services then before taking Cenvat Credit, it should be established as to whether these services are in relation to category A & functions of category B otherwise Cenvat Credit credit will not be allowed.

It is recommended to write proper narration in books of accounts establishing relationship otherwise entitlement of Cenvat Credit may be litigated.

May - 2011

14

— By CMA A. B. Nawal

During the Budget discussion, Honorable Finance Minister, Shri Pranab Mukherjee hinted that he had appreciated the concerns w.r.t Point of Taxation Rules, st st2011 and promised that implementation thereof can be postponed to 1 July 2011. However, on 31 March 2011, number of notifications have been issued

changing the provision of Point of Taxation Rules, 2011 as well as amending the provisions of Cenvat Credit Rules, 2004 and thereby in the attempt of simplification, number of options have been provided and therefore, the attempt has been made in this article to provide comparative provisions prior to

stBudget and present provisions w.e.f 1 April 2011 on the issues of Cenvat Credit & Service Tax.

Service Tax – Point of Taxation & Cenvat Entitlement

FREQUENTLY ASKED QUESTIONS Sr. No.

Frequently Asked Questions

Practice /Provisions prior to Budget

Present Provision w.e.f 1st April 2011

For Non-Continuous Service

1 What is Point of Taxation?

Though there was no Point of Taxation Rules, there was a provision to raise the invoice within 14 days from the provision of services or payment received, whichever is earlier

Completion of service

Raising of invoice

Payment Point of taxation

For Individual Partnership / Proprietorship providing services with related to Architect, Interior Decorators, Practicing Chartered Accountants, Practicing Cost Accountants, Practicing Company Secretaries, Legal Consultancy Services, Scientific or Technical Services

Export of Services

Services under Reverse Charge Mechanism like GTA, Import of Services, Sponsorships, Mutual Fund & Insurances

Associated Enterprises

For Other Categories

May

- 2

011

15

May

- 2

011

16

Before After After Point of Taxation will be only when payment isreceived forspecified services.

Point ofTaxation will be when payment is received. Therefore, when rebate claim is being filed, Point of Taxation will be when payment is received. However, if payment is not received within specified time limit of RBI then the Point ofTaxation will be raising of invoice and Service Tax will have to be paid with interest

Point ofTaxation is the date ofpayment. However if payment is not made within six months then Point of Taxation will be from the date ofreceiving the invoice and Service Tax will have to be paid along with interest.

If services are provided to Associate Enterprises within India then Point of Taxation will be completion of services / invoice. However, it is option either to make iteffective from 1st April 2011 or 1st July 2011. However, if services are provided to Associated Enterprises which arelocated outside of India, then Point ofTaxation will be date of credit in the books ofservice availers or the date of making payment, whichever is earlier.

Point ofTaxation will be completion of services / invoice. If invoice is not raised with 14 days, Point ofTaxation will be invoice or payment whichever is earlier. However, it is option either to make it effective from 1st April 2011 or 1st July 2011.

Before Before After Same as above Same as above

Same as above Same asabove

Same as above

Before After Before Invoice will have to be raised within 14 days from the date of completion of service or date of the paymentreceived and Point of Taxation will be date of payment received

Same as above


Same as above

After Before After Point of Taxation will be only when payment isreceived forspecified services.

Same as above


Same as above

After Before Before Point of Taxation will be only when payment isreceived forspecified services.

Same as above


Point ofTaxation will be date of payment received partly or fully.

After After Before Point of Taxation will be only when payment isreceived forspecified services.

Same as above


Point ofTaxation will be date of payment received partly or fully.

2 When invoice should beraised?

Invoice to be raised within 14 days of completion ofservice or payment received whichever is earlier

Invoice to be raised within 14 days of completion of service or payment received whichever is earlier

3 When Cenvat Credit isentitled?

Cenvat Credit was entitled only when complete payment of taxable services has been made

Cenvat Credit can be availed on receipt of invoice irrespective of payment made. However if payment is not made within 3 months, proportionate credit to be reversed to short payment made and re-credit can be taken when payment is made . Further, in case of Service Tax payment under the Reverse Charge Mechanism, date of payment will be the date of entitlement of Cenvat Credit.

May

- 2

011

17

4 What happens to the Services availed prior to 1st April 2011 and payment is outstanding?

Cenvat Credit was entitled only when complete payment of taxable services has been made

Service tax credit can be taken only when complete payment is made for the services availed prior to 31st March 2011

5 What iscontinuous service? And When Service Tax to be paid?

There was no such provision earlier

Continuous supply of service means any service which is provided or to be provided continuously, under a contract, for the period exceeding 3 months, Where Central Government, by a Notification in Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether to or not subject to any conditions. Central Government vide Notification No. 28/2011 ST dated 1.4.2011 has notified following services to be treated as continuous supply of service for the purpose of Point of Taxation Rule, 2011. Point of Taxation for such services will be the time when invoice for the services provided or to be provided is issued and if invoices are not issued within 14 days of completion of provision of service, and then it will be the date of such completion. However, if payment is received before raising the invoice or completion of services, then Point of Taxation will be date of receipt of payment to the extent of payment received. Explanation has also been inserted to clarify if by way of contract date of completion of each event and payment terms w.r.t such completion is mentioned then such date will be considered as date of completion of services and if any advance by whatever name is called is received then the Point of taxation will be date of receipt of each advance.

6 What happens when there is change in rate between the date when services were provided and date when payment was received?

Earlier, also the rate of Service Tax applicable wasrequired to be considered based on the period when services wererendered or payment was received.

Completio

n of Service

Invoice

Payment

Point of Taxation

Remark

Before After After Date of Invoice or Payment, whichever is earlier.

The rate of Service Tax is modified to Effective Rate of Service Tax considering the abatement. Therefore, whenever abatement rate has been changed, still the provision will apply since rate of tax and taxable value has been combined and worded as Effective Rate of Service Tax.

Before Before After Date of issuing of invoice

Before After Before Date of payment After Before After Date of payment After Before Before Date of Invoice

or Payment, whichever is earlier.

After After Before Date of issuing of invoice

7 What areTransitional provisions?

No Provision The services for which provision is completed before 30.06.2011 or where invoices are issued up to 30.06.2011, Point of Taxation shall at the option of tax payer, be the date on which payment has been received or made, as the case may be. However, the said provision can be opted by the Tax Payer w.e.t 1st April 2011 when the Point of Taxation Rule came into force.

May

- 2

011

18

May

- 2

011

19

8 How the value of the services to bedetermined by Banking & financial Institution and Foreign Exchange Broker inrelation tomoney changing and what will be rate of tax?

Gross amount of currency exchange was the taxable value and rate of tax was 0.25%

Difference between buying rate and selling rate with reference to RBI Reference Rate at particular time of money exchange will be the taxable value and rate of tax will be 0.01% of gross amount of currency exchange up to Rs. 1 lac subject to minimum amount of Rs. 25,000/- or Rs. 100/- and 0.5% if the amount of gross amount exchange is between Rs. 1lac to Rs. 10 lacs or Rs. 550/- & 0.01% if amount of gross amount exchange exceeding Rs. 10lacs and amount of Service Tax will be maximum Rs. 5,000/-

9 How valuation of exempted services i.e. trading to be considered while reversal of Cenvat credit under Rule 6 (3) when exempted service ortaxable service or exempted goods and excisable goods are produced?

No such provision Value of exempted service w.r.t traded goods will be difference between sale price (-) cost of goods based on generally accepted Accounting Principles without including the expenses incurred towards their purchase or 10% of the cost of goods sold , whichever is more.

10 Whether Cenvat Credit can be availed on supplementary invoice, bill or challan for differential Service Tax?

Though there was no specificprovision, it was entitled.

Now, it has been restricted only in case when differential Service Tax is not paid by reason of fraud, collusion or willful misstatement or contravention of any of the provision of Finance Act or the rules made thereunder with intend to evade Service Tax.

It can be observed from the above that one have to be more vigilant for discharging the Service Tax liability and also availment of Cenvat credit on invoices received

from Service Provider or under Reverse Charge Mechanism. There has to be mechanism of internal control so as to be 100% statutory compliant.

The title to this piece may look presumptuous and opinionated – presumptuous because it is futuristic in nature and opinionated because it is not supported by any empirical data to warrant some far-reaching predictions. Be that as it may, let us look at what is in store in the decade that has just now started unravelling itself. However, before doing the crystal- gazing it may be in order to place on record some caveats. Every decade, year or for that matter any period in time looks a defining one with or without compelling reasons. However, for the sheer pace and nature of change the immediate future looks much more impactful than any before. Looking back, there was an element of certainty about even the uncertainties. But no more. The shape and size of events taking place these days leave one breathless and amazed.

Gone are the days of a bipolar world in which the US and the USSR laid down the rules of the geo-political games. Just as everyone was settling down to a world ruled by a single super power, fault lines have started emerging in its ability to lord over the world. The very phrase world view had become a euphemism for American opinion. Over the years America had become a land of opportunists just because it indeed was a land of opportunities. The recent economic meltdown there has hurt its ability to sustain the self-acquired burden of the world. The Jasmine Revolution in the Middle East would turn out to be watershed event in the process of unravelling of the American role on the world stage. One by one the kingdoms, sheikhdoms and the fiefdoms of the Middle East are crumbling. All these autocrats or despots owed their allegiance to American support for their very survival. The US has been put in a piquant situation when it is being called upon to support either the ruler or the ruled. Political convenience favoured the former but allegiance to democracy demanded that it supported the latter. Come to think of it, here is an event not planned or prepared for by the US. Imagine a major revolution taking place without a CIA hand! In all these the ability of America to dictate terms in the new world order is bound to diminish. That is bound to be a major earth-shaking event in the new decade.

In the past whenever anyone in India spoke of globalisation it was always from an 'inside-out' perspective - more in the nature of we taking the option of integrating ourselves with the world. Even if we had not taken that option this integration would any case have taken place. It would have been impossible for us to be insulated by the volatile world events like what is happening in the Middle East.

Volatile oil prices and fast changing technologies would have made us look to the outside world and change ourselves. As if that is not enough the climate-change phenomena and the resultant adjustments that we are called upon to make would have exerted enormous pressure on us to be part of the world stage. The recent global economic slowdown serves as a grave reminder to us about the need and necessity of getting integrated with the rest of the world. The one prediction on which few people differ is the inevitability of China becoming the numero uno economy of the world. The moot question here is whether the country would continue to be an oxymoron with 'controlled capitalism'.

It is not only in the global macro terrain that we will see changes in this decade. Closer home the changes which will come to visit us in the current decade will be much more far reaching than any in the past. Let us look at some of the important ones.

The decade beginning with 1991 came to be known as the shining example of what economic reforms can do for a country like India. The reforms may have started out of compulsion and today it is a testimony to the world as to what free economy and unbridled entrepreneurial spirit can do to a country. However, after the initial success of the economic reforms there has been quite a lull when politics hijacked economics. However, a wave of second generation reforms are about to be ushered in with the introduction Goods and Services Tax, the new Tax Code and the mandating of IFRS for large organisations. Current political opposition notwithstanding, these are bound to be implemented whoever will be in the Government. The process may be slow but the outcome is a certainty.

Though people may shy away from articulating the consequences of terrorism in the sub continent, one cannot wish away the impact it will have on the politics and economy of this country. For the coming decade this may be the single most important factor which will affect the country's future. The success and failure of any Government in the country will depend on how it handles this one factor. With the ever changing geo-politics and the growth in ideological fanaticism, the chances of fringe elements taking centre stage in India is far more real today. By definition democracy is a breeding ground for fanatical ideologies in the name of nationalism or religion.

It may look natural that a country's standard of corruption is measured by the number of scandals

May - 2011

20

A DEFINING DECADE IN THE MAKING

While it is an opportunity, it will also prove to be a challenge to those in power. Before leaving the topic of Politics one cannot but be aware of one universal truth. Capitalism and more so crony capitalism bring in a big chasm between the 'haves' and the 'have-nots'. If recent indications are anything to go by there is enough evidence in the country where obscene display of wealth does not meet with enough criticism. The romance with Communism begins here. Despite the experience to the contrary, it would be easy for those who have been deprived to fall prey to some form of socialistic posturing. The Communists, even if they lose the coming state elections, can take heart in the fact that things could change in their favour and much of it will be in evidence by the time this decade runs out.

Expectations of a better standard of living with decent civic amenities, robust infrastructure, caring healthcare, etc. may be too obvious to state. Moreover it will also be recurring themes for any Government for any period in time. Even those who do not subscribe to the view that the Naxal movement is essentially a manifestation of lopsided development of better part of India would readily agree that these would definitely alleviate the suffering of the masses in the undeveloped regions and also at the same time alienate them from the Naxals. Incidentally containment of the Naxal movement would be top of the Agenda for both Central and State Governments and would indeed be a major challenge in the decade ahead.

The list of Challenges and Opportunities in the coming decade could be endless. Many of them could be common to any developing economy and it could even look daunting. However, in the case of India hope stems from the fact that few people had expected an invitation to India to the high table with the comity of nations as a shining example of development even a decade earlier. The unthinkable has happened and we are proud of it. That should give us the hope and confidence in the coming decade to do even better. While signing off one cannot but rue the fact that at the beginning of this decade there are very few idols still left standing. All those who stood tall at the beginning the previous decade are now mired in corruption and corporate governance issues. The list includes politicians, industrialists, bureaucrats, artistes, et al. Let us hope that this does not happen when we take a review at the end of this decade.

Thank you.


Courtesy “Footprints”

and scams which come out of the cupboards kept in the corridors of power. Strangely however, it may not be true. Everyone in India knew and at the same time did nothing about it when it came to corruption. With more and more skeletons tumbling out and more and more names dragged into the mud, it is quite natural to assume that ours is a corrupt society. We already know about it. But what is new is that here there is chance to do something about it by bringing the culprits to book. All those who are getting booked for corrupt on are those who have done the crime in the past. What is now important is that at least the names are coming out, albeit not fast enough. There are systemic deficiencies which need to be addressed. If one were to go by the signals emanating all round the chances are that this decade will see something tangible done on this score.

Unlike any time in the past the demographic profile of the country is set to change totally during the coming years. The population of the young and the impatient are about to take charge and take change they will. Age may no longer be mistaken for wisdom any more nor will the youth be patient to pardon the aged for that reason. The demand pull from the youth will create its own pressure points in all spheres of activities – be it politics or the so called morality. Youth power will decide whether Baisakhi is more important to celebrate or Valentine's Day! In fact India is in a crucial phase. There will more people in the earning group than in the non-earning group. History shows that a country grows more in the demographic dividend phase. This will call for imaginative state planning for providing employment opportunities and the ability of the Government to channelise the productive energies of the youth of the country. This by far will be the most formidable challenge to the Government of the day in the coming decade.

A discussion on Politics in India could be a vulnerable issue especially if it is to be interspersed with predictions. Ideologies had never been the weakness of any party in India. An expressed hope that there would be change in this direction any time soon could be termed as utopian. But one cannot run away from reality. Inclusive growth today may be a slogan than a conviction. In an era when 'vote-bank' politics and 'vote-for-freebies' rule the roost, it may even look unattainable. Economic reforms undeniably did achieve growth, though modest. That is not enough anymore. More people will need to be taken above the poverty line and more will need to be empowered. Again it should not be confined to a slogan. The empowerment of the youth and the deprived sections through affirmative action will decide the future of the nation. Much of which will be in evidence in the coming decade.

May - 2011

21

What's New…!!Custom

Tariff :

Ø Basic Custom Duty rate on following goods has been reduced,

ITCHS Description of Goods Duty Rate

2701 Coal having Swelling Index or Crucible NilSwelling Number of 1 and above and mean reflectance of above 0.60, for use in the manufacture of iron or steel using Corex, Finex or PCI technology

8703 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars , new, which have not been registered anywhere prior to importation, if imported,-

(1) as a Completely Knocked Down (CKD) kit containing all the necessary components, parts or sub-assemblies, for assembling a complete vehicle,with-

(a) engine, gearbox and transmission 10% mechanism not in a pre-assembled

condition;

(b) engine or gearbox or transmission 30% mechanism in pre-assembled form

but not mounted on a chassis or a body assembly. (2) in any other form. 60%

8711 Motor cycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side cars ,and side cars, new, which have not been registered anywhere prior to importation,-(1) as a Completely Knocked Down (CKD) kit containing all the necessary components, parts or sub-assemblies, for assembling a complete vehicle,with-

(a) engine, gearbox and transmission 10% mechanism not in a pre-assembled condition;

(b) engine or gearbox or transmission 30% mechanism in pre-assembled form, not mounted on a body assembly.

(2) in any other form. 60%

844399 Parts for manufacture of printers falling NILunder heading 8443 32

[CUS NTF NO. 31/2011 DATE 24/03/2011]

Ø Following goods has been exempted from payment of SAD i.e. Custom Duty under Sec 3(5),

Description of Goods ITCHS

Parts for manufacture of printers falling 844399 under heading 8443 32

The following goods, namely:- 847170 or(a) microprocessor for computer, other 847330 or than motherboards; 8523(b) floppy disc drive;(c) hard disc drive(d) CD-ROM Drive;(e) DVD Drive or DVD Writer;(f) Flash memory;(g) Combo drive. Cruise Ships, Boats, Cargo Ships, Barges, 8901ferry-boats etc

Helicopters, aeroplanes etc 8802 (except 8802 60 00)

[CUS NTF NO. 32/2011 DATE 24/03/2011]

Ø Basic Custom Duty will be exempted on following raw Sugar subject to conditions mentioned in the notification,

ITCHS Description of Goods BCD

1701 Raw Sugar Nil

1701 91 00 or Refined or white sugar Nil1701 99 90

1701 Raw sugar if imported by Nila bulk consumer

[CUS NTF NO. 34/2011 DATE 15/04/2011]

May - 2011

22

Ø Drawback amount will not be recovered in case of non realisation of export proceeds subject to following,

a) sale proceeds is compensated by the Export Credit Guarantee Corporation of India Ltd. under an insurance cover and

b) the Reserve Bank of India writes off the requirement of realization of sale proceeds on merits and

c) the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer. [CUS NTF NO. 30/2011(NT) DATE 11/04/2011]

Ø The tariff rate for brass scrap (all grades) has been revised to Rs. 4272/- Per Metric Ton and for Poppy seeds to Rs. 2745/- Per Metric Ton. [CUS NTF NO. 33/2011(NT) DATE 29/04/2011]

Circulars:

Ø It has been clarified that the exporter is required to declare on the body of the shipping bill under claim of drawback that the goods being exported to Nepal have not been imported into India from third countries and the field formations shall conduct random checking to ensure the genuineness of the exporter’s declaration. [CUS CIR NO. 14/2011 DATE 15/03/2011]

Ø It has been clarified that all packaged/ canned software imported in shrink wrapped packages, will attract Excise duty/CVD on such retail sale price declared being the combined value of the software and the licenses (right to use). Such software will, however, be exempt from payment of service tax under the category ITSS (as provided in Notification

stNo. 53/2010-ST dated 21 December 2010).

On the other hand, such packaged/ canned software, on which affixation of retail sale price is not required under the relevant provisions for the packaged commodities, and the assessment is based therefore, on the value determined under section 4 of the central excise act, 1944, the excise duty/ CVD will be charged only on the value, excluding the value representing consideration for transfer of right to use such packaged/ canned software. However, service tax under the category ITSS would be levied on such portion subsequently. [CUS CIR NO. 15/2011 DATE 18/03/2011]

Ø It has been clarified that some declarations are required to be made by the passengers at the time of arrival at the international airport in Para 7 of the Customs part of Arrival Card for Passengers. [CUS CIR NO. 16/2011 DATE 31/03/2011]

Ø The Finance Bill, 2011 stipulates ‘Self-Assessment’ of Customs duty in respect of imported and export goods by the importer or exporter. This means that while the responsibility for assessment would be shifted to the importer / exporter, the Customs officers would have the power to verify such assessments and make re-assessment, where warranted. The proposed changes shall become effective immediately from the date of enactment of the

Ø Exemption from the payment of additional duty (CVD) in excess of 1% ad valorem has been provided on the fertilisers classified under chapter. [CUS NTF NO. 35/2011 DATE 15/04/2011]

Antidumping Duty Notifications :

Ø Anti-dumping duty on Certain Rubber Chemicals (MBTS) falling under tariff item 2925 20 or 2934 20 or 3812 originating in, or exported from People’s Republic of China has been continued till 25/07/2011. [CUS NTF NO. 28/2011 DATE 04/03/2011]

Ø Anti-dumping duty on Polytetrafluoroethylene (PTFE) falling under heading 39046100 originating in, or exported from People’s Republic of China has been continued till 25/07/2011. [CUS NTF NO. 29/2011 DATE 04/03/2011]

Ø Anti-dumping duty has been imposed on imports of Glass Fibre and articles falling under heading 7019 originating in, or exported from, People’s Republic of China. [CUS NTF NO. 30/2011 DATE 04/03/2011]

Ø Anti-dumping duty imposed on imports of acrylonitrile butadiene rubber (NBR) originating in, or exported from, the Chinese Taipei has been removed. [CUS NTF NO. 33/2011 DATE 30/03/2011]

Ø Definitive Anti-dumping duty has been imposed on Acetone (29141100) originating in, or exported from, Thailand and Japan. [CUS NTF NO. 36/2011 DATE 18/04/2011]

Ø Anti-dumping duty imposed on imports of Silk fabric of weight 20 to 100 gms per metre falling under tariff item 5007 originating in, or exported from People’s

thRepublic of China has been extended upto 5 December 2011. [CUS NTF NO. 37/2011 DATE 21/04/2011]

Non Tariff :

Ø Gandhinagar, Gujarat, has been added as inland container depots for the Unloading of imported goods and the loading of export goods[CUS NTF NO. 22/2011(NT) DATE 08/03/2011]

Ø The Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 is amended. [CUS NTF NO. 26/2011(NT) DATE 01/04/2011]

Ø Hazira, Surat, Gujarat has been declared as inland container depots for the unloading of imported goods and the loading of export goods or any class of such goods. [CUS NTF NO. 28/2011(NT) DATE 06/04/2011]

Ø Ahmedbad, Jamnagar in Gujarat and Rajasansi (Amritsar), Chandigarh in Punjab are notified as customs ports or customs airports for the unloading of imported goods and the loading of export goods. [CUS NTF NO. 29/2011(NT) DATE 06/04/2011]

May - 2011

23

3. Time limit for finalization of Project Imports under PIR, 1986 is adhered to in all cases, so that such finalization is completed within the validity period of the bank guarantee in order to ensure that the government revenue is safeguarded.

4. However, in cases where the importers have not submitted the requisite documents in time, it may be ensured that the bank guarantees are kept alive until finalization of project imports so that resultant delay does not adversely affect the interests of revenue.

5. It has also been clarified that to deter the importers from non-submission or delayed submission of relevant documents, the Commissioners should ensure that in cases where the requisite Statement / documents under Regulation 7 of PIR, 1986 is not submitted in time or submitted incomplete, then necessary action for enforcing bond / undertaking, cash security/ bank guarantees executed in this regard, issue of notice for demand of duty, penalty for non-compliance with the provisions of the Regulations may be initiated against the importer

6. Importer and his Custom House Agent should ensure that the provisionally assessed Bills of Entry for the imported goods at the ports other than the port of registration of project imports are finally assessed and audited at the respective ports, and should be submitted along with the documents submitted for finalization of Project Imports. In these cases the concerned Commissioner should ensure that such Bills of Entry are finalized without undue delay.

7. It has been decided by Board that jurisdictional Central Excise Commissionerate should ensure that Plant Site Verification, where ever applicable, is completed within 15 days of submission of relevant documents by the importers

8. The Board further has directed that the concerned Commissioner of Customs should monitor the pendency of project imports cases and submit a monthly report to the Chief Commissioner of Customs in charge of the Zone, in the prescribed format enclosed along with this circular as in Annexure-I. The Chief Commissioner of Customs will monitor the pendency and send a quarterly consolidated report of

ththe Zone by 15 of next month to the Directorate General of Inspection (Customs & Central Excise), New Delhi in prescribed format as in Annexure-II. The DGIC&CE will in turn monitor the pendency at All India level, in centralized manner and will report to the Board on a quarterly basis about the progress made in finalization of project imports, trend of compliance etc. and suggest corrective measures to be taken, if any. [CUS CIR NO. 22/2011 DATE 04/05/2011]

Instructions:

Ø Food Safety and Standards Authority of India (FSSAI) is required to test samples of food articles, particularly fresh produce exported from Japan after March 11, 2011, such as sea food, fruits, vegetables and meat

Finance Bill, 2011. It is, therefore, some clarifications issued i.r.t. new legislative provisions. [CUS CIR NO. 17/2011 DATE 08/04/2011]

Ø It has been clarified that the new arrival card introduced vide MHA Notification No. GSR 113(E) dated 24.02.2011 should also be used by the Customs Authorities at Land Customs Station or the Sea Port. In this regard, it is further clarified that against the Column ‘Flight Number’, it can be mentioned either as “Not Applicable” or details of train / vessel could be filled in.[CUS CIR NO. 18/2011 DATE 08/04/2011]

Ø It has been decided to extend the facility of labeling on imported goods in Bonded warehouses by filling Warehousing Bill of Entry & subject to certain procedural conditions, in order to remove the difficulties faced by importers on account of space constraints at CFSs/ Port / ICDs and the nature of goods, etc.[CUS CIR NO. 19/2011 DATE 15/04/2011]

Ø It is clarified that import of trim cutting waste or fabric trims of continuous length with maximum width restriction of ten inches (10") falling under heading 6310, required for manufacture of Chindi rugs shall not be subjected to restrictions imposed by the present policy of ITC (HS) Code 6310 and shall be cleared without an import licence. [CUS CIR NO. 20/2011 DATE 15/04/2011]

Ø The Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 published vide Cus.Not.No. 36/2010 dated 5/05/2010 is amended and new regulations will be called as Courier Imports and Exports (Electronic Declaration and Processing) Amendment Regulations, 2011. Following Clarification has been provided.[CUS CIR NO. 21/2011 DATE 18/04/2011]

Ø Board has clarified the various issues related to Project Import Regulation,1986 as follows:

1. it has been decided by the Board that finalization of

assessments under Project imports should completed within a period of 60 days from the date of submission of required documents by the importer. However, in exceptional circumstances where it is not possible to complete the finalization within the time limit for justifiable reasons, the time limit may be extended by the jurisdictional Commissioner of Customs for such further period as may be decided by him and for the reasons to be recorded in writing.

2. It is hereby clarified that the relaxation as not to renew the bank guarantee is applicable, only if all the required documents including certificate for installation of imported goods at the Plant/ Project site, utilization of imported goods in the manufacture of declared goods etc. are submitted up to the satisfaction of proper officer for finalization of contract.

May - 2011

24

Special Economic Zone

Instructions:

Ø It has been clarified that Trading and Warehousing activities done in respect of any product by FTWZ located in sector specific SEZ between the period from 12.03.2010 to 12.11.2010 and contracts signed during this period may remain valid till 31.3.2011 and thereafter all cases including cases where the contract was signed on or before 12.11.2010 shall also be regulated by Instruction No. 71 dated 12.11.2010 w.e.f. 01.04.2011.[INST. NO. 76 DATE 22/03/2011]

Central Excise

Tariff

Ø Vaccines specified under the National Immunisation Program are exempted by amending Notification 4/2006 CE dated 01.03.06. [Ntf No.19/2011-CE dated 03.03.2011]

Ø Excise duty on mobile handsets including cellular phones is reduced to 1 % ad valorem. [Ntf No.20/2011-CE dated 24.03.2011]

Ø 1% & 5% Excise Duty imposed on certain goods vide Notification No. 1/2011 & 2/2011 CE dt. 01.03.11 wherein “ Silicon in all forms is substituted by the word Silicon in all forms other than silicon wafers; at Sr No. 100 for Mobile handsets including Cellular Phones and Radio trunking terminals is substituted by the word Radio trunking terminals. [Ntf No.21 & 22 /2011-CE dated 24.03.2011]

Ø Vegetable fats & oils falling under falling under Chapter 1516 has been exempted from Excise Duties. [Ntf No.23 /2011-CE dated 24.03.2011]

Ø Colour positive unexposed cinematographic film in jumbo rolls and colour negative unexposed cinematographic film in rolls of 400 feet and 1000 feet And Silicon Wafers will be exempted from Excise Duties. [Ntf No. 24 /2011-CE dated 24.03.2011]

Ø Central Excise Duty on Parts for the manufacture of printers falling under sub-heading 8443 32 reduced to 5 %. [Ntf No. 26 /2011-CE dated 24.03.2011]

Ø Exemption is granted to waste, parings and scrap arising in the course of manufacture of goods in respect of which the benefit of exemption under notification no. 1/2011-CE dated the 1st March, 2011 or notification no. 20 /2011–CE dated the 24th March, 2011 is availed.[Ntf No. 27 /2011-CE dated 24.03.2011]

Ø Notification No. 8/2003-CE, dated the 1st March, 2003 which provides SSI exemption to units not

from Board of Radiation and Isotope Technology, Navi Mumbai before issuing ‘No Objection Certificate’ to Customs. [CUS INST. NO. F.No.450 /22/2011-Cus.IV, DATE 17/03/2011]

Ø Food Safety and Standards Authority of India (FSSAI) has been granted accreditation following two laboratories for testing for radioactive contamination of food items imported from Japan besides BRIT, Navi Mumbai.

1. Shriram Institute for Industrial Research, 19, University Road, New Delhi-110007.

2. Monarch Biotech Private Limited, 37A-SIDCO Industrial Estate, Thrumazhisai, Chennai-602107[CUS INST. NO. F.No.450 /22/2011-Cus.IV, DATE 22/03/2011]

Ø Instruction has been issued to take suitable legal action in case any violation is noticed as to import of products containing beef in any form including Gummy Pizza. [CUS INST. NO. 528/36/2011-STO (TU), DATE 19/04/2011]

Ø It has been clarified by the Board that henceforth all Show Cause Notices under Section 28 of the Customs Act, 1962 in respect of cases investigated DRI/Customs Preventive formations are required to be issued by jurisdictional Commissioners from w h e r e i m p o r t s h a v e t a k e n place.[F.No.437/143/2009-Cus.IV(pt), DATE 15/04/2011]

Ø It has been clarified that a certificate from the Joint Director General (Coordination) or Director (Coordination) or Chief Executive Officer of the Organizing Committee (CWG)-2010, duly supported by a reconciliation statement corroborating the goods with the import documents as well as the shipping Bill under which the goods are exported may be accepted as the proof of identity, if otherwise found in order since the goods imported for Common Wealth Games (CWG)-2010 should be exported within six months from the conclusion of the Games and identification of the goods at the time of export is a necessary condition in the said notification.

However, in cases where imported goods under the said notification have undergone a change in form while being used for the intended purpose and where the condition regarding proof of identity is not satisfied, the benefit of the exemption will not be available. [F.No. 528/16/2008-CUS (TU) ,DATE 27/04/2011]

Ø It has been decided that only in the rarest of rare and genuine cases manual processing and clearance will be allowed and data for manual documents is compulsorily entered and transmitted at all locations within the stipulated time period. [F.No.401/81/2011-Cus.III, DATE 4/05/2011]

May - 2011

25

190110 All goods put up in unit 35containers

1902 other All goods 35than 19024010 and 19024090

20 All goods 35

2101 Coffee or tea pre-mixes 35

2103 Sauces, ketchup and the like 35and preparations thereof

2104 Soups and broths and 35preparations thereof

21050000 All goods 35

210690 All kinds of food mixes, 35including instant food mixes

21069030 Betelnut product known as 35“supari”

21069099 (i) Ready to eat packaged food, 35(ii) Milk containing edible nuts with sugar or other ingredients

22029010 All goods 35

22029020 All goods 35

22029030 Flavoured Milk of Animal origin 35

22029090 Tender coconut water 35

30 Medicaments (including those 35used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems), manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such books or pharmacopoeia

30 Intravenous fluids used for 35sugar, electrolyte or fluid replenishment

300220 or Vaccines (other than those 3530023000 specified under the National

Immunisation Program)

availing Cenvat Credit; in said this Notification “labels of all kinds” included in the term Packing Material.[Ntf No. 28 /2011-CE dated 24.03.20111]

Ø Exemption on Coal (2701), Lignite (2702), Peat (2703), Coke & Semi Coke (2704) and Tar (2706) is withdrawn if extracted from / manufactured in mine is withdrawn. Now it will attract Central Excise duties @ 5%. [Ntf No. 29 /2011-CE dated 24.03.20111]

Ø Exemption on following carpets falling under ITCHS 57 is removed and now will attract basic excise duties @ 10%,

(i) Hand-made carpets, whether or not any machines have been used to achieve better finish during pre-weaving or post weaving operations;

(ii) Carpets and other textile floor coverings, knotted, woven, tufted or flocked of coconut fibres (coir) or jute, whether or not made up, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of machines; and

(iii) Other carpets and other textile f loor coverings of coconut fibres(coir) or jute, whether or not made up.[Ntf No. 30 /2011-CE dated 24.03.2011]

Ø The goods bearing a brand name or sold under a brand name and falling under chapter 61,62 or 63 (except 6309 and 6310), on which appropriate duties of excise have been paid, are returned or brought back to the same premises or factory and cleared therefrom after being re-made, re-conditioned, re-packed or subjected to any other process are exempted from the whole of the duty of excise leviable thereon. [Ntf No. 31 /2011-CE dated 24.03.20111]

Non Tariff

Ø Quarterly returns needs to be filed within ten days from the close of said quarter by the assessees opting for payment of duties @1% under notification no. 1/20011 CE dated 01.03.11. [Ntf No. 08 /2011-CE (MT) dated 24.03.20111]

Ø No separate registration is required to be taken by the mines which are engaged in the production or manufacture Coal (2701), Lignite (2702), Peat (2703), Coke & Semi Coke (2704) and Tar (2706) and Cetralised registration can be obtained when the producer or manufacturer of such goods has a centralized billing or accounting system. [Ntf No. 10 /2011-CE (MT) dated 24.03.20111]

Ø Abatement @ 35% has been provided on the following items,

ITCHS Description of Goods Rate of Abatment

151710 Margarine edible grade 35

16 All goods 35

May - 2011

26

8523 Recorded audio compact discs 35".(CDs); Recorded video compact discs (VCDs); Recorded digital video discs (DVDs) & Recorded audio cassettes

[Ntf No. 11 /2011-CE (MT) dated 24.03.20111]

Ø The Tariff value, in respect of articles of apparel, whether or not knitted or crocheted, all sorts, falling under Chapter 61 or 62, is reduced from 60% to 45% of the retail sale price. Further also provided that if good are sold under brand name without mentioning retail sale price then transaction value shall be the Tariff value.[Ntf No. 12 /2011-CE (MT) dated 24.03.20111]

Ø The amendment of Point of Taxation Rules, 2011 is

already circulated and also appearing in this Bizsol Update.[Ntf No. 13 /2011-CE (MT) dated 24.03.20111]

Circulars

Ø CBEC Board have accepted the decision of Apex Court in case of Ind-Swift Labs. V/s UOI [2009(240)ELT328(P&H)}and thereby instructed the field formation to recover the interest on the wrong availment of Cenvat Credit. [Circular No. 942/03/2011-CX dated 14.03.2011]

Ø Additional confusion has been created by the Board allowing Cenvat Credit on furniture, stationary even though it is not covered under definition of capital goods and inputs. If the said ratio is made applicable any goods received in factory other than food article, then CEnvat Credit will be allowed. Issues and Clarification given by CBEC are reproduced below,

32159010 Fountain pen ink 35

32159020 Ball pen ink 35

32159040 Drawing ink 35

33061010 Tooth Powder 35

34060010 Candles 35

39 or 40 Nipples for feeding bottles 35

4015 Surgical rubber gloves or 35medical examination rubber gloves

48184010 All goods 35

48184090 All goods 35

56011000 All goods 35

7310 or Mathematical boxes, geometry 357326 or boxes and colour boxes, pencil any other sharpenersChapter

8215 All goods 35

84212120 Water filters functioning without 35electricity and replaceable kits thereof

8517 or Mobile handsets including 35852560 Cellular Phones and Radio

trunking terminals

8517 Wireless data modem cards 35with PCMCIA or USB or PCI express ports

S.No Issue Clarification

1 Can credit of capital goods be

availed of when used in manufacture

of dutiable goods on which benefit

under Notification 1/2011- CE is

availed or in provision of a service

whose part of value is exempted on

the condition that no credit of inputs

and input services is taken?

As per Rule 6(4) no credit can be availed on capital goods used

exclusively in manufacture of exempted goods or in providing exempted

service. Goods in respect of which the benefit of an exemption under

notification No. 1/2011-CE, dated the 1st March, 2011 is availed are

exempted goods [Rule 2(d)]. Taxable services whose part of value is

exempted on the condition that no credit of inputs and input services,

used for providing such taxable service, shall be taken, are exempted

services [Rule 2(e)]. Hence credit of capital goods used exclusively in

manufacture of such goods or in providing such service is not allowed.

2 Is the credit of only specified goods

and services listed in the definition of

inputs and input services not allowed

such as goods used in a club,

outdoor catering etc, or is the list

only illustrative?

The list is only illustrative. The principle is that cenvat credit is not

allowed when any goods and services are used primarily for personal

use or consumption of employees.

May - 2011

27

3 How is the “no relationship

whatsoever with the manufacture of

a final product” to be determined?

Credit of all goods used in the factory is allowed except in so far as it is

specifically denied. The expression “no relationship whatsoever with the

manufacture of a final product” must be interpreted and applied strictly

and not loosely. The expression does not include any goods used in or

in relation to the manufacture of final products whether directly or

indirectly and whether contained in the final product or not. Only credit

of goods used in the factory but having absolutely no relationship with

the manufacture of final product is not allowed. Goods such as furniture

and stationary used in an office within the factory are goods used in the

factory and are used in relation to the manufacturing business and

hence the credit of same is allowed.

4 Is the credit of input services used

for repair or renovation of factory or

office available?

Credit of input services used for repair or renovation of factory or office

is allowed. Services used in relation to renovation or repairs of a factory,

premises of provider of output service or an office relating to such

factory or premises, are specifically provided for in the inclusive part of

the definition of input services.

5 Is the credit of Business Auxiliary

Service (BAS) on account of sales

commission now disallowed after the

deletion of expression “activities

related to business”?

The definition of input services allows all credit on services used for

clearance of final products upto the place of removal. Moreover activity

of sale promotion is specifically allowed and on many occasions the

remuneration for same is linked to actual sale. Reading the provisions

harmoniously it is clarified that credit is admissible on the services of

sale of dutiable goods on commission basis.

6 Can the credit of input or input

services used exclusively in trading,

be availed?

Trading is an exempted service. Hence the credit of any inputs or input

services used exclusively in trading cannot be availed.

7 What shall be the treatment of credit

of input and input services used in

trading before 1.4.2008?

Trading is an exempted service. Hence credit of any inputs or input

services used exclusively in trading cannot be availed. Credit of

common inputs and input services could be availed subject to restriction

of utilization of credit up to 20% of the total duty liability as provided for

in extant Rules.

8 While calculating the value of trading

what principle to follow- FIFO, LIFO

or one to one correlation?

The method normally followed by the concern for its accounting

purpose as per generally accepted accounting principles should be

used.

9 Are the taxes and year end discounts

to be included in the sale price and

cost of goods sold while calculating

the value of trading?

Generally accepted accounting principles need to be followed in this

regard. All taxes for which set off or credit is available or are refundable/

refunded may not be included. Discounts are to be included.

10 Does the expression “in or in

relation” used in Rule 6 override the

definition of “input” under Rule 2(k)

for determining the eligibility of

Cenvat credit?

The definition of “input” is given in Rule 2(k) and Rule 6 only intends to

segregate the credits of inputs used towards dutiable goods and

exempted goods. While applying Rule 6, the expression “in or in

relation” must be read harmoniously with the definition of “inputs”.

May - 2011

28

Ø Abatement percentages has been notified for following 2 new services,

Sub Clause SERVICE DESCRIPTION Abatement65(105) (zzzzv) Restaurant Services having 30%

Air conditioner and licence to serve the beverages

(zzzzw) Hotel, guest house, inn, club 50%or campsite services having tariff Rs 1000/- or more

[NTF. NO. 34/2011-ST, DT. 25/04/2011]

Ø An insurer carrying on life insurance business shall have the option to pay tax on,

(i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

(ii) 1.5 per cent of the gross amount of premium charged from a policy holder in all other cases.

Earlier it was 1% of gross premium charged for all the cases and there was separate provision for basis of service tax wherein specified amount is allocated for investment. [NTF. NO. 35/2011-ST, DT. 25/04/2011]

Ø Export of Services Rules, 2005 amended to include new services falling under (zzzzv) and (zzzzw) i.e. Restaurant Services having Air conditioner and license to serve the beverages & Hotel, guest house, inn, club or campsite services respectively under in rule 3, in sub-rule (1), in clause (i). Similarly, Taxation of services (provided from outside India and received in India) Rules, 2006 is also amended for these services. [NTF. NO. 36 & 37/2011-ST, DT. 25/04/2011]

[Circular No.943/04/2011-CX dated 29.04.2011]

Service Tax

Ø The amendment of Point of Taxation Rules, 2011 is already circulated and also appearing in this Bizsol Update. Notification No.25/2011 – ST, Dt. 31.03.2011 & Notification No.26, 27, 28/2011 – ST, Dt. 31.03.2011. For more details refer to article in this update.

Ø Provision of Finance Act, 2011 will be applicable from on 1st day of May 2011 and thereby new services are

stcovered under ambit of service tax w.e.f. 1 May 2011. [NTF. NO. 29/2011-ST, DT. 25/04/2011]

Ø Service tax on Health Check up and Treatment Services falling under Sub Clause (zzzzo) of sec 65(105) has been exempted. [NTF. NO. 30/2011-ST, DT. 25/04/2011]

Ø Service tax exemption given to the services provided by Hotel, guest house, inn, club or campsite services having tariff less than rupees 1000 per day. [NTF. NO. 31/2011-ST, DT. 25/04/2011]

Ø Service tax exemption for representing before statutory authorities by CA/CS/Cost Accountant exempted from service tax has been withdrawn w.e.f.

st1 May 2011. There is discriminatory favorable treatment given to Advocates even though they provide identical services. [NTF. NO. 32/2011-ST, DT. 25/04/2011]

Ø Service tax exemption has been provided to any commercial coaching or training center for following services,

l any preschool coaching and training and

l any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law for the time being in force.[NTF. NO. 33/2011-ST, DT. 25/04/2011]

11 Sub-rules 3B and 3C of rule 6 apply

to whole entity or independently in

respect of each registration?

The sub-rules 6(3B) and 6(3C) impose obligation on the entities

providing banking and financial services (in case of a bank and a

financial institution including a non-banking financial company) or life

insurance services or management of investment under ULIP service.

The obligation is applicable independently in respect of each

registration. When such a concern is exclusively rendering any other

service from a registered premises, the said rules do not apply. In

addition to BoFS and life insurance services if any other service is

rendered from the same registered premises, the said rules will apply

and due reversals need to be done.

12 Is the credit available on services

received before 1.4.11 on which

credit is not allowed now? e.g. rent-

a-cab service

The credit on such service shall be available if its provision had been

completed before 1.4.2011.

May - 2011

29

Ø Export of Honey to European Union will be subject to the condition that Honey exported shall be “wholly obtained” Indian Origin Honey and No blending of Indian Honey shall be permitted with honey originating from any other countries. [NOTIFICATION NO. 26/2010, DT. 28/02/2011]

Ø The export of 1,00,000 MTs of wheat to Afghanistan, as a donation from Government of India to the Government of Islamic Republic of Afghanistan will be permitted for export through FCI upto 31.03.2011. [NOTIFICATION NO. 27/2010, DT. 28/02/2011]

Ø For claiming the TED refund, a Declaration stating non availment of Cenvat Credit will be required to be submitted in specified format (Annexure II to ANF 8). Further for claiming Duty Drawback on deemed exports, a Declaration stating non availment of CENVAT credit /rebate by the supplier of goods will be required to be submitted in specified format (Annexure III to ANF 8). Para 8.5 of FTP, Para 8.3.1 of HBP Vol 1 and Appendix AFN 8 is amended to this give above effects. [NOTIFICATION NO. 28/2010, DT. 01/03/2011 & PUBLIC NOTICE NO. 35/2010, DT. 01/03/2011]

Ø The export of cotton yarn (Tariff Codes 5205, 5206 & 5207) was allowed under license. Now, issue of export licenses for cotton yarn will be subject to a limit of 720 million Kgs during the fiscal year 2010-11 (i.e. upto 31.03.2011). [NOTIFICATION NO. 31/2010, DT. 10/03/2011]

Ø The export of cotton is free subject to registration of export contracts with DGFT. The cap on export during the Cotton Season, 2010-11 (01.10.2010 to 30.09.2011) will be 55 lakh bales or as notified by DGFT from time to time. But, export of 5,000 bales of Assam Comillas Cotton (Tariff Code 5201 00 12) is exempted from the cap, but not from registration. [NOTIFICATION NO. 32/2010, DT. 14/03/2011]

Ø The export of 25,000 MT of non-Basmati rice to Nepal through MMTC shall be allowed during the KMS 2010-11 with a maximum of 25% brokens. [NOTIFICATION NO. 33/2010, DT. 15/03/2011]

Ø Prohibition on export of pulses has been extended by one more year; from 31.03.2011 to 31.03.2012. However this prohibition will not be applicable to Kabuli Chana & Organic Pulses with a ceiling of 10,000 tonnes and subject to certain conditions as mentioned. [NOTIFICATION NO. 35/2010, DT. 23/03/2011]

Ø Minimum Export Price (MEP) of onions other than Bangalore Rose Onions and Krishnapuram has been reduced to US$ 225 per Metric Ton F.O.B. Minimum Export Price (MEP) of Bangalore Rose Onions and Krishnapuram onions will be US$ 600 per Metric Ton F.O.B. Earlier it was US$ 1400 per Metric Ton. [NOTIFICATION NO. 36/2010, DT. 23/03/2011 & POLICY CIR NO. 25/2010, DT. 22/02/2011]

Circulars

Ø The existing Service Tax Audit Manual has been in use since 2003. With experience gained while conducting audits and rapid change in service tax law over the years, growth in service tax categories, assessee base as well as revenue, a need was felt to update the manual. The Board had set up a Working Group in 2009. But the same has not made available to public at large [Circular No.135/4/2011-TRU dated 19.04.2011]

Ø Accounting Codes for new taxable services have been provided,

[Circular No.136/5/2011-TRU dated 20.04.2011]

Ø Assistance provided by a visa facilitator, for obtaining visa, to a visa applicant or for foreign employer does not fall within the scope of supply of manpower service. Visa facilitators, while providing visa assistance directly to individuals does not act on behalf of the embassies, as agents of the principal and hence service tax is not leviable within the meaning of business auxiliary service. Also where the assistance is rendered to an individual directly, by a visa facilitator, and the visa applicant pays the service charge on his own, the same cannot be considered as support service for business or commerce. [Circular No.137/5/2011-TRU dated 20.04.2011]

Foreign Trade PolicyDGFT Notification

Foreign Trade PolicyDGFT Notification

No Taxable Services Accounting Code

Tax

Collection

Other

Receipts

Deduct

Refunds

-1 (2) (3) (4) (5)

1. Service provided by a

restaurant having air-

conditioning and license

to serve alcoholic

beverages in relation to

serving of food or

beverage, including

alcoholic beverages or

both, in its premises

[Finance Act 1994,

Section 65(105) (zzzzv)]

00441067 00441068 00441069

2. Service provided by a

hotel, inn, guest house,

club or campsite in

relation to providing of

accommodation for a

continuous period of

less than three

months[Finance Act

1994, Section 65(105)

(zzzzw)]

00441070 00441071 00441072

May - 2011

30

Ø Further the export will be subject to fulfillment of other conditions like packing, drawing samples etc as mentioned in the public notice. [PUBLIC NOTICE NO. 36/2010, DT. 01/03/2011]

Ø The export of Sona Masuri and Ponni Samba varieties of non-Basmati rice shall be subject to a Minimum Export Price (MEP) of USD 850 per MT. [PUBLIC NOTICE NO. 37/2010, DT. 08/03/2011]

Ø Validity of Bank Guarantee to be executed with Regional Authorities in case of domestic procurement of goods against EPCG authorization will be for the entire period of export obligation viz.8+2=10 years or 12+2=14 years as the case may be. The amendment is done so as to harmonize the provisions of FTP with the provisions of Customs Circular No.58/2004 dated 21.10.2004 as amended from time to time. [PUBLIC NOTICE NO. 38/2010, DT. 09/03/2011]

Ø SION for Woollen blended Worsted Yarn in the Textiles Product (Product Code: J) is being notified for the first time. The SION will be as under,

[PUBLIC NOTICE NO. 39/2010, DT. 09/03/2011]

Ø Fees for issuance of Certificate of Origin (Preferential) have been enhanced to Rs. 350/- from existing Rs 150/- from 1st April, 2011. [PUBLIC NOTICE NO. 40/2010, DT. 09/03/2011]

Ø SION S.No.C-514 of the Product Group “Engineering Product” has been amended. There has been a change in the description of export product. On the input side quantity permitted in respect of some inputs have been reduced. [PUBLIC NOTICE NO. 41/2010, DT. 18/03/2011]

Ø Prohibition on export of Export of milk powders, Casein and Casein products will not be applicable to consignments which were already handed over to customs for examination and export on or before 18.02.2011 i.e. date of notification banning export of said goods. [NOTIFICATION NO. 37/2010, DT. 24/03/2011]

Ø List of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) has been notified under new Chapter IV A which has been introduced in the FT(D&R) Act,1992. It deals with controls on export of specified goods, services and technologies. [NOTIFICATION NO. 38/2010, DT. 24/03/2011]

Ø The sale of vehicles imported by Foreign Diplomats and Other Privileged Persons is now permitted to other non privileged persons in the manner specified in Foreign Privileged Persons (Regulation of Customs P r i v i l e g e s ) R u l e s , 1 9 5 7 , a s a m e n d e d . [NOTIFICATION NO. 39/2010, DT. 31/03/2011]

Ø Now, the export of cotton yarn (Tariff Codes 5205, 5206 & 5207) is “Free” subject to registration of export contracts with DGFT. Earlier these were under “Restricted” category. Accordingly conditions and modalities for registration of Contract has been mentioned in policy circular. [NOTIFICATION NO. 40/2010, DT. 31/03/2011 & POLICY CIR NO. 27/2010, DT. 01/04/2011]

Ø Minimum Export Price (MEP) of onions other than Bangalore Rose Onions and Krishnapuram onions will be US$ 170 per Metric Ton F.O.B. It was US$ 225 per Metric Ton as notified on 23.03.2011. There shall be no change in the MEP of Bangalore Rose Onion and Krishnapuram onion which continues to be USD 600 per Metric Ton F.O.B. [NOTIFICATION NO. 41/2010, DT. 31/03/2011]

Ø Export of items listed in,

l INFCIRC/254/Rev.9/Part 1 and INFCIRC/254/Rev.7/ Part 2 (IAEA Documents) and

l S/2010/263 (UN Security Council Document)are prohibited for export to Iran considering additional sanctions imposed by UN Security Council on Iran related to its nuclear and missile development programme. [NOTIFICATION NO. 42/2010, DT. 31/03/2011]

Ø The export of 32,094.70 MTs of wheat flour to Maldives, is permitted under the Bi-lateral Trade Agreement between Government of India and the Republic of Maldives through M/s. MMTC Ltd. upto 31.03.2012. [NOTIFICATION NO. 43/2010, DT. 20/04/2011]

Public Notices

Ø Quantity of Non-Basmati rice permitted for export and port of export will be as under,

No. Variety of non-Basmati Rice

Quantity (MTs)

Port of export

1. Sona Masuri 1,00,000 50,000 MT from Chennai Sea Port and 50,000 MTs from Vishakhapatnam Sea Port

2. Ponni Samba 25,000 Tuticorin Sea Port

3 Matta 25,000 Cochin Sea Port

Sl. No.

Export item

Qty Import item Quantity allowed

J-374

Woollen blended Worsted Yarn: made from Wool Tops and Acrylic Tops

1 Kg

(1) Wool Tops, below 32 micron

1.10 Kg / Kg content in export

(2) Acrylic Tops up to 3.00 denier

1.10 Kg / Kg content in export

May - 2011

31

Ø EOUs are eligible for Chapter 3 benefits without “Declaration of Intent” on shipping bills for the period 1.4.2008 till 31.12.2010. Accordingly all RAs are directed to finalize rejected claims of EOUs for the period 1.4.2008 till 31.12.2010. [POLICY CIR NO. 28/2010, DT. 15/04/2011]

Ø Conditions and modalities for registration of contracts of Assam Comilla Cotton with DGFT have been notified. [POLICY CIR NO. 29/2010, DT. 19/04/2011]

Ø It is clarified that requirement of compliance to Chapter 87 Import Licensing Notes are applicable only to “Special Purpose Vehicles” which are classified under Code : 8705 as clarified in Policy

thCircular No. 21 dated 14 December, 2007 and not other equipments. [POLICY CIR NO. 30/2010, DT. 27/04/2011]

Special Economic ZoneInstructions:

Ø Trading and Warehousing activities done in respect of any product by FTWZ located in sector specific SEZ between the period from 12.03.2010 to 12.11.2010 and contracts signed during this period may remain valid till 31.3.2011 and thereafter all cases including cases where the contract was signed on or before 12.11.2010 shall also be regulated by Instruction No. 71 dated 12.11.2010 w.e.f. 01.04.2011. Therefore the Warehousing Units set-up in product based SEZ will e entitled to store / sale / Export only such products. [INST. NO. 76 DATE 22/03/2011]

Ø In SION No. H-18, the description of export product is extended to export of plastic playing cards without plastic cases. Further in SION No. H-51 an alternate input is introduced. [PUBLIC NOTICE NO. 43/2010, DT. 30/03/2011]

Ø Minimum Export Price of USD 850 per MT is applicable for Matta rice. Further condition relating to testing of quality of rice has been removed. [PUBLIC NOTICE NO. 44/2010, DT. 31/03/2011]

Ø As the DEPB benefit on export of cotton yarn was withdrawn with effect from 21.4.2010, DEPB benefit on cotton (the basic raw material for cotton yarn) has also been disallowed for exports made from 21.4.2010 onwards. [PUBLIC NOTICE NO. 45/2010, DT. 31/03/2011]

Policy Circulars

Ø Following 7 new locations has been added to 75 existing locations for on-line transmission of DES (Advance Authorization), EPCG and DEPB Authorization

[POLICY CIR NO. 26/2010, DT. 21/03/2011]

No Name of new ICES Location

LOCODE (Customs Port Codes)

1 Pipavav Port INPAV1 2 ACC Goa INGOI4 3 ICD Thar Dry Port, Sanand INSAU6 4 Paradeep Port INPRT1 5 ICD Marripalam, Guntur INGNR6 6 ACC Coimbatore INCJB4 7 Gangavaram Port INGGVI

RBI / FEMACircular Number Date Of

Issue

Department Subject

RBI/2010-2011/457

A.P. (DIR Series) Circular No. 47

31.3.2011 Foreign Exchange

Department

Export of Goods and Software – Realisation and

Repatriation of export proceeds – Liberalisation

RBI/2010-2011/456

RPCD.CO.FID. BC.No.58

/12.01.018/2010-11

31.3.2011 Rural Planning

and Credit

Department

Establishment of Financial Literacy and Credit

Counselling Centres

RBI/2010-2011/455

DBOD.

AML.No.15369/14.06.001/2010-11

31.3.2011 Department of

Banking

Operations and

Development

List of Terrorist Individuals/ Organisations under

UNSCR 1267(1999) and 1822(2008) on Taliban/Al-

Qaida Organisation

May - 2011

32

RBI/2010-2011/454

DBOD.No. Leg. BC.

83/09.07.005/2010-11


Banking

Operations and

Development

The Banking Companies (Nomination) Rules,

1985- Clarifications

RBI/2010-2011/453

DNBS.PD/ CC.NO.

214/03.02.002/2010-11


Non Banking

Supervision

NBFCs not to be Partners in Partnership firms

RBI/2010-2011/452

UBD. BPD. No. 41/12.05.001/2010-

11

29.3.2011 Urban Banks

Department

Collection of account payee cheques – Prohibition

on crediting proceeds to third party accounts

RBI/2010-2011/451

RPCD.CO.RRB.BC No. 56/

03.05.90-A/2010-11


and Credit

Department

Section 23 of Banking Regulation Act, 1949-

Relaxations in Branch Licensing Policy

RBI/2010-2011/450

RPCD.CO.RRB.AML.No.

11078/03.05.28 (A)/2010-11


and Credit

Department

Anti-Money Laundering (AML) / Combating of

Financial Terrorism (CFT) - Standards

RBI/2010-2011/449

DPSS. CO.

PD 2224/02.14.003/2010-2011


Payment and

Settlement System

Security Issues and Risk mitigation measures -

Online alerts to the cardholder for usage of

credit/debit cards

RBI/2010-2011/448

RPCD.CO.RCB.BC.No.57/07.02.03/

2010-11


and Credit

Department

Meeting of Committee on Investor Education and

Protection Fund-Ministry of Corporate Affairs-

Minutes of the Meeting

RBI/2010-2011/447

DBOD. AML.No.15008

/14.01.001/2010-11


Banking

Operations and

Development

Anti- Money Laundering (AML) / Combating of

Financing of Terrorism (CFT)- Standards

RBI/2010-2011/446

DBOD. AML.No.

15007/14.01.001/2010-11


Banking

Operations and

Development

Anti-Money Laundering (AML)/Combating of

Financing of Terrorism (CFT) - Standards

RBI/2010-2011/445

DPSS.CO.CHD.No. 2191/ 03.01.03

/ 2010-2011


Payment and

Settlement System

Special Clearing on March 30th and 31st, 2011

RBI/2010-2011/444

DPSS No. 2174/02.14.004/2010-

2011


Payment and

Settlement System

Issuance and Operation of pre-paid payment

instruments in India- Clarification

RBI/2010-2011/443

DPSS. CO. AD. No.

2181/02.27.005/2010-11


Payment and

Settlement System



Qaida Organisation

May - 2011

33

RBI/2010-2011/442

DGBA.GAD.No.H.6589/42.01.029/2

010-11


Government and

Bank Accounts

Annual Closing of Government Accounts -

Transactions of Central / State Governments -

Special Measures for the Current Financial Year

(2010-11)

RBI/2010-2011/441

DPSS.CO. OSD No.

2162/06.07.002/2010-2011


Payment and

Settlement System

Reconciliation of transactions at ATMs failure –

Time limit Complaints resolution with banks

RBI/2010-2011/440

DPSS.CO. OSD No.

2161/06.07.002/2010-2011


Payment and

Settlement System

Reconciliation of transactions at ATMs failure –

Time limit

RBI/2010-2011/439

RPCD.CORRB.AML.No.

10630/03.05.28(A)/2010-11

21.3.2011 Rural Planning and

Credit Department

List of Terrorist Individuals / Organisations - under

UNSCR 1267(1999) and 1822(2008) on Taliban /

Al-Qaida Organisation

RBI/2010-2011/438

IDMD.PDRD.No.

3961/03.64.00/2010-11

18.3.2011 Internal Debt

Management

Department

FIMMDA accredited brokers for transactions in

OTC Interest Rate Derivatives Market

RBI/2010-2011/437 A.P.(DIR Series) Circular No. 46

18.3.2011 Foreign Exchange Department

Exim Bank's Line of Credit of USD 100 million to the Ecowas Bank for Investment and Development

(EBID)

RBI/2010-2011/436

REF.No.MPD.BC.341

/07.01.279/2010-11

17.3.2011 Monetary Policy

Department

Standing Liquidity Facilities for Banks and Primary

Dealers

RBI/2010-2011/435

UBD.CO.BPD (PCB) Cir.No.

7/14.01.062/2010-11


Department


Financing of Terrorism (CFT) – Standards

RBI/2010-2011/434

UBD.CO.BPD (PCB) Cir.No. 6

/14.01.062/2010-11


Department


Financing of Terrorism (CFT) – Standards

RBI/2010-2011/433

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

40/13.01.000/2010-11


Department

Exchange Traded Interest Rate Futures (IRFs) –

UCBs

RBI/2010-2011/432

DNBS (PD) CC.

No.213/03.10.001/2010-2011

17.3.2011 Department of Non

Banking

Supervision

Amendment to Definition of Infrastructure Loan

RBI/2010-2011/431

FMD.MOAG. No.57/01.01.01/2010-

11

17.3.2011 Financial Markets

Department

Liquidity Adjustment Facility – Repo and Reverse

Repo Rates

May - 2011

34

RBI/2010-2011/430

RPCD.CO.Plan.BC. 55

/04.09.01/2010-11


Credit Department

Data on Priority Sector Advances - Agricultural

Lending

RBI/2010-2011/429

DBOD.No.BP.BC.82/21.04.157/2010

-11


Banking Operations

and Development

Accreditation of brokers in OTC Interest Rate

Derivatives Market

RBI/2010-2011/428

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

39/09.73.000/2010-11


Department

Coins of 25 Paise and Below - Withdrawal from

Circulation

RBI/2010-2011/427



Department

Introduction of Annual return on Foreign Liabilities

and Assets reporting by Indian Companies and

discontinuation of the Part B of form FC-GPR

RBI/2010-2011/426



Department

Exim Bank's Line of Credit of USD 50 million to the

Government of the Republic of Malawi

RBI/2010-2011/425

UBD. BPD. (PCB) No.

38/12.05.001/2010-11


Department

Amendments to the Prevention of Money

Laundering Rules, 2005

RBI/2010-2011/424

RPCD. CO. LBS.BC. No.

54/02.08.01/2010-11


Credit Department

Formation of new district in Uttar Pradesh –

Assignment of Lead Bank Responsibility

RBI/2010-2011/423

DPSS (CO) CHD No.

2099/03.02.03/2010-11


Payment and

Settlement System

Automation of non-MICR Clearing Houses –

Implementation of a new Clearing Software –

Express Cheque Clearing System

RBI/2010-2011/422

DBOD. AML.No.14203

/14.06.001/2010-11


Banking Operations

and Development



Qaida Organisation

RBI/2010-2011/421

RPCD.CO.RCB.AML.No.10096/07.0

2.12/2010-11


Credit Department



RBI/2010-2011/420

DPSS. CO. AD. No.

2068 /02.27.005/2010-11


Payment and

Settlement System



Qaida Organisation

RBI/2010-2011/419

DNBS. (PD) CC No

212/03.10.42/2010-11

8.3.2011 Department of Non

Banking

Supervision

Know Your Customer (KYC) norms /Anti-Money

Laundering (AML) standards/Combating of

Financing of Terrorism (CFT) Obligation of NBFCs

under PMLA, 2002

May - 2011

35

RBI/2010-2011/418

RPCD.CO.RCB.AML.No. 9886

/07.02.12/2010-11


Credit Department



RBI/2010-2011/417

IDMD.PCD. 28 /14.03.01/2010-11

7.3.2011 Internal Debt

Management

Department

Exchange-traded Interest Rate Futures

RBI/2010-2011/416

RPCD.CO RRB.AML.No.9868

/03.05.28(A)/2010-11


Credit Department




RBI/2010-2011/415

RPCD.CO RRB.AML.No. 9809

/03.05.28(A)/2010-11


Credit Department




RBI/2010-2011/414

DGBA.GAD.No.H.6002/42.01.029/2

010-11


Government and

Bank Accounts

Scheme for Collection of Dues of (i) Central Board

of Direct Taxes (ii) Central Board of Excise and

Customs (iii) Departmentalised Ministries Account -

Reporting and Accounting of March Transactions -

Special Arrangements - Financial Year 2010-2011

RBI/2010-2011/413

RPCD.CO RRB.AML.No. 9665

/03.05.28(A)/2010-11


Credit Department




RBI/2010-11/412

Ref.DBOD.No.Ret.BC/ 82

/12.07.037/2010-11


Banking Operations

and Development

Alteration in the name of 'The Dhanalakshmi Bank

Limited' to 'Dhanlaxmi Bank Limited' in the Second

Schedule to the Reserve Bank of India Act, 1934

Company Law:Appointment of Cost AuditorMinistry of Corporate Affairs has directed vide Order

ND rdunder F. No. 52/26/CAB-2010 DATED 2 May, 2011 & 3 May, 2011 to get cost accounting records audited by practicing Cost Accountant for each of its financial year

stcommencing on or after the 1 day of April, 2011.

A) All companies to which following rules apply and the aggregate value of net worth as on the last date of immediately preceding financial year exceeds five crores of rupees; or wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty crores of rupees; or wherein the company’s equity or debt securities are listed or are in process of listing on any stock exchange, whether in India or outside India.

i. Cost Accounting Records (Bulk Drugs) Rules, 1974

ii. Cost Accounting Records (Formulations) Rules, 1988

iii. Cost Accounting Records (Fertilizers) Rules, 1993

iv. Cost Accounting Records (Sugar) Rules, 1997

v. Cost Accounting Records ( Industrial Alcohol) Rules, 1997

Part B of the Form FC-GPR is replaced by a separate ‘Annual Return on Foreign Liabilities and Assets’ given as Annex-I. To be filed by 15 July of every year to the Director, External Liabilities and Assets Statistics Division, RBI. All Indian companies which have received FDI and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year are required to submit the same. Annex –II has given the concepts and definitions useful in filling the Annual Return on Foreign Liabilities and Assets. A.P. (DIR Series) Circular No. 45 Dt. 15.03.2011.

Period of realization and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export, extended up to September 30, 2011. A.P. (DIR Series) Circular No. 47 Dt. 31.03.2011.

AD Category- I banks are directed to advise the foreign airlines; to discontinue immediately the practice of using overseas banks for settlement of INR transactions, on account of sale of air tickets in India, by selecting the country and currency of customers’ choice . A.P. (DIR Series) Circular No. 48 Dt. 05.04.2011.

May - 2011

36

Every company to which these orders apply shall follow the revised procedure for appointment of cost auditor as laid down vide Ministry of Corporate Affairs General

thCircular No. 15/2011(52/5/CAB-2011) dated 11 April 2011.These orders do not apply to a company which is a body corporate governed by any Special Act.

Income Tax

Ø Stock exchange will ensure that transactions, in respect of cash and derivative market, which are registered in the system will not be erased / modified. Corrections / modifications are permitted only for rectification of errors and maintenance of data, subject to monthly filing of Form No. 3BB. Notification No. 14/2011 Dt. 09.03.2011.

Ø Intention of legislature, behind amendments and new enactments; also clarification w.r.t.the same is detailed out. Circular No. 01/2011, CBDT, Dt. 06.04.2011.

vi. Cost Accounting Records (Electricity Industry) Rules, 2001

vii. Cost Accounting Records (Petroleum Industry ) Rules, 2002

viii. Cost Accounting Records (Telecommunications) Rules, 2002

B) Aggregate value of turnover made by the company from sale or supply of all products or activities during the immediately preceding financial years exceeds hundred crores of rupees or wherein the company’s equity or debt securities are listed or are in process of listing on any stock exchange, whether in India or outside India.

i. Cost Accounting Records (Cement) Rules, 1997ii. Cost Accounting Records (Tyres & Tubes) Rules,

1967iii. Cost Accounting Records (Steel plant) Rules, 1990iv. Cost Accounting Records (Steel Tubes and Pipes)

Rules, 1984v. Cost Accounting Records ( Paper) Rules, 1975vi. Cost Accounting Records (Insectisides) Rules, 1993

May - 2011

37

Central Excise

Ø “capital goods” would not only include goods falling under Chapters 82, 84, 85 and 90 of the Central Excise Tariff Act but also components, spares and accessories of such goods, and moulds and dies which are used in the factory of the manufacturer of the final product, but not equipment or appliance used in an office. It is only goods mentioned in clauses (i) to (iii) of Rule 2(b), and which are used in the manufacturer’s factory, which fall within the ambit of “capital goods”.[AIT-2011-121-HC]

Ø Department’s failure due to long gap to verify transporter’s copy in original not to lead to denial of substantive benefit of credit to assessee. [2011 (265) ELT 50(Tri-Chennai)]

Ø The M S Tanks was incomplete and not ready for use, since it was not removed from factory is not excisable. The Burden to prove that product is excisable is on Department. [2011 (265) ELT 229]

Ø Default in payment of duty by due date hence penalty of Rs. 5 lakhs was imposed but due to financial crisis penalty reduced to Rs. 1,50,000/- [2011 (265) ELT 241(Tri-Del)]

Ø Since the Compounding levy scheme is a separate scheme from the normal scheme for col lect ion of excise duty on goods manufactured and Rules under compounded levy scheme stipulate menthod, time & manner of payment of duty interest & penalty. C o m p o u n d e d l e v y s c h e m e b e i n g comprehensive scheme in itself hence general provisions of Central Excise Act & rules are not applicable. Therefore limitation under section 11A is not applicable for the said scheme. [2011 (265) ELT 321(SC)]

Ø Credit reversal sought on ground that inputs short received as per relevant Income Tax Return, except for 3CD Income Tax Return no evidences produced to indicate that shortage of raw material was on account of short receipt. Credit availed on duty indicated in invoices for Inputs Therefore it is held that cenvat credit

admissible unless invoices found to be wrong or inputs received under any invoice diverted. [2011 (265) ELT 332(Guj.)]

Ø Payment of education cess by utilizing Cenvat Credit of basic excuse duty not permissible, earlier decisions of Tribunal allowing such utilization are contrary to law. [2011 (265) ELT 366 (Tri-Del)]

Ø MRP based assessment not applicable to manufacture and clearance of unwrapped razor blades being not sold in retail in the same form. [2011-TIOL-380-CESTAT-BANG ]

Ø Refund should not be denied on the ground that assessee having home clearances also, when 93% clearances are to export. However, no assessee would like to claim refund and pay duty from PLA. Further, refund claimed filed in old Format can not be a ground for denying the refund. [2011(266)ELT. 366(Tri-Del.)]

Ø The clearances affected by 100% EOU to own sister concerns were not sales but were stock transfer and since no sales tax was required to be paid on such clearances the demand of duty of 4% additional duty of customs, which is in lieu of sales tax, was not called for is untenable in view of LB decision in Moser Baer India Limited vs. CCE, Nodia 2009-TIOL-1058-CESTAT-DEL-LB .

Limitation - The appellant at no point of time addressed to the Revenue that they would be paying 4% additional duty in respect of other DTA clearances and they would not be paying such duty in respect of clearances made to their sister units - extended period invocable.

Revenue neutrality - it cannot be claimed as a matter of right without establishing that sister concerns were in a position to avail the modvat credit and utilize the same for payment of duty from their end - no final view can be taken at interim stage - appellant not able to make a prima facie case in their favour - pre-deposit ordered of Rs.11 crores being approximately 1/3rd of the confirmed duty as no financial hardship pleaded: [M/s Micro Inks Ltd Vs CCE, Vapi,2011-TIOL-541-CESTAT-AHM ]

May - 2011

38

when the goods are cleared into DTA or failure in terms of provisions of Rule 8 of SEZ Rules 2003. Once the event is not covered by these provisions at all, we have to hold that goods are still in foreign territory which is the status of SEZ and it is a deemed fictional status. [2011-TIOL-387-CESTAT-AHM ]

Ø Duty paid on a consignment of three bearings indicated on the invoice, but only one bearing received - Appellants also paid duty on subsequent import of the remaining two bearings - Normally no refund should be allowed unless the shortage is recorded in the presence of customs officials and before the out of charge from customs control is given - However, in the pecul iar facts and circumstances of the case and considering the documentary evidence available, in the interest of justice, it is felt that the appellants should not be denied refund of duty paid in excess against the first Bill of Entry. [2011-TIOL-375-CESTAT-MAD ]

Service Tax

Ø CESTAT failed to focus its consideration on prima facie case, balance of convenience and irreparable loss. It did not consider the aspect of undue hardship which must exist for exercising power under Section 35F of the Central Excise Act. Even assuming that there is hardship, the Tribunal ought not to have granted the order of stay or dispensation of pre-deposit without imposing conditions [2011-TIOL-147-HC-AP-ST \AIT-2011-122-HC]

Ø Cenvat Credit availed prior to making payments of service tax & charges, department denied the Credit but the tribunal held that Credit was permissible as there was no dispute about genuineness of the service provider, however for period between dates of taking of credit and payments, assessee is liable for interest & penalty as they enjoyed the monetary benefit.

For inputs, payment of price of goods & excise duty to supplier is not pre-condition for taking Cenvat credit but in case of input service, payment of service charges & service tax is the per-condition to take credit. [2011(265) ELT 239 (Tri- Del.)]

Ø There is no dispute that the service providers from whom the Respondent had received the taxable services are not the persons having

Ø Cenvat credit taken on paints cannot be denied on the ground that the same has not been used on final products but used for painting the machinery and workshop floor. Paint is used on the floor of production hall to make it dust free and fire retardant & it is a commercial necessity to paint floor so as to enhance the effective manufacturing activity; nexus exists with manufacture of final product Credit admissible. [2011-TIOL-540-CESTAT-AHM]

Ø

Customs

Ø Suspension is not a punishment. The CHA gets adequate opportunity to present its case before the Commissioner at the post decisional hearing which the CHA is yet to attend pending these proceedings initiated by it. We have no doubt in our mind about the immediacy that necessitated the order. The order is competently and justifiably made- AIT-2011-153-CESTAT

Ø Proceedings relating to penalty for failure to discharge export obligation under Advance Licence and Appeals dismissed by Tribunal for failure to pre-deposit Rs. 5 Lakhs further High Court Ordered to make pre-deposit of Rs. 20Lakhs, Supreme Court held that when Appellate Authority exercising discretion dispensed with part amount of pre-deposit High Court ought to have not enhanced pre-deposit amount. [2011(265)E.L.T. 24(SC)]

Ø Goods destroyed by fire in SEZ, since the destruction took place in a deemed Foreign Territory - No Customs Duty Payable. SEZ is a fiction created and in that fiction if there is contravention of provisions of SEZ Rules, the fiction itself provides for taking action. Once the action to the SEZ units or the loss of goods by fire is not covered by Rule 8 of SEZ Rules 2003, the deemed fiction of SEZ being a foreign territory comes into picture. As already considered earlier, duty becomes payable only

Commissioner chooses to ignore directions of the Tribunal in de novo proceedings. The Tribunal said, - We are totally unhappy about the approach of the Commissioner in the above matter. It is really surprising that in spite of specific directions in this regard on two earlier occasions in the same matter, the Commissioner has chosen to ignore the same and to proceed to decide the matter contrary to those directions.: [2011-TIOL-519-CESTAT-DEL ]

May - 2011

39

settled law that re-classification of the services cannot be done at the recipient’s end - Matter remanded to re-examine the claim of the appellants. [2011-TIOL-401-CESTAT-AHM]

Ø CENVAT Credit on security services used at job-worker’s premises is not admissible to the principal manufacturer: [2011-TIOL-450-CESTAT-MAD]

Ø Letting out vacant land not covered under ‘Renting of Immovable Property Service’ - Operation and maintenance of mud plant not covered under ‘Maintenance & Repair Service’ - Prima facie case for full waiver of pre-deposit; [2011-TIOL-381-CESTAT-BANG]

Ø Consideration received for providing corporate

guarantee to bank for availment of loans by another entity - Corporate guarantee appropriately classifiable under Banking and Other Financial Service and not Business Support Service - Tax demand confirmed by invoking incorrect provision of law, prima facie case for full waiver of pre-deposit. [2011-TIOL-378-CESTAT-BANG]

Ø Revenue denying the benefit of Notification 32/2004-ST on the ground that the GTA did not submit the required declaration of non-availment of benefit of Cenvat credit and Notfn. 1 2 / 0 3 - S T i n t h e p r o p e r f o r m a t . Commissioner(A) allowed benefit, Tribunal held that matter no longer res-integra Notification 32/2004-ST does not require consignment-wise declaration on consignment notes or prescribe any format for filing the declaration; [2011-TIOL-498-CESTAT-DEL ]

Ø

Income Tax

Ø Commisioner of Income Tax (Appeals) is justified in directing the Assessing Officer to adopt the value of the property as determined by the Departmental Valution Officer under Section 50C, as against Stamp Duty Valuation. 2011-TIOL-125-ITAT-LKW

Ø Advance given for commercial transactions is not deemed as dividend or advance / loan within the ambit of Section 2(22)(e). 2011-TIOL-127-ITAT-MUM

Service Tax on representation service provided by Lawyers has been stayed by Hon'ble Gauhati High Court vide Order dated 29.04.2011

office or establishment in India - enabling provisions of Section 66 A of the Act, 1994 for charging of service tax from the service recipient in India was introduced w.e.f. 18.04.2006 - service tax liability cannot be fastened on service recipient in India during the period of dispute 9.7.04 to 31.3.2006 - Bombay High Court decision in Indian National Shipowners Association ( 2008-TIOL-633-HC-MUM-ST ) as upheld by Supreme Court relied upon [2011-TIOL-441-CESTAT-DEL ]

Ø Appellant giving space at their authorized service station to various financial institutions - CBEC vide Circular 6.11.2006 clarifying that such service would be covered under Business Auxiliary Service - Mere non-approaching the department or non seeking of clarification, by itself cannot be made a ground for invocation of longer period of limitation, unless the same is associated with a willful intent to evade payment of duty - Period involved is July 2003 to December 2005 is barred by limitation - decision in Maheshwari Bajaj (2010-TIOL-1027-CESTAT-AHM) relied upon [2011-TIOL-428-CESTAT-AHM]

Ø From the definition of ‘input service’, it is clear that the services used in or in relation to the setting up, modernization, renovation or repairs of a factory or premises of output service provider or an office relating to such factory or premises, are covered by the definition of ‘input service’. The service availed by the appellant for construction of the factory buildings and office buildings of the factory are, therefore, covered by the definition of ‘input service’: [2011-TIOL-424-CESTAT-DEL]

Ø Liability to pay service tax on TDS amount deducted at source by client - Prima facie case for full waiver of pre-deposit - Stay granted: [2011-TIOL-415-CESTAT-BANG]

Ø No bar on ISD to distribute CENVAT credit to only one unit. However distribution of service tax credit availed on services received in trading centre to be decided at the time of final disposal of appeal - Prima facie case for full waiver of pre-deposit - Stay granted [2011-TIOL-407-CESTAT-BANG ]

Ø Refund of Service tax filed under Notification No 41/2007 ST on the services used in respect of goods exported. Refund denied on the services like terminal handling charges, documentation fee, courier services, CHA services rejected on the ground that the classification of the services was wrong. It is a

May - 2011

40

Ø Assessee receives a sum as loan through bank drafts made out of cash deposited same day by the creditor of low means. AO is right in making addition for the same as unexplained cash credit under section 68. 2011-TIOL-155-ITAT-AHM

Ø Merely because the funds invested in shares were borrowed from parent company, long term capital gain can not be construed as an adventure in nature of trade particularly when there is only one transaction and the period of holding is more than four year. 2011-TIOL-157-ITAT-AHM

Ø Amount received by assessee on transfer of IPRs such as trade secrets and goodwill constitutes receipt of capital in nature and hence taxable as capital gains. Non-compete fee received by the assessee is capital receipt particularly when such fee debars assessee from continuing business. 2011-TIOL-175-ITAT-AHM

Ø When AO completes assessment u/s 143(3), a presumption can be made that he has applied his mind to all aspects of the case. Reassessment can not be initiated on the basis of Audit Wing objection. 2011-TIOL-183-ITAT-MUM

Ø Assessee suo-motto rectifies his mistake before the indulgence of the AO during the reassessment proceedings, penalty is not leviable under section 271(1)(c). 2011-TIOL-189-ITAT-MUM

Ø Condonation of delay is allowable when appeal was not filed against the CIT (A)’s order passed u/s 158BD on the advice of the chartered accountant but the appeal is filed before the ITAT. 2011-TIOL-188-ITAT-MUM

Ø Assessee fails to furnish evidence of expenses. It by itself does not prove that assessee furnished incorrect particulars of income, warranting levy of penalty. 2011-TIOL-166-HC-P&H

Ø Only trading debts are governed by the provisions of Section 36(1)(vii). Hence writing off of advances in the nature of investments would not be allowed. They are not allowed even if the interest earned on these amounts has been offered as business income in the previous years. 2011-TIOL-130-ITAT-MUM

Ø AO is not justified in disallowing a portion of the net expenses claimed by the assessee under section 14A, using the quantum of dividend income earned as a criteria for making the proportional adjustment towards earning the tax free income; and not considering that 97 per cent of the tax free dividend income was earned from a single company. 2011-TIOL-129-ITAT-MUM

Ø Assessing Officer allowed the interest expenditure incurred for earning non-taxable income. Commissioner of Income Tax rightly invoked powers u/s 263 to revise the assessment to disallow the interest expenses under section 14A. Though proviso to Sec 14A was effective from 11.5.2001, section 14A was with retrospective effect from 1/4/1962. 2011-TIOL-136-HC-KAR-IT

Ø Time for filing return is extended in terms of proviso to Section 139 (1), it automatically means extension of the due date for the purpose of Section 43B of the Act and the expenses under section 43B before extended due date are allowed as deduction. 2011-TIOL-138-HC-DEL

Ø Even when Directors are acquitted in Sec. 276B proceedings, the assessee company is not entitled to automatic acquittal on the ground that it is merely a legal entity managed by the same set of Directors. 2011-TIOL-141-HC-DEL-IT

Ø Non-availability of tax credit receivables can not be considered as bad debt niether can be claimed as business loss. 2011-TIOL-147-ITAT-MUM

Ø Interest under section 220 is automatic and triggered as soon as the assessee creates default in making the payments of tax assessed either under normal provisions or under MAT. Expenses incurred on increase in authorized capital are allowable. Expenses incurred wholly and exclusively for the purpose of de-merger are required to be allowed in 1/5th proportion. 2011-TIOL-149-ITAT-MUM

May - 2011

41

May - 2011

42

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

With West Bengal finance minister, Asim Dasgupta losing the election from Khardah,

speculation is rife that -Ficci secretary-general Amit Mitra – may be the man who could

drive political consensus on the long-delayed goods and services tax (GST). Asim

Dasgupta , who played the lead role in finalising the GST structure, will not be there in

the last leg of GST roll out.

Steel makers take RIL to court on gas supply cuts.

Supreme Court issued notice to Sahara group chief Subrata Roy for initiating contempt

proceedings against him for allegedly interfering with theinvestigation in 2G spectrum

case.

Competition Commission of India summons Private Airlne heads to explain price rise.

Govt. tightens deemed export benefit scheme, a move expected to save about Rs.

1,800 crore to exchequer annually.

Lakshmi MIttal continues to be richest man in UK for 7th year.

Rajya Sabha Ethics Committee rules against putting lists of assets of MPs on website.

Enforcement Directorate suspends its Officer Amrendra Singh, who investigated

Hasan Ali money laundering case from 2006 to 2008 for allegedly taking bribe from

Hasan Ali

l MC Thakur appointed as Member(Central Excise) in CBEC

l Justice S N Dhingra joins as Chairperson of Appellate Authority

constituted under Section 22A of the Chartered Accountants Act, 1949,

Cost and Works Accountants Act, 1959 and Company Secretaries Act, 1980

l PwC India agrees to pay 7.5 million dollars to settle Satyam Accounting

fraud Probe by US Securities & Exchange Commission-Mahindra Satyam to

pay 10 million dollars

l SD Majumdar gets charge of Member(Service Tax) in CBEC on retirement

of Vijay Lakshmi Sharma

l Service Tax Collection in 2011-12 expected to be higher than Central

Excise duty

l India & Thailand inching towards Free Trade Pact by end of 2011

l Government bans import of food articles from Japan for a period of 3

months

l Sidhartha Verma son of ex-CBEC Chairman BP Verma booked by CBI in CWG

scam

l SC issues notice to Government on Petition for investigation in alleged

money laundering by owners of Lilawati Hospital Mumbai

l Government of Maharashtra appoints the 1st May 2011 to be the date on which

the provisions of sections 3 to 15, 16(1), (2) and (4), 17, 18, 19(2) and (3) and

sections 20 and 21 of the Maharashtra Tax Laws (Levy, Amendment and

Validation) Act, 2011 shall come into force

May - 2011

43

Finally

it is proved that -

No one is safe in Pakistan,

not even Osama!

but Everyone is safe in India,

even Afzal & Kasab!

May - 2011

44

UPDATE

May - 2011

Bizsolindia Services Pvt. Ltd. Consultancy & Audit in the area of l Direct & Indirect Taxation,

l FEMA,

l Foreign Trade Policy,

l EOU,

l SEZ,l Project Consultancy SEZ, EOU, STPI,

Industrial Parks, Clusters etc.l Internal Audit,l Strategic Management Consultancy.

Bizsolindia Outsourcing Pvt. Ltd. Knowledge Process Outsourcing in the area of

l Indirect Taxation,

l Accounts, l Inventory management, l Fixed Assets Management.

Bizsolindia IT Services Pvt. Ltd. Specialised IT Consulting and Solutions / modules

along with ERP Integration and following ares,l Specialized Software for EOUs and SEZs l Expert in Application programming using Java and

ERP Connectivity / Data Migrationl Offers bucket of Add On Products for EXIM related

solutions for the complete industry needsl ERP Consulting / Implementation

Bizsol HR services Pvt. Ltd. Strategic Consultancy in the area of HR & Soft skills

Training.

Bhagwati Shipping Pvt. Ltd Custom House Agent (11/548)Custom Clearance of

Export and Import consignments.

A B Nawal & Associates, Cost Practicing Cost Accountant, Cost Audit, Central Excise,

Accountants Adjudication matters upto CESTAT, VAT Audit.

Behede Joshi & Associates, Practicing Chartered Accountants, Statutory Audit & Tax

Chartered Accountant Audit, VAT Audit, Transfer Pricing.

R Venkitachalam, Company Practicing Company Secretary. Secretary.

Bizsolindia provides consultancy in the following areas through associate companies and professional firms of the director,

O U R S E R V I C E S

May - 2011UPDATE

For private circulation only. While utmost care has been taken to provide upto date & current information, any person using this information may exercise sufficient caution.We shall not be responsible for any errors or omissions or any losses arising out of use of contents of this newsletter.

Reproduction of contents in any form needs prior written approval from Bizsol.

Yas

ho

da

- 02

0 -

2538

2945

14 -17, SuyBaner, Pune - 411 045. Tel.: +91 20 40702000/01 Fax:+91 20 [email protected], www.bizsolindia.com

Nashik: +91 253 2340586, Mumbai: +91 22 30284141,

Indore: +91 731 2539736, Daman: +91 9909025831,

ash Commercial Mall, Near Pan Card Club, Baner Road, Board of Directors Advisory Board Editorial Board

Venkat R. Venkitachalam Monica Joshi Manoj Malpani

Ashok Nawal Arun Sawant

Manoj Behede Pravin Arote

Hemant Sonar

Ganesh Borge

Kiran Sawale

Bizsolindia Services Pvt. Ltd.