01 January 0001

Tax Amicus: April 2014

The emerging concept of Service PEs has been discussed in the ‘Article’ section in the backdrop of recent decision of the Income Tax Appellate Tribunal (ITAT) in the case of JCB Bamford. The author argues that establishing that there is no PE is not simply a matter of keeping the period of stay in India within threshold limits and laying down terms in the contract that control and supervision have passed from the deputing company to the Indian entity.

Under Excise, among the important cases covered are the CESTAT order holding that Rule 10A of Central Excise Valuation Rules on job work valuation will be applicable only if inputs / goods are predominantly supplied free of charge to manufacturer of goods and if some inputs alone are supplied, the said rule would not be applicable. This issue also covers a case involving suo motu re-credit, the Ahmedabad Bench of CESTAT has held that re-credit of Cenvat credit, reversed earlier to claim refund of Terminal Excise Duty (TED), would be permissible when the refund claim was subsequently withdrawn. Bombay High Court order holding that penalty would not be imposable for non-submission of ARE-1 when proof of export is available through other documents, is also summarized in this issue of Tax Amicus.

The Customs Section of this issue includes update on notification of procedures by Directorate General of Foreign Trade (DGFT) for online application of Export Obligation Discharge Certificate (EODC) /redemption under Advance Authorization and DFIA Schemes from 1-6-2014. Goods cannot be confiscated and penalty cannot be imposed for not possessing Importer Exporter Code (IEC) when filing of manual bill of entry was allowed by the department.

Availment of Cenvat re-credit suo motu after paying service tax in cash which became necessary owing to objection from department on initial credit availment was the issue decided by CESTAT in a case discussed in this issue. The claimant was successful when CESTAT allowed refund holding that bar of unjust enrichment was passed when invoice was not issued and certificate from buyers was furnished as to non-collection of service tax amount. This order is summarized in this issue of Tax Amicus.

The Value Added Tax (VAT) Section in this issue covers amendments to Punjab VAT Act and clarification by Rajasthan Government on inclusion of freight in cases of FOR destination sales under Rajasthan VAT Act. It also discussed an interesting judgment of Delhi High Court holding that salting and roasting do not change essential nature and use of dry fruits.

The Income Tax portion brings to readers the clarification on Section 10(2A) by Income Tax Department that income of a partnership firm is to be taxed in the hands of the firm only and not the partners besides the ITAT orders holding that companies operating in different geographical locations can be regarded as comparables and corporate guarantee not involving any cost to taxpayer cannot be regarded as international transaction.

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