Honeymoon of manufacturers in J & K, Kutch & North-East is Over

Himachal Government hikes VAT from 4 per cent to 5 per cent on all items, except edible oils and foodgrains Authority for Advance Ruling rules no capital gains accrued or arose at the time of conversion of partnership firm into a private limited company under Part IX of the Companies Act and therefore, notwithstanding the non-compliance with clause (d) of proviso to Section 47(xiii) of the Income Tax Act, by reason of premature transfer of shares, the said company is not liable to pay capital gains tax-AIT-2010-93-AAR Authority for Advance Ruling rules if the purchasers are non-residents other than the applicant, the applicant is liable to pay tax in India on the amount received by it for the support services rendered through the branch office in India-AIT-2010-92 -AAR Jurisdiction of Dispute Resolution Panel-Income Tax Order No.3 Employment of washing process in the manufacture of agglomerates etc from imported plastic waste and scrap-SEZ Instruction No.48 Haryana Government imposes surcharge ranging from 0.25 per cent to 0.7 per cent on VAT Service Tax Notification No. 17/2010 which exempts the taxable service providing packaged or canned software, intended for single use and packed accordingly amended-Service Tax Notification No.18 Procurement, Import and Export of Prohibited and Restricted Goods by SEZ Units-SEZ Instruction No. 47 Tractors are chargeable to tractor cess in terms of the Tractor Cess Rules, 1992 read with the IDRA Act, 1951-Central Excise Circular No. 916 Authority for Advance Ruling rules the amounts received/receivable by Technopromexport from NTPC under contract for Offshore supply of all plant and equipment including mandatory spares are not liable to tax in India under the provisions of the Income-tax Act, 1961 and DTAA between India and Russia-AIT-2010-79-AAR whether Cess levied under section 5 of Textile Committees Act, 1963 is includable as a component of CVD-AIT-2010-78-HC Toilet linen and kitchen linen, of terry toweling or similar terry fabric, of cotton and of other textile materials added in Focus Product Scheme for exports made after 1st Jan 2010-DGFT PN 46 TDS on payment of interest on time deposits under Section 194A of the Income Tax Act by banks following Core-Branch Banking Solutions software-Income Tax Circular No.3 Duty Credit Scrips can also be used / debited towards payment of Customs Duties in case of EO defaults under Authorizations issued under Chapters 4 and 5 of the Policy-DGFT Notification No.32 SC Ruling-the nature of roll over premium charge incurred by the assessee as also the scope and applicability of Section 43A of the Income Tax Act, 1961, in the context of such charges-we find no merit in the contention of the assessee that roll over charges have nothing to do with the fluctuation in the rate of exchange-AIT-2010-75-SC Pre-authentication of excise invoices dispensed with Excise duty on Goggles and OTS cans hiked to 10 per cent av gas and mosquito net impregnated with insecticides subjected to 4 per cent excise Outright exemption from additional duty of customs (of 4%) leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 to goods imported in a pre-packaged form and intended for retail sale Benefit of allowing Cenvat credit to be reversed on proportionate basis (when common inputs are used for the manufacture of dutiable and exempt products) extended retrospectively Bad News for ladies-sanitary napkins & kids diapers subjected to 10 per cent excise excise duty @ 4% imposed on specified IT products like microprocessor other than motherboards, floppy disc drives, CD-Rom drive etc when these items are meant for external use with a computer or laptop as a plug-in device Packaged software or canned software exempted from excise excise duty on Cartons, boxes and cases, of corrugated paper or paperboard manufactured by Standalone manufacturers lowered from 8% to 4%

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Honeymoon of manufacturers in J & K, Kutch & North-East is Over

RS Sharma Advocate

Modification of excise exemption scheme for Jammu & Kashmir, Kutch, North-East & Sikkim is like changing the rules of the game after the game has already started. The Scheme was more lucrative than the scheme of Uttaranchal & Himachal because of the twin benefits. Though Uttaranchal & Himachal Units get outright exemption from excise duty and thus not required to pay any excise; a special mechanism was provided by the Government for J & K, Kutch , North-East & Sikkim. The Notifications for these States exempted that portion of the excise duty, which was paid by the manufacturers in cash. According to the mechanism prescribed in pre-amended Notifications ; the manufacturer was first required to pay the excise duty and thereafter, whatever was paid in cash(other than CENVAT) was refunded. It is also a part of the scheme that the buyer of any input or capital goods on which such exemption is availed ; gets full CENVAT Credit including the portion of duty refunded to the manufacturer. The provisions of section 11B of Central Excise Act do not apply in case of all these Notifications.

The following Central Excise Tariff Notifications have been issued on 27th March 2008 amending the existing scheme in Jammu & Kashmir, Kutch, North-East & Sikkim.

16/2008	Exemption from Excise duty in Kutch Notification No. 39/2001 amended
17/2008	Exemption from Excise duty in North-East Notification No. 32/99 amended
18/2008	Exemption from Excise duty in North-East Notification No. 33/99 amended
19/2008	Exemption from Excise duty in J & K Notification No. 56/2002 amended
20/2008	Exemption from Excise duty in North-East Notification No. 20/2007 amended
21/2008	Exemption from Excise duty in J & K Notification No. 56/2003 amended
22/2008	Exemption from Excise duty in J & K Notification No. 57/2002 amended
23/2008	Exemption from Excise duty in Sikkim Notification 71/2003 amended

As a fallout of the amendment in the abovesaid Notifications , in the preamble, for the words and figures, “to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2002”, the words “to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit” has been substituted with effect from 1st April 2008.

As a result, the refund of only duty paid on value addition will be admissible to a manufacturer in place of unlimited refund of duty paid in cash. As a general norm 36 per cent of duty has been treated as duty for value addition whereas a different percentage of value addition has been notified for Chapters 29, 30, 33. 34, 38, 39, 40, 72, 73 , 74 , 76 & 85.

The only solace is that the manufacturer has the option not to avail the rates specified in the Notifications and apply to the Commissioner of Central Excise for fixation of a special rate representing the actual value addition in respect of any goods manufactured and cleared under these notification, if the manufacturer finds that four-fifths of the ratio of actual value addition in the production or manufacture of the said goods to the value of the said goods, is more than the rate specified in the said Table expressed as a percentage.

Investment of Lakhs of Crores was made by Industrialists in Jammu & Kashmir, Kutch, Sikkim & North-East after working out the incentives and sops. Though the Government was concerned with a drain of revenue in doling out Crores as refund to these Units; the Industrialists are in for a shock and have already approached the Advocates for filing Petition in High Courts for challenging the amendments as the Government seems to have backtracked from its promise and , therefore, it is a case of Promissory Estoppel.

Several Delhi based Industrialists deserted their wives and families and migrated to Jammu & Kashmir for setting up Units. Last night I got a call at 12.30 Hours from the jubiliant wife of such an Industrialist who told me that her husband has decided to wind up his Project in Jammu & Kashmir due to change in Policy and has decided to shift back to Delhi. I asked the rich and lonely lady as to why she was disturbing me at odd hours? The lady told me that she wanted to cross check about the change in policy from a Consultant as she had a big doubt that her husband was making her an April Fool.

(The Writer is an Advocate & Consultant based in Delhi and is advising several MNCs PSUs & Indian Corporates on Indirect Tax Issues. He can be mailed at rssharma@gmail.com)

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