TDS on sale of Immovable Property (Sec 194IA)

Insertion of Section:-

Vide BUDGET 2013, read with Notification No.39/2013 dated 31^st May, 2013, a new Section 194-IA was inserted to Income Tax Act, 1961 to avoid tax evasion and collection of Capital Gain tax in the case of transfer of immovable property (situated in India or abroad/commercial or residential). The Section has become applicable w.e.f. 1^st June 2013. This section has been introduced by the Finance Minister to mitigate undervaluation and non-disclosure of transfers of immovable property.  

Provisions of TDS on sale of Immovable Property (Sec 194IA) – as stated:-

The provisions of this section states that TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the consideration paid or payable is more than Rs 50,00,000/-. Earlier, there was no such deduction in case of immovable properties as it is in the case of salary, interest, rent etc. Any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), is liable to deduct tax at source under section 194-IA.Where the transaction is less than Rs 50,00,000 /-, the liability to deduct tax at source will not be applicable.  

Rate at which TDS shall be deducted :-

• Tax is deductible at the rate of 1% of the consideration payable to a resident transferor.
• If a valid PAN is not provided by the seller, the tax rate would go up to 20%.
  

Obtaining TAN:-

Purchaser is not required to obtain a TAN for deduction.  

Payment and return of TDS :-

• Tax shall be deducted at the time of payment or at the time of giving credit to the transferor, whichever is earlier.  If advance payment is being made then TDS would be required to be deducted at the time of advance payment itself. And if installment payment is made, the TDS would be required to be deducted at each such installment.

• The tax deducted shall be paid to the credit of Central Government within a period of seven days from the end of the month of deduction.

• Online payment u/s 194IA is mandatory and the tax should be deposited on challan-cum-statement on Form No.26QB. Form No 16B (TDS Certificate) will be issued by the deductor within fifteen days from the due date of depositing tax.
  

Applicability of section :-

Section 194IA is only attracted for the transactions on or after 1^st June, 2013. For example:-

• Sale agreement is made before 1^st June, 2013 but consideration received after 1^st June, 2013 – Sec 194IA is not applicable.

• Advance consideration of Rs 5000,000 or more is received before 1^st June, 2013 but sale agreement made after 1^st June, 2013. – Section 194IA is not applicable.

Where property is held by Joint-owners :-

In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all. The value of property should be more than Rs 50,00,000/- for applicability of deduction of tax.

For example:- A,B and C  jointly purchased an immovable property. The purchase price for each owner is Rs 20lakhs, Rs 15 lakhs and Rs 35 Lakhs respectively. In this case individual purchase price is less than Rs 50,00,000 but the aggregate value of the transaction is exceeds Rs 50,00,000.Thus section 194-IA would be applicable.

Scope :-

• Section 194-IA is applicable to all including relatives, minor, senior citizens etc.
• However, if transfer is made without payment of any consideration like in case of gift, then this section will not apply.

Provisions for Non Resident Indian:-

• If payment is made to a Non-Resident then section 194-IA will not be   applicable. Rather section 195 will be attracted and TDS is required to be deducted @20%+EC&SHEC on the sale consideration. Surcharge @10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI’s.

Non Compliance:-

In case of failure to comply with the provisions, interest and penalty would be imposed to the purchaser.

•  Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted.
•  Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

Exports without payment of Central Excise Duty in bond

Circular No. 87/87/94-CX

dated 26/12/94

 

F.No. 209/18/93-CX.6 (Pt.)   Government of India Ministry of Revenue Department of Revenue Central Board of Excise & Customs, New Delhi Subject:    Exports without payment of Central Excise Duty in bond under Rule 13(1)(a)- Procedure regarding.1.1    Attention of Collectors is invited to Board's telex F.No. 209/18/93 dt. 26.09.94 & 27.09.94 communicating the issue of fresh rules and notification relating to exports.
1.2    The new Central Excise Rule 13(1) (a) has been framed to permit exports of excisable products without payment of Central excise Duty. The Rule 13(1) corresponds to the earlier Rule 13(1) of the Central Excise Rules. The fresh Notification No. 48/94-dt. 22nd Sept. 1994 [read with Corrigendum dt. 6th and 26th Oct, 1994] has been issued under the new Rule 13(1)(a) which permits export of all excisable goods outside India Nepal and Bhutan, without payment of Central Excise Duty.
2.    the salient features of the new Rules and Notification issued thereunder are briefly summarized below:-
2.1    Self Removal Procedure
        Now the exporters are being allowed to take clearances for export without the presence and examination of export goods by the Central Excise Officer. However this facility shall not be available to export of excisable commodities under physical control.
2.2    AR4 and AR4A are merged
        The existing AR4 and AR4A forms have been merged. Now only one single type of AR4 is required to be filed by exporters in all the situations namely:-

-    Export Clearances on their own without examination by the Central Excise Officer whether under claim for rebate or under bond.-    Export Clearances under Central excise seal whether under claim for rebate or under bond.

2.3    Option of executing bond either with Maritime Collector or Jurisdictional  Assistant Collector of Central Excise

(a)    The number of Maritime Collectors has been presently reduced to seven(b)    Even where the export is from any of the port, airport or post office falling within the jurisdiction of Maritime Collector of Central Excise, the option is available to execute the bond before such Maritime Collector of Central Excise or the Jurisdictional Assistant Collector of Central Excise. Accordingly exporters are required to clearly indicate on the AR4 the complete postal address of the authority before whom the bond is executed and to whom the documents are to be submitted/ transmitted for admission of proof of export;
(c)    Where the export is made from a Port/ Airport/ Post Office, other than the Port/ Airport / Post Office falling within the jurisdiction of the Maritime Collector of Central Excise specified in the Rule/ Notification, the exporter shall be required to execute the bond for export without payment of duty before the jurisdictional Assistant Collector of Central Excise.

3.    The following consolidated instructions are issued with regard to export under bond without payment of Central Excise Duty on excisable goods exported to countries other than Nepal and Bhutan [For exports to Nepal and Bhutan separate instructions are being issued]. The earlier instructions, on the subject which are inconsistent with these instructions, the new rules and the notifications issued thereunder may be treated as withdrawn.BOND
4.0    The first step that is required to be taken for clearance of excisable goods, without payment of Excise Duty for export from the factory or the warehouse or any other premises as approved is the execution of the bond for due despatch of goods. The bond can be executed either by the manufacturer or the merchant exporter. Where the export is from any of the port, airport or post office falling within the jurisdiction of Maritime Collector of Central Excise, option is available to execute the bond before Assistant Collector of Central Excise having jurisdiction over the factory of manufacture of excisable goods. For this purpose exporters are required to clearly indicate on the AR4 complete postal address of the authority before whom bond is executed.
4.1    Types of Bonds:    There are six types of bonds available for purpose of due despatch of goods or exports. These are

-    B 1 (Surety)-    B 1 (Security)
-    B 1 (General Surety)
-    B 1 (General Security)
-    B 16 (General Surety)
-    B 16 (General Security)

Exporters have option to execute general bond (B 1 general) or bond (B 1) to cover particular consignment. In case of particular B-1 bond, amount of bond should be equal at least to the duty chargeable on the goods to be exported. In case of general B-1 bond amount of the bond would be equal to the full duty on the exporters estimate of the maximum quantity of the excisable goods likely to be in transit during the period between clearance from the factory and acceptance of proof of export. In case of B-1 general bond a running bond account in proforma of Annexure-I shall be maintained by the authority before whom the bond is executed. The manufacturer exporters who have executed B-16 bond are not required to execute separate bond to cover duty on goods exported without payment of Duty.4.2    Special facility to Certain categories of exporters:    Following categories of exporters need not furnish any Bank Guarantee or Cash Guarantee or Cash Security for the export bond. Bond with Surety would suffice in these cases.

-    Super Star Trading Houses-    Star Trading Houses
-    Trading Houses
-    Export Houses
-    Registered Exporters (registered with relevant Export Promotion Council)

4.3    Extent of Security or Bank Guarantee:    Other manufacturer exporters may execute B-1/ B-16 bond with 10% security/ bank guarantee. Merchant exporters [other than those falling under para 4.2 above] shall execute B-1 bond with 25% security/ bank guarantee.4.4    Bond to be executed by Manufacturer Exporters
4.4.1    Manufacturers who are exporting on their own account (Manufacturer Exporters) who manufacture dutiable excisable goods and desiring to export without payment of Excise Duty (under bond) can execute either a particular B-1 bond [to cover the particular consignment] or a consolidated B-1 general bond [to cover a series of export from his factory], or B-16 (General Security or General Surety) with the jurisdictional Assistant Collector of Central Excise.
4.4.2    Where the export is from any of the port, airport or post office falling within the jurisdiction of Maritime Collector of Central Excise, the option is available to the Manufacturer Exporter to execute the particular bond or the consolidated bond before such Maritime Collector of Central Excise. In case where B-1 bond is executed for a specific consignment before the Maritime Collector of Central Excise, the Manufacturer Exporter should obtain an attested photo copy of the Bond executed before the Maritime Collector of Central Excise and produce the same at the time of presentation of AR4 to the Superintendent of Central Excise. Where a Consolidated B-1 general bond is executed before the Maritime Collector of Central Excise, the Manufacturer Exporter shall inform him of intention to export the goods and obtain a Certificate of provisional debit in the Running Bond Account (maintained in proforma at Annexure 1) by him. This certificate will have to be produced by the manufacturer exporter before Superintendent of Central Excise at the time of presentation of AR4 for signature.
4.4.3    Export by Merchant Exporters under Bond Eecuted by manufacturers
        Merchant exporters are also permitted to export excisable goods under Bonds executed by manufacturers. In such circumstances, for purposes of complying with Central Excise Law and Procedures the manufacturer who has executed the Bond would be responsible for discharging all the liabilities under the said provisions. In such circumstances, the application in Form AR4 will be in the name of the manufacturer who executes the Bond. All other procedures for admission of the proof of export would be the same as in the case of manufacturer exporters. It should be brought to the notice of manufacturers that once they permit the Bond executed by them for exports by merchant exporters, it would be the manufacturer's responsibility for accountal of the export goods.
4.5    Bonds to be executed by Merchant Exporters
4.5.1    With jurisdictional Assistant Collector:  Where a merchant exporter desires to export excisable goods manufactured in a factory or number of factories, he can execute a B-1 bond to cover a particular consignment or a consolidated B-1 general bond, to cover series of export consignments from the same factory, before the Assistant Collector of Central Excise having jurisdiction over the factory.
    With the Maritime Collector of Central Excise
4.5.2    Where the export is from one of the port, airport or post office falling within the jurisdiction of Maritime Collector of Central Excise, the option is available to the Merchant Exporter to execute the particular bond or the consolidated bond before concerned Maritime Collector of Central Excise. In case of a particular B-1 bond, the Merchant Exporter should obtain an attested photo copy of the Bond executed before the Maritime Collector of Central Excise and produce the same at the time of presentation of AR4 to the Superintendent of Central Excise. Where a Consolidated B-1 general bond is executed, the Manufacturer Exporter shall inform the Maritime Collector of his intention to export the goods and obtain a Certificate of provisional debit in the Running Bond Account (in proforma of Annexure 1) maintained by him. This certificate will have to be produced by the Merchant Exporter before Superintendent of Central Excise at the time of presentation of AR4 for signature. In above situations the exports are expected to go through the port of the Maritime Collector of Central Excise before whom the bond is executed.
4.5.3    Where the Merchant Exporter has executed the consolidated B-1 general bond with the Maritime Collector of Port 'X' but the export are to be made through the port 'Y' or 'Z' falling under jurisdiction of other Maritime Collector of port 'X' and obtain a block transfer of the Credit in the Running Bond Account maintained by the Maritime Collector of port 'X' against the B-1 general bond. The block transfer shall be made in favour of the Maritime Collector of Central Excise of port 'Y' or 'Z'. The Maritime Collector of Central Excise of port 'X' shall also intimate the fact of block transfer to both the Maritime Collector of Central Excise of port 'Y' or 'Z'. The Maritime Collector of Central Excise of Port 'X' shall also intimate the fact of block transfer to both the Maritime Collector of Central Excise of port 'Y' or 'Z' and the Superintendent of Central Excise having the jurisdiction over the factory/ warehouse. On receipt of intimation of Block Transfer, the Maritime Collector of Central excise of port 'Y' or 'Z' shall treat the same as Bond executed before him and shall be responsible for monitoring the proof of export. However where it becomes necessary to recover duties, the action for recovery will have to be taken by the Maritime Collector of Central Excise of port 'X'.
4.5.4.    Where the Merchant Exporter has executed the consolidated B-1 general bond with the Maritime collector of port 'X' but the exports are to be made through the port 'A' or 'B' not falling under jurisdiction of any of the Maritime Collector of Central Excise, the Merchant Exporter shall approach Maritime Collector of Port 'X' and obtain a block transfer of the Credit in the Running Bond Account maintained by him against the B-1 general bond. The block transfer shall be made in favour of the Assistant Collector of Central Excise having jurisdiction over the factory/ warehouse and suitable intimation sent to him by the Maritime Collector of Central Excise of port 'X'. On receipt of intimation of Block Transfer, the Assistant Collector of Central Excise having jurisdiction over the factory shall treat the same as Bond executed before him and shall be responsible for monitoring the proof of export. However where it becomes necessary to recover duties, the action for recovery will have to bee taken by the Maritime Collector of Central Excise before whom the bond is executed.
4.5.5    Where bond is executed by the merchant exporter, it shall be necessary that the AR4 is signed by both the merchant exporter and the manufacturer.
4.6    Running Bond Account
        Every Central Excise Authority before whom a consolidated B-1 general bond has been executed shall maintain a running bond account in the proforma of Annexure 1. Whenever any block transfer are made in favour to other Central Excise authority, debit shall be made in the account. Suitable debit shall also be made wherever exports are allowed against the bond. On acceptance of the proof of export the bond account shall be credited  to the extent the debit was made while permitting the exports. The running bond account shall also be credited after the Block Transfer is returned by the other authority. However where it becomes necessary to taken action for recovery of duties, such action shall be taken by the authority before whom the bond is executed in consultation with the Assistant Collector of Central Excise having  jurisdiction of the factory and / or the other Maritime Collector of Central Excise.
5.0    The removal of goods without payment of Central Excise Duty from a factory or warehouse without examination by the Central Excise Officers.
5.1.1    The exporters are now allowed to remove the goods for export on their own without getting the bonds examined by the Central Excise officers in respect of all commodities other than those covered under physical control. The AR4 in such cases would be prepared in sixtuplicate, giving all particulars and declarations. The exporter shall deliver triplicate, quadruplicate, quintuplicate and sixtuplicate copies of AR4, to the Superintendent of Central Excise having jurisdiction over the factory or the warehouse, within twenty four hours of the removal of the consignment and would retain the original and duplicate copies for presenting alongwith the consignment to the Customs Officer at the point of export. However the exporters may ensure before clearances that the necessary bond as as detailed in para 4 has been executed for this purpose.
5.1.2.    Exporters, whether manufacturer exporter or merchant exporter may be cautioned that unless they execute the necessary bond before the Competent Authority they should not clear the goods under the relaxed procedure. They should without fail indicate the Bond Number and the authority before whom the relevant bond is executed in the relevant columns provided in Form AR4. Exporters should be suitable advised in the Trade Notice that if it is found that the goods are being removed without execution of bond for export or the particulars of bond furnished in the AR4 in not correct and proper, the exporters will be liable for penal action as if the goods have removed without authority of law.
5.2    The jurisdictional Superintendent of Central Excise shall examine the information contained in AR4 and verify the fact of execution of bond (as per para 4 above) and other certificates/ declarations made by the exporter. After he is satisfied that the information contained in the AR4 is true, he will sign at appropriate places in the four copies of AR4 submitted to him and put his stamp with his name and designation below his signature. He would then dispose of the triplicate, quadruplicate, quintuplicate and sixtuplicate copies of AR4 as under:-
i)        Triplicate

To the authority before whom the bond is executed and who will accept the proof of export i.e. Maritime Collector of Central excise or the Assistant Collector of Central Excise declared by the exporter on the AR4. This copy on the request of exporter may be sealed and handed over to the exporter/ his authorized agent for presenting to the authority.

ii)        Quadruplicate

To the Chief Account Officer in the Collectorate Headquarters.

iii)        Quintuplicate

Office copy to be retained by the Central Excise Officer.

iv)        Sixtuplicate

To be to given the exporter or his authorized agent is sealed cover.Procedure for exports under Central Excise Seal:

6.1    Where the exporter desires the sealing of the goods by the Central Excise officers so that the export goods may not be examined by the Customs Officers at the Port/ Airport of shipment, he should present an AR4 application in sixtuplicate to the Superintendent of Central excise having jurisdiction over the factory/ warehouse at least twenty four before the intended removal of the export goods from the factory/ warehouse. However, where exporter is unable to give 24 hours advance notice to the Superintendent of Central Excise, his request for shorter notice should normally be accepted. All such relaxations shall be reported to the Assistant Collector of Central Excise for ex-post facto approval. Collector of Central Excise may delegate powers under rule 187 to the Assistant Collector of Central Excise.6.2    The Superintendent of Central Excise may depute an Inspector of Central Excise or may himself go for sealing and examination of the export consignment. Where the AR4 indicates that the export is in discharge or an export obligation under a Quantity- based Advance License or a Value-based License issued under the Duty Exemption Scheme, in such case the consignment should invariable be examined and sealed by the Superintendent of Central Excise himself.
6.3    The Central Excise Officer examining the consignment would draw samples wherever necessary in triplicate. He would hand over two sets of samples, duly sealed, to the exporter or his authorized agent, for delivering to the Customs Officer at the point of export. He would retain the third set for his records. The instructions and procedure for drawl of samples prescribed by the Collector or the Board should be followed.
6.4    The export consignment should be carefully examined vis a vis the description of goods, their value and other particulars/ declarations on the AR4. The Central Excise Officer shall verify the facts, certificates/ declaration made by the exporter. The value declared on AR4 should be as per Section 4 of Central Excise and Salt Act, 1944. After Central Excise Officer is satisfied that the information contained in the AR4 is true and after verifying that necessary bond (as detailed in para 4 above) has been executed by the exporter, he would allow the clearances and also sign all the six copies of the AR4 at appropriate places and put his stamp with his name and designation below his signature.
        The copies of AR4 would be disposed of as under:
 

	To the exporter for presenting to Customs Officer at the point of export along with the export consignment
Triplicate:	To the authority competent to accept the proof of exports i.e. Maritime Collector of Central excise or the jurisdictional Assistant Collector of Central Excise, as declared by the exporter on the AR4. The Central Excise Officer may hand over this copy under a sealed cover on exporter's request.
Quadruplicate:	To the Chief Account Officer at his Collectorate Head Quarters
Quintuplicate:	To be retained for records
Sixtuplicate:	To be given to the exporter or his authorized agent, in a sealed cover, for handing over to Customs Officer.

Markings
7.1    The packages in which the goods are to be exported would be legibly marked in ink or oil color or in such other durable manner with progressive number commencing with no.1 for each calendar year and with the exporter's name. Under proviso to rule 185(1) or Central Excise Rules, 1944, Collectors are empowered to relax this requirement [Places see Para 15.5].
8.1    The different copies of AR4 forms should be of different colors indicated below:-

(i)    Original - White(ii)    Duplicate - Buff
(iii)    Triplicate - Pink
(iv)    Quadruplicate - Green
(v)    Quintuplicate-Blue
(vi)    Sixtuplicate - Yellow

It will be sufficient if the copies of AR4 contain a color based on the tip or right hand corner in accordance with above color scheme.8.2    Exporters should be advised to take adequate care in filling up the AR4 proforma. The authority before whom the bond is executed or in whose favour BLOCK TRANSFER is obtained [who is also the authority for accepting the proof of export] should be clearly indicated on the AR4 along with its complete postal address at appropriate place in the AR4. The applicable portions should be clearly retained and inapplicable portion struck off. The exporters are now required to give following certificates/ declaration.
        "We hereby certify that the above mentioned goods have been manufactured

(a)    availing facility/ without availing facility of Modvat credit under rule 57A of Central Excise Rules, 1944(b)    availing facility/ without availing facility under Rule 12(1)(b) of Central Excise Rules, 1944.
(c)    availing facility/ without availing facility under Rule 13(1)(b) of Central Excise Rules, 1944.

We hereby declare that the export is in discharge of the export obligation under a Quantity based Advance Licence/ Value based Advance Licence/ Under Claim of Duty Drawback under Customs & Central Excise Duties Drawback Rules, 1971."9.1    The original, duplicate and sixtuplicate copies of the AR4 shall be presented by the exporter/ his authorized agent to the Customs Officer at the point of export along with the goods, Shipping bill/ Bill of Export and samples sealed by the Central Excise Officer. The export consignment shall be checked by the Customs Officer to see whether the seals are intact and the marks and number tally and in found in order he may allow exports after ensuring that the No. of the AR 4 has been indicated in the Shipping Bill or the Bill of Export, as the case may be. The samples shall be dealt in accordance with instructions/ standing orders of the Collector of Customs or the Central Board of Excise and Customs. In case goods are removed from the factory without the supervision of Central Excise Officer, Customs Officer shall carry out the usual examination and draw samples as per standing instructions. After the goods have been shipped the proper officer of Customs would make necessary endorsements in the Original, Duplicate and Sixtuplicate copies of the AR4 at appropriate places and put his stamp with his name and designation below his signature. The copies of AR4 shall be disposed off by him in the following manner:-
 

Original and Sixtuplicate:	To be Handed over to the Exporter. Criginal shall be used for filing proof of export for getting the bond discharged. Sixtuplicate copy shall be used for Drawback/ DEEC endorsement. The sixtuplicate copy of AR4 shall be presented by the exporter for claiming Drawback or endorsement of exports in the DEEC. At that stage the same shall be retained by the Customs House for its records.
Duplicate:	To be sent to authority before whom the bond is executed and declared on AR4. This copy on a request of exporter may be sealed and handled over to the exporter/his authorized agent for presenting to the authority declared on AR4 [Maritime Collector of Central Excise or the Jurisdictional Assistant Collector of Central Excise].

        Filing of Proof and discharge of Bond
10.1    Following documents should be filed by the exporter for proof of due exportation-

-    Original copy of AR4-    Duplicate copy of AR4 in sealed cover received from Customs Officer [(optional)]
-    Duty attested copy of Bill of Lading
-    Duly attested photocopy of Shipping Bill (Export Promotion Copy)

10.2    With Maritime Collector of Central Excise:    Where the export of the goods is from any of the ports, airports or post offices falling within the Jurisdiction of Maritime Collector of Central Excise of Bombay, Calcutta, Madras, Paradeep, Vishakhapatnam, Cochin, Kandla and the exporter had executed the bond before such Maritime Collector of Central excise or has obtained BLOCK TRANSFER in his favour and declared the same on AR4, he will file as proof of due exportation the documents listed in para 10.1 above to Maritime Collector of Central Excise who shall compare the original AR4 received from the exporter with the triplicate copy of the AR4 received from the Central Excise Officer and the duplicate AR4 received from the Customs Officer either direct or from the exporter in Customs seal cover. The Maritime Collector after due scrutiny and verification of the said AR4s, will record the proof of export and discharge the bond and also inform the fact of acceptance of the proof of export to the jurisdictional Superintended of Central Excise. Where the proof of export is admitted against BLOCK TRANSFER, the Maritime Collector shall return the BLOCK TRANSFER to the authority before whom bond is executed and also intimate him the fact of acceptance of proof of export.10.3    With Assistant Collector, Central Excise having jurisdiction over the factory:    Where the exporter has executed the bond before the Assistant Collector having jurisdiction over the factory or warehouse or has obtained BLOCK TRANSFER in his favour, from where the goods were removed for export, he will file as proof of due exportation the documents listed in para 10.1 above before such Assistant Collector. The Assistant Collector of Central Excise, would verify and compare the original copy of AR4 with the duplicate copy of AR4 received from the Customs Officer either direct or in Customs seal cover from the exporter with the triplicate copy of AR4 received from Superintendent, Central Excise Range and after Satisfying himself that the proof is in order admit the proof of export and will discharge the bond. Where the proof of export is admitted against BLOCK TRANSFER, the Assistant Collector shall return the BLOCK TRANSFER to the authority before whom bond is executed and also intimate him the fact of acceptance of proof of export.
10.4    Partial Export:
        If the scrutiny of AR4 reveals that only part of the consignment removed in bond for export has actually been exported out of India, the Assistant Collector of Central Excise or the Maritime Collector of Central Excise, as the case may be, shall forthwith call upon the bonder to pay within 10 days the duty leviable on the quantity short-shipped in terms of the bond. Such demands should be made by letter as prescribed in Annexure 2. Where the bond is executed with the Maritime Collector of Central Excise, the assessable value and the rate of duty leviable [see para 15.11 on quantity short shipped shall be worked out by such Maritime Collector and got verified and confirmed by the Assistant collector having jurisdiction over the factory of manufacture/warehouse from where the goods were cleared for exports. Where the bond is executed with the Assistant Collector having jurisdiction over the factory, he will work out the duty recoverable and demand the same from the person who has executed the bond. An endorsement of the recovery of duty on quantity short shipped would be made in all the three copies of the AR4 in the following form:-
        "Proof of export admitted to the extent of duty amounting to Rs....... .. in Figs. (......... in words). Duty on goods short-shipped (quantity short shipped ......), amounting to Rs. ........ in figs. (......... in words) demanded under demand No. ......... dated ........... and recovered vide Challan No ......... dt .......... of ...........(Name of the Bank)"
11.    Small Scale Units:
        Units which are otherwise eligible for benefit under and of the Central Excise Notification granting partial or full Exemption based on value of clearances for home consumption may be exempted from filing AR4 and Bond. In view of the exemption from filing AR4 and bond, the facility of sealing of the export consignment at place of despatch under rule 187 of Central Excise Rules, 1944 cannot be availed. This shall be extended to only such of the units which export whole of their production either themselves or through merchant exporters. However where exports are by merchant exporters, it will be necessary that the shipping bill/ bill of export contains the name of the units as manufacturer. Units who are availing.

-    facility of Modvat credit under rule 57A of Central Excise Rules, 1944.-    facility under Rule 12 (1) (b) of Central Excise Rules, 1944
-    facility under Rule 13 (1) (b) of Central Excise Rules, 1944

shall follow regular procedure of AR4 and bond for exports.12    Diversion of Export Goods for home consumption-
        Cancellation of Export documents.
        12.1.    An exporter intending to divert the excisable goods, cleared for export in bond, for home consumption should send an intimation together with the original, duplicate and sixtuplicate copies of the AR4 to the authority with whom bond is executed and declared as such on the AR4 (i.e. the Maritime Collector of Central Excise or the Assistant Collector of Central Excise having jurisdiction over the factory). Where the bond is executed with the Maritime Collector of Central excise, a copy of the intimation sent to the Maritime Collector shall also be endorsed to the Assistant Collector of Central Excise having jurisdiction over the factory.
12.2    The intimation referred in para above shall contain following minimum information.

i)    Description of the goods to be diverted for home consumption.ii)    Identification marks.
iii)    No. of packages and complete description of packages.
iv)    Quantity.
v)    Assessable Value under Section.
vi)    Amount of duty due.
vii)    Reasons for diversion for home consumption.
viii)    Place where the said goods are lying pending for home consumption.

12.3    Where Bond Is Executed With Maritime Collector.        On receipt of intimation referred in para 12.2 above the Maritime Collector of Central Excise would seek verification of the goods including the description of Packages, identification marks etc. from the Superintendent of Central Excise having jurisdiction over the place where the goods are stored pending diversion for home consumption. He will also simultaneously refer the matter to the Assistant Collector of Central Excise having jurisdiction over the factory, for determination of Assessable value [under Section 4 of the Central Excise and Salt Act, 1944] and duty leviable. After receipt of verification report regarding storage from the Superintendent of Central excise and after confirming the duty leviable from the jurisdictional Assistant Collector, the Maritime Collector of central Excise shall recover the duty. After satisfying that the duty has been paid, be would cancel the Original, Duplicate and Sixtuplicate copies of AR4 and note the fact of Cancellation in his records. He will also cancel the bond and inform the Assistant Collector having jurisdiction over the factory.
12.4    Where Bond Is Executed With Jurisdictional Assistant Collector.
        On receipt of intimation referred in para 12.2 above, the Assistant Collector of Central Excise having jurisdiction over the factory from where goods were cleared for exports shall seek verification of the goods including the description of packages, identification marks etc. from the Superintendent of Central Excise having jurisdiction over the place where the goods are stored pending diversion for home consumption. After receipt of verification report regarding storage from the Superintendent of Central Excise and after working out the Assessable value [under Section 4 of the Central Excise and Salt Act, 1944] and the duty leviable, he shall recover the duty leviable, he shall recover the duty. After satisfying that the duty has been paid, he would cancel the Original, Duplicate and Sixtuplicate copies of AR4 and note the fact of Cancellation in his records. He will also cancel the bond and inform the Concerned Maritime Collector of Central Excise.
13.    Re-entry of the goods, cleared for export under Bond but not actually exported, in the factory of manufacture.
        Sub-Rule (1A) of Rule 173M of the Central Excise to allow return of goods cleared for export under bond but not actually exported provided such goods are returned to the factory within one year and the assessee gives intimation of the re-entry of each consignment in Form D-3 within twenty-four hours of such re-entry. Further, such goods are to be stored and accounted for separately.
14.    Re-import of exported goods for repairs etc. and subsequently re-exported.
        In Rule 173 MM, provision have been made for permitting re-entry of goods that have been re-imported for undertaking repairs, re-conditioning etc. and subsequent re-export therefor. It may, however, be specifically noted that such permission fro re-entry will be granted in those cases where the goods after being subjected to the specified processes, are to be re-exported out the country.
14.1    For return of the exported excisable goods to the factory of manufacture for carrying out (i) repairs, (ii) re-conditioning, (iii) refining, (iv) re-making or subjecting to any process similar to processes, referred to in (i) to above:-
(a)    The manufacturer shall make an application in writing well in advance to the Collector, Central Excise having jurisdiction over the factory where the above processes are to be undertaken. The application should contain details of the:-

(i)    Premises including Central Excise Licence Number where the processing operation is to be undertaken,(ii)    Particulars of the goods re-imported and sought to be returned to the factory.
(iii)    Nature of processing along with collateral evidence to show that such processing is absolutely necessary in the case,
(iv)    Expected date and time of commencement and completion of the processing,

(b)    If permission for such processing is accorded, it would be subject to the following conditions:-

(i)    Excise supervision over such processing operation will be required.(ii)    Supervision charges will be recovered as prescribed under para 38.39 of this Guide for rates of such charges.
(iii)    On arrival of the excisable goods in the processing factory an intimation in proforma as given in Annexure 49 should be given to the proper Central Excise Officer within 24 hours of their receipt, along with the original documents etc.
(iv)    The goods should be stored separately in the factory after receipt and should not be taken for processing etc., before verification by the Central Excise Officer.
(v)    Proper accounts of the goods received for repairs, reconditioning etc., should be maintained in the form as shown in Annexure 50.

14.2    After the processing etc. operations are completed, a fresh AR4/AR4A/ Invoice(s) will be issued by the Central Excise Officer, with a suitable endorsement thereon to the effect that no rebate/ drawback in respect of the goods which are being re-exported as well as the goods used in the manufacture thereof is admissible. The disposal of the AR4s shall be as usual, with necessary instructions by the Central Excise Officer to the Officer of original manufacturer.Miscellaneous
15.1    Rate of Duty:    In terms of sub-rule (3) of rule 9A of the Central Excise Rules, 1944, in case of exports under bond, in absence of proper proof of export, the rate of Central Excise duty leviable is the rate in force on the date on which Central Excise duty is paid. Central Excise Officers dealing with the situations, where it becomes necessary to recover Central Excise duty on goods cleared for export under bond, such as short shipment or diversion of export goods for domestic consumption etc. Should ensure that the Duty liability is calculated with reference to rate of duty in force on the date of actual payment.
15.2    Numbering of AR4:    Every AR4 shall contain a running serial of the Factory starting with 1 every financial year.
15.3    Appointment of Maritime Collectors:    Collectors of Central Excise who are functioning as Maritime Collector of Central Excise shall in the Trade Notice clearly specify the postal Address of the authority designated as Maritime Collector who will sanction the rebate claim and admit proof of exports in case of exports under bond.
15.4    Where the bonds executed by the merchant exporter, both the exporter and the manufacturer shall sign the AR4.
15.5    Collectors may having regard to the nature of goods or trade practice relax any of the conditions regarding marking on the export packages recording the reasons. Necessary trade notice may be issued for this purpose.
Issual of Trade Notice etc.
16.    Collectors may also issue detailed Trade Notice/ s and Standing Order/s in this regard. Copies of all Trade Notices and Standing Orders may be endorsed to Board and DGCCE.
Annexure 1 and 2 are enclosed.

Your faithfully,

Sd/-

(I.P. Lal)

Deputy Secretary to the Government of India 

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Proforma of Running Bond Account to be Maintained by Assistant Collector of Central Excise in respect of Consolidated B-1 (General) Bonds Executed With Them. 1.    Name of the Exporter2.    Address of the Exporter
3.    Consolidated B-1 Bond No. & Amount of Bond.
4.    Whether with Surety of Security.
5.    Name of Surety & his complete address.
6.    Whether financial soundness of the surety has been verified.
 
 

Date	Particulars	Credit Rs.	Debit Rs.	Balance	Remarks	Signature of Asstt. Collr.
	Opening Balance			Cr..........

Note:-

1.    Debit & Credit entries should be entered in separate lines.2.    Opening Balance is the amount of Bond as soon as it is executed and accepted.
3.    Debit entry shall be made on Block Transfer, while issuing certificate of Provisional debit or exports.
4.    Credit entry shall be made on acceptance of proof of export or return of Block Transfer.

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 Annexure 2

Proforma of Demand in respect of Short Shipment of Exports Cleared Without Payment of Central Excise Duty Under Bond From

____________________________
____________________________

To

_____________________________
_____________________________

Subject:    Demand in respect of short shipment of exports cleared without payment of C. Ex. duty under bond.        Kindly refer to AR4 No. .............. under which (qty.) of .............. (description of goods) were taken clearance without payment of Central Excise duty on your execution of Bond No. .......... On scrutiny of the documents submitted by you as proof of export, it is observed that only ........... Qty. of .......... (Description of goods) have been shipped under S.Bo. No./Bill of export No. ............ dated .............. from ........... (Name of port/ airport /ICD/LCS). The quantity short shipped is ................. (qty.) of ............ (description  of goods) on which Central Excise duty payable works out to be Rs............. (as detailed in annexure).
        You are hereby called upon to deposit the difference within 10 days failing which it should be explained to (Name of officer to be given) as to why action shall not be taken for recovery in terms of the Bond executed and other provisions of Central Excise Law.
        (You are further required to state as to why penal actions shall not be taken against you for contravention of C.E. Rules. (Relevant rules to be cited).

Superintendent of Central Excise (Seal)

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Taxability of EPF under the IT Act 1961

The provident fund (PF) is one of the most popular retirement benefit schemes in India. It is also considered as a tax-saving investment for contributions (employer up to 12% of basic salary and employee up to overall deduction of R1 lakh) made towards an approved/recognised PF, the year-on-year accruals and the amount received on maturity from such funds is tax exempt.

In most cases, the accumulated PF balance is withdrawn at the time of retirement, and therefore, not taxable in the hands of the individual. However, in certain cases like change in employment, an individual may even withdraw the PF balance earlier. The point one needs to remember is that the amount received from such PF is not exempt from tax in all cases. Only under the circumstances listed below will the amount withdrawn from PF be eligible for such exemption from tax.

If the employee has rendered continuous service withthe employer for five years or more. Again, if the balance includes amount transferred from the individual’s PF account maintained by previous employer(s), then the years of continuous service rendered to the former employer(s) would be included for the purpose of computing the five-year period.

If the employee has not rendered continuous service of five years, but the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.

Another tax-exempt case is when, on the cessation of the employment, the employee finds another job and the the accumulated PF balance is transferred to his individual PF account maintained by the new employer.

In short, where the PF amount is withdrawn before five years of continuous service, it may be taxable in the hands of the individual as if the fund was not recognised from the start of the contributions. In such a case, payment received by the individual in respect of the employer’s contribution along with the interest accrual thereon is taxed as “salary”. Interest on the employee’s contribution is taxable as “other income”. Payment received in respect of the employee’s own contribution is exempt from tax (to the extent not claimed as a deduction earlier).

I-T provisions provide that the trustees of a recognised PF or any person authorised by the regulations of the fund to make the payment of the accumulated balance to the employee should deduct tax at source while paying the amount. Further, the person liable to deduct tax has to issue the certificate of tax deducted at source (Form 16) within the specified time frame to the employee depicting the details of taxes withheld from the accumulated PF balance and also comply with other salary-related compliance necessities. So the next time you think of withdrawing your PF, you must as an individual also assess whether the same is taxable or exempt.

Contract Labour case law

Employees having completed 240 days of service and engaged through unlicensed/unregistered contractors will be deemed as employees of principal employer when the contract labour system was a sham and the contractor was only a name lender.

Secretary, Haryana State Electricity Board vs. Suresh, 1999 LIC 1323: (1999) 94 FJR 554: (1999) 1 LLJ 1086: 1999 LLR 433 (SC): 1999-1 CLR 959: 1999 (81) FLR 1016.

SEBI Board Meeting

Securities & Exchange Board of India (SEBI) in its Board Meeting held on 2nd April, 2012 had taken long pending important decisions with respect to Ownership and Governance of Market Infrastructure Institutions (MIIs) (i.e. Stock Exchanges, depositories & clearing Corporations etc.) and has further approved the proposal to frame SEBI (Alternative Investment Funds) Regulations, 2012. The key decisions taken at the Board meeting are: The most important decision taken at the meeting is to allow Stock Exchanges & Depositories to be Listed. In this regard SEBI has further provided that the Exchanges would not be allowed to be listed on itself, shall be permitted to be listed within three years of SEBI date of approval and must put appropriate of mechanism to resolve any conflict of interest. Clearing Cooperation are not allowed to be listed. The aforesaid decision of the Board has been contrary to the recommendations made in the Report of Dr. Bimal Kumar Jalan on Review of Ownership and Governance of MIIs, although other recommendations so made in the report have been broadly accepted. It is agreed in the Board Meeting that that the Stock Exchanges and Depository would be required to have a Networth of atleast Rs. 100 Crores and Clearing Corporation to have Networth of Rs. 300 Crores. Further, SEBI has approved for the diversified ownership amongst the MIIs: Stock Exchanges: Single Investor cannot hold more than 5% and except Stock Exchange, Depository, Insurance Company, Banking Company or public financial institution who can hold upto 15% and public category holding should be 51%. Clearing Corporation: At least 51% holding will be held by Stock Exchanges with a condition that no single stock exchange will hold more than 51% in a Clearing Corporation. Further, Stock Exchange holding 51% in a Clearing Corporation cannot hold more than 15% in any other Clearing Corporation. Depositories: minimum 51% holding will be held by sponsors and No other entity will be allowed to hold more than 5% of equity share capital. Further, a single stock exchange will not hold more than 24%. Important provisions with respect to Governance structure are also addressed requiring HODs of Members department as well as Listing and Trading Regulations to report to independent committees of the board of the Exchanges as well as MD/CEO. For governance of Members Department, for long run it is proposed to set up Independent SROs. Also, Conflict Resolution Committee to take care of conflicts of interest to be formulated by SEBI with majority of external and independent members. It is also decided to have separate risk management with independent clearing corporations mandatorily be registered with SEBI for which regulations to be formulated by SEBI. As another step to have better risk management, it is also decided that Stock Exchanges would be mandated to transfer 25% of their profits to Settlement Guarantee Funds of Clearing Corporations and depositories would also transfer 25% of their profits to Investor Protect Fund. In addition to above, decision with respect to providing exit to Non-Operational stock exchanges has also been taken in the same board meeting. Another long pending decision with respect to formulation of Regulations for Alternative Investment funds is also taken by the SEBI board. The board has now approved to frame SEBI (Alternative Investment Funds) Regulations, 2012. The proposed regulations would govern investment funds operating as Private Equity Funds, Real Estate Funds, Hedge Funds etc. and would require registration with SEBI. SEBI (Venture Capital Funds) Regulations, 1996 would be repealed and existing VCF would be governed by these new regulations and shall not be allowed to raise any fresh funds or float any new schemes before being registered under these new regulations. The categories of Alterative Investment Funds would be defined and the Regulations would not be applicable to Mutual Funds, CIS schemes, Family Trusts, ESOP funds, Employee Welfare Trust, Holding Companies, funds managed by ARCs, Securitization Trust and such other pools being directly governed by any other regulations in India. The AIF would not be allowed to accept any investment from an investor of value less than Rs. 1 Crore and shall not have any fund or scheme having more than 1000 investors. A minimum corpus of Rs. 20 Crore would be required and the manager or sponsor to continue to have interest in the AIF of not less than 2.5% of the initial corpus or Rs. 5 crore whichever is less. Units of AIF would be allowed to be listed on exchanges subject to minimum tradable lot of Rs. 1 core but AIF shall not be allowed to raise funds through stock exchange mechanism. Maximum permissible investment limit in one investee company would be 25% of the investible fund and shall not be allowed to invest in associate companies. All AIFs would have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009.

Simplified and Revised Procedure for Reporting of Software Exports

The Reserve Bank of India (RBI), vide A.P. (DIR Series) Circular No. 80 dated 15th February, 2012, has revised the procedure for reporting the software exports to Software Technology Parks of India (STPI). This procedure is applicable to those software exporters whose annual turnover is excess of Rs. 1,000 Crores or who submits at least 600 Softex Forms annually. As per the procedure: A statement in prescribed excel format along with quadruplicate set of Softex Form has to be submitted with STPI within 30 days from the close of month in which the invoice is raised. Details of all invoices have to be provided in excel format. STPI will verify and certify the form. First copy will be forwarded to Regional Office of RBI, second copy to Authorised Dealer, third copy to exporter and last copy will be retained by STPI for its own records. This new procedure is applicable w.e.f. April 01, 2012 in Bangalore, Hyderabad, Chennai, Pune and Mumbai and w.e.f. June 2012 in rest of India. The annexure to the Circular provides the Revised Procedure fo reporting of Software exports to STPI, the Authorised Dealer and online submission of Periodic Export Declaration. Clarification - Purchase of Immovable Property in India – Reporting requirement As per the extant Regulations, a person resident outside India, acquiring a branch, office or other place of business in India excluding a liaison office, may also acquire any immovable property in India, which is necessary for or incidental to carry on such activity, subject to the condition that such person is required to report to Reserve Bank in the declaration Form IPI within ninety days of such acquisition. Such provision seems to convey that every person resident outside India acquiring immovable property in India is required to do such reporting to Reserve Bank. Clarifying the interpretation, Reserve Bank of India issued the Circular No. 79 dated 15th February, 2012 stating that extant regulations do not prescribe any reporting requirements for transactions where such person resident outside India is a Citizen of India or a Person of Indian Origin (PIO) who acquires any immovable property in accordance with the provisions of Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000.

No Long Term Capital Gain Exemption if Asset is Converted to Stock in Trade – ITAT Delhi

Smt. Alka Agarwal Vs. ADIT (ITAT Delhi) - once the assessee has converted a capital asset into stock-in-trade, the capital gain arising on such transaction of transfer shall be deemed to be the income of the previous year in which transfer took effect. That was the ordinary position where the capital gain would have been liable to tax in the AY 2005-06 itself. Now, the provisions of Section 45(2) make an exception to the generality of provisions of Section 45(1). Where it is a case of conversion of stock -in-trade, the profit arising on transfer by way of conversion shall be chargeable to income tax as its income in the previous year in which such stock-in-trade is actually sold or otherwise transferred by him and for the purpose of computation of capital gain, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of consideration received or accruing as a result of such conversion, meaning thereby, the year of assessability of income to tax is postponed to date on which actual sale of this stock-in-trade takes place. There can be no confusion or a debate or two opinions as regards the aforesaid provisions. A cumulative reading of the aforesaid provisions, in our mind, makes it clear that as far as the benefit of Section 10(38) is concerned, the assessee shall not be eligible for this benefit at the first stage of chargeability of capital gains because the deemed sale is the point of conversion into stock-in-trade which had not suffered STT. Further, with regards to the second part of the transaction, the assessee is not eligible for benefit under Section 10(38) because the second part of the transaction is purely a business transaction and provisions of Section 10(38) are applicable only in terms of long term capital assets. In our view, these provisions should be read in this manner and there can be no confusion or two opinions about the scheme of the provisions of conversion of capital asset into stock-in-trade as also the liability towards the capital gains tax on sale of shares held as capital asset which has suffered STT. Nowhere on the date of actual sale, the assessee was holding the impugned securities as a part of capital asset. They have already become the stock-in-trade of the business. So, we do not agree with the assessee as regards the total exemption from capital gains tax in respect of the capital assets which were converted into stock-in-trade as on 1st April, 2005 merely because on the date of sale such stock-in-trade the assessee was required to pay STT on them. We agree with the departmental stand in respect of this issue as we do not find any merit in such contentions of the assessee.

Chartered Accountants (Amendment) Bill, 2010 (as passed by Lok Sabha on 19.12.2011)

The Lok Sabha passed on 19.12.2011 the much awaited Chartered Accountants (Amendment) Bill, 2010, which provides for the following: Firstly, to enable the Members of the Institute of Chartered Accountants of India to form Multi Disciplinary firms i.e Partnership with other recognised professions and offer Multi Professional services in a competitive and commercial manner. It permits to enter into partnership with prescribed profession. Secondly, to extend the benefits of the Limited Liability Partnership Act, 2008 to the Firms of Chartered Accountants under the Chartered Accountants Act, 1949. Though the amendments are brought in the Chartered Accountants Regulations, the existing Companies Act 1956 requires an amendment as follows, till the New Companies Bill is enacted. Section 226 of Companies Act, 1956 Clause 141 of the New Companies Bill 226(1) A person shall not be qualified for appointment as auditor of a company unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949): Provided that a firm whereof all the partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company, in which case any partner so practising may act in the name of the firm. 141(1) A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant: Provided that a firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a Company The Chartered Accountants Act (as passed in the Parliament) permits Partnership with SPECIFIED PROFESSIONS. Specified Professions are already notified by the Council which includes (a) Company Secretary; (b) Cost Accountant; (c) Advocate; (d) Engineer; (e) Architect; (f) Actuary; and (g) Members of Professional Bodies outside India relating to accountancy and recognized council. If the partnership as per above is entered, the firm cannot be appointed as Auditor for a Company as the existing act requires all the partners in the Firm to be a practicing CAs. Whereas in the New Companies Bill, the corresponding provision is carefully worded as a firm whereof majority of partners practicing in India. Since, the Companies Bill did not find its way in the present winter session (as per the press announcements), the existing Companies Act will see the amendments soon.

Notifications prescribing Cost Accounting Records Rules, 2011 for different industries

MCA has vide Notifications G.S.R. 869(E), G.S.R.872(E), G.S.R.874(E), G.S.R. 870(E), G.S.R.873(E) and G.S.R. 871(E) dated 7.12.2011, notified Cost Accounting Records Rules, 2011 for 6 different industries. The Rules require the stated industries to keep cost records and books of account, and the books of accounts so maintained to contain specified particulars mentioned in the Schedule annexed to the respective rules. The Rules also prescribe the form of Compliance Report and the form for filing the Report (duly authenticated and signed by a cost accountant) and other documents with the Central Government in electronic mode.

The notified Rules are mentioned as follows:

The Cost Accounting Records(Telecommunication Industry) Rules,2011 vide G.S.R. 869(E) has superseded Cost Accounting Records (Telecommunications) Rules, 2002
The Cost Accounting Records( Sugar Industry) Rules,2011 vide G.S.R. 872(E) has superseded Cost Accounting Records (Sugar) amended Rules, 1997 and Cost Accounting Records (Industrial Alcohol) Rules, 1997
The Cost Accounting Records( Pharmaceutical Industry) Rules,2011 vide G.S.R. 874(E) has superseded Cost Accounting Records (Bulk Drugs) Rules, 1974 and Cost Accounting Records (Formulations) Rules, 1988
The Cost Accounting Records( Petroleum Industry) Rules,2011 vide G.S.R. 870(E) has superseded Cost Accounting Records (Petroleum Industry) Rules, 2002
The Cost Accounting Records( Fertilizer Industry) Rules,2011 vide G.S.R. 873(E) has superseded Cost Accounting Records (Fertilizers) Rules, 1993
The Cost Accounting Records( Electricity Industry) Rules,2011 vide G.S.R. 871(E) has superseded Cost Accounting Records (Electricity Industry) Rules, 2001

Circular No. 134 /3 / 2011 – ST

F.No.354/42/2011-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise& Customs
Tax Research Unit
North Block, New Delhi
8 th April, 2011
To
Chief Commissioners of Central Excise and Service Tax (All),
Director General (Service Tax),
Director General (Central Excise Intelligence),
Director General (Audit),
Commissioners of Service Tax (All),
Commissioners of Central Excise and Service Tax (All).

Madam/Sir,
Subject: - Education Cess and Secondary and Higher Education Cess – reg.

Representations have been received from the field formations, seeking clarification regarding the applicability of service tax exemption to Education Cess (refers to both Education Cess leviable under Finance (No.2) Act, 2004 and Secondary and Higher Education Cess leviable under Finance Act, 2007), under notifications where ‘whole of service tax' stands exempted. Apparently the doubt arises in the context of Tribunal’s Order in the matter of M/s. Balasore Alloys Ltd. Vs CCE, Customs and Service Tax, BBSR-I (2010-TIOL-1659-CESTAT-KOL).
2. The issue has been examined. Though Tribunal’s Order referred above is in favor of revenue, it is inconsistent with the policy intention of the Government to exempt education cess in addition to service tax, where ‘whole of service tax’ stands exempted. According to section 95(1) of Finance (No.2) Act, 2004 and section 140(1) of Finance Act, 2007, Education Cess and Secondary and Higher Education Cess are leviable and collected as service tax, and when whole of service tax is exempt, the same applies to education cess as well. Since Education Cess is levied and collected as percentage of service tax, when and wherever service tax is NIL by virtue of exemption, Education Cess would also be NIL.
3. This being the principle, field formations are directed not to initiate proceedings to recover the education cess, where ‘whole of service tax’ stands exempted under the notification. Extending the same principle, where education cess has been refunded to exporters along with service tax, by virtue of exemption notifications where ‘whole of service tax’ is exempt, the same need not be recovered.
5. Field formations may be instructed accordingly.
6. Please acknowledge the receipt of this circular. Hindi version to follow.
(J. M. Kennedy)
Director, TRU
Tel: 011-23092634

Payment of Cheques/Drafts/Pay Orders/Banker’s Cheques

Date: Nov 04, 2011

RBI/2011-12/251
DBOD.AML BC.No.47/14.01.001/2011-12
November 4, 2011
The Chairmen/Chief Executive Officers
All Scheduled Commercial Banks (excluding RRBs)/Local Area Banks
Dear Sir,
Payment of Cheques/Drafts/Pay Orders/Banker’s Cheques
In India, it has been the usual practice among bankers to make payment of only such cheques and drafts as are presented for payment within a period of six months from the date of the instrument.
2. It has been brought to the notice of Reserve Bank by Government of India that some persons are taking undue advantage of the said practice of banks of making payment of cheques/drafts/pay orders/banker’s cheques presented within a period of six months from the date of the instrument as these instruments are being circulated in the market like cash for six months. Reserve Bank is satisfied that in public interest and in the interest of banking policy it is necessary to reduce the period within which cheques/drafts/pay orders/banker’s cheques are presented for payment from six months to three months from the date of such instrument. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, Reserve Bank hereby directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument.
3. Banks should ensure strict compliance of these directions and notify the holders of such instruments of the change in practice by printing or stamping on the cheque leaves, drafts, pay orders and banker’s cheques issued on or after April 1, 2012, by issuing suitable instruction for presentment within the period of three months from the date of the instrument.
4. Please acknowledge receipt
Yours faithfully,
(Deepak Singhal)
Chief General Manager in-Charge

Notification No.12/2006-Service Tax

G.S.R. (E).– In exercise of the powers conferred by clause (aa) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:-

1. Short title and commencement.– (1) These rules may be called the Service Tax (Determination of Value) Rules, 2006.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions.–In these rules, unless the context otherwise requires,–
(a) “Act” means the Finance Act, 1994 (32 of 1994);
(b) “section” means the section of the Act;
(c) “value” shall have the meaning assigned to it in section 67;
(d) words and expressions used in these rules and not defined but defined in the Act shall have the meaning respectively assigned to them in the Act.

3. Manner of determination of value.– Subject to the provisions of section 67, the value of taxable service, where the consideration received is not wholly or partly consisting of money, shall be determined by the service provider in the following manner:–
(a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

4. Rejection of value.– (1) Nothing contained in rule 3 shall be construed as restricting or calling into question the power of the Central Excise Officer to satisfy himself as to the accuracy of any information furnished or document presented for valuation.
(2) Where the Central Excise Officer is satisfied that the value so determined by the service provider is not in accordance with the provisions of the Act or these rules, he shall issue a notice to such service provider to show cause why the value of such taxable service for the purpose of charging service tax should not be fixed at the amount specified in the notice.

(3) The Central Excise Officer shall, after providing reasonable opportunity of being heard, determine the value of such taxable service for the purpose of charging service tax in accordance with the provisions of the Act and these rules.

5. Inclusion in or exclusion from value of certain expenditure or costs.– (1) Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.
(2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.

Explanation1.–For the purposes of sub- rule (2), “pure agent” means a person who–
(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service;
(b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;
(c) does not use such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services.

Explanation2.– For the removal of doubts it is clarified that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice.
Illustration 1.– X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for Television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his services as an estate agent

Illustration 2.– In the course of providing a taxable service, a service provider incurs costs such as traveling expenses, postage, telephone, etc., and may indicate these items separately on the invoice issued to the recipient of service. In such a case, the service provider is not acting as an agent of the recipient of service but procures such inputs or input service on his own account for providing the taxable service. Such expenses do not become reimbursable expenditure merely because they are indicated separately in the invoice issued by the service provider to the recipient of service.

Illustration 3.– A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B.

Illustration 4.– Company X provides a taxable service of rent-a-cab by providing chauffeur-driven cars for overseas visitors. The chauffeur is given a lump sum amount to cover his food and overnight accommodation and any other incidental expenses such as parking fees by the Company X during the tour. At the end of the tour, the chauffeur returns the balance of the amount with a statement of his expenses and the relevant bills. Company X charges these amounts from the recipients of service. The cost incurred by the chauffeur and billed to the recipient of service constitutes part of gross amount charged for the provision of services by the company X.

6. Cases in which the commission, costs, etc., will be included or excluded.– (1) Subject to the provisions of section 67, the value of the taxable services shall include‚–
(i) the commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker;
(ii) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit;
(iii) the amount of premium charged by the insurer from the policy holder;
(iv) the commission received by the air travel agent from the airline;
(v) the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer;
(vi) the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer;
(vii) the commission or any amount received by the rail travel agent from the Railways or the customer;
(viii) the remuneration or commission, by whatever name called, paid to such agent by the client engaging such agent for the services provided by a clearing and forwarding agent to a client rendering services of clearing and forwarding operations in any manner; and
(ix) the commission, fee or any other sum, by whatever name called, paid to such agent by the insurer appointing such agent in relation to insurance auxiliary services provided by an insurance agent.
(2) Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include–
(i) initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit;
(ii) the airfare collected by air travel agent in respect of service provided by him;
(iii) the rail fare collected by air travel agent in respect of service provided by him;and
(iv) interest on loans.

7. Actual consideration to be the value of taxable service provided from outside India.– (1) The value of taxable service received under the provisions of section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided.
(2) Notwithstanding anything contained in sub-rule (1), the value of taxable services specified in clause (ii) of rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as are partly performed in India, shall be the total consideration paid by the recipient for such services including the value of service partly performed outside India.

F. No. B1/4/2006-TRU