The Hindu Business Line : Hey, what's the taxman doing with the measuring tape?

IF IT'S Mumbai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and if the order on hand is of M. Moheb Ali, I'd suggest you stop to read it. Take the case of Ceenik Exports Ltd, which the Tribunal decided on June 1.

"The appellant is a manufacturer exporter and is a recognised Export House," begins the text of CESTAT's ruling. It seems Ceenik filed seven shipping bills under claim for drawback.

For starters, `drawback' isn't a disadvantage, problem, downside, negative aspect, weakness, shortcoming, hitch or snag, as Word would suffuse with synonyms, but refund of Customs and Excise duty chargeable on imported and indigenous materials used in the manufacture of exported goods, given as an incentive to exporters.

Not something unique to India, as you can learn from www.fedex.com that assures, "By recovering 99 per cent of your import duties when you export, you can manufacture with foreign merchandise in the US virtually duty-free."

Also, that "if you've never filed for drawback, you can retroactively claim duty on exports shipped over the past three years. This provision allows you to qualify for a substantial refund."

Fine, let me resume with the Ceenik story. The company's claim for refund was for export of readymade garments, that is, `ladies blouses' made of cotton and rayon powerloom fabrics. The FOB value declared for full-sleeve blouse was $8 per piece for the rayon variety and $7.50 for the cotton ones.

Blouse, if you were to trace the origin of the word in the Online Etymology Dictionary, is from French for `workman's or peasant's smock'. "Origin unknown. Perhaps akin to Prov. (lano) blouso `short (wool)'. Another suggestion is that it is from M.L. pelusia, from Pelusium, a city in Upper Egypt, supposedly a clothing manufacturing centre in the Middle Ages," postulates www.etymonline.com.

In Hindi, it's choli, and Encarta defines the word after cholesterol and cholestyramine, but before cholic acid, as `a short fitted top with short sleeves, worn underneath a sari'.

For those interested in knowing more, there's Payal Singhal's write-up titled Choli Ke Peeche...on www.shaadi.com, where she cautions that a choli can make or mar even a designer sari.

"A choli is such an important part of a woman's attire that a well designed and fitted choli can make all the difference. The choli has undergone a sea of change in the past few decades. From capped sleeves, to full-length. From long-backs to halters. A choli gets reinvented with every change in season," she would add.

A different type of reinventing often happens in the Department to give very imaginative reasons for disallowing an assessee's claim, especially when it means giving away a refund. Even if it meant that the taxman has to explore depths and heights that common people may dread to tread.

Thus, after studying Ceenik's claim, the Department said that the export consignments were overvalued. That implies, a higher refund too, something that the taxman was not inclined to give. Only, the Department's reasoning was innovative: The Commissioner said that only 80 cm to 1.25 mt of fabric is needed for making a ladies blouse. He accordingly recalculated the value and fixed $3 per piece and allowed drawback accordingly. An aggrieved Ceenik rushed, therefore, to the tribunal, seeking remedy.

At the CESTAT, the company argued that the Commissioner had not taken in to consideration "the difference between cotton and rayon fabrics while arriving at the value of the export goods".

Also disputed was the taxman's ignoring other elements that any accountant would have listed in any cost sheet — such as "stitching charges, embroidery charges, overheads, packing material charges and so on" — when calculating the FOB value of the garments in question. If one were to take into account all these, it would be more, and not $3 per piece, as the Commissioner had pegged the value at, said Ceenik.

I'm sure the Department would have come up with some stout protest on why the cost should have been leaner than what the assessee asked for. But Moheb Ali who heard the rival contentions of the case along with Jyoti Balasundaram, the Vice-President, wondered, "It is not clear from the order as to which type of blouse, the Commissioner has in mind. He feels that ladies blouse does not require more than 80 cm to 1.25 mt of fabric."

He added: "The presumption of the Commissioner that ladies blouse needs a quantity of only 80 cm to 1.25 mt of fabric is based on his own notions and not based on any evidence. Surely, one cannot say with any amount of certainty that a blouse needs only 80 cm to 1.25 mt without first ascertaining the type of blouse under export."

Finally, Moheb Ali opined: "A foreigner need not necessarily be wearing the same type as an Indian does. The Commissioner's order is based on his own assumptions and, therefore, cannot be justified."

Tailpiece

"Are you sure that FBT isn't the name of a new bus transport from the Finance Ministry?"

"If it's any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, the same shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate... "

Detaxification@TheHindu.co.in

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