Module 1 - Central Excise & CENVAT Credit

Transcription

1 Module 1 - Central Excise & CENVAT Credit Preface to Fourth Edition I-5 Acknowledgement I-7 How to study and revise this book I-9 Index to coverage of select cases of ICAI in this book [Modules 1, 2 and 3] I-11 DIVISION ONE CHARGE, CLASSIFICATION AND VALUATION 1 BASIC CONCEPTS UNDER CENTRAL EXCISE 1.1 Taxation system - Direct and Indirect taxes Constitutional background Sources of central excise laws Extent and applicability of central excise laws Charge of excise duty - Section 3 of CEA, Levy v. Collection - Concept & difference Factory [Section 2(e)] Other definitions - Not relevant under the present law Basis for levy and measurement of excise duty Exceptions to levy Types of excise duties Goods - Meaning, movability and marketability Excisable goods - Meaning & related concepts 14 I-15 I-15

2 1.14 Manufacture, production & deemed manufacture Manufacturer - Concept & scope Processing, packing/labelling/branding & assembly - Whether amounts to manufacture? Change in tariff heading - Not relevant to identify whether a process amounts to manufacture Waste or scrap - Whether dutiable? Taxable event, manner of collection & rate of duty and tariff valuation applicable Dutiability of pre-budget stock, or, levy of duty in case of change in rate of duty between date of manufacture & date of removal Dutiability of intermediate products & captive consumption Dutiability of site related activities & immovable property, or, excisability of plant and machinery assembled at site [CBEC Order No. 58/1/2002-CX, dated ] 43 2 TARIFF AND CLASSIFICATION 2.1 Central Excise Tariff - Introduction and linkage with Central Excise Act Classification of goods - Meaning, need and guidance Power of Central Government to increase rate of duty & amend CETA Purpose of rules for interpretation of tariff General rule - Terms of headings, etc. to determine classification, not title [Rule 1] Classification of incomplete/unfinished goods and of mixtures [Rule 2] Classification of goods prima facie classifiable under two or more headings [Rule 3] Akin rule [Rule 4] Classification of packing materials/packing cases [Rule 5] Notes to Tariff Schedule Generally accepted principles of classification of goods, or, manner of classification of goods Change in classification by assessee or department - Extent and scope HSN - Meaning, significance and legal status Trade parlance or commercial parlance theory/test Classification of parts and accessories 71 3 DUTY BASED ON ANNUAL CAPACITY, COMPOUNDED LEVY SCHEME, TARIFF VALUE & MRP-BASED EXCISE DUTY 3.1 Power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods [Section 3A] Special procedure for payment of duty, or, compounded levy scheme [Rule 15 of the Central Excise Rules, 2002] Duty based on ACP under section 3A & compounded levy scheme - Difference Tariff value - Concept, fixation and valuation [Section 3(2) & 3(3)] 84 I-16

3 3.5 Valuation of excisable goods based on retail sale price, or, RSP - Based excise duty, or, MRP-based excise duty [Section 4A] 85 4 TRANSACTION VALUE BASED DUTY & VALUATION AUDIT 4.1 Transaction value - Applicability and concept [Section 4] Transaction value - Meaning of [Section 4(3)(d)] Assessee [Section 4(3)(a)] Time and place of removal - Concept and significance Related person - Meaning and concept [Section 4(3)(b)] Price-cum-duty - Concept of [Explanation to section 4(1)] Relationship between manufacture, classification & valuation Inclusions in transaction value Exclusions from transaction value Central Excise Valuation Rules, Summarised introduction Valuation if price of goods is not known at time of removal [Rule 4 of Central Excise Valuation Rules, 2000] Valuation if goods are sold for delivery at a place other than place of removal [Rule 5 of Central Excise Valuation Rules, 2000] Valuation when price is not sole consideration for sale [Rule 6 of Central Excise Valuation Rules, 2000] Valuation if excisable goods are not sold for delivery at the time and place of removal, or, valuation of depot transfers [Rule 7 of Central Excise Valuation Rules, 2000] Valuation in case of captive consumption [Rule 8 of Central Excise Valuation Rules, 2000] Valuation in case of sale to, or through, related persons [Rule 9 and rule 10 of Central Excise Valuation Rules, 2000] Valuation of goods manufactured on job-work basis [Rule 10A of Central Excise Valuation Rules, 2000] Special audit in certain cases where value has not been correctly determined, or, valuation audit [Section 14A of CEA, 1944] 148 DIVISION TWO CENVAT CREDIT 5 CENVAT CREDIT - BASICS AND DEFINITIONS 5.1 Value Added Tax (VAT) & Central Value Added Tax (CENVAT) - Concept, need and differences Basics of Cenvat Credit Scheme Capital goods - Definition [Rule 2(a) of Cenvat Credit Rules, 2004] Input - Definition [Rule 2(k) of Cenvat Credit Rules, 2004] 161 I-17

4 5.5 Input service - Definition [Rule 2(l) of Cenvat Credit Rules, 2004] Final product and output service - Definition of [Rule 2(h) and 2(p) of Cenvat Credit Rules, 2004] CENVAT CREDIT - AVAILMENT AND UTILIZATION 6.1 Cenvat credit - Availment and utilization - Difference between Duties/taxes of which cenvat credit may be taken [Rule 3(1) of Cenvat Credit Rules, 2004] Restrictions on availment of credit, or, credit in case of inputs/capital goods manufactured by 100% EOU/EHTP unit/stp unit and cleared to DTA [Rule 3(7)(a) of the Cenvat Credit Rules, 2004] Conditional exemption subject to non-availability of credit - Credit not to be allowed [Explanation to rule 3] Conditions for allowing cenvat credit - Timing and manner of availment of credit on input, input service and capital goods [Rule 4 of the Cenvat Credit Rules, 2004] Utilization of Cenvat Credit [Rule 3(4) of the Cenvat Credit Rules, 2004] Duty/tax-wise restrictions on utilization of credit [Rule 3(4) and rule 3(7)(b) of the Cenvat Credit Rules, 2004] Special provisions in respect of goods manufactured by units availing area-based exemptions [3rd proviso to rule 3(4) and rule 12] Deemed cenvat credit, or, credit availment at deemed rates - Power of Central Government [Rule 13 of Cenvat Credit Rules, 2004] Removal of cenvated input/capital goods by manufacturer or service provider - Quantum of reversal required [Rule 3(5), 3(5A) & 3(6)] Write-off of input/capital goods - Credit reversal [Rule 3(5B)] Reversal of credit of input used in final product on which duty is remitted under rule 21 of CER, 2002 [Rule 3(5C)] Reversal of credit under rule 3(5B) and rule 3(5C) [Circular No. 907/27/2009-CX., dated & Circular No. 930/20/2010-CX, dated ] Job work - Meaning and scheme of cenvat credit [Rules 2(n), 3(1), 4(5) and 4(6) of the Cenvat Credit Rules, 2004] Documents on strength of which an assessee is permitted to avail cenvat credit [Rule 9(1) and rule 9(2)] Accounting for availment and utilization of credit CENVAT CREDIT - EXEMPTED GOODS & SERVICES 7.1 Exempted goods and exempted services [Rule 2(d) and 2(e) of Cenvat Credit Rules, 2004] General bar on availment of credit in respect of exempted goods and services - Obligation of a manufacturer or producer of final products and a provider of output service [Rule 6(1), 6(2) & 6(4)] Option not to maintain separate accounts for inputs/input services - Percentage payment or proportionate reversal [Rule 6(3), 6(3B) and 6(3D) of the Cenvat Credit Rules, 2004] 217 I-18

5 7.4 Manner of determination of pro rata reversal [Rule 6(3A)] Goods/services for which reversal under rule 6(1) to 6(4) not required [Rule 6(6), 6(7) and 6(8) of the Cenvat Credit Rules, 2004] Exempted goods/services becoming taxable/dutiable or vice versa - Treatment under CENVAT [Rule 3(2), 3(3) and rule 11] Non-reversal of credit even if process not manufacture - Power of Central Government to allow non-reversal [Section 5B of CEA] CENVAT CREDIT - PROCEDURES 8.1 Refund of cenvat credit in case of exporters exporting goods or services without payment of duty/tax [Rule 5] Refund of cenvat credit in certain other cases [Rules 5A and 5B] Transfer of cenvat credit on shifting/transfer of factory of manufacturer or business of service provider [Rule 10] Transfer of cenvat credit of special additional duty of customs (SAD or SPL. CVD) leviable under section 3(5) of the Customs Tariff Act [Rule 10A] Storage of input outside the factory of manufacturer [Rule 8] Cenvat records to be maintained, and, returns to be submitted by manufacturer or service provider [Rule 9(5), 9(6), 9(7), 9(9) and 9(11)] Information relating to principal inputs [Rule 9A] Dealers under central excise - First stage and second stage dealers - Position under Cenvat Credit Rules Input Service Distributor (ISD) - Provisions Distribution of credit on inputs/capital goods by the office or any other premises of output service provider [Rule 7A] Recovery of cenvat credit wrongly taken or erroneously refunded [Rule 14] Confiscation and penalty [Rules 15 and 15A] Special audit in cases where credit of duty availed or utilised is not within the normal limits, etc. or cenvat audit [Section 14AA of CEA] Differences between valuation audit and cenvat audit Large taxpayers - Concept [Rule 2(ea) and rule 12BB of Central Excise Rules, 2002 & Rule 12A of Cenvat Credit Rules, 2004 read with Notfn. No. 20/2006-CE(NT)] Large taxpayers - Inter-unit transfer of intermediate goods or inputs or capital goods for further manufacture [Rule 12A of Cenvat Credit Rules, 2004 & Rule 12BB of Central Excise Rules, 2002] Large taxpayers - Other procedural provisions Power to impose restrictions in cases of misuse of cenvat credit or evasion of duty [Rule 12AAA of Cenvat Credit Rules, 2004 and Rule 12CCC of Central Excise Rules, 2002] Credit of duty on goods brought to the factory [Rule 16 of the Central Excise Rules, 2002] 256 I-19

6 DIVISION THREE SSI, PROCEDURES AND EXPORTS 9 SSI EXEMPTION 9.1 Small scale industry exemption - Concept of [Not. No. 8/2003-CE] Option to avail or not avail this exemption Small scale industry - Eligibility limit ` 400 lakhs [Not. No. 8/2003-CE] Extent of exemption and exemption limit of ` 150 lakhs Availment or utilization of cenvat credit - Provisions Branded goods - Eligibility for exemption [Para 4 of notification] Dummy units created to avail of SSI-exemption - Lifting of veil and clubbing of clearances Procedural concessions enjoyed by SSIs GENERAL PROCEDURES UNDER CENTRAL EXCISE 10.1 Assessment, assessee, physical control & self-assessment Provisional assessment [Rule 7] Provisional assessment - Not to be done by department itself Storage of non-duty paid goods outside factory [Rule 4(4)] Manner of payment - Due date, mode, etc. [Rule 8] Manner of payment - Consequences of delayed payment [Rule 8] Payment through personal ledger account/account current Persons required to take & persons exempted from registration [Section 6 read with rule 9 & Notification No. 36/2001-CE (NT) and Central Excise Manual] Registration - Procedure of [Notification No. 35/2001-CE (NT) and Central Excise Manual] Period of validity of registration certificate Penal provisions for not taking registration [Section 9 and rule 25] Remission of duty [Section 5 read with rule 21] Remission - Certain instances where available/not available Removal of inputs/intermediate goods/final products outside factory for carrying out certain processes [Rules 16A to 16C] Daily records, or, daily stock account [Rule 10] Goods to be removed on invoice [Rule 11] Filing of return [Rule 12] Removal of goods by a 100% EOU for Domestic Tariff Area [Rule 17] Scrutiny of assessment [Rule 12(3) and 12(4) and rule 17(4) and 17(5)] Electronic maintenance of records and filing of returns, etc. [Circular No. 499/65/99-CX, dated ] 317 I-20

7 10.21 Access to a registered premises, or, submission of records [Rule 22] Confiscation and penalty [Rule 25] Penalty for certain offences or personal penalty [Rule 26] General penalty [Rule 27] Confiscation - Meaning and related aspects Central Excise Officer - Meaning, hierarchy and powers Adjudicating authority and adjudication Monetary limits of adjudication [Section 33 and section 11A] Payment of duty under protest Excise Audit 2000 (EA 2000) [Central Excise Manual] Power to summon persons to give evidence and produce documents in inquiries under the Act [Section 14, applicable to service tax also; corresponding provision section 108 of the Customs Act, 1962] Power of search and seizure [Section 12F] Search of conveyance and detention & seizure [Rules 23 and 24] Return of records or documents not relied upon [Rule 24A] Arrests and related provisions [Sections 13, 18, 19 and 20] Vexatious search, seizure, etc., by central excise officer [Section 22] Power of Central Government to make rules [Section 37] Bonds - Meaning, types & other aspects [Central Excise Manual] Warehousing provisions [Rule 20] Goods liable to duty at concessional rate, subject to end-use for specified purposes, or, end-use based exemptions Consequences if subject goods not used for intended purpose, or, recovery of duty in certain cases [Rule 6] EXPORT INCENTIVES AND PROCEDURES 11.1 Rebate of duty [Rule 18] Export without payment of duty [Rule 19] Rebate under rule 18 of CER, 2002 v. Export without payment of duty with refund of input credit under rule 5 of CCR, Rebate of duty paid on goods exported - Conditions/limitations Rebate of duty paid on goods exported - Procedures Rebate of duty paid on goods exported - Manner of claiming rebate Input-stage rebate of materials used in goods exported - Conditions and procedure Export without payment of duty to country other than Bhutan - Conditions Export without payment of duty to country other than Bhutan - Procedure for removal Export without payment of duty to country other than Bhutan - Cancellation of export documents, or, diversion for home consumption [Not. No. 42/2001 and Central Excise Manual] 354 I-21

8 11.11 Export without payment of duty to country other than Bhutan - Procedure in respect of exported goods subsequently re-imported and returned to the factory Re-entry of the goods, cleared for export under bond but not actually exported, in the factory of manufacture [CE manual] Export under bond to Bhutan and, in certain cases, to Nepal - Conditions and safeguards Export under bond to Bhutan and, in certain cases, to Nepal - Procedure Procurement of inputs without payment of duty for use in goods exported under bond - Conditions and safeguards Export warehousing, or, removal of goods from factory to warehouse for export therefrom - Conditions [Rule 20(1) and Notification No. 46/2001- C.E. (N.T.), dated ] Export warehousing - Diversion of goods for home consumption [Circular No. 581/18/2001-CX, dated ] Export warehousing - Waiver of physical warehousing in case of exigency [Circular No. 581/18/2001-CX, dated ] 365 I-22

9 Module 2- Customs Laws & Foreign Trade Policy Preface to Fourth Edition I-5 Acknowledgement I-7 How to study and revise this book I-9 Index to coverage of select cases of ICAI in this book [Modules 1, 2 and 3] I-11 DIVISION ONE CHARGE, VALUATION AND CLASSIFICATION 1 CUSTOMS : BASICS AND CHARGE OF DUTY 1.1 Concept of customs duty - Source of law Rules and regulations Charge of customs duty or dutiable goods [Sec. 12 of Customs Act, 1962] Some concepts relating to charge [Section 2] Date for determination of rate of duty and tariff valuation [Sections 15 and 16 of the Customs Act, 1962] Determination of duty where goods consist of articles liable to different rates of duty [Section 19] Re-importation of goods [Section 20] Goods derelict, wreck, etc. - Liable to duty [Section 21] Remission of duty on pilfered goods [Section 13] Remission of duty on lost, destroyed or abandoned goods [Sec. 23] Abatement of duty on damaged or deteriorated goods [Section 22] 13 I-15

10 1.12 Denaturing or mutilation of imported goods [Section 24] Refund of export duty in certain cases [Section 26] Refund of import duty in certain cases [Section 26A] Assessment - Meaning of [Section 2(2)] Self-assessment [Section 17(1) to 17(3)] Reassessment [Section 17(4) and 17(5)] Assessment - Audit of - On-site post clearance audit [Section 17(6)] Provisional assessment - Circumstances when it is ordered [Section 18(1)] Final assessment or reassessment of provisional assessment - Payment/refund of differential sum with interest [Section 18(2) to 18(5)] Certain definitions as regards goods [Section 2] Powers to specify and approve certain places/areas [Sections 7, 8 and 10] Inland container depots and container freight stations Powers to appoint/license warehouses, etc. [Sections 9, 57 and 58] Power to prohibit importation or exportation of goods [Sec. 11] Detection of illegally imported goods and prevention of the disposal thereof [Chapter IV-A : Sections 11A to 11G] Prevention or detection of illegal export of goods [Chapter IV-B : Sections 11H to 11M] 28 2 CUSTOMS : VALUATION OF GOODS 2.1 Valuation of imported/export goods - Transaction value [Section 14(1) of Customs Act, 1962] Related person [Rule 2(2) of the Customs Import/Export Valuation Rules, 2007] Tariff value [Section 14(2)] Introduction to Customs Imported Goods Valuation Rules, Transaction value Inclusions in transaction value [Rule 10(1)] Value under all rules to include : Cost of transport, insurance & handling, etc. [Rule 10(2)] Inclusions/exclusions of certain items Additions under rule 10 - Scope of Transaction value - Conditions for acceptance [Rule 3(2)] Transaction value acceptable even if buyer & seller are related persons [Rule 3(3)] Valuation if transaction value not accepted - Order of application of other rules [Rule 3(4) and rule 6] Transaction value of identical goods [Rule 4] Transaction value of similar goods [Rule 5] Identical goods and similar goods - Concept and difference Deductive value [Rule 7] Computed value [Rule 8] 55 I-16

11 2.18 Residual method [Rule 9] Divergence between accounting principles and customs principles as to valuation of imported goods Declaration by the importer [Rule 11] Rejection of declared value [Rule 12] Transaction value [Rule 2(b)] Determination of the method of valuation [Rule 3] Determination of export value by comparison [Rule 4] Computed value method [Rule 5] Residual method [Rule 6] Rejection of declared value [Rule 8] 62 3 CUSTOMS : CLASSIFICATION, TARIFF & VARIOUS DUTIES 3.1 Classification of goods Five column-headings of schedule to the customs tariff Levy of duty where standard rate and preferential rate are specified [Section 4 of the Customs Tariff Act, 1975] Levy of a lower rate of duty under a trade agreement [Section 5] Emergency power of Central Government to increase or levy export duties [Section 8] Emergency power of Central Government to increase import duties [Section 8A] Power of Central Government to amend First Schedule [Section 11A] Project imports - Concept, eligible projects & investment criteria [Project Imports Regulations, 1986] List of duties levied on imports Additional duty of customs u/s 3 - Manner of computation Levy of additional duty equal to excise duty [CVD] [Section 3(1) & 3(2)] Levy of additional duty equal to sales tax, local taxes and other charges [Special CVD] [Section 3(5) and 3(6)] Additional duty u/s 3 - Common provisions Goods manufactured by 100% EOU and cleared to DTA Manner of levy of duty on packaged/canned software Protective duties - Levy, duration and alteration [Sections 6 and 7] Safeguard duties [Sections 8B and 8C] Countervailing duty on subsidized articles [Section 9] Anti-dumping duty on dumped articles [Section 9A] Anti-dumping duty & anti-subsidy duty - Common provisions [Sections 9 and 9A of the Customs Tariff Act, 1975] Anti-dumping duty & anti-subsidy duty - Not to be levied in certain cases [Section 9B] Safeguard duty v. Anti-dumping duty 88 I-17

12 3.23 Refund of anti-dumping duty in certain cases [Section 9AA] Appeal to Tribunal against order determining or reviewing anti-dumping or anti-subsidy duty [Section 9C] 89 DIVISION TWO IMPORT AND EXPORT PROCEDURES AND POWERS 4 IMPORT, EXPORT & WAREHOUSING PROCEDURES 4.1 Division of import procedures Person-in-charge [Section 2(31)] Arrival of vessels and aircrafts in India [Section 29] Delivery of import manifest or import report [Section 30] Provisions relating to unloading, etc Certain provisions not to apply to baggage and postal articles [Section 44] Restrictions on custody and removal of imported goods [Section 45] Entry of goods on importation or provisions relating to bill of entry [Section 46] Procedure of bill of entry under e-filing [Bill of Entry (Electronic Declaration) Regulations, 2011] Clearance of goods for home consumption [Section 47] Procedure for disposal of goods not cleared within a specified period [Sections 48 and 49] Division of export procedures Entry of goods for exportation, or, filing of shipping bill or bill of export [Section 50] Clearance of goods for exportation [Section 51] Provisions relating to e-filing, etc. of shipping bill or bill of export [Shipping Bill (Electronic Declaration) Regulations, 2011] Export goods not to be loaded on vessel until entry-outwards granted [Section 39] Export goods not to be loaded unless duly passed by proper officer [Section 40] Delivery of export manifest or export report [Section 41] No conveyance to leave without written order - Applicable to both imported and export goods [Section 42] Exemption of certain classes of conveyances from certain provisions of this chapter [Section 43] Short-export [notice of Short-Export Rules, 1963] Chapter not to apply to baggage, postal articles and stores [Section 52] Transit of certain goods without payment of duty [Section 53] Transhipment of certain goods without payment of duty [Section 54] Transit v. Transhipment - Conditions for exemption Liability of duty on goods transited under section 53 or transhipped under section 54 [Section 55] 110 I-18

13 4.27 Transport of certain classes of goods subject to prescribed conditions [Section 56] Overview of provisions relating to warehousing Warehousing bond [Section 59] Permission for deposit of goods in a warehouse [Section 60] Period for which goods may remain warehoused [Section 61] Control over warehoused goods [Section 62] Payment of rent and warehouse charges [Section 63] Owner s right to deal with warehoused goods [Section 64] Manufacture and other operations in relation to goods in a warehouse [Section 65] Power to exempt imported materials used in the manufacture of goods in warehouse [Section 66] Removal of goods from one warehouse to another [Section 67] Clearance of warehoused goods for home consumption [Section 68] Clearance of warehoused goods for exportation [Section 69] Allowance in case of volatile goods [Section 70] Goods not to be taken out of warehouse except as provided by this Act [Section 71] Goods improperly removed from warehouse, etc. [Section 72] Relevant dates for warehoused goods Cancellation and return of warehousing bond [Section 73] CUSTOMS : DRAWBACK, BAGGAGE, IMPORT/EXPORT BY POST, STORES & COASTAL GOODS 5.1 Concept of drawback Interest on drawback [Section 75A] Prohibition and regulation of drawback in certain cases [Section 76] Re-export of duty-paid imported goods - Conditions for allowing drawback [Section 74] Re-export of duty-paid imported goods - Quantum of drawback Procedure for claiming drawback on goods exported by post [Rule 3 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] Statements/declarations to be made on exports other than by post [Rule 4 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] Manner and time of claiming drawback on goods exported other than by post [Rule 5 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] Payment of drawback and interest [Rule 6 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] Repayment of erroneous or excess payment of drawback and interest [Rule 7 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] 131 I-19

14 5.11 Power to relax [Rule 7A of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995] Drawback on imported materials used in the manufacture of goods which are exported [Section 75] Drawback - Meaning of [Rule 2(a) of CCEST Drawback Rules, 1995] Export - Meaning of [Rule 2(c) of CCEST Drawback Rules, 1995] Drawback, or, general rate of drawback, or, all industry rates [Rules 3, 4 and 5 of CCEST Drawback Rules, 1995] All industry rates [Notification No. 98/ Customs (N.T.), dated ] Cases where amount or rate of drawback has been : (1) not determined; or (2) low determined, or, brand rate and special brand rate [Rules 6 and 7 of CCEST Drawback Rules, 1995] Upper and lower limits of drawback [Rules 8 and 8A of CCEST Drawback Rules, 1995] Powers of specially authorised customs officers in relation to drawback [Rule 9 and rule 10 of the CCEST Drawback Rules, 1995] Procedure for claiming drawback and payment thereof [Rules 11 to 14, 16 and 17 of the CCEST Drawback Rules, 1995] Supplementary claim for short-paid drawback [Rule 15 of CCEST Drawback Rules, 1995] Recovery of amount of drawback where export proceeds not realised [Rule 16A of the CCEST Drawback Rules, 1995] Difference between section 74 and section Baggage - Concept of Baggage - Declaration, relevant date, exemption to bona fide baggage and power to make regulations Temporary detention of baggage [Section 80] Baggage - Rate of duty and exemptions General Free Allowance (GFA) [Rules 3 and 4] Professionals returning to India [Rule 5] Jewellery - Duty-free allowance [Rule 6] Tourists - Duty-free allowance [Rule 7] Transfer of Residence (TR) [Rule 8] Provisions regarding unaccompanied baggage [Rule 9] Application of these rules to members of the crew [Rule 10] Provisions for import/export by post [Sections 82 to 84] Procedure for clearance of goods imported by post Stores - Meaning of [Section 2(38)] Foreign going vessel or aircraft [Section 2(21)] Stores - Concessions, exemptions, drawback [Sections 85 to 90] Coastal goods - Meaning of [Section 2(7)] Coastal goods - Entry, loading and clearance [Sections 92 to 94 and 96] 162 I-20

15 5.42 Provisions relating to coasting vessel Coastal goods - Miscellaneous provisions CUSTOMS : POWERS, CONTROL & PROCEDURES 6.1 Classes of officers of customs [Section 3] Adjudicating authority and proper officer [Section 2] Appointment of officers of customs [Section 4] Customs officers - Powers and entrustment of powers Indian customs waters and its significance Power to search suspected persons entering or leaving India, etc. [Section 100] Power to search suspected persons in certain other cases [Section 101] Persons to be searched may require to be taken before Gazetted Officer of Customs or Magistrate [Section 102] Power to screen or x-ray bodies of suspected persons for detecting secreted goods [Section 103] Power to arrest [Section 104] Power to search premises [Section 105] Power to stop and search conveyances [Section 106] Power to inspect [Section 106A] Power to examine persons [Section 107] Power to require production of order permitting clearance of goods imported by land [Section 109] Seizure of goods, documents and things [Section 110] Provisional release of goods, documents and things seized pending adjudication [Section 110A] Offences by officers of customs [Section 136] Conveyances and goods in a customs area subject to control of officers of customs [Section 141] Power to allow import or export on execution of bonds in certain cases [Section 143] Duty deferment [Section 143A, omitted w.e.f ] Power to take samples [Section 144] Owner, etc., to perform operations incidental to compliance with customs law [Section 145] Licence for customs brokers [Section 146, as substituted by the Finance Act, 2013] Liability of principal and agent [Section 147] Liability of agent appointed by the person in charge of a conveyance [Section 148] Procedure for sale of goods and application of sale proceeds [Section 150] Certain officers required to assist officers of customs [Section 151] Delegation of powers [Section 152] Correction of clerical errors, etc. [Section 154] 184 I-21

16 7 CUSTOMS : CONFISCATION AND PENALTIES 7.1 Certain relevant terms [Section 2] Effect of confiscation [Sections 126 and 127] Confiscation of improperly imported goods, etc. [Section 111] Penalty for improper importation of goods, etc. [Section 112] Confiscation of goods attempted to be improperly exported, etc. [Section 113] Penalty for attempt to export goods improperly, etc. [Section 114] Scope of confiscation of goods [Sections 118 to 121] Confiscation of conveyances [Section 115] Penalty for not accounting for goods [Section 116] Other penalties Adjudication of confiscations and penalties [Section 122] Burden of proof in certain cases [Section 123] Issue of show cause notice before confiscation of goods, etc. [Section 124] Option to pay fine in lieu of confiscation [Section 125] 197 DIVISION THREE FOREIGN TRADE POLICY 8 FOREIGN TRADE POLICY (FTP) BASIC CONCEPTS 8.1 FTP - Meaning and need FTP - Law governing foreign trade viz. FT (D&R) Act FT (D&R) Act - Provisions relating to import/export, etc FT (D&R) Act - Penalty, confiscation, etc FT (D&R) Act - Appeal and review FTP - Administration/authorities involved and relation with other tax laws Components of FTP - FTP , HBP, SION & ITC(HS) classification FTP - Features of FTP - Scope/coverage FTP - Glossary of terms/acronyms FTP - Certain definitions FTP - Special focus initiatives FTP - Board of trade (BOT) FTP - General provisions regarding imports and exports 222 I-22

17 9 FTP - EXEMPTION/REMISSION SCHEMES, REWARD SCHEMES, EPCG AND DEEMED EXPORTS 9.1 Duty exemption and remission schemes - Basics Duty exemption scheme - Advance authorisation scheme Duty exemption scheme - Duty Free Import Authorisation (DFIA) Scheme Duty remission scheme - Duty Entitlement Passbook (DEPB) Scheme Duty Remission Scheme - Drawback (DBK) Scheme Promotional measures in department of commerce Promotional measures in DGFT Reward Schemes - Basics Reward Schemes - Export & trading houses/status holder Reward schemes - Services exports Reward schemes - Common provisions of duty credit scrip, except where specifically provided for Reward Schemes - Served from India Scheme (SFIS) Reward Schemes - Vishesh Krishi and Gram Udyog Yojana (VKGUY) (Special Agriculture and Village Industry Scheme) Reward Schemes - Agri. Infrastructure Incentive Scrip Reward Schemes - Focus Market Scheme (FMS) Reward Schemes - Incremental Exports Incentivisation Scheme (IEIS) on annual basis Reward Schemes - Focus Product Scheme (FPS) Reward Schemes - Market Linked Focus Products Scrip (MLFPS) Reward Schemes - Status Holders Incentive Scrip (SHIS) Export Promotion Capital Goods (EPCG) Scheme Post Export EPCG Duty Credit Scrip(s) Deemed Exports - Meaning and supplies covered Deemed Exports - Benefits available to suppliers Deemed Exports - Benefits - Other provisions FTP - EOUS, EHTPS, STPS, BTPS, SEZS AND FTWZS 10.1 EOU/EHTP/STP/BTP - Meaning/Eligibility EOU/EHTP/STP/BTP - Application and approvals EOU/EHTP/STP/BTP - Letter of Permission/Letter of Intent and Legal undertaking EOU/EHTP/STP/BTP - Exports that can be made and manner EOU/EHTP/STP/BTP - Imports and domestic procurements that can be made EOU/EHTP/STP/BTP - Net Foreign Exchange (NFE) earnings DTA Sale by EOU/EHTP/STP/BTP - Finished Products/Rejects/Waste/Scrap/ Remnants and By-products 263 I-23

18 10.8 EOU/EHTP/STP/BTP - Entitlements/benefits in respect of supplies from DTA EOU/EHTP/STP/BTP - Other entitlements/benefits EOU/EHTP/STP/BTP - Inter-unit Transfer EOU/EHTP/STP/BTP - Sub-contracting EOU/EHTP/STP/BTP - Sale of Unutilized Material EOU/EHTP/STP/BTP - Replacement/repair of imported/indigenous goods EOU/EHTP/STP/BTP - Conversion EOU/EHTP/STP/BTP - Exit from EOU Scheme or debonding EOU/EHTP/STP/BTP - Other Provisions SEZ AND FTWZ - Concept of SEZ - Import, export, manufacture and service SEZ - Guidelines/purposes for setting up/establishment SEZ - Various modes of setting up/establishment and brief procedure SEZ - Deemed to be outside India and deemed to be Port/Airport/Customs Station SEZ - Administration, single window clearance through approval committee & jurisdiction of other authorities SEZ - Various fiscal/tax incentives/concessions SEZ - Recent measures to revive investor s interest in SEZ 276 I-24

19 Module 3 - Service Tax & Common Provisions Under Indirect Taxes Preface to Fourth Edition I-5 Acknowledgement I-7 How to study and revise this book I-9 Index to coverage of select cases of ICAI in this book [Modules 1, 2 and 3] I-11 DIVISION ONE BASIC CONCEPTS UNDER SERVICE TAX 1 CHARGE OF SERVICE TAX & PERSON 1.1 Concept of service and service tax Sources of service tax law Extent and application [Section 64] Charge of service tax [Section 66B] Person and deemed separate persons 8 2 SERVICE, DECLARED SERVICES AND NEGATIVE LIST 2.1 Service - Concept of [Section 65B(44)] Role of consideration [Department guidance note] Service includes declared services [Section 66E] Activity of transfer of title of goods/immovable properties Not service [Section 65B(44)(a)(i) and 65B(44)(a)(ii)] 16 I-15

20 2.5 Transactions only in money or actionable claims Not service [Section 65B(44)(a)(iii)] Provision of service by an employee to employer Not service [Section 65B(44)(b)] Negative list [Section 66D] Statutory authorities/public authorities performing functions laid down in law for them Not service 27 3 RELEVANT DATE FOR TAXATION/VALUATION OF SERVICES AND POINT OF TAXATION 3.1 Date of determination of rate of tax, value of taxable service and rate of exchange [Section 67A] Point of Taxation (PoT) - Deemed date of provision of services - General provisions [Point of Taxation Rules, 2011] Point of Taxation (PoT) - General - Rule PoT in case of change in effective rate of tax [Rule 4] Payment of tax in case of new services [Rule 5] PoT in certain other cases [Rules 7, 8 and 8A] Section 67A v. PoT Rules 37 4 VALUATION OF SERVICES 4.1 Valuation of taxable services for charging service tax [Section 67] Manner of determination of value when consideration not ascertainable [Rule 3, applicable in case of section 67(1)(iii)] Inclusion in or exclusion from value of certain expenditure or costs [Rule 5] Cases in which the commission, costs, etc., will be included or excluded - Items specifically includible/excludible [Rule 6] 46 5 INTERPRETATION AND CLASSIFICATION OF SERVICES AND BUNDLED SERVICES 5.1 Principles of interpretation of specified descriptions of services [Section 66F(1) and 66F(2)] Bundled services [Section 66F(3)] 53 6 PLACE OF PROVISION OF SERVICES 6.1 Introduction - Need of Place of Provision (PoP) Place of Provision (PoP) of service - Determination of [Section 66C] Location of the service provider or service recipient [Rule 2(h) and rule 2(i) of the Place of Provision of Services Rules, 2012] Order of application of rules Latter the better [Rule 14] 59 I-16

21 6.5 Place of Provision generally [Rule 3] PoP of services provided on board a conveyance [Rule 12] PoP of passenger transportation service [Rule 11] PoP of goods transportation services [Rule 10] PoP of specified services - Location of service provider [Rule 9] PoP of services relating to events [Rule 6] PoP of services directly relating to immovable property [Rule 5] PoP of performance based services [Rule 4] Some special instances [Rule 7 and rule 8] PoP of notified services to be place of effective use and enjoyment of a service [Rule 13] 71 7 EXPORT OF SERVICES, SEZS AND EXPORT INCENTIVES 7.1 Export of services [Rule 6A(1) of the Service Tax Rules, 1994] Power to grant rebate [Section 93A] Rebate of inputs/input services when service exported [Rule 6A(2)] Service provided outside India but not exported Rebate of service tax paid on taxable services received by an exporter of goods and used for export of goods [Notification No. 41/2012-ST, dated ] Exemption to taxable services received by exporter of goods and used for export of goods [Not. No. 31/2012 & Not. No. 42/2012-ST] Exemption to services provided to exporters against debit to FMS/FPS/VKGUY Duty Credit Scrips [Not. Nos. 6/2013, 7/2013 & 8/2013-ST, dated ] Exemption to services provided by SEZ for use in SEZ [Section 26 of SEZ Act] Exemption on services received by SEZ unit/developer for authorised operations in SEZ [Notification No. 12/2013-ST, dated ] 82 8 EXEMPTION TO SMALL SERVICE PROVIDERS, CHARITIES AND UN 8.1 Power to grant exemption from service tax [Section 93] Threshold exemption to small service providers up to aggregate value of ` 10 lakhs [Notification No. 33/2012-ST, dated ] Exemption to charitable activities [Entry 4 of Notification No. 25/2012-ST] Services provided to United Nations, or, a specified international organization [Entry 1 of the Notification No. 25/2012-ST] 93 I-17

22 DIVISION 2 TAXABILITY OF SERVICES 9 DECLARED SERVICES & RELATED PROVISIONS 9.1 Renting of immovable property - Declared service [Section 66E(a) & Section 66D(m)] Activities relating to delivery of goods on hire purchase, etc. - Declared service [Section 66E(g)] Hiring, leasing, licensing, etc. of goods without transfer of right to use - Declared service [Section 66E(f)] Information technology software related services - Declared service [Section 66E(d)] Intellectual property right related services [Section 66E(c)] Agreeing to refrain from an act, or, to do an act etc. - Declared service [Section 66E(e)] Service portion in catering/restaurant transactions - Declared service [Section 66E(i) read with entry 19 & 19A of Not. No. 25/2012-ST] Construction services, except where entire consideration is received after completion - Declared service [Section 66E(b)] Works contract services - Declared service [Section 66E(h)] Exemption relating to works contract/construction services [Notification No. 25/2012-ST] NEGATIVE LIST OF SERVICES AND RELATED PROVISIONS 10.1 Services provided by Government/local authority [Section 66D(a)] Municipal functions by governmental authority - Exempt [Entry 39 of the Not. No. 25/2012-ST] Services provided for assistance in municipal functions - Exempt [Entry 25 of Notification No. 25/2012-ST] Services by RBI - Not taxable [Section 66D(b)] Agriculture related services - Not taxable [Section 66D(d)] Trading of goods - Not taxable [Section 66D(e)] Process of manufacture or production of goods - Not taxable [Section 66D(f)] Selling of space or time slots for advertisement - Not Taxable [Section 66D(g)] Toll charges - Not taxable [Section 66D(h)] Betting, gambling or lottery [Section 66D(i)] Entertainment/amusement - Admission/access to - Not taxable [Section 66D(j)] Transmission or distribution of electricity by specified persons - Not taxable [Section 66D(k)] Education, training and coaching - Coverage of [Section 66D(l) & Entry 8, 9 & 9A of Not. No. 25/2012-ST] 159 I-18

23 10.14 Deceased related services [Section 66D(q)] Services to, or by, foreign diplomatic mission - Not liable to service tax [Section 66D(c) & Not. No. 27/2012-ST] Transport of passengers and related services [Section 66D(o)] Services by way of Transportation of goods [Section 66D(p)] Transport of goods - Goods transport agency [Section 66D(p)] Banking/financial services & money changing services [Section 66D(n) read with section 65B(44)] OTHER SERVICES EXEMPTION, ABATEMENT, COMPOSITION RATES 11.1 Religious services [Entry 5 of Notification No. 25/2012-ST] Medical and health care services [Entry 2 & 3 of Not. No. 25/2012-ST] Legal services - Exemption [Entry 6 of Not. No. 25/2012] Classical or folk artists except brand ambassadors - Exempt [Entry 16 of Notification No. 25/2012-ST] Exemption to parking facility, except renting of parking space [Entry 24 of Not. No. 25/2012-ST, omitted w.e.f ] Exemption to Unincorporated Body/NPO providing services to members [Entry 28 of Not. No. 25/2012-ST] Exemption to transfer of a going concern [Entry 37 of Not. No. 25/2012-ST] Exemption to services provided to a recognized sports body [Entry No. 10 of Notification No. 25/2012-ST] Exemption to sponsorship of certain sport events [Entry 11 of Not. No. 25/2012-ST] Exemption to technical testing or analysis of newly developed drugs [Entry 7 of Not. No. 25/2012-ST] Exemption to certain General insurance, Life insurance & ESI Schemes [Entry 26, 26A and 36 of Not. No. 25/2012-ST] Exemption to public/free telephone [Entry 32 of Not. No. 25/2012-ST] Exemption to news collection/provision, public libraries, public conveniences and slaughtering of animals [Entry 17, 33, 35 and 38 of Not. No. 25/2012-ST] Exemption to organization of business exhibition outside India [Entry 31 of Not. No. 25/2012-ST] Exemption to services received from provider of service located in non-taxable territory [Entry 34 of Not. No. 25/2012-ST] Exemption to certain intermediary services [Entry No. 29 of Not. No. 25/2012-ST] Exemption to services provided by TBI/STEP (incubator) [Notification No. 32/2012-ST, dated ] Exemption to services provided by incubatee upto ` 50 lakh for 3 years [Entry 27 of Not. No. 25/2012-ST] Tour operator services - Abatement [Entry 11 of Not. 26/2012-ST] Optional composition schemes for payment of service tax - Air travel agent and life insurance companies [Rule 6(7) and 6(7A) of the Service Tax Rules, 1994] 199 I-19

24 DIVISION 3 PROCEDURES UNDER SERVICE TAX 12 PAYMENT OF SERVICE TAX (INCLUDING REVERSE CHARGE) & ACCOUNTING 12.1 Payment of service tax [Section 68] Person liable to pay service tax in respect of notified services [Rule 2(1)(d) of the Service Tax Rules, 1994 read with Notification No. 30/2012-ST] Manner of payment of service tax [Rule 6 of Service Tax Rules, 1994] Excess payment of service tax and adjustment thereof against liability of subsequent period Credit of service tax when service not provided or amount of invoice re-negotiated [Rule 6(3)] Consequences of failure to make payment or delay in payment - Interest and penalty [Sections 75 and 76] Accounting entries in relation to service tax REGISTRATION UNDER SERVICE TAX 13.1 Registration - Persons liable to take registration and time-limit [Section 69 read with rule 4 of the Service Tax Rules, 1994 and Service Tax (Registration of Special Category of Persons) Rules, 2005] Registration - More than premises - Centralized registration or separate registration [Rule 4(2), rule 4(3) and rule 4(3A)] Registration - Procedures [Rule 4(1A) and rule 4(4) to 4(8)] ASSESSMENT, SELF-ASSESSMENT AND RETURNS UNDER SERVICE TAX 14.1 Assessee and assessment Types of assessment - Self-assessment, provisional assessment and best judgment assessment [Sections 70, 72 and rule 6(4)] Returns by an assessee - Submission, revision and fees for delayed submission [Rules 7, 7B and 7C of the Service Tax Rules, 1994] Returns by persons other than assessee Scheme for submission of returns through service tax return preparers [Section 71] INVOICE, RECORDS, AUDIT, POWERS AND OTHER PROVISIONS 15.1 Taxable service to be provided or credit to be distributed on Invoice, Bill or Challan [Rule 4A of the Service Tax Rules, 1994] 236 I-20

25 15.2 Records [Rule 5] Access to a registered premises [Rule 5A] Procedure and facilities for large taxpayer [Rule 10] Special audit - To Deal with Valuation, Cenvat Credit and multiple-location based accounts [Section 72A] Department audit Frequency norms Appointment of officers [Rule 3] Rectification of mistake [Section 74] Power to search premises [Section 82] Application of certain provisions of Central Excise Act [Section 83] Penalty for contravention of rules and provisions of Act for which no penalty is specified elsewhere [Section 77] Power of adjudication of penalty [Section 83A] 246 DIVISION 4 COMMON PROVISIONS UNDER INDIRECT TAXES 16 INDIRECT TAX LAWS (IDTL) : RECOVERY & INTEREST 16.1 Show-cause notice (SCN) - Concept and requirements of Recovery of duties/interest not levied or not paid or short-levied or short-paid or erroneously refunded [Section 11A] Recovery in case of non-evasion cases [Section 11A(1) to 11A(3)] Recovery in cases of evasion - Extended period of limitation [Section 11A(4) to 11A(7) and 11A(9)] Recovery - Relevant date for computing period of limitation [Explanation to section 11A] Recovery - Adjudication of demand [Section 11A(10) to 11A(14)] Interest on delayed payment of duty [Section 11AA] Power not to recover duty of excise not levied or short-levied as a result of general practice [Section 11C] Duties of excise collected from the buyer to be deposited with the Central Government [Section 11D] Interest on the amounts collected in excess of the duty [Section 11DD] Provisional attachment to protect revenue in certain cases [Section 11DDA] Recovery of sums due to Government [Section 11] Liability under Act to be first charge [Section 11E] Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded [Section 73] Various other provisions under service tax law in relation to recovery Recovery of duties not levied or short-levied or erroneously refunded [Section 28] 272 I-21

26 16.17 Recovery of duties in certain cases where any licence/scrip relating to import/ export obtained by collusion, etc. is utilized by some other person [Section 28AAA] Various other provisions under customs law in relation to recovery INDIRECT TAX LAWS (IDTL) : EVASION PENALTY AND PUNISH- MENT 17.1 Penalty for short-levy or non-levy or non-payment or short-payment or erroneous refund of duty in certain cases [Section 11AC] Offences and penalties [Section 9] Compounding of offences [Section 9A(2)] Offences by companies [Section 9AA] Power of court to publish name, place of business, etc., of persons convicted under the Act [Section 9B] Presumption of culpable mental state [Section 9C] Relevancy of statements under certain circumstances [Section 9D] Power of courts to order forfeiture [Section 10] Presumption as to documents in certain cases [Section 36A] Service of decisions, orders, summons, etc. [Section 37C] Publication of information respecting persons in certain cases [Section 37E] Offences and penalties [Section 89] Penalty for suppressing, etc., of value of taxable services [Section 78] Penalty for offences by director, etc., of company [Section 78A, inserted by Finance Act, 2013] Various other provisions under Service Tax Laws Penalty for short-levy or non-levy or erroneous refund of duty or interest in certain cases [Section 114A] False declaration, false documents, etc. [Section 132] Obstruction of officer of customs [Section 133] Evasion of duty or prohibitions [Section 135 read with section 104] Preparation [Section 135A] Cognizance of offences [Section 137(1) and 137(2)] Compounding of offences [Section 137(3)] Offences to be tried summarily [Section 138] Service of order, decision, etc. [Section 153] Various other provisions under Customs Laws INDIRECT TAX LAWS (IDTL) : CIRCULAR, EXEMPTION & REFUND 18.1 Circulars/instructions/orders issued by CBEC [Section 37B] Power to grant exemption from duty of excise [Section 5A] 304 I-22