Indirect Tax Newsletter

Transcription

1 Corporate India Advisors LLP 16th February 2015 Indirect Tax Newsletter I N S I D E T H I S I S S U E 1 Service Tax 2 CENVAT Credit 3 Central Excise 4 Customs and FTP 5 VAT/CST Contents Notifications/Circulars Customs 1 Foreign Trade Policy 2 Judgments Service Tax.3 CENVAT Credit.5 Central Excise 5 Customs & FTP.7 VAT/CST 8 News..9 Notifications / Circulars Customs Notification Duty Drawback allowed on rice (including basmati) The government has amended the Customs, Central Excise Duties and Service tax Drawback Rules, 1995 to allow Duty Drawback on goods falling under heading 1006 i.e. rice (including basmati). Further where no amount or rate of drawback is determined for such goods, any manufacturer or exporter of such goods may, within sixty days can apply in writing to the CCE having jurisdiction over the manufacturing unit. Further, if in respect of such goods, the amount or rate of drawback found to be less than 4/5th of the duties or taxes paid on the materials, then manufacturer or exporter may within sixty days from the relevant date can make an application in writing to the CCE having jurisdiction over the manufacturing unit. Notification No. 20/2015- Custom, Dated

2 Page 2 Circular CBEC clarifies on submission of KYC documents by courier Companies CBEC has changed the list of documents to be collected from the importers/exporters for KYC verification at the time of shipment by modifying the Circular No. 33/2010-Cus dated and Circular No. 04/2015-Cus dated and decided that in case of individuals only one document containing both proof of identity and proof of address is sufficient for verification. Further the Board has also decided to include Aaddhar card as the valid document for the individuals. The existing instructions will remain in force in case of others i.e. other than individuals. Circular No. 07/2015-Customs, Dated Foreign Trade Policy Public Notice New format for e-iecintroduction of Appendix 18B -1 (Format of e-iec) in Handbook of Procedure Vol. I (Appendices and Aayat Niryat Forms), The Director General of Foreign Trade has introduced a new format for issuance of IEC numbers in electronic form i.e. e-iec as Appendix 18B-1. Further, it is notified that decision regarding grant or refusal of IEC will be conveyed to the applicant through SMS and system generated letter on the registered address of the applicant. In case of any change in the name/address or constitution of e-iec holder then such holder shall cease to be eligible to import or export against such IEC number after expiry of 90 days from the date of such change unless such changes are effected in the e- IEC by the concerned licensing authority Public Notice no. 84 (RE-2013)/ , Dated

3 Page 3 Judgments Service Tax Service tax not payable on notional interest SCN need not be issued if service tax and interest is paid pursuant to audit Service tax is payable on all services (taxable or otherwise) in an airport SEZ Act overrides the notification granting refund of service tax paid on input services The appellant received the security deposit for renting of immovable property. The authorities demanded service tax on notional interest. The Tribunal overruled this demand by holding that notional interest is not the value of services and security deposit was obtained to secure default in payment of renting, utility charges or other charges payable by the lessee. K Raheja Corp. Pvt. Ltd. Vs. CCE, Pune-III [2015-TIOL-100-CESTAT-MUM] In this case the appellant provided the job work to manufacturer at its factory. Pursuant to departmental audit, it discharged the service tax and interest on the departmental allegation that the services are manpower supply services. The Tribunal negated the imposition of penalties on the basis that when objection has been raised during the course of audit, service tax has been paid by the appellant and later-on interest was also paid to avoid litigation, it cannot be said that the appellant was having any intention to evade the payment of service tax. Vivekanand Jha & Co. Vs. CCE, Nagpur [2015-TIOL-134-CESTAT-MUM] In this case the service tax authorities demanded service tax from Airport Authority of India (AAI) under the taxable category of Airport Services on all the services authorised to be provided by AAI (or persons authorised by AAI) within the airport. The Tribunal held that the services in so far as provided by AAI or anybody authorised by it will be subject to service tax under the Airport Services irrespective of the fact whether the services were taxable or not. The Tribunal upheld levy of service tax on: (a) Passenger service fee;(b) Left luggage facility, rest rooms/retiring rooms facility and supply of trolleys for courier service;(c) Renting/leasing of space inside Airports/Civil Enclaves to various Airlines and other persons for their business activity;(d) Renting of space inside the Airports/Civil Enclaves for various persons for putting up hoardings /advertisements; and(e) Lump sum amounts received as license fee from licensees/ concessionaries for operating/managing car parking facility, public admission and issue of season tickets/temporary passes. Airport Authority of India Vs. CST, Delhi [2015-TIOL-148-CESTAT-DEL] In this case the appellant paid service tax on the input services, which were wholly consumed in the SEZ and were ab-initio exempt at the first instance. The authorities rejected the refund claim by citing that the services were exempt at the first instance. The Tribunal held that SEZ Act has overriding

4 Page 4 effect on all statutes and procedural infractions cannot jeopardise the refund claim. Barclays Technology Centre India Pvt. Ltd. Vs. CCE, Pune III [2015-TIOL-82- CESTAT-MUM] Condonation of penalty under Section 80 and invocation of larger period stand on different footing and are not complementary to one another Time limit of 1 year not applicable on refund of service tax paid when the services were not rendered No coercive action including freezing of accounts during pendency of appeal Services of procuring orders from Indian customers for supply of material by foreign manufacturer will be exports In this case the appellant argued for non-invocation of larger period on the basis that the adjudicating authority had condoned the penalty under Section 80 for a reasonable cause. The Tribunal negated these contentions and held that in the present case the entire demand is not time barred and appellant has not shown his bonafides by paying the service tax along with interest for the period within limitation period. Ajmnani Jaspal Singh Vs. CCE & ST, Surat [2015-TIOL-166-CESTAT-AHM] In this case the respondents discharged service tax on the advances. However, the services were not provided and the respondents filed the refund claims, which were rejected as time barred. The Tribunal held that service tax was not payable as no services were rendered and hence the service tax so paid will be treated as deposit. Thus, it was held that the time limit of 1 year will not be applicable. CCE & ST, Bhavnagar Vs. Madhvi Procon Pvt. Ltd. [2015-TIOL-87-CESTAT- AHM] In this case the appellant submitted the mandatory pre-deposit in the Tribunal and the appeal was pending for decision. During the pendency, the DGCEI attached the bank accounts of the appellant and started the recovery proceedings. The Tribunal disapproved the coercive action and held that there is no need to freeze the accounts of the appellant as long as the appeal is pending before this Bench. Kala Mines & Minerals Vs. CC, CE & ST, Goa [2015-TIOL-193-CESTAT-MUM] In this case the appellant procured orders from Indian customers and passes them to the foreign manufacturers for supply of goods. The foreign manufacturers supplied the goods to Indian customers and paid commission to appellant. The Tribunal held that the services provided by appellant will be export of services and hence will not be subject to service tax. However, from , position may different due to change in POP Rules. ATE Enterprises Pvt. Ltd Vs. CST, Mumbai [2015-TIOL-252-CESTAT-MUM]

5 Page 5 CENVAT Credit CENVAT credit cannot be denied for the fault of authorities CENVAT credit not allowed at will on the basis of old documents In this case the appellant applied for ISD registration. However, the authorities granted the registration as service provider. Subsequently, the credit was disallowed by the authorities. The Tribunal remanded back the matter to the jurisdictional authorities by holding that there was no fault of appellant and matter to be re-adjudicated. Punjab National Bank Vs. CCE & ST Ghaziabad [2015-TIOL-196-CESTAT-DEL] The authorities conducted an audit and raised a service tax demand. The Appellant digged out certain cenvatable documents on which it had not availed the CENVAT earlier. The Appellant availed the corresponding CENVAT credit and discharged the service tax liability from such CENVAT credit. The Tribunal denied such an adjustment and held that appellant cannot take cenvat credit in the CENVAT account on a date earlier than the visit of the audit officers when such credit was not earlier reflected in the CENVAT account. If some credit was admissible on the basis of cenvatable documents existing with the appellant, but credit was not taken, then the same could have only been taken after the date of visit of the Audit officers. Gammon India Ltd. Vs. CCE & ST, Vadodara [2015-TIOL-225-CESTAT-AHM] Central Excise Remission of duty to be allowed in case of destruction of goods before time of removal and not before the place of removal Assessee at his choice can opt for any of the available exemption notification In this case the appellant shipped the goods for exports. However, when the goods were enroute to the port, they got destroyed. The appellant filed a remission claim with the authorities, which was rejected on the basis that the remission claim is not allowed if the goods are destroyed after the removal of goods from the place of removal. The Tribunal also rejected the remission claim by holding that the Rule 21 of Central Excise Rules, 2002 mandates that the goods should have been destroyed before the time of removal of goods and not before the place of removal of goods. Presently, since the time of removal of goods is the time of removal from the factory, the remission claim is not allowable. Periwal Exports Vs. CCE, Jaipur II [2015-TIOL-190-CESTAT-DEL] In this case two notifications: one for reduced rate and another for upright exemptions were available on satisfaction of identical condition of non availment of input CENVAT credit. The Authorities argues for availability of only one benefit i.e. outright exemption. The tribunal negated such arguments and held that appellant can always opt for the Notification which

6 Page 6 is most beneficial and Department cannot coerce the assessee to avail a particular exemption Notification. Winsome Yarns Ltd. Vs. CCE & ST, Chandigarh-II [2015-TIOL-233-CESTAT-DEL] Refund under Section 11B is mandatory Freight cost is includible in transaction value in case of FOR deliveries Cutting of plastic films is not manufacture Freight incurred for delivering the inputs to job worker factory is includible in transaction value Freight charges from factory to warehouse includible in transaction value irrespective of the fact who paid the freight In this case the appellant filed a refund claim in 1997 which was rejected by the authorities. The tribunal held that the refund was claim payable on But the refund was finally paid on The appellant demanded interest for late payment of refund. The Tribunal allowed the interest and held that there is no provision under Section 11BB of the Central Excise Act 1944 that relevant date for determining the rate of interest will be postponed in any eventuality. Tata Chemicals Ltd Vs. CCE, Rajkot [2015-TIOL-240-CESTAT-AHM] In this case the Tribunal held that if the goods are sold on FOR basis, the transportation charges incurred by manufacturer in delivering the goods at buyer s premises will be includible in the transaction value for levying duty of excise. UFLEX Ltd. Vs. CCE & C, Jammu [2015-TIOL-245-CESTAT-DEL] In this case the respondent was cutting the big plastic sheets into the smaller ones in accordance with the requirements of the customers. The Tribunal held that this activity will not tantamount to manufacture as no new item comes into being. CCE, Aurangabad Vs. Universal Enterprises [2015-TIOL-250-CESTAT-MUM] In this case the Appellant discharged excise duty on the value arrived at after adding the raw material value and job work charges. The authorities demanded excise duty on the transportation charges incurred on delivering the inputs to job worker factory. The Tribunal held that transportation charges are includible in transaction value since cost of the input will not only be the charges on which such goods have been purchased by M/s Indian Security Press, but also include the transportation cost upto the job-worker's place. Soma Papers & Industries Ltd. Vs. CCE, Nashik [2015-TIOL-254-CESTAT-MUM] In this case the Tribunal held that freight charges from factory to warehouse are includible in the transaction value irrespective of the fact who paid for the freight. CCE, Belapur Vs Sharp Batteries & Allies Inds Ltd. [2015-TIOL-259-CESTAT- MUM]

7 Page 7 CUSTOMS Distribution fee for providing the services is not includible in transaction value Benefit under Served from India Scheme (SFIS) available to Indian subsidiaries of foreign companies Varying discount on imported goods is not a reason for increasing the valuation Duty cannot be demanded jointly and severally, can be demanded on individual basis only In this case the appellant paid for distribution fees, which in-turn was meant for acquiring non-exclusive rights for satellite delivered, advertiser supported television service. The customs authorities loaded this fee on the tapes imported by appellant for getting the clearance from the CBFC. The Tribunal negated the applicability of custom duty by holding that distribution fee was paid for the rights to distribute a service and has nothing to do with the goods imported by the appellant from the foreign entity. The tapes were meant for the limited purpose of obtaining certification from CBFC and technical quality checks and not for the distribution activity. Multi Screen Media Pvt. Ltd. Vs. CC, Mumbai [2015-TIOL-191-CESTAT-MUM] In this case the DGFT disallowed the benefit of SFIS scheme by citing that the appellant is a subsidiary of foreign company and hence not eligible for the benefit under SFIS scheme. The Delhi High Court came down heavily on DGFT and held that DGFT cannot read new provisions in the FTP and the reasons of DGFT are bereft of any logic. Yum Restaurants India Pvt. Ltd. & ANR Vs. UOI & ORS [2015-TIOL-225-HC- DEL-CUS] In this case the respondent imported goods in varied quantities and the underlying Discounts varied without any particular format. The Tribunal held that enhancement of valuation is not permissible in the absence of any evidence to the contrary. CC (Import), Chennai Vs. GE Healthcare Bio Sciences Ltd [2015-TIOL-216- CESTAT-MAD] In this case the authorities demanded Duty from two persons. However, in the adjudication order, the authorities demanded duty from several persons on joint and several basis. The Tribunal remanded back the matter for fresh adjudication by holding that the duty cannot be demanded on joint and several basis and the liability of each person has to be determined separately. Gurpreet Singh & Ors Vs. CC, Mumbai [2015-TIOL-224-CESTAT-MUM] Royalty paid for reproduction of plant varieties is not includible in value for duty In this case the appellant paid the royalty to overseas related party for reproduction of a plant variety in India. The customs authorities included the royalty so paid in the transaction value. The Tribunal noted that Rule 10 (1) (c) specifically excludes the charges for the right to reproduce the imported

8 Page 8 goods in the country of importation as per the interpretative notes given in the schedule thereto. The Tribunal also relied on WCO rules and held that they have persuasive value for interpretation purposes. In the end the Tribunal held that the royalty so paid was not includible in the value for customs duty. KF Bioplants Pvt. Ltd. Vs. CC (Import), Mumbai [2015-TIOL-248-CESTAT-MUM] VAT Diamonds used in jewellery will tantamount to consumption of diamonds In this case the appellant purchased diamonds from unregistered dealers and used them in the manufacture of jewelry. The VAT authorities demanded purchase tax from the appellant alleging that the diamonds were consumed in the manufacture of jewelry. The appellant contested the demand by arguing that the diamond cannot be said to be consumed since they have retained their shape. The High Court of Karnataka rejected these arguments and held that the appellant has not sold the diamonds as such to a buyer. When the diamonds were used in making the jewelry and embedded them in the jewelry, it changed into another commercial commodity and therefore, such a commercial commodity came into existence on absorption of the diamond and hence there is a consumption of diamonds and bullions in the process of manufacture of a different commercial commodity i.e., diamond embedded jewelry article. RI Vijay Kumar Surana Prop M/s Vijay Gems No. 411, Ashoka Road Mysore Vs. Deputy Commissioner of Commercial Taxes Assessments-2, Mysore [2015-TIOL-224-HC-KAR-CT] Sales tax is applicable on the processing and supplying of Photographs, Photo Prints and Photonegatives In this case the issue was whether the activity of processing and supplying of photographs, photo prints and photonegatives would be subject to levy of sales tax specifically when the negative etc. forms very small part of the value. The Supreme Court of India held that dominant nature test is not applicable on transactions listed in Article 366(29A) of the Constitution of India and the transaction will be that of works contract. Accordingly, the challenge to constitutional validity of levying VAT on such transaction is not valid. State of Karnataka Etc Vs. Pro Lab & Ors Etc [2015-TIOL-08-SC-CT-LB]

9 Page 9 News Celebration of Central Excise Day The central Excise Day is celebrated on 24th February every year. CBEC has decided that year 2015 is to be celebrated as the 'Year of Taxpayers services'. The Government has time and again stressed on initiatives designed to foster voluntary compliance through increased efficiency in delivery of services to taxpayers, transforming the attitude of taxpayers toward paying taxes through continuous education and instituting a service-focused culture within the indirect tax administration. With this in view, it is proposed that while planning the celebrations for the Central Excise Day, 2015, the above theme is to be kept in mind. MAIT asks for duty relief, export sops to boost electronic manufacturing IT hardware industry body MAIT has asked the government to consider giving duty relief and export sops to boost the domestic electronic manufacturing sector. MAIT, which represents the over USD 13 billion Indian IT hardware manufacturing industry, met the Prime Minister in January and following a meeting with PMO officials submitted its recommendations earlier this month. The industry body suggested that benefit of SAD exemption may be extended to all goods (including inputs, components and accessories and their parts and sub parts) when imported for use in the manufacture of ITA (information technology agreement) goods. Drawing attention towards growth of mobile manufacturing in India following various government incentives, especially reduction of excise duty, Shirpurwala said bringing down excise duty for ITA goods (like hard drives, CD roms, etc) across the value chain will help the IT hardware industry. He suggested that: "Excise duty may be kept at 1 per cent, wherein manufacturer cannot avail any Cenvat Credit and 12 per cent Excise Duty wherein Cenvat Credit can be availed." The incentive will not impact government's revenue as none of the components are under zero per cent duty and the government will be assured of a fixed revenue of 1 per cent on the transfer price, he added. MAIT said the 1 per cent duty benefits across the value chain will help fuel growth of the eco-system from the OEMs (original equipment manufacturers) to component manufacturing industry.

10 Page 10 Corporate India Advisors LLP MUMBAI Suresh Rohira Phone: DELHI Rohini Aggarawal Pankaj Goel PUNE Phone: Kumar Iyer Phone: About CIA CIA is an indirect tax specialist firm. CIA is run by eminent professionals having a niche experience in all realms of indirect taxes in leading multinational consulting firms. The services comprises of Service tax, Central Excise, Foreign Trade Policy, Customs, Value Added Tax, Central Sales Tax, Anti-dumping / Subsidy Measures and Goods and Services Tax. CIA has Wide spectrum of network on PAN India basis and provides best value for money proposition. CIA leverages upon its strong knowledge base, research and professionals with distinguished background For Private Circulation Only CIA does not assume any responsibility for the information given under the document. While every effort has made to avoid errors or omissions in this publication, it is suggested that to avoid any doubt the reader should cross-check all the facts, law and contents of the publication with original Government publication or notification or judgment. CIA neither accepts nor assumes any responsibility or liability for any act undertaken by any reader of this publication in whatsoever manner.