MANOJ BATRA

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INDIRECT TAX COMING BATCHES BATCH- 1 Satellite batch BATCH- 2 BATCH- 3

Start DATE 30TH May 2012(M,W,F) 4th Apr 2012 (daily batch ) 24th May 2012(T,T,S)

Timing 6-30 to 10-30 a.m 6-45 to 10-30 a.m 6-30 to 10-30 a.m

By Mr. Manoj Batra (Visiting Faculty of ICAI) CONTACT - At Bright Professionals Classes 1/53, Lalita Park, laxmi Nagar Delhi-92 Ph.-011- 47665555

Index
Case lawsAMENDMENT FOR MAY 2012 Amendment for Nov 2011 Amendments for May 2011 Amendments for Nov 2010 Amendments for May 2010 Miscellaneous que Some Imp Question Page No 2-36 37-132

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Marketability [Nicholas Piramal India Ltd Vs CCE 2010 TIOL 101 (SC)] The assessee produced Crude VitaminA, which is consumed for producing animal feed supplements. The assessee did not market Crude VitaminA. The product has a life of 2 to 3 days. Decision: Where the product is commercial known and is capable of being marketed, then such goods shall be liable for excise duty, subject to other conditions. It is not necessary that the goods should be actually marketed by the manufacturer. Further, only where a product has NO shelf life or the shelf life is insufficient to market the product, then only it is considered as Not Marketable. In the given case, since the product has a life of 2 to 3 days, the same shall be considered as marketable.

(1) MEDLEY PHARMACEUTICALS LTD.(SC)(2011)

Assessee a pharmaceutical company distributed free samples of medicines. The medicine samples were cleared by printing thereon Physian sample- Not to be sold. Assessee is of the view that samples cant be sold hence not marketable and no duty payable. Excise duty being a levy on manufacture or production of goods, payable on manufacture whether or not goods are sold - Marketability does not requires require actual sale, it is capability if being bought and sold, - Physician sample capable of being sold in open market - Primary reason for distribution of free physician samples is to advertise and enhance sale of product in market - Drugs Act and Central Excise Act, 1944 operate in different fields and restrictions under Drugs Act not applicable to Central Excise Act for non-levy of excise duty causing revenue loss - Prohibition on sale of physician samples under Drugs Act having no bearing or effect on levy of excise duty. Hence excise duty leviable on physicians sample

(2) Waste & Scrap- IMP

Bawana Sugar Mills Ltd. is engaged in the manufacture of sugar. During the course of manufacture of sugar, bagasse emerges as a residue. The Department has demanded duty on the bagasse treating it as excisable goods on the ground that bagasse is capable of being sold for consideration. However, the assessee contends that the waste or refuse or residue arising during the course of manufacture cannot be treated as excisable goods even if such waste fetches some price in the market. You are required to examine the veracity of the demand raised by the Department in law. Ans The demand raised by the Department is valid in law. By budget 2008 explanation to sec 2(d) inserted that for the purposes of this clause, goods include any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. It was clarified by CBEC in Circular No. 904/24/09 after amendment made by the Finance Act, 2008 in the definition of excisable goods, bagasse, aluminium/zinc dross and other such products termed as waste, residue or refuse which arise during the course of manufacture and are capable of being sold for consideration would be excisable goods and chargeable to payment of excise duty. Hence it can be concluded that, Bawana Sugar Mills Ltd. is liable to pay excise duty because bagasse is excisable

(3) Whether aluminium dross and skimmings have become excisable in view of the insertion of Explanation
to section 2(d) of the Central Excise Act, 1944 by the Finance act, 2008? Hindalco Industries Ltd. UOI 2009 (243) E.L.T. 481 (All.) The assessee submitted that insertion of the explanation to section 2(d) would not change the position established in law that aluminium dross and skimming, were neither processed or manufactured, or were marketable commodities. It was held that insertion of the explanation under Section 2(d) providing for a fiction in law by a deeming clause in definition of goods to include any article, material or substance which is capable of being bought and sold for a consideration, and to treat such goods as marketable, would make the

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Aluminium Dross and Skimming liable to excise duty. Where the goods are specified in the Schedule, they can be subjected to duty, if they are produced, or manufactured by the person on whom duty is proposed. The expression has been explained by the Supreme Court to mean that the goods so produced must satisfy the test of marketability. The excise duty is levied on production and manufacture which means bringing out a new commodity, substance, and it is implicit that such goods must be usable, saleable and marketable. The duty is on production or manufacture is for taking out such goods to the market for sale. If the goods are marketable or are deemed to be marketable, as on now by the explanation added to Section 2(d) of Section 78 of the Finance Act, 2008, such goods included in the Schedule would attract excise duty. The marketability of the goods becomes a factor, which links the levy of excise duty, to its production or manufacture. If the goods are marketable or are deemed to be marketable, as on now by the explanation added to section 2(d), such goods included in the Tariff would attract excise duty. The theoretical possibility of product being sold is sufficient to establish the marketability of a product. Critically examine the said statement.

(4) Bata India Ltd (SC)(2010)- IMP

1) The Assessee is a well known manufacturer of foot wear. For the manufacture of foot wear, various raw materials are purchased by the assessee from the market and / or from their respective manufacturers such as fabrics, rubbers, chemicals, solvents etc. During the process of manufacturing of foot wear various chemicals / rubbers / solvents etc., are mixed together and a thin layer of such mixed materials is sandwiched in between two sheets of textile fabric, in running length, through a three bowl calendering machine. The resultant product Double Textured Rubberized Fabric (DTRF) is later cut and stitched according to the assessee's requirements and in-process materials are used as shoe- uppers in the foot wear. Such fabrics are also at times sent to job workers for stitching purposes only and the fabric sandwiched with the mixed materials are inputs of the intermediate stage during the course of manufacture of footwear. 2) Vulcanisation of the foot wear takes place only after completing the entire process and then it would be a finished product as a footwear, made available in the market and acquires commercial identity and turns out to be a commercially known product. 3) The department, came to the conclusion that this double textured fabrics are marketable 4) Without proof of marketability the intermediate product would not be goods . Such a product is excisable only if it is a complete product having commercial identity capable of being sold to a consumer which has to be established by the Revenue. 5) The test report of the Chemical Examiner, SPB hand book of rubber products and the statement of the Superintendent (Supply and Transportation) of the assessee's company do not show that the product in question is capable of being marketed. The mere theoretical possibility of the product being sold is not sufficient but there should be commercial capability of being sold. Theory and practice will not go together when we examine the marketability of a product. 6) Hence it was not marketable. 1. USHA RECTIFIER CORPN. (I) LTD.(2011)(SC)- M IMP & EXPECTED The assessee is a manufacturer of electronic transformers, semi-conductor devices and other electrical and electronics equipments. During the course of such manufacture the appellant also manufactured machinery in the nature of testing equipments to test the final products of the assessee company. Thre the assessee contending that assembly of testing equipments from various parts and components bought from outside is not manufacture. Further he contended that even if it is treated as manufacture, as it ie not engaged in manufacture and it will be disassembled after compltion of research. it is not marketable since testing equipments were not removed outside the factory It was held that testing equipments having different name and use, hence it is manufacture. Further the profuct will be treated as marketable because assessee have clearly taken a stand in their reply to show cause notice that they bought various parts and components to develop the testing equipments for use within the factory and that such steps were undertaken to avoid importing of such equipments from the developed countries with a view to

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save foreign exchange. As pe Explanation to Rule 5 of CER 2002, Rate of duty for captiley consumed goods will be e date of issue for such use. GTC Manufacturers was a manufacturer of cigarettes. It used duty paid paperback aluminum foil in the roll form for the purpose of packing cigarettes. In the process, the roll of aluminum foil was cut horizontally to igarettes. make separate pieces of the foil and word PULL was embossed on it. Thereafter, fixed number cigarettes were wrapped in it. An aluminium foil being resistant to moisture was used as a protector for the cigarettes used and to keep them dry. Revenue issued a show cause notice to GTC Manufacturers alleging that the process of cutting and d embossing aluminum foil amounted to manufacture. Since the aluminum foil was used as a shell for cigarettes to protect from them moisture; the nature, form and purpose of foil were changed. Briefly discuss, with reference to case law, whether the show cause notice is sustainable in law. or Does the process of cutting and embossing aluminum foil for the purpose of packing of the cigarettes amount to manufacture? M IMPORTANT ORTANT GTC Industries Ltd. 2011 (Bom.) A roll of aluminum foil was cut horizontally to make separate pieces of the foil and word PULL was embossed on it. Thereafter fixed number cigarettes were wrapped in it. An aluminium foil being a resistant to moisture was used as a protector for the cigarettes and to keep them dry. rettes Revenues submitted that the process of cutting and embossing aluminum foil amounted to manufacture. Since the aluminum foil was used as a shell for cigarettes to protect from them moisture; the nature, form and purpose of foil were changed. It was held that cutting and embossing did not transform aluminum foil into distinct and identifiable commodity. There were no records to suggest that cut to shape/embossed aluminum foils used for packing cigarettes were distinct marketable commodity. Since, foil was cut to size in a continuous process, process did not amount to ble manufacture as per section 2(f) of Central Excise Act, 1944. because the process which produces distinct and identifiable commodity will amount to manufacture. Manufacture (5) Discuss, with the help of a decided case law, if any, whether production of mustard oil and oil cake from mustard seeds amounts to manufacture. Ans It was held in case of Jai Bhagwan Oil and Flour Mills 2009 (S.C.) agwan Manufacture - Oil cake - Mustard oil cake - Mustard seeds subjected to process of extraction whereby mustard oil and oil cake produced - Production of mustard oil and oil cake from mustard seeds is manufacture it was Not mere process of cleaning, repairing, reconditioning, recycling or assembling - New marketable article distinct from raw ng, material emerged when oil cake produced from oil seeds - Oil cake is distinct and different entity from mustard seeds with separate name, character and use different fro mustard seed - Oil cake not a waste but valuable product from having marketability Hence it can be said that the said process amounts to manufacture.

(6) SONY MUSIC ENTERTAINMENT (I) PVT LTD.(2010)(BOM) IMP LTD.(2010)(BOM)RTP Nov 10 new

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Parsvnath Music Systems Ltd. imported recorded audio and video discs in boxes each containing 50 discs. Each individual disc was then packed in transparent plastic cases known as jewel boxes. An inlay card containing the details of the content of the compact disc was also placed in the jewel box. The compact whole thing was then shrink wrapped and sold in wholesale. The Department contended that the said process amounted to manufacture. Explain, with the help of a decided case law, if any, whether Departments contention is justified in contention law. 1) Ans- The Departments contention is not justified in law. The facts of the given case are similar to the case of CCE v. Sony Music Entertainment (I) Pvt. Ltd. 2010 (Bom) Note 6 to Section XVI of the tariff provides that in respect of goods covered by that section, conversion of an article which is incomplete espect or unfinished but having the essential character of a finished article into a complete finished article shall amount to manufacture. It was held that 1) that the activities carried out by the respondent does not amount to manufacture since the compact disc were complete and finished when imported by the assessee. They were imported in finished and completed form. 2) Note6 clearly does not apply to the facts before us. None of the activity that the appellant undertook involved any process on the compact discs that were imported. Those compact discs were complete and finished. They could be played by any person in order to listen to the sound and view the image images that they contained. They were imported in finished and completed form. The mere packing of these discs has no bearing on the fact that they were imported complete and finished. Hence, the said process does not amount to manufacture. he

(7) Rotomac Corporations Ltd. was engaged in the assembling and installing the parts and components of tions
asphalt batch mix, drum mix/hot mix plant. The Department alleged that the assembling and installation of asphalt batch mix, drum mix/hot mix plant amounted to manufacture. It contended that the said plant was not per se immovable. Attachment of plant with nuts and bolts was only intended to provide stability and prevent vibration. The attachment was easily detachable from foundation and was not permanent. Therefore, the assessee was liable to pay duty on the said plant. essee

Explain, with the help of a decided case law, if any, whether Departments allegation is justified in law.
Ans The Departments allegation is justified in law. The facts of the given case are similar to the case of CCE v. Solid & Correct Engineering Works and Ors 2010 (SC) It was held that that assembling, installation and commissioning of Asphalt Drum/Hot Mix Plants amounted to manufacture Plants inasmuch as the plant that eventually came into existence was a new product with a distinct name, character and use different from what went into its manufacture. ent

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The fixing of plants to a foundation was meant only to give stability to the plant and keep its operation stability vibration/wobble free. Futher, the setting up of the plant itself was not intended to be permanent at a given . place; the plant could be moved and was actually moved after the road construction/ repair project wa was over. Therefore, mere fixation of a plant to the earth by nuts and bolts for ensuring wobble free operation of the plant would not render it immovable property. The machine could not be regarded as part and parcel of the earth permanently. mix Hence, the Asphalt Drum/ hot-mix plants manufactured at site by Solidmec were manufactured and movable property hence excisable goods liable to duty.

(8) VIRGO INDUSTRIES (ENGINEERS) PVT. LTD.

1) It was observed that Virgo had been manufacturing and supplying signages (illuminated signs) under a contract with M/s. Indian Oil Corporation Ltd. (IOC) and had erected them at the retail outlets of IOC located at various places in the south. 2) It was contended by assessee that Signage came into existence only at site and the same was immovable ntended on erection as it was fixed to earth on concrete foundation. . 3) It was held that Signages erected at various petrol bunks of IOC - Excisability of - Complete signage is movable and is installed by fixing it on a concrete foundation - These can be detached and shifted to another location without damaging them - Signage is fixed to earth and is complete before fixing on the concrete platform Signages do not emerge as an immovable property on assembly or erection - Signages are excisable goods rge Sections 2(d) and 3 of Central Excise Act, 1944. 4) Excisability - Item which is fixed in the earth can continue to be movable and excisable if the same is capable of being shifted from one place to another without having to dismantle the same into the constituent components Sections 2(d) and 3 of Central Excise Act, 1944.

(9) MEHTA & CO. (2011)(SC) whether the items like chairs, beds, tables, desks, etc., affixed to the ground could be said to be immoveable ground assets and not liable to excise duty. It was held that in case of Craft Interiors (supra) has clearly laid down that ordinarily furniture refers to moveable items such as desk, tables, chairs required for use or orname ornamentation in a house or office. So, therefore, the furniture could not have been held to be immoveable property
Miscellaneous que

(10)
a) b) c) d)

Discuss briefly whether excise duty is attracted on the excisable goods manufactured : In jammu & kashmir In special economic Zone In 100% EOU Beyond Indian territorial waters (within 150 NM from the shore line) Ans-

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(a) As Per Section 1(2) of Central Excise Act, 1944, Excise duty is attracted on the excisable goods manufactured in Jammu & Kashmir, Since Central Excise Act, 1944 extends to the whole of India (b) Goods manufactured in special economic zone are not exigible to excise duty as they are excluded from the scope of charging provisions of section 3 of Central Excise Act, 1944. (c) As per Proviso to Sec 3 of CEA 1944, Excise duty on the goods manufactured in 100% export oriented undertaking will be attracted only when they are brought to any other place in India. (d) Excise duty is attracted on the excisable goods manufactured beyond Indian territorial waters, but within 150 nautical miles from the shore line as Central Excise Act, 1944 has been extended to the designated areas in the Continental Shelf and Exclusive Economic Zone of India which extends up to 200 nautical miles Inside the sea from the base line. (11) May 2008 Explain briefly with reference to rule 21 of CER 2002 relating to remission of duty the following (i) can remission of duty be granted on goods cleared from the factory after payment of duty, but which were destroyed by fire in transit. (ii) upon grant of remission of duty the cenvat credit on inputs used in final product has to be reversed. Ans (i) As per Rule 21 of CER 2002, Remission of duty is granted when the goods are lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption, at any time before removal. Hence, in present case remission of duty cannot be granted as goods have already been cleared from the factory after payment of duty. (ii) As per sub-rule (5C) of rule 3 of CENVAT Credit Rules, 2004, where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods shall be reversed.

(12)

May 2003/nov 2002/nov2003

Q 1 discuss whether remission of duty shall be granted or not, in the following cases, under the central excise rules 2002; (i) excisable goods manufactured in the factory are claimed by the manufacturer as unfit for consumption or marketing (ii) duty paid goods were damaged due to breakage in handling. (iii) Finished goods entered in Daily stock Account (DSA) were stolen from the factory. Ans- provisions regarding remission of duty are contained in Rule 21 of CER 2002. (I) Remission of duty can be granted, because as per rule 21 of CER 2002, if goods are unfit for consumption of marketing then remission of duty can be granted (II) If the breakage took place before removal then remission shall be granted. Since the goods were duty paid goods, it implies that they have been removed from the factory. Hence remission shall not be granted. (III) Remission shall not be allowed, since it is not covered by Rule 21 of CER 2002. Further it was held in Gupta Metal Sheets (2008) (TRI-LB) Loss by theft or dacoity cannot be termed as loss due to natural cause or due to unavoidable accident. Theft or dacoeity is a mere incident not an accident. Further the word loss implies that the goods are unavailable for consumption. Whereas in case of theft or dacoity, the stolen goods enter the market for consumption. Thus loss by theft or dacoity is not eligible for remission of duty. Hence remission of duty shall not be allowed. Q 2 Discuss whether remission of central excise duty will be granted in the following cases under the central excise rules 2002; I. Goods were not fully manufactured and lost by natural causes before entry in Daily Stock Account II. Goods (fully manufactured were lost during transportation of the same to the customers business premises due to unavoidable accident. III. goods ( fully manufactured) were lost by fire before removal from the factory and the assessee has received a claim from the insurance company. Ans- provisions regarding remission of duty are contained in Rule 21 of CER 2002.

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(I) there is no question of claiming remission on such goods, because no duty can be levied, i) duty is levied only if a new product emerges. (II) Remission can not be granted. As per Rule 21 of CER 2002, remission can be claimed only if the loss arises at any time before removal. And in present case the loss has taken place after removal, during transit. (III) Remission can be claimed as the loss has taken place in factory before removal. Honwever if insurance claim is also made of duty, then remission cant be claimed.

Nov 08 old Discuss whether remission of duty will be granted under the Central Excise Rules, 2002, in the following cases: (i) Loss of molasses due to auto combustion in sugar factory. (ii) Normal evaporation, storage and handling losses of petroleum products. (iii) There was natural calamity in the factory, but the department was not intimated in time. Ans (i) Yes. Loss of molasses due to auto combustion in sugar factory is an unavoidable accident and hence, remission is admissible (ii) Yes. Remission can be granted in case of normal evaporation, storage and handling losses of petroleum products. (iii) Yes. Remission cannot be denied simply because there was delay in giving intimation to the Department. If there is a natural calamity in the factory, procedural lapse cannot come in the way of benefit.

(13)

VALUATION IMPortant- PQR Export Corporation gets its product manufactured on job work basis from ABC Ltd. - an independent processor. The details of the transaction are as follows:Particulars Amount(Rs.) Cost of material sent to job worker for processing 3,500 Processor charges (including Rs.700 as processing charges and Rs.500 as his profit) 2,200 Transport charges for receiving goods at the premises of the processor 600 After processing, goods are sold by PQR Export Corporation at Rs.9,500 from the premises of ABC Ltd. You are required determine the assessable value of the goods under section 4 of the Central Excise Act. ANS The assessable value of the goods shall be Rs.9500. As per rule 10A of the Central Excise Valuation Rules, 2000, where the excisable goods are produced or manufactured by a jobworker, on behalf of a person (hereinafter referred to as principal manufacturer) and the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer. M imp & expected (1) XYZ Motors manufactures motor vehicles. It gets complete motor vehicles manufactured by sending the chassis of the motor vehicles to PQR Works, independent body builders (job-worker), for building the body as per the design/specification given by it. The practice followed is that the chassis is transferred to PQR Works on payment of appropriate central excise duty on stock transfer basis and is not sold to them. PQR Works avails the CENVAT credit of the duty paid on the chassis and clears the same on payment of duty to the Depot of XYZ Motors. The duty is discharged by PQR Works on the assessable value comprising the value of chassis and the job charges. The Depot of XYZ Motors sells the vehicles

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at a higher price than the price on which duty had been paid. Discuss whether the practice followed is correct in terms of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. AnsAs per rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, where the excisable goods are produced or manufactured by a jobworker, on behalf of a person (hereinafter referred to as principal manufacturer) and the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer. As per rule 10A (ii) of the Central Excise Valuation Rules, 2000 the assessable value for the purpose of charging central excise duty, in cases where the job-worker transfers the excisable goods to the Depot/Sale office/Distributor and/or any other sale point of the principal manufacturer, shall be the transaction value on which goods are sold by the principal manufacturer from such a place. Accordingly, after the insertion of Rule 10A, the practice of discharging the duty on cost construction method by XYZ Works is not legally correct. Thus, BD Works should pay the duty on the transaction value on which vehicles are sold by MB Motors from its depot.

(2) Ford India Pvt. Ltd. (SC)(2010) (1) appellants are engaged in the manufacture of motor vehicles (cars). (2) They sell their cars, on a principal-to-principal basis, to their dealers against payment of full sale consideration which includes mandatory warranty charges for one year. The applicable duty on the transaction value (including mandatory warranty charges) is levied at the time of removal of cars from the factory to the dealers. (3) There is no direct sale from the factory to the customers, who purchase the cars from the dealers. (4) When the dealers sell the cars to the customers, an option is given to the customers to obtain warranty for a further period of 2 years against payment of separate charges. This extended warranty is optional and not mandatory. Usually, only about 15% of the customers opt for it. Such extended warranty not included in assessable value of manufactured cars. It was held that (1) the first sale of the car is to dealers. Central Excise duty is being levied on manufacture. It is well-settled that the first sale transaction is the relevant price for the purpose of valuation of manufactured goods. (2) The extended warranty was optional, it was not a condition of sale. The sale of car and sale of extended warranty Are two different businesses, which had no direct or proximate connection. (3) The definition of transaction value in Section 4 of the Central Excise Act makes it clear that the payment must be by the buyer of the goods. In the present case, first buyer of the goods is not in the picture and makes no payment to the manufacturer or anybody else towards extended warranty. Thus the manufacturers sale of car, and sale of extended warranty are two different business carried out by the appellant and consideration of one cannot be included in the consideration of other. (4) Hence extended warranty charges were not includible in the assessable value of cars.
Que- Maruti Suzuki Ltd. was manufacturer of various types of motor vehicles chargeable to duty on ad valorem basis. Department observed that while selling the vehicles to the customers, the dealers added their own margin known as the dealers margin to the price at which the vehicles were made available to them by Maruti Suzuki Ltd. This dealers margin contained provision for rendering pre-delivery inspection and three after sale services. Hence, the Department contended that the cost of pre-delivery inspection and after sale services would form part of the assessable value of the automobile while discharging the duty liability. Decide whether contention of department is valid (3) Maruti Suzuki India Ltd.(2010)(Tri-LB) (1) The assessee, a manufacturer of motor cars sells the motor car to dealers who in turn sells them to ultimate customer. The assessee pays duty on price charged from dealers and dealer margin = [price charged from customerprice paid to Maruti ]

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(2) Under Dealership agreement, the dealer was required to carry out pre-delivery inspection and three after sale services. Dealer margin consist of [ PDI & after sale sevice and margin of dealer] (3) MSL was not paying duty on PDI & after sale service whereas department contending that these charges form part of assessable value. It was held that The definition of the expression transaction value undoubtedly uses the expression any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including.......servicing, warranty, commission or any other matter,...... The definition clause defines the transaction value to be the price paid or payable for the goods when sold. It then explains that the inclusion of identified items does not mean that they are restricted or limited to those which are specifically identified. In this inclusion part of definition, the legislature has used the word any amount at two places, thereby clearly disclosing the extensive nature of the definition. Thereafter, the definition clause specifically identifies the items which stand excluded from the transaction value, which is absolutely restrictive in nature. The pre-delivery inspection and after sale services are carried by dealer under the terms of dealership agreement between assessee and dealer. these charges are paid by buyer to dealer on behalf of assessee and the same is payable by reason of or in connection with sale of car by assessee to dealers. Hence these charges will be included in assessable value of motor cars and therefore liable to excise duty.

(4) Xerographic Ltd. (SC)(2010) M/s. Xerographic Limited, engaged in the manufacture of Plain Paper Copier Machines with the Trade mark Ricoh Murphy. Respondent was selling its products through two other companies viz. M/s. Murphy (India) Limited and M/s. Mecotronics (P) Limited. (hereinafter referred to as distributors) By a show cause notice, It was alleged that the respondent was evading excise duty by under-valuing the goods. That the respondent and the afore-mentioned two companies were related persons and therefore the transaction between the assessee and the two distributors were not on principal to principal basis. As per department the price at which the said machines were sold by two distributors will be takes as assessable value. It was held that there was no extra commercial consideration shown by the respondent while selling the goods to the afore-mentioned two companies. Even if the parties are related persons, it should be shown that the price at which goods were sold to related persons was not the Normal price at which the goods were sold to other distributors. Hence the assessable value will be the price at which sold to related distributors because no extra commercial consideration involcved in fixing the prices.

Classification (1) Pleasanttime Products(2009)(SC)- imp

according to department Scrabble was neither a puzzle, nor a toy; it was a game having boards & pieces and thus classifiable under sub-headng 9504.90- liable to duty @ 16%. The Court opined that Scrabble was not a puzzle/crossword. 1) The difference between a game and a puzzle is brought out by three distinct features, viz., outcome, cluechance and skill. In a puzzle, the outcome is fixed or pre-determined which is not there in Scrabble. 2) In a Scrabble there are no clues whereas in crossword puzzle, as stated above, words are written according to clues. 3) Hence, the essential characteristic of crossword to lay down clues and having a solution is absent from Scrabble. 4) Thus, Scrabble would not fall in the category or class mentioned in sub-heading 9503.00, namely, puzzles of all kinds.

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5) As per the dictionary meaning, Scrabble is a board game in which players use lettered tiles to create words in a crossword fashion. 6) Applying the dictionary meaning, the Apex Court held that Scrabble was a board game. It was not a puzzle. In the circumstances, it would fall under heading 95.04 and not under sub-heading 9503.00 of the CETA.

Que- whether the carpet, in which jute is predominant by weight, but the surface is entirely of polypropylene, should be classified as jute carpet or polypropylene carpet CHAMPDANY INDUSTRIES LIMITED (2009)(SC)- M. Imp & Expected The assessee was engaged in the manufacture of carpets in which jute predominated by weight over every other single textile material. However, revenue contended that the same should be classified as polypropylene carpet. In this regard, the Apex court considered the following points 1) Relying on note 1 to chapter 57, revenue argued that the surface of the carpet being entirely of polypropylene, the same should be classified as polypropylene carpet. The SC viewed that role of chapter note is limited to decide whether the goods in question are carpets and other textile floor coverings for the puposes of chapter 57 or not. Once the goods are carpets and falling under chapter 57, the role of chapter note 1 comes to an end Further referring to the relevant statutory provisions laid down in section notes 2(A) and 14(A) of Section XI, the Apex court held since the impugned goods admittedly fell under chapter 57 and consisted of more than two textile materials, it had to be classified on the basis of that textile material which predominated by weight over any other single textile material. As, in the goods in question, jute admittedly predominated by weight over each other single textile material, the said carpet could only be classified as jute carpets and nothing else. The contrary interpretation given by the revenue was incorrect 2) Relying on the concept of essentiality test, revenue argued that the exposed surgace of the carpet was polypropylene fiber and not jute, these goods could not be classified as jute carpets. The court held the said argument of he revenue t be erroneous because it was against the principle of predominance test the Apex Court pronounced that the said carpets shall be classified as jute carpets and note as polypropylene carpet. 1 the note 1 to chapter 57 of the Excise tariff is reproduced as below for the purposes of this chapter, the term carpets and other textile floor coverings meaning floor coverings in which textile materials serve as the exposed surface of the article when in use and includes article having the characteristics of textile floor coverings but intended for use for other purposes. 2. section Notes 2(A) and 14(A) of Section XI of the Central Excise Tariff Act, 1985 is set out as follows2(A) goods classifiable in chapter 50 to 55 or in heading 5809 or 5902 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile material which predominates by weight over any other single textile material. 14(A) products of Chapter 56 to 63 containing two or more textile materials which would be selected under note 2 to this section for the classification of a product of chapter 50 to 55 or of heading 5809 consisting of the same textile materials Note- the heading in the case laws mentioned above may not co-relate with the heading of the present Excise Tariff since case is on facts which are old.

M/s CPS Textiles P Ltd. v. Joint Secretary 2010 (255) ELT 228 (Mad.) CPS Textiles P Ltd. v. Joint Secretary 2010 (255) ELT 228 (Mad.) company is engaged in manufacture and export of Knitted Garments. After completion of the exports, petitionercompany claimed drawback on the export of the goods. Department issued notice/letter stating that excess drawback was claimed and paid due to wrong classification and called upon the petitioner to repay the excess amount

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the following 2 issues for consideration are 1. Whether the description of the goods as per the documents submitted along with the Shipping Bill be a relevant criterion for the purpose of classification, if not otherwise disputed on the basis of any technical opinion or test? 2. Whether a separate notice is required to be issued for payment of interest which is mandatory and automatically applies for recovery of excess drawback? It was held that 1. Description of goods as per the documents submitted along with shipping bill will be a relevant criteria for the purpose of classification, if not otherwise disputed on the basis of any technical opinion or test Petitioner cannot plead that exported goods should be classified under different headings contrary to description given in the invoice and the shipping bill which have been assessed and cleared for export 2. insofar as the interest is concerned Section 75A(2) of the Customs Act, 1962 reads as follows :Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable under this Act or the rules made thereunder, the claimant shall, within a period of two months from the date of demand, pay in addition to the said amount of drawback, interest at the rate fixed under section 28-AB and the amount of interest shall be calculated for the period beginning from the date of payment of such drawback to the claimant till the date of recovery of such drawback. On reading of Section 75A(2) of the Customs Act, it is clear that when the claimant is liable to pay the excess amount of drawback he is liable to pay interest as well. The section provides for payment of interest automatically along with excess drawback. No notice need be issued separately as the payment of interest become automatic, once it is held that excess drawback has to be repaid M/s Xerox India Ltd(SC)(2010) Whether the Xerox Regal 5799 which are multi functional machiner performing function of Printer, fax machine, copier and or scanner will be classified under 8471 (specific heading)- automatic data processing machines and units therof 8471.60 inputs or output units whether or not containing storage units in the same housing 8479- ( residuary heading)- machines and mechanical appliances having individual functions not specified or included elsewhere in this chapter It was held that Xerox Regal classified under heading 8471 1) Because 85% of its total parts and components along with manufacturing cost allocated to printing. Hence printing is principal function and as per rule 3(b) of GIR classifiable as multi functional machine. 2) Further the conditions of chapter note 5(B) are also fulfilled as it is be used principally in ADPM, connectable to central processing unit and able to accept data in form of codes or signals which can be used by system. Chapter note- 5 (B)- a unit is regared as being a part of complete system if it meets all the following conditions: (a) it is of kind solely or principally used in an automatic data processing system (b) it is connectable to the central processing unit either directly or through one or more other units and (c) it is able to accept or deliver data in form 9 codes or signals) which can be used by the system.

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Cenvat credit

(1) MADRAS CEMENTS LTD. (2010)(SC) Capital goods used in mines - Mines if captive mines so as to constitute one integrated unit with concerned cement factory, Cenvat/Modvat credit available - Mines if not captive mines but supply to various other cement companies of different assessees and goods used in mines outside factory of assessee, credit not available under appropriate Rules Cenvat/Modvat - Input used in mines - Explosives, lubricating oil, etc. used in mines - Issue squarely covered by decision of Apex Court in case of Vikram Cement [2006 (194) E.L.T. 3 (S.C.)] cenvat credit on input allowed even if they are not used in the factory of production but are used in mines. Vardhman Ltd., engaged in manufacturer of excisable goods at Delhi, is registered as Input Service Distributor. It has its units situated at Meerut and Moradabad also. It pays the service tax of ` 12,50,000 for services received by it and its units from various service providers. Thereafter, it distributes credit of the service tax to its various units. The unit situated at Meerut availed and utilized the said credit for payment of central excise duty on its final products. Revenue denies the credit availed and utilised by the Meerut unit. It contends that credit utilised by Meerut unit is in respect of the advertising services which were obtained by Moradabad unit. Examine the veracity of the Departments contention with reference to a decided case law. ECOF INDUSTRIES PVT. LTD. (2011)(Kar) Cenvat credit of Service tax - Input service - Manufacturer with more than one unit The assesse was having Head office at Chennai registered as ISD and having units at cuttack and Kolar. For various services like insurance, telephones, advertising, etc., AVAILED BY UNIT IN CUTTACK but Credit of Service tax thereon distributed to unit in Kolar by issuing Invoice by head office, who used it for payment of Central Excise Duty - HELD : Credit could not be denied on ground that input services were not used/received in relation to manufacture of goods in Kolar - Registered input service distributor is entitled to distribute credit, subject to conditions prescribed in Rule 7 of Cenvat Credit Rules, 2004. [Union of India Vs M/s IndSwift Laboratories Ltd 2011 TIOL 21 (SC)] Interest on Wrong Availment of CENVAT Credit Interest has to be charged from the date of availing credit and not from the date of utilization. Hence, interest has to be charged even in a case where CENVAT is wrongly availed and is reversed before utilization of such credit. Reasoning: As per Rule 14, where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. There is no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or `has been erroneously refunded' as the word "AND". On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest. (1) TATA ADVANCE MATERIALS(2009)(Tri) 1) The appellants purchased Capital Machinery in 1998 and availed Cenvat credit on the said Capital Goods. They were put to use in manufacturing the final products. However, in 2003, a fire accident occurred and the goods were destroyed. They were cleared as scrap without payment of duty. Insurance was also claimed. 2) Revenue proceeded against the appellants for the reversal of the Cenvat credit taken on the Capital Goods. The Original Authority confirmed the demand. He further imposed penalty under Section 11AC along with demand of interest.

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On a very careful consideration of the issue, I find that the goods have been put to use from 1998 upto 2003. The appellants had legally availed the Cenvat credit and further used the same for payment of duty on the final products. The goods were destroyed in 2003 due to a fire accident. There is no legal provision for demanding the Cenvat credit taken on the said goods during the relevant period. The fact that the appellants claimed insurance, which is inclusive of Excise Duty, is not at all relevant. No reversal of CCR

Author note- but presently if cleared as waste and scrap then duty leviable on transaction value.

In case of combo-pack of bought out tooth brush sold alongwith tooth paste manufactured by assessee; is tooth brush eligible as input under the CENVAT Credit Rules, 2004? (2) CCus. v. Prime Health Care Products 2011(Guj) The assessee was engaged in the manufacture of tooth paste. It was sold as a combo pack of tooth paste and a bought out tooth brush. - No extra amount recovered from consumer on toothbrush - The assessee availed CENVAT credit of central excise duty paid on the tooth brush IT WAS HELD : Combo-pack reached its final stage of marketability only after packet containing tooth brush was placed with tooth paste - Also, re-packing, labelling etc. amounted to manufacture - In that view, tooth brush was an input on which assessee was entitled to credit of duty paid. (3) RAJASTHAN SPINNING & WEAVING MILLS LTD. (SC)(2010) Steel plates and M.S. channels used in fabrication of chimney for diesel generating set falling under chapter 85 of CETA 1985. - User test evolved in Jawahar Mills judgment [2001 (132) E.L.T. 3 (S.C.)] applicable to instant case No case that steel plates and M.S. channels not required for fabrication of chimney as integral part of diesel generating set - Mandatory under pollution control laws that all plants emitting effluents to be equipped with apparatus to get rid of effluent gases and any equipment used therefor to be treated as accessory to goods specified as capital goods - Impugned Tribunal order holding steel plates and M.S. channel was accessory to diesel generating set and hence capital goods under rule 2(a)(A) of CCR 2004 and credit thereon admissible (4) Bhuwalka Steel Industries (2010)(Tri) (2) Rule 3(1) of the Cenvat Credit Rules allow credit in respect of input or capital goods actually received in the factory of manufacturer of the final product. In a case where either the entire quantity of goods not received in the factory of manufacturer of the final product, there cannot be any question of allowing any credit in respect of such goods not received. (3) However, it cannot be denied that some goods are susceptible to transit loss on account of such goods being of hygroscopic nature or of volatile nature. There can also be cases of difference in weight on account of difference in the weighing scales at both ends, i.e., at the point of despatch and at the point of receipt. Whether CCR allowed in that case? (4) There may be difference in quantity received and invoiced. Such difference is termed as transit loss and if such loss falls within the tolerance/normal limits or industry norms, CCR will be allowed on whole of the quantity of input as stated in the invoice and no disallowance of CCR.

Whether welding electrodes used in repairs/maintenance of plant and machinery can be considered as input as defined under rule 2(g) of the erstwhile CENVAT Credit Rules, 2002
(5) Ambuja Cements Eastern Ltd. (2010) (Chattisgarh) Ambuja Cement Ltd., engaged in manufacture of clinker and cement, availed the credit on welding electrodes used in manufacture of parts and components of the capital goods and also in repairs and maintenance of the capital goods within the factory of production. The Department denied the CENVAT credit on welding electrodes held that welding electrodes used in repairs and maintenance of plant and machinery were inputs as defined under rule 2(k) and thus, entitled for CENVAT credit.

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(6) BANSAL ALLOYS & METALS LTD.(2010) (Tri) The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of Iron and Steel Ingots classifiable under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. They were availing Cenvat credit benefit on final product. They also paid service tax on the transportation of goods by road. The appellants removed the inputs as such after reversal of Cenvat credit on input availed by them under Rule 3(5) of Cenvat Credit Rules, 2004 during the period January, 2005 to October, 2005. It has been alleged that the appellants had not reversed the Cenvat credit of service tax availed in respect of transportation of goods by road. From the plain reading of Rule 3(5) it is clear that the manufacturer shall be required to pay an amount equal to the credit in respect of such input or capital goods. On the other hand, Rule 3(1) allowed the manufacturer to take credit on any input or capital goods and any input service. Rule 3(5) does not indicate for payment of equal amount in respect of credit of input service. It is well settled that while interpreting the statute no addition or subtraction can be made and the words used therein must be given their plain meaning. So, the appellants are required to reverse equal amount of input credit on removal of the inputs as such under Rule 3(5) of the Rules. There is no provision for payment of credit on input service. So, reversal of Credit on input service in respect of Goods Transportation Agency service is not justified. (7) Tata engineering Locomotive co. Ltd. (2010)( Bom) The applicant is engaged in the manufacture of motor vehicles (final product). It has its factory at Pune (Pimpri Chinchwad) in the State of Maharashtra and at different places in different parts of the country. Motor vehicles, chassis of different models are manufactured in its Pimpri Chinchwad works. In the process of manufacture of motor vehicles, the applicant uses large number of components, It is stated that before any raw materials which are used for manufacture are subjected to what is described as destructive test. These parts are subjected to stresses and strains in order to test their tensile strength and other qualities up to a point where the stress on them is greater than they have withstood and they break or get so distorted that they cannot be put to use. After testing the remnants of these parts are cleared as scrap on payment of duty appropriate to scrap. The applicants had taken cenvat credit of the duty paid on these inputs. The department was of the view that the conversion of the parts which were tested into scrap did not take place during the course of manufacture and cenvat credit not allowed CCR available if inputs used in or in relation to manufacture of finished goods whether input is physically present or not in finished excisable goods. in the age of global competition, no manufacturer could afford to push its product in the national or international market without achieving certain level of quality in the product. The quality control has become integral part of the manufacturing process, which is required to be undertaken either before the commencement of actual production or subsequent thereto depending upon the nature of the product. Laboratory test or quality check is always in relation to the manufacture of finished goods. It is immaterial whether or not the input is physically present in the final finished product as such, in our considered view, the laboratory test in relation to the manufacture of final product is a part of manufacture. Therefore CCR allowed on input consumed in quality control test and cleared as scrap

(8) Can CENVAT credit be taken on the basis of private challans? CCEx. v. Stelko Strips Ltd. 2010 (P & H) The issue under consideration before the High Court in the instant case was that whether private challans other than the prescribed documents are valid for taking MODVAT credit Document for taking credit - Private challans - Credit can be taken on the strength of private challans, as the same was not found to be taken and there was a proper certification that duty had been paid - Rule 9 of Cenvat Credit Rules, 2004. (9) Fibre Foils Ltd.(2009)(Bom)- IMP Whether tribunal is empowered to reduce penalty imposable under rule 15 of CCR 2004

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The Bombay High Court noted that from the plain or literal reading of the said sub-rule, it would be clear that the language used is shall. Hence the court pronounced that undoubtedly the language is mandatory and there is no discretion vested in the authorities in the mantter of imnposition of penalty. The penalty had to be imposed by the A.O based on the material available and not on the defence which the assessee might have thaken. Hence the cout held that the penalty has to be equal to the amount of duty which is payable and not less than that.

(10) Green Alloys Pvt. Ltd.(2009)(P&H)-IMP Whether input can be confiscated under rule 15 of CCR 2004 on the ground of non-accountal of inputs in the records maintained in computer. The goods seized have been found to be entered in the stock register of assessee In these circumstances, it cannot be held that there was a clear case for confiscation only on the ground that in the computer in excel sheet, some of the goods were not entered. It is not the case that there was wrongful availment of Cenvat credit or even in respect of goods which were entered in the register but not entered in the computer. Presumption of wrong availment of Cenvat credit on the basis of the fact that there was little value addition to the finished product over and above the value of the raw material, is a debatable issue. Thus, it could not be said that there was strong prima facie case for confiscation of goods

(11) PQR Ltd. was engaged in the manufacture of electricity using naptha as fuel for generation of electricity. The electricity was partly used captively and partly sold outside to its joint ventures, vendors or given to the grid for distribution. PQR Ltd. claimed the CENVAT credit on the naptha used in the manufacture of the electricity. However, Department denied the credit on the ground that CENVAT credit on naptha could not be admitted because part of the electricity was cleared outside the factory to the joint ventures, vendors etc. Examine the veracity of the action taken by the Department with the help of a decided case law. Maruti SuZuki (SC) (2009)- IMP Whether CCR allowed on naptha used for generation electricity cleared to Joint venture/Vendors? Decision- NO, to the extent the excess electricity is cleared to the grid for distribution or to the joint ventures, vendors, and that too for a price (sale) the process and the use test fails. In such a case, it cannot be said that electricity generated is used in or in relation to the manufacture of final product, within the factory. Therefore, to the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of input in Rule 2(g) of the CENVAT Credit Rules, 2002.

Latest cases from May 09 to OCT 09 Jaya Mills Ltd.(2009)(Tri) Confiscation of goods - Stock of cotton yarn seized from factory - No evidence on record to show that the goods were likely to be removed clandestinely - Confiscation not justifiable - Rule 25 of Central Excise Rules, 2002. Confiscation of goods seized from vehicle - Duty paid by party - Goods not to be confiscated - Rule 25 of Central Excise Rules, 2002. Cenvat/Modvat - Capital goods - Wrong availment of credit on capital goods on which depreciation claimed for income-tax purposes - Assessee rectified the mistake of claiming depreciation of value of capital goods in relevant income-tax return - Assessee filed revised income-tax return without claiming depreciation - CENVAT credit of duty paid on capital goods admissible - Rule 14 of Cenvat Credit Rules, 2004.

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(12) whether penalty can be imposed on the directors of the company for the wrong CENVAT credit availed by the company? Ashok Kumar H. Fulwadhya v. UOI 2010 (Bom.) It was held that words any person rule 15(1) of the CENVAT Credit Rules, 2004] clearly indicate that the person who has availed CENVAT credit shall only be the person liable to the penalty. It was held that, CENVAT credit had been availed by the company and the penalty under rule 15(1)] was imposable only on the person who had availed CENVAT credit [in present case company], who was a manufacturer. The petitioners-directors of the company could not be said to be manufacturer availing CENVAT credit.

Small Scale Industry

Nov 08 to April 09 (1) Unison Electronics Pvt. Ltd. (2009)(SC) The assessee, a manufacturer of ice-cream makers and popcorn makers, used to avail of the benefit of SSI exemption. The said goods were s0ld under their own brand name cremica. However, in case of sale to Unite TeleShopping (UTS) and tele-Shopping Network (TSN), the supervisors ofr UTS and TSN used to examine the goods and affix a sticker thereon containing the names of UTS/TSN. The department denied SSI-exemption in respect of goods bearing the names/symbols of UTS/TSN contending that the same amounts to affixation of brand name so as to disentiltle the exemption. Held that, the sticker containing names/symbols of UTS/TSN wer fixed after quality checking. Thefefore, the same was a brand name used for the purpose of indicating a connection in the course of trade between the goods and UTS/TSN. Accordingly, the assessee was not entitled to SSI-exemption in respect of goods sold to UTD/TSN. (2) Whether the clearances of two firms having common brand name, goods being manufactured in the same factory premises, having common management and accounts etc. can be clubbed for the purposes of SSI exemption?

CCE v. Deora Engineering Works 2010 (255) ELT 184 (P & H) Facts of the case: The respondent-assessee was using the brand name of "Dominant" while clearing the goods manufactured by it. One more manufacturing unit was also engaged in the manufacture and clearance of the same goods under the same brand name of "Dominant" in the same premises. Both the firms had common partners, the brand name was also common and the machines were cleared from both the units under common serial number having common accounts. Department clubbed the clearance of the goods from the both the units for the purposes of SSI exemption because both the units belong to same persons and they had common machinery, staff and office premises etc. The High Court held that indisputably, in the instant case, that the partners of both the firms were common and belonged to same family. They were manufacturing and clearing the goods by the common brand name, manufactured in the same factory premises, having common management and accounts etc. Therefore, High Court was of the considered view that the clearance of the common goods under the same brand name manufactured by both the firms had been rightly clubbed.
Demand & Refund[Hans Steel Rolling Mill Vs CCE, 2011 TIOL 30 (SC)]

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Facts: Assessee opted for the Compounded Levy Scheme for determination and payment of Excise Duty Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997. The department issued Show Cause Notice u/s 11A demanding additional duty from the assessee. The question is whether the departments notice is valid or not. Decision: The Department cannot issue notice u/s 11A for nonpayment under Compounded Levy Scheme. Reasoning: Since the assessee is governed by the Compounded Levy Scheme, the regular provisions of the act relating to assessment shall not be applicable. The elements of one scheme of tax administration cannot be extended to a different scheme of tax administration as it would disturb the smooth functioning of that unique scheme. The Time limit prescribed u/s 11A of the Act shall not be applicable for recoveries under Compounded Levy Scheme. AUTHOR NOTE- BUT PRESENTLY THIS CASE HAS LOST ITS RELEVANCE, AFTER INSERTION OF NEW SEC 3A BY F. ACT 2008 AND RULES MADE THEREUNDER SEC 11A HAS BEEN MADE APPLICABLE ON COMPOUNDED LEVY SCHEME.

(1) Accrapac (India) Pvt. Ltd. 2010 (Guj.) that the respondent-assessee is engaged in manufacture of various toilet preparations such as after-shave lotion, deo-spray, mouthwash, skin creams, shampoos, etc. One of the main ingredients used in the manufacture of various items is Extra Natural Alcohol (ENA). The assessee procures ENA from the local market on payment of duty, to which Di-ethyl Phthalate (DEP) is added so as to denature it and render the same unfit for human consumption. The officers of DGCEI visited the factory of the respondent on 29-8-2001 and found that the addition of DEP to ENA results in the manufacture of an intermediate product i.e. Denatured-ethyl Alcohol, which is a specified product liable to central excise duty the issue for consideration is that non-disclosure as regards manufacture of Denatured Ethly Alcohol amounts to suppression of material facts and hence it attracts the larger period of limitation under section 11A. it was held that, As regards invocation of the extended period of limitation, the Tribunal noted that denaturing process in the Cosmetic Industry is a statutory requirement under the Medicinal & Toilet Preparations (M&TP) Act. Thus addition of DEP to ENA to make the same unfit for human consumption was a statutory requirement. The fact that the respondent was manufacturing cosmetics, was admittedly known to the department. Hence, failure on the part of the respondent to declare that it was adding DEP to ENA cannot be held to be suppression, since this was a well known fact, which the excise authorities are required to be in knowledge of. That such facts known to the both sides would not render omission, if any, on the part of the assessee into suppression or mis-statement with an intention to evade payment of duty. The Tribunal also noted that as similarly situated assesses were not paying duty on denatured ethyl alcohol, the respondent entertained a reasonable belief that it was not liable to pay excise duty on such product. The Tribunal was accordingly of the view that the department was not justified in invoking the larger period of limitation (2) Gem Properties (P) Ltd. 2010 (Kar) The assessee is engaged in the manufacture of HDPE sacks, falling under Chapter 6307 of Central Excise Tariff Act, 1985. The assessee had paid duty amounting to Rs. 7,11,039/- on HDPE tapes which is an intermediary product in the manufacture of HDPE sacks. The assessee contended that the assessee was not liable to pay the duty and therefore an application came to be filed claiming refund of Rs. 7,11,039/-. The claim of the assessee was rejected by the department that he was not entitled to claim refund as it would amount to unjust enrichment The issue for consideration is that Merely because assessee has sustained loss more than the refund claim, whether proves that it is not a case of unjust enrichment even though the assessee failed to prove that duty in the cost of production is not included? The Chartered Accountant certificate clearly shows that the cost of the duty is also included while computing the cost of production of the materia By looking into the certificate, we are of the opinion while computing the cost of the product, the assessee has calculated the duty. It is no doubt true that the assessee has sustained loss during relevant assessment year. Merely because the assessee has sustained the loss, cannot be a ground to hold it is not

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a case of any unjust enrichment as long as the assessee proves before the authorities that assessee has sustained loss on account of non-inclusive of the duty. Hence assessee will not be entitled to refund.

REFUND OF EXCISE DUTY Whether Chartered Accountants certificate alone is sufficient evidence to rule out the unjust enrichment under customs? BPL Ltd. 2010 (Mad.) Assessee had not produced any document other than the certificate issued by the Chartered Accountant to substantiate its refund claim. The certificate issued by the Chartered Accountant was merely a piece of evidence acknowledging certain facts. It would not automatically entitle a person to refund in the absence of any other evidence. Hence, the respondent could not be granted refund merely on the basis of the said certificate. (1) Section 27 of the Customs Act, 1962 Can the assessee be denied the refund claim only on the basis of contention that he had produced the attested copy of TR-6 challan and not the original of the TR-6 challan? Narayan Nambiar Meloths v. CCus. 2010 (251) E.L.T. 57 (Ker.) Facts of the case are that assessee made application for refund alongwith attested copy of TR-6 Challan Department denied to grant refund on the reasoning that production of original of the TR-6 challan was a mandatory requirement for processing the refund application. The Kerela High Court held that assessee will be entitled to refund claim because of following reasons1. attested copy of TR 6 Challan was purely a technical contention and could not be accepted. 2. as per clarification issued vide F.No. 275/37/2K , dated 2-1-2002, a simple letter from the person who made the deposit, requesting for return of the amount, along with the appellate order and attested Xerox copy of the Challan in Form TR-6 would suffice for processing the refund application. Hence it can be concluded that assesee cant be denied for claim of refund. Author Note- Now TR-6 challan replaced by GAR-7 challan. (2) . AP SPINTEX LTD- 2009- RAJSTHAN HC ED recovered from buyer credit notes issued subsequently Applicability of Doctrine of Unjust Enrichment Sec 11-B of CEA, 1944 provides that any refund of excise duty shall be credited to the Consumer Welfare Fund. However, it shall be given to the applicant if duty of excise has been paid and borne by the manufacturer. In a case where assessee manufacturer initially recovered excise duty from the buyer and then subsequently issued credit note to the buyer, then whether this can be treated as equivalent as excise duty paid and borne by the manufacturer. it was held that When debit note is issued by the buyer and corresponding credit note is issued by the seller, price of goods stand reduced to the extent of debit note and credit note. When debit note and credit note are issued and effected, it cannot be assumed that incidence of duty has been passed on the purchaser. In other words, doctrine of unjust enrichment shall not be applicable in such situation and the appellant shall be entitled to the refund .

Can the excess duty paid by the seller be refunded on the basis of the debit note issued by the buyer? CCE v. Techno Rubber Industries Pvt Ltd. 2011 (272) E.L.T. 191 (Kar.) Facts of the case: The assessee cleared the goods paying higher rate of excise duty in the month of March, although the rate of duty on the said goods had been reduced in the budget of the same financial year. However, the buyer refused to pay the higher duty which the assessee had paid by mistake. The customer raised a debit note in his name in the month of June of the same year. The assessee applied for the refund of

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excess excise duty paid. Revenue rejected his claim on the ground that incidence of the duty had been passed by him to the buyer. Department contended that since the debit note was issued in the month of June and not March, it could not be the basis for refund. It was held that once it is admitted that the Department has received excess duty, they are bound to refund it to the person who has paid the excess duty. If the buyer of the goods has paid that excess duty, he would have been entitled to the said refund. In the instant case, when the buyer had refused to pay excess duty claimed and had raised a debit note, it means that the assessee had not received that excess duty which he had paid to the Department. Hence Department was bound to refund to the assessee the excess duty paid.

Appeals RDC CONCRETE (INDIA) P. LTD. (SC)(2011) In an appeal proceeding, the CESTAT concluded that (i) Assessee and buyer are inter-connected company and (ii) Appointment of department cost accountant was valid in law. On being rectification application filed by the assessee the CESTAT altogether changes its conclusion that (i) Assessee and buyer are not inter-connected company and (ii) Cost accountant appointed must be in practice for purpose of valuation audit u/s 14A. Department alleged that rectification order amounts to review which was not permissible. It was held that the CESTAT has modified its order dated 4th November, 2008 in such a way as if the respondent assessee had filed an appeal against the said order and the CESTAT has virtually allowed the appeal against its own order. Re-appreciation of evidence on a debatable point or reconsideration of an incorrect application of law are not mistake apparent from record. Hence CESTAT cant do so. VOLVO INDIA LTD. (2011)(kar) Appeal to High Court in Service tax matter Royalty charges for transfer of know-how - Whether Service tax is leviable on it as Consulting Engineer service. the question that arises for our consideration in this appeal is whether the assessee is liable to pay service tax under the aforesaid agreements. In other words, the question relates to payment of rate of duty/tax. Whether Against CESTAT order appeal can be made to High court. HELD : Question relates to rate of tax, for which appeal from CESTAT order lies to Supreme Court, and High Court has no jurisdiction over it Because, the said question falls squarely within the exception carved cut in Section 35G, an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment, (1) Electronics Corporation of India Ltd. v. Union of India, (SC) The idea behind setting up of the Committee, initially called a High-Powered Committee (HPC), later on called as Committee of Secretaries (CoS) and finally termed as Committee on Disputes (CoD) was to ensure that resources of the State are not frittered away in inter se litigations between entities of the State, which could be best resolved, by an empowered CoD. The machinery contemplated was only to ensure that no litigation comes to Court without the parties having had an opportunity of conciliation before an in-house committee. Whilst the principle and the object behind the aforestated Orders is unexceptionable and laudatory, experience has shown that despite best

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efforts of the CoD, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation. Even on same set of facts, clearance is given in one case and refused in the other. This has led a PSU to institute a SLP in the Supreme Court on the ground of discrimination. The mechanism has led to delay in filing of civil appeals causing loss of revenue. In many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases, there could be overlapping of jurisdictions between, e.g., SEBI and insurance regulators. Civil appeals lie to the Supreme Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario, time has come to recall the directions of the Supreme Court in its various earlier Orders setting up the said mechanism

Is the CESTAT order disposing appeal on a totally new ground sustainable?

CCE v. Gujchem Distillers 2011 (270) E.L.T. 338 (Bom.)

The High Court elucidated that in the instant case, the CESTAT had disposed of the appeal on a ground which was not urged by the respondents before the adjudicating authority. Thereby the CESTAT had disposed of the appeal on a totally new ground which was not laid before the adjudicating authority and which would entail a finding on facts. The High Court explained that had the CESTAT not been satisfied with the approach of the adjudicating authority, it should have remanded the matter back to the adjudicating authority. However, it could not have assumed to itself the jurisdiction to decide the appeal on a ground which had not been urged before the lower authorities. (2) WHETHER THE APPEAL FILED BY COMMISIONER HIMSELF AND NOT BY SUBORDINATE OFICER BASED ON AUTHORIZATION UNDER SECTION 35B, IS MAINTAINABLE ? Shree Ganesh Dyeing & Ptng. Works 2008 (Guj.)- M. IMP In the instant case, the assessee raised objection as to maintainability of the appeal on the ground that the appeal had been filed by Commissioner himself, instead of by the Central Excise Officer authorized by the Commissioner, as required by section 35B(2) of the Central Excise Act, 1944. Appeal by Department - Authorization - Appeal filed by Commissioner himself and not by subordinate officer based on authorization therefor, whether maintainable - Commissioner vested with discretion to give opinion as legality or propriety of impugned order and also to file appeal or not - Formation of opinion by Commissioner as to legality or propriety of impugned order, a pre-requisite and mandatory to direct filing of appeal - Commissioner empowered to file appeal himself when vested with power to delegate such work - Appeal maintainable and Tribunal directed to decide as per law - Section 35B of Central Excise Act, 1944.

(3) Whether the Department is not required to state any reason while filing an application for condonation of delay in filing the appeal to CESTAT- IMP CCEx Vs Chennai Vs CESTAT(2009)(Mad)- in the absence of sufficient cause, the tribunal could not by itself invent reason and grant the relief as sought by the petitioner.

Application for condonation of delay filed with CESTAT- but no reason specified for delay
Department file appeal late

Whether Department also to give reason for delay - yes

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(4) Can a writ petition be filed against the order of waiver of pre-deposit under first proviso to sec 35F. Cisco Systems India Pvt. Limited (2009)(Del)- IMP as long as discretion is not excercised in an arbitrary manner, a writ court would not interfere with order of waiver of pre-deposit. Advance Ruling 1) Can a writ petition be invoked against advance rulings?- V. IMP Ans It was held by high court in in case of UAE Exchange Centre Ltd. v. UOI 2009 , that the ruling by Advance Rulings Authority is binding on the applicant, the departmental officers concerned and transaction on which the ruling is sought. The decision of the Authority is not final. The High Court is of the opinion that the Courts would have jurisdiction to entertain actions under Article 226 of the Constitution for writ petition. Therefore, a writ petition can be invoked against advance rulings.

SETTLEMENT COMMISSION M. IMP & EXPECTED 2) Bawa Traders Pvt. Ltd. filed an application with the Settlement Commission under section 32E of the Central Excise Act, 1944. However, as the applicant was not willing to accept the duty liability settled by the Commission, it sent the case back to the adjudicating authority in terms of section 32L(1) of the Act. It directed the adjudicating officer to dispose the case in accordance with the provisions of the Act as if no application had been made to Settlement Commission. When case came up before Revenue for adjudication, it decided that since as per section 32M, any order made by the Settlement Commission was conclusive; the figure of duty liability fixed by the Settlement Commission had attained finality. Hence, Bawa Traders Pvt. Ltd. was required to make payment of the said amount along with penalty and interest. Do you think that, in the light of facts and circumstances of the instant case, Revenue was justified in considering the order passed by the Settlement Commission to be the final order of adjudication? Ans- No, in the light of facts and circumstances of the instant case, Revenue was not justified in considering the order passed by the Settlement Commission to be the final order of adjudication. The facts of the given case are similar to the case of Vishwa Traders Pvt. Ltd. v. UOI 2009 (241) E.L.T. 164 (Guj.) wherein the High Court held that under section 32L(1), once the Settlement Commission forms an opinion that any person who made an application for settlement under section 32E of the Act has not cooperated in the proceedings before the Commission, the Settlement Commission may send the case back to the adjudicating authority to dispose of the case in accordance with provisions of the Act, as if, no application under section 32E has been made. If there is no application before Settlement Commission, there can be no question of any final order of adjudication. Consequently, the order passed by the Settlement Commission under section 32L(1) cannot be considered to be the final order of adjudication. The High Court, while interpreting section 32L(3), held that for working out the time limit prescribed under section 11A for recovery of duties, the period commencing from the date of application to the Settlement Commission to the date of receipt of the order under section 32L by the adjudicating authority, shall be excluded. Therefore, the balance period available from the date of making of application before Settlement Commission shall be available to the adjudicating authority for making an order assessing duty liability of an assessee. Hence, the High Court pronounced that Revenue shall continue the adjudication proceedings from the stage at which the proceedings before Settlement Commission commenced

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3)

Is the Settlement Commission empowered to grant the benefit under the proviso to section 11AC in cases of settlement? - IMP

The Court, in case of Ashwani Tobacco Co. Pvt. Ltd. v. UOI 2010 (251) E.L.T. 162 (Del.), held that benefit under the proviso to section 11AC could not be granted by the Settlement Commission in the cases of settlement. Settlement is in distinct from adjudication before Central Excise Officer - Scheme of provisions in Chapter V of Central Excise Act, 1944 is settlement and not adjudication - Powers of Central Excise Officer vested in Settlement Commission to give finality to its orders - Order of settlement different from adjudication order as adjudicating Central Excise Officer not empowered to grant immunity from prosecution while determining duty liability - Therefore, the benefit under the proviso to section 11AC, which could have been availed when the matter of determination of duty was before a Central Excise Officer would not be attracted to the cases of a settlement, undertaken under the provisions of Chapter-V of the said Act. Section 127M of the Customs Act, 1962 4) Can the order of the Settlement Commission be considered to be a judicial proceeding? The High Court observed that as per section 127M of the Customs Act, 1962, the order passed by the Settlement Commissioner is in judicial proceedings and it is a judicial order. The above is sue has been decided in case of East and West Shipping Agency 2010-HC-MUM Facts of the case are that The Custom House Agent License of the respondents was suspended on the ground that authorized agent of the respondents had committed misconduct by taking active part in the act of smuggling and has thus violated the Custom House Agent Licensing Regulations, 2004. During pendency of the misconduct proceedings, respondents approached Settlement Commission. The Settlement Commission after hearing all the parties held that Revenue had failed to prove that the authorized agent of the respondent Custom House Agent (CHA) had a conscious knowledge of mis-declaration of goods. On the basis of said order of the Settlement Commission, Tribunal decided the case in favour of the respondents and dropped the misconduct proceedings against them. The appellants challenged the Tribunals order alleging that the order passed by the Settlement Commission was ab-initio, null and void being without jurisdiction. The High Court observed that as per section 127M of the Customs Act, 1962, the order passed by the Settlement Commissioner is in judicial proceedings and it is a judicial order. Further, the appellants had not challenged the said order. Hence, the order passed by the Settlement Commissioner could not be brushed aside considering the scheme of Chapter XVIA. It must be held good in law so long as it is not set aside. Considering the facts and circumstances of the case, the High Court answered the question of law in affirmative in favour of the respondents and against the appellant. 5) In case of a Settlement Commission's order, can the assessee be permitted to accept what is favourable to them and reject what is not? Sanghvi Reconditioners Pvt. Ltd. V. UOI 2010 (251) ELT 3 (SC) The Apex Court held that the application under section 127B of the Customs Act, 1962 is maintainable only if the duty liability is disclosed. The disclosure contemplated is in the nature of voluntary disclosure of concealed additional customs duty. The Court further opined that having opted to get their customs duty liability settled by the Settlement Commission, the appellant could not be permitted to dissect the Settlement Commission's order with a view to accept what is favourable to them and reject what is not. 6) Does the Settlement Commission have jurisdiction to settle cases relating to the recovery of drawback erroneously paid by the Revenue? 1. whether application can be made for Duty Drawback to settlement Commission? UOI Vs CUS. & C. EX. SETTLEMENT COMMISSION, MUMBAI(2010)(Mum) DEPARTMENT ISSUED show-cause-notice for recovery of duty drawback amounting to Rs. 2,07,71,436/- with interest, said to have been obtained fraudulently by Assessee. Assessee instead of responding to the SCN, preferred to file an application before the Settlement Commission for settlement of the case.

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Department appeared and objected to the jurisdiction of the Settlement Commission to entertain and consider the case relating to recovery of duty drawback erroneously granted; contending that such type of cases do not fall within the definition of case stipulated under Section 127-A(b) of the Act.

The Special Bench of the Settlement Commission passed an order by majority of four against one ruling that Settlement Commission has jurisdiction to entertain such case. i. ii.
iii.

case defined under Section 127-A(b), as ANY proceeding under this Act or any other act of the levy, assessment and collection of customs DUTY, pending before adjudicating authority. a proceeding for recovery of drawback of duties could be treated as a case as defined in the Act and covered by the word ANY PROCEEDING
the duty drawback is nothing but a claim for refund of duty may be as per the statutory scheme framed by the Government of India or in exercise of statutory powers under the provisions of the Act. Custom

1) Essar Steel Ltd (2010)(Guj) M.M. IMP Export duty - Special Economic Zones - Export duty whether leviable under Customs Act, 1962 on goods supplied from DTA to SEZ Developers/Units - Customs Act defining export as taking out of India to a place outside India Definition of export or charging Section 12 ibid not amended and charging provision not inserted contemplating movement of goods from Domestic Tariff Area to Special Economic Zone as taxable event entailing export duty as in the case of export - Levy of export duty cannot be justified under Customs Act - Export duty not payable on movement of goods from DTA to SEZ units or developers -

Decorative Laminates (I) Pvt. Ltd. 2010 (257) E.L.T. 61 (Kar.) Imported resin impregnated paper and plywood for manufacture of furniture warehoused from the date of its import and application for extension of period of warehousing was made. warehousing period extended and goods not cleared even after expiry of such extended period. Subsequently, the assessee made application for remission of duty under section 23 of the Customs Act, 1962 on the ground that the said goods had become unfit for use on account of non-availability of orders for clearance. Application for Remission of duty not allowed as u/s 23 as the goods have neither been: [i] lost nor [ii] destroyed nor[iii] title to the goods has been relinquished at any time before clearance for home consumption. There will be no remission of duty if the goods had become unfit for use on account of non-availability of orders for clearance within the period or extended period as given by the authorities, their continuance in the warehouse will not attract section 23 of the Act. Under Section 23 the expression at any time before clearance for home consumption would mean the time period as per the initial order during which the goods are ware housed or before the expiry of the extended date for clearance and not any period after the lapse of the afore said periods. The said expression cannot extend to a period after the lapse of the extended period merely because the licence holder has not cleared the goods within the stipulated time. It was held that, the fact that since the goods were not removed for home consumption they continued to be in the warehouse, even after the expiry of the warehousing period, it would be a case of goods improperly removed from the warehouse as per Section 72(1)(b) read with Section 71 of the Act. We have to hold that in the instant case, the circumstances made out under Section 23 of the Customs Act are not applicable to the present case since the destruction of the goods or loss of the goods has not occurred in the instant case before the clearance for home consumption within the meaning of that section. When the goods are not cleared within the period or extended period as given by the

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authorities, their continuance in the warehouse will not attract Section 23 of the Act. Relevant Date for removal of warehoused goods after permitted period Normally the relevant date for CD rate shall be date of filing Bill of Entry (BoE) for Home Consumption if the warehoused goods are removed u/s 68 within the permitted period. If warehoused goods are removed from Warehouse after the permitted period, then such goods shall be deemed to be improperly removed u/s 72. Hence such goods are not removed u/s 68. In such case, the relevant date shall be the date of the expiry of the permitted warehousing period and the date of filing BoE for Home Consumption. [SBEC Sugars Limited 2011 (SC)]

Latest cases from May 09 to OCT 09 2) Ferodo India Pvt. Ltd. (2008)(SC) Royalty and license fees for use of know-how/secret formula supplied by foreign supplier, which was based on net sales value of licensed products manufactured out of components imported from such supplier, is not includible in the value of imported components, if the same is not related to imported components and is not paid as a condition of import.

Paras Fab International v. CCE 2010 (256) E.L.T. 556 (Tri. LB) 1) Whether the entire premises of 100% EOU should be treated as a warehouse? 2) Whether the imported goods warehoused in the premises of 100% EOU is to be held to have been removed from the warehouse before the same is issued for manufacture/production/processing by the 100% EOU? 3) Whether issue for use by 100% EOU would amount to clearance for home consumption? 4) Whether non-filing of ex-bond bill of entry before using the goods by the 100% EOU makes the goods as not cleared for home consumption? The facts of the case are that the Assessee is a 100% EOU in Alwar. They imported the impugned goods namely HSD oil through Kandla Port and filed into Bond Bill of Entry for warehousing the imported goods. The impugned goods were warehoused in their 100% EOU in Alwar and subsequently used in the factory within the premises of the 100% EOU for manufacture of the finished goods. The Departmental Authorities at Kandla as well at Alwar have separately demanded Additional Customs duty imposed under Section 128 of the Finance Act, 2003 the contention of the Assessee that since (i) the entire premises of the 100% EOU has been licensed as a warehouse under the Customs Act; (ii) the impugned goods have been warehoused therein and subsequently utilized for manufacture of finished goods in bond; and (iii) the impugned goods have not been removed from the warehouse, there cannot be any question of demanding duty on the same. On a perusal of the provisions relating to warehousing in the Customs Act, 1962 and the provisions relating to EOU Scheme under the Customs Manual, we find that the entire premises of a 100% EOU is required to be licensed as a customs bonded warehouse and the imported goods are required to be imported directly to such premises. The manufacturing is also required to be done within the bonded premises. Hence, we find support for the contention of the appellants that the entire premises of 100% EOU is a bonded warehouse. Neither the Manual nor the Customs Act speaks of any requirement to pay any duty on the warehoused goods which are used for manufacture in bond nor it requires filing of any ex-bond bills of entry at that stage. Section 68 of the Act deals with clearance of warehoused goods for home consumption and it requires filing of an ex-bond of Bill of entry payment of import duty and other charges and an order for clearance for home consumption. Section 65 of the Act which deals with manufacturing in bond on the other hand, does not require any filing of ex-bond bills of entry or payment duty before taking warehoused goods for manufacture inside the bonded premises. We also find that Section 66 of the Act empowers the Central Government to exempt imported material used in a warehouse. It is thus clear that neither the

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scheme of the Act nor the provisions contained in the Manual require filing of ex-bond bills of entry or payment of duty before taking the imported goods for manufacturing in bond nor there is any provision to treat such goods as deemed to have been removed for the purpose of Customs Act, 1962. It was held that, The entire premises of a 100% EOU has to be treated as a (a) warehouse if the licence granted under Section 58 to the unit is in respect of the entire premises. (b), (c ) and (d) Imported goods warehoused in the premises of a 100% EOU (which is licensed as a Customs bonded warehouse) and used for the purpose of manufacturing in bond as authorized under Section 65 of the Customs Act, 1962, cannot be treated to have been removed for home consumption. Miscellaneous Ambalal & Co. had smuggled rough diamonds into the country clandestinely without payment of duty. The Department issued a notice to Champalal & Co. proposing confiscation of the diamonds under clause (d) of section 111 of the Customs Act, 1962 and imposing penalties on various persons concerned. However, the said goods were unconditionally exempted from the payment of the import duty vide an exemption notification. So, Champalal & Co. contended the benefit of the said exemption notification. However, the Department denied to give the benefit of exemption meant for imported goods to be given to the smuggled goods. Do you think that Departments action is valid in law? [ M.Ambalal & Co. 2010 (SC)] Fact: The assessee imported rough diamonds into India, which were not disclosed at the time of imports. Hence, the Department treated them as Smuggled Goods and levied duties and penalties on them. However, such rough diamonds are exempt from payment of import duty as per a specific notification. The question is whether the assessee can claim such exemption in respect of such smuggled goods. It was held that The Customs Act treats imported goods and smuggled goods as two different set of goods. Hence, only those goods which are imported into India based on a valid declaration and as per the provisions of the Act shall alone be considered as Imported Goods and eligible for exemption. Smuggled Goods not eligible for exemption.

Can separate penalty under section 112 of the Customs Act be imposed on the partners when the same has already been imposed on partnership firm? Textoplast Industries 2011 (Bom.) As per Explanation to section 140 of the Customs Act, 1962 brings within purview of Company, a firm or an association of individuals, and Director in relation to firm, includes its partner. IN CASE OF Standard Chartered Bank v. Directorate of Enforcement, there emerged the principle that the deeming fiction is not confined to a criminal prosecution but will also extend to an adjudication proceeding as well. Hence, the High Court, in the instant case, held that the deeming fiction in section 140(2) making Director, Manager, Secretary or other officer of company liable to penalty, would not be confined to criminal prosecution but extends to adjudication proceeding as well. The High Court explained that had it been otherwise, it would have led to strange situation where, for criminal prosecution, partner as well as person in charge responsible for conduct of business of partnership firm would be liable whereas for adjudication purposes, a narrower construction had to be adopted. There was no reason to exclude penalty on partnership firm, particularly when it was consistent with overall scheme and object of the Act. In view of the above discussion, the High Court held that for the purpose of imposing penalty, the adjudicating authority under Customs Act, 1962 might, in an appropriate case, impose a penalty both upon a partnership firm as well as on its partners.

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Can the goods be detained indefinitely without any formal order under section 110 of the Customs Act, 1962? S.J. Fabrics Pvt. Ltd. v. UOI 2011 (268) E.L.T. 475 (Cal.) Decision of the case: The High Court held that there is no time limit for issuance of an order under section 110 and/or the proviso thereof. However, such notice should ordinarily be issued immediately upon interception and detention of the goods. The goods cannot indefinitely be detained without any order under section 110. The High Court observed that section 110(2) provides that when any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within 6 months of the seizure of the goods, the goods shall be returned to the person from whose possession, the goods were seized. The proviso to Section 110(2), however, empowers the Commissioner of Customs to extend the aforesaid period of six months by a further period of not exceeding 6 months on sufficient cause being shown.

Is it mandatory for the Revenue officers to make available the copies of the seized documents to the person from whose custody such documents were seized? Manish Lalit Kumar Bavishi v. Addl. DIR. General, DRI 2011 (272) E.L.T. 42 (Bom.) Facts of the case: The assessee sought copies of the documents seized from his office premises under panchanama and print outs drawn from the Laptop during his attendance in DRI. However, Revenue officers replied that the documents would be provided to him on completion of the investigation. Decision of the case: The High Court held that from the language of section 110(4), it was apparent that the Customs officers were mandatorily required to make available the copies asked for. It was the party concerned who had the choice of either asking for the document/seeking extract and not the officer. If any document was seized during the course of any action by an officer and relatable to the provisions of the Customs Act, that officer was bound to make available copies of those documents. The denial by the Revenue to make the documents available was clearly an act without jurisdiction. The High Court directed the Revenue to make available the copies of the documents asked for by the assessee which was seized during the course of the seizure action. Under what circumstances can the penalty be imposed in terms of section 112(a)(ii) of the Customs Act, 1962? O.T. Enasu v. UOI 2011 (272) E.L.T. 51 (Ker.) The High Court noted that under sub-clause (ii) of clause (a) of section 112, the liability to penalty is determined on the basis of duty sought to be evaded. THE High Court inferred that unless it is established that a person has, by his omissions or commissions, led to a situation where duty is sought to be evaded, there cannot be an imposition of penalty in terms of section 112(a)(ii) of the Act. (1) Section 125 of the Customs Act, 1962

1. Whether, under section 125 of the Customs Act, 1962, discretion vests with the Adjudicating Authority to give option to redeem the goods even though the said goods are liable to absolute confiscation (since the importation of said goods is prohibited)?
CCus v. Alfred Menezes 2009 (242) E.L.T. 334 (Bom.) It is, clear that Section 125(1) deals with two situations :-

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(1) Importation and exportation of prohibited goods and (2) Importation and exportation of any other goods Insofar as importation or exportation of prohibited goods, the expression used is that where the goods were confiscated, the officer may. In the case of any other goods, which are confiscated, the officer shall. It is, therefore, clear that insofar as the prohibited goods are concerned, there is discretion in the officer to release the confiscated goods in terms as set out therein. Insofar as other goods are concerned, the officer is bound to release the goods. The High Court held that in the instant case, the adjudicating officers action was justified. He had exercised his discretion and had given an option to redeem the goods even though the said goods were liable for absolute confiscation as the importation of said goods was prohibited.

Section 111 and 125 of the Customs Act, 1962

2. In case the imported goods are confiscated, and goods are not redeemed by paying fine, whether the importer is bound to pay the customs duty? Poona Health Services v. CCus. 2009 (242) E.L.T. 335 (Bom.) It was submitted on behalf of the appellant before CESTAT that once the imported goods are confiscated under Section 125 of the Customs Act, 1962, and the option to release them is not exercised by paying fine, no duty is payable. Assessee was of the view that section 23 which provides that if the owner of imported goods relinquishes his title to the goods, he shall not be liable to pay the duty thereon. High court held that, The distinction between Section 23 and Section 125 becomes very apparent when one looks at the language of the section itself. Under Section 23, the person who imports the goods, surrenders his title in the goods. By surrendering title in the goods, the person importing the goods or the owner of the goods ceases to have a right to claim the goods. Whereas, The order of confiscation is passed in respect of the person who has claimed to import or export the goods. In other words, claims title or right in the property. The fine u/s 125 is payable by the person who seeks redemption of the goods. If the goods are not redeemed then they vest in the State. The person however, who had imported the goods does not cease to have liability for payment of duty. As he continues to be the person who had imported the goods and claims title of the goods. The two sections therefore, operates in two different situations and are mutually exclusive. Section 23 therefore, cannot be considered for the purpose of interpreting Section 111. Apart from that as earlier noted in Section 125(2), the legislature has made it clear that even if the goods are released on payment of fine, such person is also liable to pay duty and charges thereon. Section 111 confers the power to confiscate and applies only when the goods are improperly imported and or the other provisions satisfied. Whereas Sections 12 and 17 are in respect of the goods which are dutiable. Even in respect of those goods, there may be improper importation. The fine payable to get possession of the goods under Section 125 is distinct and different from the duty of goods which are to be imported or exported. It is the nature of recompensation to the state for goods which are vested in it and on sale would have realized the value of the goods and from that to recover the duty which is unpaid as also fine.

. In case of the goods liable to confiscation under section 111, issuing of a notice to the owner-original importer of the goods is enough or whether notice is also required to be issued to the person from whose custody the goods are seized? Gawar Construction Ltd. v. UOI 2009 (243) E.L.T. 484 (Bom.) Though Section 110 confers a power on the customs authorities to seize the goods from possession of such transferee even without notice, sub-section (2) of Section 110 read with Section 124 of the Act cast an obligation on the customs authorities to issue a show cause notice within 6 months or extended period of further 6 months to show

)2( )2( )2( )2( )3( )3( )3( )3(

Section 110 and 124 of the Customs Act, 1962

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cause why the order of confiscation of the goods should not be made. Opportunity must be given to the person in possession of the goods because their confiscation would affect his civil right to possess the goods which were seized from his custody. It is for this reason that Section 124 uses the expression the owner of the goods or such person and says that no order of confiscating the goods or imposing any penalty on any person shall be made unless the owner of the goods or such person is given a notice in writing informing him the grounds on which it is proposed to confiscate the goods or to impose a penalty. The word or appearing in the expression owner of the goods or such person is obviously used conjunctively and not disjunctively. A notice may be required to be given only to the owner where he is in possession of the goods and they are seized from his custody, but where the goods are seized from the custody of a person other than the original owner-importer, the notice must also be given to the person from whose custody the goods are seized. We are clearly of the view that the person from whose custody the goods have been seized under Section 110 of the Act is entitled to a notice under Section 124 of the Act and is entitled for a reasonable opportunity of making a representation and reasonable opportunity of being heard before an order of confiscation of goods is passed hence, the person from whose custody goods are seized is also entitled to notice and hearing before order of confiscation is passed (4) Is the want of evidence from foreign supplier enough to cancel the confiscation order

of goods undervalued?
CCus. v. Jaya Singh Vijaya Jhaveri 2010 (251) E.L.T. 38 (Ker.) in order to sustain confiscation order for misdeclaration, the Tribunal wanted evidence from the Singapore supplier and for failure of the department to prove the excess payment of invoice value by the respondent to the Singapore supplier, the Tribunal cancelled the confiscation order. In our view, it is illogical that a person who is a party to undervaluation and sale of car at lower than the actual price will give evidence to the department to prove the case that the invoice raised by him on the respondent is a bogus one and that they received underhand payment of the differential price. It is also to be noted that the respondent has not produced evidence for payment of even the invoice value. The only reasonable inference possible is that it is an arranged transaction between the Singapore supplier and the respondent for import of the car by misdeclaring its actual value in the invoice. We, therefore, reverse the order of the Tribunal and uphold the order of confiscation and release on redemption fine. (5) Whether the goods held to be improperly imported are liable for confiscation under section 111 of the Customs Act, 1962, even though the same are cleared and not available for seizure? Whether redemption fine can be imposed with regard to such goods?

CCus v. Finesse Creation Inc. 2009 (248) E.L.T. 122 (Bom.) Decision of the case:
The Court opined that the concept of redemption fine arises in the event when the goods are available and are to be redeemed. If the goods are not available, there is no question of redemption of the goods. Under section 125, a power is conferred on the Customs Authorities in case import of goods becoming prohibited on account of breach of the provisions of the Act, rules or notification, to order confiscation of the goods with a discretion in the authorities on passing the order of confiscation, to release the goods on payment of redemption fine. Such an order can only be passed if the goods are available, for redemption. The question of confiscating the goods would not arise if there are no goods available for confiscation nor consequently redemption. Once goods cannot be redeemed, no fine can be imposed. Consequently, the Court held that in the absence of the goods being available, no fine in lieu of confiscation could have been imposed. (6) Que- whether revenue can prefer an appeal against the consent order Trilux Electronix (2010)(HC)- imp It was held that if an order passed by CESTATbased on the consentand matter was remanded at the instance of revenue, then revenue could not pursue appeal in higher forum. It was held by High court that that appeal against the consent order can not be filed by revenue.

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A consent order is a judicial decreeexpressing a voluntary agreement between parties to suit, especially an agreement by defendant to cease activities alleged by the government to be illegal in return for an end to charges.

Service tax LINCOLN HELIOS (INDIA) LTD.(2011)(KAR.) The assessee is a manufacturer and supplier of centralized lubrication system and it also undertakes erection and commissioning at site as a part of their business activity. Customer charged for services rendered as well as value of goods. THE assessee has paid the Excise duty paid on whole value including that for services. But The assessee did not pay the service tax on the value of commission and erection services on the ground that it forms part of the finished product and that they have paid the excise duty on the same. However, the authorities held that the assessee is liable to pay the service tax on the value of erection and commissioning services. DecisionIt was held that the excise duty was levied on the aspect of manufacture and service tax is levied on the aspect of services rendered. Therefore, it will not amount to payment of tax twice. Hence assessee will be liable to pay service tax on value of services. Section 65(105)(zzzze) of the Finance Act, 1994 (1) Can a software be treated as goods and if so, whether its supply to a customer as per an "End User Licence Agreement" (EULA) would be treated as sale or service? Infotech Software Dealers Association (ISODA) v. Union of India 2010 (20) STR 289 (Mad.) Facts: Infotech Software Dealers Association (ISODA)is a society registered under the Societies Registration Act It is engaged in the business of reselling of computer software products falling under 3 categories (i) Shrink Wrap Software; (ii) Multiple User Software/Paper License and (iii) Internet Download The ISODA filed the subject petitions under Article 226 of the Constitution of India, praying for the issue of a Writ of Declaration to declare Section 65(105)(zzzze) of Chapter V of Finance Act, 1994 (the Finance Act) in relation to the business activities of the members of the Petitioner as: A. Null and void; B. Ultra vires and unconstitutional of the provisions of Article 245, Entries 92C and 97 of List-I, Entry 54 of List-II of Schedule VII of the Constitution of India; and C. Contrary to provisions of Articles 14, 19(1)(g), 265 and 268A of the Constitution of India The writ petitions raised the following three questions: Whether software is goods Whether supply of software pursuant to the End User License Agreement is to be treated as sale or service Whether the Parliament has the legislative competency to levy Service Tax on Information Technology Software Services Software is 'goods' as defined in Article 366(12) of the Constitution of India The Parliament has the legislative competency to bring in enactments to include certain services provided or to be provided in terms of Information Technology Software for use in the course or furtherance of business or commerce to mean a taxable service, in terms of the residuary Entry 97 of List I of Schedule VII The challenge to the amended provision cannot be accepted so long as the residuary power is available. The question as to whether a transaction would amount to sale or service depends upon the individual transaction and on that ground, the vires of a provision cannot be questioned

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(2) Rule 4(5) of the Service Tax Rules, 1994 Whether the provisions of deemed registration under rule 4(5) of the Service Tax Rules, 1994 are attracted in case of centralized registration? Karamchand Thapar & Bros. (Coal Sales) Ltd. v. UOI 2010 (20) STR 3 (Cal.) Decision of the case: The Court observed that every person liable to pay service tax is required under rule 4(1) of the Service Tax Rules, 1994, to apply to the Superintendent of Central Excise for registration in Form ST-1. The deeming provision in rule 4(5) is applicable to registration granted by the Superintendent of Central Excise. The Honble High Court held as under: a) The deeming provision under Rule 4(5) of Service Tax Rules, 1994 providing that registration certificate deemed to have been granted if not granted within seven days from the date of receipt of application is applicable only to registration granted by Superintendent of Central Excise and not to centralized registration granted under Rule 4(2). b) Though no time limit is specified for grant of centralized registration, however the same cannot be indefinitely delayed and be granted within reasonable time and seven days can be considered as reasonable time. c) The Commissioner or Superintendent is not empowered to grant registration in category other than the category in which registration can be sought by the service provider. Further, they are not empowered to refuse application for registration if the same is properly filled up. d) The circulars prescribe appropriate action against officers who delay registration

(3) Will the service provided by way of advice, consultancy or technical assistance in the case of turnkey contracts attract service tax and can these turnkey contracts be vivisected? CCE v. BSBK Pvt. Ltd. 2010 (18) S.T.R. 555 (Tri. LB) Ans. Recently, the Larger Bench of CESTAT in the case of Commissioner of Central Excise, Raipur vs. BSBK Pvt. Ltd. 2010 (18) STR 555 (Tri- Larger Bench) has held that the submission that turnkey contracts cannot be vivisected does not find legal support and the entire submission that severability of turnkey contract by 46th Constitutional Amendment [Article 366(29-A)(b) to the Constitution ]has only permitted levy of sales tax on goods is misconceived. The Larger Bench has also held that introduction of Works Contract service w.e.f. 1.6.2007 has nothing to do with severance of the contract to segregate goods and services involved in turnkey contracts. However, as observed by the Larger Bench, leviability of service tax on different elements of services depends on the facts and circumstances of the case and classification of respective services. It can be concluded that turnkey contracts can be vivisected and discernible service elements involved therein can be segregated and classifiable as well as valued for levy of service tax under the Finance Act, 1994 provided such services are taxable services as defined by that Act and depending on the facts and circumstance of each case, services by way of advice, consultancy or technical assistance in the case of turnkey contract shall attract service tax liability. (4) Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 1. Can the option for composition scheme under works contract service be exercised after payment of service tax on a particular works contract? Nagarjuna Construction Company Ltd v. GOI 2010 (19) STR 321 (A.P.) Decision of the case: composition scheme which provided a choice to the service provider, in relation to works contract, to discharge service tax liability by paying 4% of the gross amount charged for such works contracts. Rule 3 (3 ) of such rule makes it clear that the service provider must expressly opt for the composition schemes before payment of service tax thereon and must continue with it till the conclusion of such

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contract. Hence, where service tax has been paid in respect of a works contract, the eligibility to exercise an option to avail the benefits of the composition scheme is excluded.

(5) Shubh Timb Steels Ltd. 2010 (P&H) Legislative competence Service tax on service of renting of property is exclusively covered by Entry 49 List II. Entry 49 of List II relates to tax on land and building and not any activity relating thereto. Income tax on income from property, wealth tax on capital value of assets including land and building and gift tax on gift of land and building have been upheld. It cannot be held that renting of property did not involve any service as service could only be in relation to property and not by renting of property. Renting of property for commercial purposes is certainly a service and has value for the service receiver. Moreover, the aspect of service element in renting transaction is certainly an independent aspect covered under Entry 92C read with Entry 97 of List I. In any case, subject matter of impugned levy being outside the scope of entry 49 of List II, power of Union Legislature is undoubted. Question whether levy will be harsh being in addition to income tax and property tax is not a matter for this Court once there is legislative competence for the levy. Even if it is held that transaction of transfer of right in immovable property did not involve value addition, the provision cannot be held to be void in absence of encroachment on List II. Retrospectivity of levy It is well settled that competent legislature can always clarify or validate a law retrospectively. It cannot be held to be harsh or arbitrary. Object of validating law is to rectify the defect in phraseology or lacuna and to effectuate and to
carry out the object for which earlier law was enacted.

(6) A.P FEDERATION OF CHIT FUNDS(2009)(AP) CHIT FUND NOT COVERED Service tax levy on chit funds after deletion of exclusion to cash management from 1-6-2007 challenged - Specific statutory definition of cash management or asset management absent and wider interpretation to include or exclude transactions not arises - Definition of financial institution in RBI Act not relevant as tax not levied using such definition before 1-6-2007 - No policy decision or statutory legislative act to levy Service tax on chit funds mentioned Finance Act, 1994 not includes or excludes chit business - Chit funds not covered in view of absence of inclusive definition in statute - Levying Service tax based on C.B.E. & C. Circular not permissible. (7) Bajaj auto finance Ltd.(SC)(2008) Hire purchase finance-not liable to service tax. The appellants contention is that there is a fundamental difference between a hire purchase agreement and hire purchase finance agreement, namely that in the case of the former, the title to the goods remains with the hire vendor which bails the goods to the hirer in return for periodical payments and the title to the goods is transferred to the customer/hirer only if he exercises the option to purchase the same on full payment to the hire vendor, while in the case of the latter,(I,e Hire Pur. Finance) the title to the goods vests in the purchaser right from the beginning and the hire purchase finance company who has only a right to seize the goods for non-payment of the loan, is not the owner of the goods. (8) Whether the levy of service tax on hire purchase and leasing transactions falling under section 65(12) of the Finance Act, 1994 is constitutionally valid? Madras Hire Purchase Association & Others v. Union of India, 2009-MAD-HC . Facts: Appellant was non banking financial company engaged in the business of hire purchase & leasing. State Government levied sales tax on hire purchase & leasing transaction. Appellant did not collect any charges for service. Issue: Whether imposing of service tax on hire-purchase and leasing transactions by Central Government is constitutionally valid? Decision: High Court of Madras upheld the legislative constitutional validity of service tax levy on hire purchase and lease services. It also said service tax would be chargeable only to extent of servicesinvolved in such

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transaction and not on the value of the transaction. It implies that service tax was levied on service and not on sale or purchase of goods. The High Court rejected the plea that levy of service tax on hire purchase/leasing transaction is violative of Articles 14 and 19(1)(g) of the Constitution after observing that a taxing statute was not per se, a restriction of the freedom under Article 19(1)(g) and policy of a tax, in its effectuation, might, bring in some hardship in some individual cases but that was inevitable. . (9) Whether mere forwarding service without clearing liable to service tax (i) KULCIP MEDICINES (P) LTD. (2009)(P&H)- S.tax not leviable- M. IMP the Tribunal proceeded to hold that once there is no clearing activity taken by the dealer therefore the service rendered by him would not satisfy the requirement of clearing and forwarding agent and consequently it set aside the demand. . It is clear from the terms of the agreement that appellant herein does not attend to the clearing of the medicines manufactured by Cipla. Consignments of medicines are cleared from the factory by the manufacturer and delivered to the appellant at his premises. In this factual situation, it has to be held that there is no clearing by the appellant and for that reason, the service rendered by the appellant does not satisfy the requirement of clearing and forwarding. We, therefore, are of the view that the demand is not sustainable. (10) Whether a sales agent of independent dealer can be regarded as a clearing and forwarding agentIMP Valli Inc. v CCEx Trichirappali 2009 (tri0 A consignment agent receives and dispatches goods on behalf of the principal. In the instant case, Valli receives the goods and sells them on its own as a dealer. three agents are normally involved when C & F Agents service is rendered, i.e., the principal, the ultimate recipient of goods in business and the C & F Agent that forwards the goods after taking delivery to dealers. Here the dealer receives the goods and sells them in retail to consumers. He has Sales Tax registration and issues bills for sales. No third agency is involved. The exclusivity clause, other conditions of agency agreement and the commission paid to Valli gives the arrangement the complexion of a franchise. These are dictated by the power of the brand involved. In the circumstances, the activity the appellant undertakes as per the agreement cannot be held to be Clearing and Forwarding Agents service. (11) Can a commission agent also acting as a consignment agent be covered under the definition of clearing and forwarding agent? CCE v. Mahaveer Generics 2010 (17) S.T.R. 225 (Kar.) Decision of the case: The assessee contended that activity carried on by him came within purview of commission agent and not under the clearing and forwarding agent. The Court elucidated that assessee in question had not restricted its activities to business of commission agency, but had also carried on business as consignment agent. Since the consignment agent had been brought under statutory definition of clearing and forwarding agent by inclusive clause, the High Court held that the assessee falls under the definition of clearing and forwarding agent SINCE Mere procurement of purchase orders was not involved, but stored goods were also cleared and forwarded to stockists and dealers by the assessee. (12) Aakar advertising (2009)(Raj.)- IMP

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Penalty (Service tax) - Quantum of - Whether under Section 76 of Finance Act, 1994 reducible below the minimum prescribed therein - Minimum amount of penalty prescribed in Section 76 by use of expression not less than If reasonable cause is not shown, and penalty is required to be levied, then, the minimum penalty prescribed cannot be further reduced, under the garb of any existing discretion; assumed to be vesting with the authority, including the Tribunal. Where the two limits have been prescribed, being the minimum and upper limit, then obviously the free play is available between the two limits only, and the discretion can be exercised within those limits, but then that does not mean, that the authorities have any power to impose penalty less than the minimum prescribed by the section. (13) BUSINESS AUXILIARY SERVICE - TRIHUVAN MOTORS LTD- 2010- TRIBUNAL, Business Auxiliary Service covers Service of promoting or marketing of service of client . In a case where the dealer of Motor Vehicle provides TABLE SPACE to bank/financial institutions and charges rent for the same, whether it can be said that he was promoting the services of the bank and taking rent as consideration of that service. it was held that mere fact of financial institutions being provided with space by the assessee (appeallant) and the appellant receiving some money for lease of table space cannot be brought within the definition of Business Auxiliary Service..

PAST cases from Nov 08 to April. 09- Excise

Custom
1) Super Cassettes Indus. Ltd. V. CC(2008) 225 ELT 401(SC) - IMP Goods sent abroad for repairs when reimported into India are liable to customs duty as if they had been imported for first time in India. Sec 20 Facts 1) The assessee used to import magnetic head for the purposes of recording on audio cassettes on payment of custom duty including additional duty of customs u/s 3 of Customs Tariff Act (CTA), 1975. When such magnetic heads got worn out, they were sent abroad for repairs. 2) When magnetic heads were re-imported into India after carrying out repairs abroad, the customs authorities demanded basic customs duty along with additional duty of customs u/s 3 of CTA. 3) The assessee paid the requisite basic customs duty but contested levy of additional duty of customs contending that since the magnetic heads were only repaired outside India and the process of repairing did not amount to manufacture, therefore, no additional duty of customs was leviable. It was held For levy of additional customs duty, it is not material as to after what process an article is imported or reimported into india. The only test is whether the importedarticle is one which has been manufactured or produced. In this case, the product reimported is magnetic head which is a manufactured product. Hence, the same is liable to additional duty of customs u/s 3 of CTA 1975. Past cases from May 08 to oct. 08 Basic Concept 1) Rattan Melting & Wire industries (SC)(2008)- M. Imp a) CBEC circular binding on Departmental authorities and not on assessee or appellate authority. b) Judgement of courts binding on all authority and not the circular c) Revenue can file appeal against circular

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Rule 9/10 2) Bharti Telecom ltd. (2008)(SC)- imp If goods are sold to related persons at or about the same price at which they are sold to unrelated persons i.e the relationship doesnt influence the price, the price at which goods are sold to related will be acceptable as assessable value.

Cenvat credit 1) q- whether 5% can be recovered . whether buyer can avail ccr of that ans- (i) yes (ii) no que- whether sec 11D can be invoked for the amount recovered from the buyer. Ans- sec 11D provides that any amount which has been collected as excise duty and not paid to the credit of the CG shall be liable to be recovered. The scheme of the law is that manufacturers shall not collect amounts falsely representing them as central excise duty and retain them, thus unjustly benefitting themselves. However, in case of recovery of amounts referred to in rule 6 of CCR 2004, from the buyer, sec 11D is not applicable since the amount of 8% or 10% of value of exemptyed goofs/ services has already been paid to the revenue and no amount is retained by the assessee. (unison metals Ltd.(2006) (tri) 2) SLOVAK INDIA TRADING CO. LTD 2008 - SC imp. Assessee closed down his factory. He was having unutilized cenvat credit in his books of accounts. There is no express prohibition in Cenvat Credit Rules, 2004 regarding refund of cenvat credit. But at the same time, there is no express provision allowing refund of cenvat credit. [Under CCR, 2004, only Rule 5 and Rule 5-A deals with situations where refund is permissible and none of these cover this situation]. Whether cenvat credit shall be refundable to the assessee or shall it lapse? Held: YES if the assessee opts out of the Cenvat Scheme or its unit is closed, then, the assessee is eligible for refund of unutilized Cenvat credit, which is to be made in cash. There is no express prohibition in Rule 5 and 5-A of CCR in that regard. . custom 1) DEEMED TERRITORY OF INDIA- LANDMARK IN ABAN LOYD CHILES OFFSHORE LTD. V. UOI (2008)227 ELT 24 (SC) : It was held in this judgement that though section 2(27) defines India to include territorial waters of India, however,1. Since the customs Act, 1962 and Customs Tariff Act, 1975 have been extended to designated areas and other areas of the continential shelf and the Exclusive Economic Zone of India, 2. Therefore, by virtue of deeming fiction of the Maritime Zones Act, the said areas from part of the territory of India for the purposes of the Customs Act, 1962 and the Customs Tariff Act. 1975. Implication of the aforesaid deeming fiction and judgement on scope of levy of customs duty: The implication of the aforesaid deeming fiction and judgement is that since territorial waters of India or the designated areas of the Continential Shelf or Exclusive Economic Zone are India, hence,1. Any goods produced or manufactured within such areas and brought to the mainland of India shall not regarded as imported goods and will not be liable to customs duty;

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2. Any goods brought from any foreign country into such areas will be treated as import and hence, liable to customs duty; and 3. Any Goods supplied from the mainland to such areas shall not be treated as export and consequently, no export benefits shall be available in respect of them; DEMAND AND RECOVERY GEO TECHNOLOGY FOUNDATIONS AND CONSTRUCTION 2008 SCFacts: Assessee manufactured PSC girders at site to be used in the construction of railway bridges. The articles were cleared without payment of central excise duty under the Central Excise Act, 1944. A SCN was issued invoking normal period of limitation (i.e., 1 year) but withdrawn/drop. Subsequently, second SCN was issued invoking extended period of limitation (i.e., 5 years). Assessee challenged SCN on the ground of limitation. Issue: Can the extended period of limitation be invoked in a second notice, where the first notice did not resort to same? Held: NO When in the first SCN, allegation of suppression had not been made; the same could not have been made subsequently as the facts alleged to be suppressed by the assessee were known to them. Extended period of limitation has no application in the instant case.

RETURN UNDER EXCISE

Return ER-1
Monthly return for Non-SSI

due date within 10 days after the close of the Month within 10 days after the close of the Month Within 10 days after the close of the Quarter 30th day of November of Succeeding year 30th April of each financial year

ER-2 Er-3 ER 4

Monthly return by 100% EOU Quarterly return for SSI Annual Financial information statement / Form to be filed by assesses paying duty of 1 crore or more from PLA+CCR ANNUAL RETURN of information relating to principal inputs To be filed by assessee paying duty of Rs 1 crore or more than PLA+CCR Monthly return of information relating to principal inputs to be filed by assesses paying duty of Rs. 1 crore or more than PLA+CCR Annual installed capacity statement-annual return EVERY ASSESSEE EXCEPT BIRI, MATCH BOXES, REINFORCED CEMENT CONCRETE PIPES. 130 ITEM ON WHICH DUTY 1%QUARTERLY

ER 5

ER 6

With in 10 days after the close of the month

ER-7

By 30th april of succeeding year

ER-8

WITH IN 10 FROM CLOSE OF QUARTER

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AMENDMENT FOR MAY 2012

BASIC CONCEPTS Under rule 4(1A) now jobworker cant be authorized to pay duty in case of branded readymade garments. (1) in rule 4, after sub-rule (1), the following shall be inserted, namely:[(1A) Notwithstanding anything contained in sub-rule (1), every person who gets the goods, falling under Chapter 61 or 62 or 63 of the First Schedule to the Tariff Act, produced or manufactured on his account on job work, shall pay the duty leviable on such goods, at such time and in such manner as is provided under these rules, as if such goods have been manufactured by such person Provided that such person may authorize the job worker to pay the duty leviable on such goods on his behalf and the job worker so authorized may undertake to discharge all liabilities and comply with all the provisions of these rules : PROVIDED that where any person had instead of paying duty authorized job worker to pay the duty leviable on goods manufactured in his behalf under the provision of sub-rulw (1A) as it stood prior to the publication of this notification, he shall be allowed to obtain registration and comply with the provisions of these rules within a period of 30 days from the date of publication of this notification in the official gazette. Explanation. - For the purposes of this sub-rule, the expression job worker means a person engaged in manufacture, or undertaking any process on behalf and under the instructions of such person for manufacturing, from any inputs or goods supplied by such person or by any other person authorized by such person so as to complete a part or whole of the process resulting ultimately in the manufacture of goods falling under Chapters 61 or 62 or 63 of the First Schedule to the Tariff Act, and the term job work shall be construed accordingly.] AUTHOR NOTE(a) Articles of apparel and clothing accessories, knitted or crocheted [Chapter 61 of the First Schedule to the Tariff Act] (b) Articles of apparel and clothing accessories, not knitted or crocheted [Chapter 62 of the First Schedule to the Tariff Act] (c) Other made up textile articles; sets; worn clothing and worn textile articles; rags [Chapter 63 of the First Schedule to the Tariff Act]. 1. 2. 3. 4. 5. 6. 7. RULE-4(1A)- who will pay duty- RMS/BO (but jobworker may be authorised ) RuLE-12D-CER 2002 Provisions apply to RMS/BO RULE-9- Registration by RMS/BO SSI Exemption-8/2003-AVAILABLE Sec 3(2)-Tariff value-45% of RSP R- 2(naa)-CCR 04- Manufacturer includes r- 4(1A) person (Means RMS/BO Can take CCR) R-5 CER 02- CL. STOCK ON 28/2/11- When cleared liable to duty.

(i) Rule 2(naa) OF CCR 2004 manufacturer or producer,(i) in relation to articles of [jewellery or other articles of precious metals falling under heading 7113 or 7114 as the case may be] of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002; (ii) in relation to goods falling under Chapters 61, 62 or 63 of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1A) of rule 4 of the Central Excise Rules, 2002;] (ii) Exemption from registration to jobworker of goods falling under Chapter 61, 62 or 63 Because RMS/BO is liable to pay duty and he will take registration.

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(iii) SSI Exemption Amendment to Notification No. 8/2003-C.E. THESE GOODS ARE SPECIFIED GOODS FOR TAKING SSI EXEMPTION. EXPLANATION INSERTED IN E/N- 8/2003 In respect of goods falling under chapter 61, 62 or 63 of the First Schedule, the expression manufacturer shall include a person who is liable to pay the duty of excise leviable on such goods under sub-rule (1A) of rule 4 of the Central Excise Rules, 2002.; Value for computing the eligibility as well as the exemption limit for purposes of SSI exemption is defined in Explanation (C) to Notification No. 8/2003-C.E., dated 1st March, 2003. Accordingly, it would be the tariff value of the goods. Would SSI exemption In the absence of a provision in the SSI notification to curtail the exemption be available to a to Rs. 12.5 lakh for March, 2011 benefit upto the full exemption threshold of Rs. manufacturer/unit for goods 1.50 crore would be available for clearances for home consumption made in falling under Chapters 61, 62 March, 2011. Of course, the conditions of the notification would have to be or 63 for the full exemption fulfilled. limit of Rs. 1.5 crore for the month of March, 2011? Or, would this limit be applied on a pro rata basis for one month i.e. Rs. 12.50 lakh? Can manufacturers Manufacturers can claim Cenvat credit on inputs as per the provisions of claim Cenvat credit of excise the Cenvat Credit Rules, 2004 duty paid on inputs

(iv) Rule 12D. Application of the rules. The provisions of these rules shall apply to a person who is liable to pay the duty or duties of excise leviable on goods falling under Chapter 61 or 62 or 63 of the First Schedule to the Tariff Act under sub-rule (1A) of rule 4 as if such goods have been manufactured by him Author note- The provisions of the Central Excise Rules, 2002 shall apply to RAW material supplier/ Brand owner (person on whose behalf the goods are manufactured by the job-workers) of the Chapter 61 or 62 or 63 goods as if such goods have been manufactured by him. VALUATION In sec 4A Legal Metrology Act 2009 substituted for the words Standards of weights and Measures Act 1976. Notifications issued under section 5B also to be laid before Parliament [Section 38(2)] Prior to Amendment Every rule made under this Act, every notification issued under section 3A, section 4A, section 5A(1) and section 11C and every order made under section 5A(2), other than an order relating to goods of strategic, secret, individual or personal nature, must be laid before Parliament for 30 days when Parliament is in session. Amendment made by the Finance Act, 2011 Now, section 5B has also been brought under the purview of section 38. Thus, the notifications issued under section 5B must also be laid before Parliament for 30 days when Parliament is in session. (Effective from April 08, 2011)

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(1) Amendment of Rule 3 of CENVAT Credit Rules, 2004. (1) In the CENVAT Credit Rules, 2004, rule 3 shall stand amended and shall be deemed to have been amended retrospectively. (2) With effect from 18.04.2006, rule 3 has been amended to provide that a manufacturer or producer of final products/a provider of taxable service shall be allowed to take credit of the service tax leviable under section 66A of the Finance Act, 1994.

(2) CCR ON INPUT SERVICE- RULE 4 (7) OF CCR 2004 Rule 4(7) The CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received : Where service tax is paid on reverse charge basis Provided that in case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9 : IF PAYMENT OF VALUE AND SERVICE TAX IS NOT MADE WITHIN 3 MONTHS OF THE DATE OF INVOICE/BILL/CHALLAN Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, is not made within 3 months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules : IF PAYMENT TOWARDS AN INPUT SERVICE IS REFUNDED OR A CREDIT NOTE IS RECEIVED BY THE MANUFACTURER/SERVICE PROVIDER Provided also that if any payment or part thereof, made towards an input service is refunded or a credit note is received by the manufacturer or the service provider who has taken credit on such input service, he shall pay an amount equal to the CENVAT credit availed in respect of the amount so refunded or credited : CENVAT CREDIT IN RESPECT OF AN INVOICE/BILL/CHALLAN ISSUED BEFORE THE 01.04.2011 Provided also that CENVAT credit in respect of an invoice, bill or, as the case may be, challan referred to in rule 9, issued before the 1st day of April, 2011 shall be allowed, on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9. Explanation I. - The amount mentioned in this sub-rule, unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation II. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under this sub-rule, it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation III - In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, following month and month of March occurring in sub-rule (7) shall be read respectively as following quarter and quarter ending with the month of March.] Cir- 122/2010 Subject: Clarification regarding availment of credit on input services - reg

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Author note Case 1 Whether associated enterprise can take CENVAT credit of the service tax paid under rule 4(7) of the CCR, 2004 if S. tax paid on basis of, debit/credit entries in books of account Case 2 Whether CENVAT credit of the service tax paid can be claimed where a service receiver does not pay full invoice value and service tax.

CCR allowed because rule 4(7) doesnt prescribe mode of payment CCR availed proportionately if amt paid less due to discount or unsatisfactory service

(3) INFORMATION RELATING TO PRINCIPAL INPUTS

Rule 9A

1) A manufacturer of final products shall furnish to the superintendent, annually by 30th April of each financial year, a declaration in the form ER-5 in respect of each of the excisable goods manufactured or to be manufactured by him the principal inputs and the quantity of such principal inputs required for use in the manufacture of unit quantity of such final products: For May 2012 Provided further that where a manufacturer of final products has paid total duty of Rs 10 lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year, he shall file such declaration electronically. 2) if a manufacturer of final products intends to make any alteration, he shall furnish information together with the reasons for such alteration before the proposed change or within 15 days of such change in the form specified. 3) A manufacturer of final products shall submit, within 10 days from the close of each month to the superintendent of central excise, a monthly return in the form ER-6 in respect of information regarding the receipt and consumption of each principal inputs with reference to the quantity of final products manufactured by him. For May 2012 Provided that where a manufacturer of final products has paid total duty of Rs 10 lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year, he shall file the said monthly return electronically: (5) Every assessee shall file electronically, the declaration or the return, as the case may be, specified in this rule. Explanationprincipal inputs means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw-materials for the manufacture of unit quantity of a given final products. But this rule is applicable only to those assessees who are manufacturing goods specified under this rule and who have paid duty of one crore or more through account current and CCR during the preceding financial year. SMALL SCALE INDUSTRY -Subject :

Clarification on issues pertaining to the levy of excise duty on branded readymade garments and made-up articles of textiles- Regarding.

Board has received representations from trade and industry seeking clarification on certain issues pertaining to the levy of excise duty on readymade garments/made-ups that either bear or are sold under a brand name. These issues are :(i) applicability of the mandatory levy of excise duty on school uniforms, uniforms for private security guards, companies, hotels, airlines etc. and made-ups such as linens, towels etc. bearing the name or logo of a hotel, restaurant or airlines etc; and (i) applicability of mandatory levy of excise duty on made-ups such as blankets bearing the name of the manufacturer and supplied to the Ministry of Defence or its organizations. 2. The matter has been examined. On the issue of applicability of excise duty on uniforms or made-up articles like quilt, blankets, towels, linen etc. bearing the name or logo of a school, security agency, company, hotel or airline etc., it is clarified that such products would not merit treatment as branded products merely because the name of

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the school, institution or company or their logo is either printed, embroidered or etched on them. This is equally true of made ups such as towels, linen etc. bearing the name of a hotel, restaurant or airlines; In all these cases, there is no nexus between such a name or logo & the product at the time of its sale which is essential ingredient in the definition of the term brand name. Unless such garments/made-ups also bear a brand name in addition to the name or logo of the school, security agency, hotels, airlines and company, such goods would not attract the excise duty. It is also gathered that in some cases, apart from the name or logo of such organisations, the name of the tailor or manufacturer is affixed on such garments. However, mere affixing of name of the tailor or manufacturer would not constitute a brand name. Another related issue is the applicability of the mandatory excise duty to blankets which are supplied to the defence establishment, armed forces, police forces etc. against tenders that stipulate that the name of the manufacturer should be clearly indicated or marked on the product. As pointed out above, affixing the name of the manufacturer on such goods would not, by itself, bring them within the ambit of branded goods. 3. Another issue raised by the trade concerns the determination of eligibility of a manufacturer or factory to the benefit of small scale exemption contained in Notification No. 8/2003-C.E., dated 1-3-2003. Under the exemption, a manufacturer or a factory whose aggregate value of clearances for home consumption did not exceed Rs. 4 crore in the preceding financial year is eligible for full exemption on similar clearances not exceeding Rs. 1.5 crore in this financial year. It has already been clarified that a certificate from a chartered Accountant about the aggregate value of clearances for home consumption in the preceding financial year may be accepted. It has now been decided that self certification by a manufacturer may also be accepted for this purpose. As regards maintenance of records by such manufacturers, Central Excise law does not prescribe any specific record which is to be maintained by an assessee. Hence records of production, clearance & purchases that are maintained for the purpose of VAT purposes can be accepted for purposes of Central Excise. CENTRAL EXCISE RULES 2002 (1) REGISTRATION Exemption from registration exempts from the operation of said rule, every manufacturing unit engaged in the manufacture of recorded smart cards falling under sub-heading 8523 where manufacturer of such goods has a centralized billing or accounting system in respect of such goods manufactured by different manufacturing units and opts for registering only the premises or office from where such centralized billing or accounting is done. (2) EARLIER ER-1 TO ER-8 ARE REQQUIRED TO FILE ELECTRONICALLY- REFER PG- NO- 36 where an assessee has paid total duty of rupees 10 lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year, he shall file the monthly or quarterly return, or declaration as the case may be, electronically :] but now ER-1 to ER-8 are required to file electronically irrespective of duty paid in previous F.Y. Every assessee other than assessees availing the exemption under NN-49/2003 or 50/2003 (Uttrakhand & Himachal Pradesh) shall file electronically the return or the statement, as the case may be, specified in this rule. (3) penal provisions for non-submission of returns Penalty under Rule 27 of Central Excise Rules, 2002 and Rule 15A of CENVAT Credit Rules, 2004 can be invoked against such errant assessees.

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Applicable for May 2012 (1) For section 11A of the Central Excise Act, the following section shall be substituted, namely : F Act 2011 Sec 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. (1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, SCN WITHIN 1 YEAR- FOR CASES OTHER THAN FRAUD (a) the Central Excise Officer shall, within one year from the RELEVANT DATE, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; VOLUNTARY PAYMENT OF EXCISE DUTY AND INTEREST BEFORE ISSUE OF SCN (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of, (i) his own ascertainment of such duty; or (ii) duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA. WRITTEN INTIMATION OF VOLUNTARY PAYMENT TO CEO - No SCN issued if full amount paid (2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder. SCN ISSUED IF AMOUNT PAID IS SHORT (3) Where the Central Excise Officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that sub-section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under sub-section (2). SCN WITHIN 5 YEARS- For Cases Of FRAUD & COLLUSIONPENALTY=100% DUTY(NOT Captured transaction) Sec 11A(4) Where any duty of excise has not been levied or paid or has been short levied or short-paid or erroneously refunded, by the reason of (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the CEO shall, within 5 years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty Equivalent

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SCN WITHIN 5 YEARS- For Cases Of FRAUD & COLLUSIONPENALTY=50% DUTY(Captured transaction) (4) Where, during the course of any audit, investigation or verification, it is found that any duty has not been levied or paid or short-levied or short-paid or erroneously refunded for the reason mentioned in clause (a) or clause (b) or clause (c) or clause (d) or clause (e) of sub-section (4) but the details relating to the transactions are available in the specified record, then in such cases, the Central Excise Officer shall within a period of 5 years from the relevant date, serve a notice on the person chargeable with the duty requiring him to show cause why he should not pay the amount specified in the notice along with interest under section 11AA and penalty equivalent to 50% of such duty. BEFORE ISSUANCE OF SCN -PAYMENT OF (DUTY+ INTEREST+ PENALTY-Max-25%) (5) Any person chargeable with duty under sub-section (5), may, before service of show cause notice on him, pay the duty in full or in part, as may be accepted by him along with the interest payable thereon under section 11AA and PENALTY EQUAL TO 1% of such duty per month to be calculated from the month following the month in which such duty was payable, BUT NOT EXCEEDING A MAXIMUM OF 25% OF THE DUTY, and inform the Central Excise Officer of such payment in writing. (6) The Central Excise Officer, on receipt of information under sub-section (6) shall NO SCN ISSUED IF FULL AMOUNT PAID (i) not serve any notice in respect of the amount so paid and all proceedings in respect of the said duty shall be deemed to be concluded where it is found by the Central Excise Officer that the amount of duty, interest and penalty as provided under sub-section (6) has been fully paid; SCN ISSUED IF AMOUNT PAID IS SHORT (ii) proceed for recovery of such amount if found to be short-paid in the manner specified under sub-section (1) and the period of one year shall be computed from the date of receipt of such information. (7) In computing the period of one year referred to in clause (a) of subsection (1) or five years referred to in subsection (4) or sub-section (5), the period during which there was any stay by an order of the court or Tribunal in respect of payment of such duty shall be excluded. (8) Where any appellate authority or Tribunal or court concludes that the notice issued under sub-section (4) is not sustainable for the reason that the charges of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty has not been established against the person to whom the notice was issued, the Central Excise Officer shall determine the duty of excise payable by such person for the period of one year, deeming as if the notice were issued under clause (a) of sub-section (1). (9) The Central Excise Officer shall, after allowing the concerned person an opportunity of being heard, and after considering the representation, if any, made by such person, determine the amount of duty of excise due from such person not being in excess of the amount specified in the notice. (10) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10) (a) within 6 months from the date of notice where it is possible to do so, in respect of cases falling under subsection (1); (b) within 1 year from the date of notice where it is possible to do so, in respect of cases falling under subsection (4) or sub-section (5). (11) Where the appellate authority modifies the amount of duty of excise determined by the Central Excise Officer

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under sub-section (10), then the amount of penalties and interest under this section shall stand modified accordingly, taking into account the amount of duty of excise so modified. (12) Where the amount as modified by the appellate authority is more than the amount determined under subsection (10) by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority in respect of such increased amount. (13) Where an order determining the duty of excise is passed by the Central Excise Officer under this section, the person liable to pay the said duty of excise shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately. Explanation.For the purposes of this section and section 11AC, (a) refund includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) relevant date means, (i) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid, and no periodical return as required by the provisions of this Act has been filed, the last date on which such return is required to be filed under this Act and the rules made thereunder; (ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been shortlevied or short-paid and the return has been filed on due date, the date on which such return has been filed; (iii) in any other case, the date on which duty of excise is required to be paid under this Act or the rules made thereunder; (iv) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (v) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund; (c) specified records means records including computerised records maintained by the person chargeable with the duty in accordance with any law for the time being in force.. Applicable for May 2012 (2) Substitution of new section for sections 11AA a[ F Act 2011] 11AA. Interest on delayed payment of duty. (1) Notwithstanding anything contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty, shall, in addition to the duty, be liable to pay interest at the rate specified in sub-section (2), whether such payment is made voluntarily or after determination of the amount of duty under section 11A. (2) Interest, at such rate not below 10% and not exceeding 36% p.a , as the Central Government may, by notification in the Official Gazette, fix, shall be paid in terms of section 11A after the due date by the person liable to pay duty and such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment of the amount due. (3) Notwithstanding anything contained in sub-section (1), No interest shall be payable where, (a) the duty becomes payable consequent to the issue of an order, instruction or direction by the

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Board under section 37B; AND (b) such amount of duty is voluntarily paid in full, within 45 days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment.. Applicable for May 2012 (3) Substitution of new section for section 11AC [ F act 2011] For section 11AC of the Central Excise Act, the following section shall be substituted, namely : 11AC. Penalty for short-levy or non-levy of duty in certain cases. (1) The amount of penalty for non-levy or short-levy or non-payment or short payment or erroneous refund shall be as follows : If Transaction Was not Captured Transaction (Recorded In Specified Records) (a) where any duty of excise has not been levied or paid or short-levied or short paid or erroneously refunded, by reason of fraud or collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to PAY A PENALTY EQUAL TO THE DUTY so determined; If Transaction Was Captured Transaction (Recorded In Specified Records) (b) where details of any TRANSACTION AVAILABLE IN THE SPECIFIED RECORDS, reveal that any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded as referred to in sub-section (5) of section 11A, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to 50% of the duty so determined; Penalty 25% if paid within 30 days ( only for Captured Transaction) (c) where any DUTY as determined under sub-section (10) of section 11A AND the interest payable thereon under section 11AA in respect of transactions referred to in clause (b) is paid within 30 days of the date of communication of order of the CEO who has determined such duty, the amount of penalty liable to be paid by such person shall be 25% of the duty so determined; PENALTY AND INTEREST TO BE MODIFIED IF EXCISE DUTY (DETERMINED BY CEO) IS MODIFIED BY THE APPELLATE AUTHORITY OR TRIBUNAL OR COURT (d) where the appellate authority modifies the amount of duty of excise determined by the Central Excise Officer under sub-section (10) of section 11A, then, the amount of penalties and interest payable shall stand modified accordingly and after taking into account the amount of duty of excise so modified, the person who is liable to pay duty as determined under subsection (10) of section 11A shall also be liable to pay such amount of penalty or interest so modified. Explanation.For the removal of doubts, it is hereby declared that in a case where a notice has been served under sub-section (4) of section 11A and subsequent to issue of such notice, the Central Excise Officer is of the opinion that the transactions in respect of which notice was issued have been recorded in specified records and the case falls under sub-section (5), penalty equal to 50% of the duty shall be leviable.

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IF DUTY MODIFIED IS MORE THAN DUTY DETERMINED BY CEO (2) Where the amount as modified by the appellate authority is more than the amount determined under subsection (10) of section 11A by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority in respect of such increased amount..

(4) Recovery of sums due to Govt. Sec 11 In respect of duty and any other sum of any kind including the amount required to be paid the credit of CG u/s 11D the officer empowered by CBEC recover in following manner adjustment against money payable (i.e refund) attachment and sale of excisable goods belonging to assessee And if amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the collector of the district in which such person resides or conducts his business and the said collector on receipt of such certificate shall proceed to recover from the said person as arrear of land revenue

Provided that if any duty or any other sum is recoverable from any person (hereinafter referred to as predecessor) and He transfers or otherwise disposes of his business or trade in whole or in part or effects any change in the ownership in consequence of which He is succeeded by any other person then any officer authorized by CBEC and with the written permission of CCE Attach and sale all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person succeeding the business for recovery of sum due from such predecessor at the time of such transfer, disposal or change. Applicable for May 2012- Insertion of new section 11E [F Act 2011] (5) Sec 11E. Liability under Act to be first charge. Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest, or any other sum payable by an assessee or any other person under this Act or the rules made thereunder shall, SAVE AS OTHERWISE PROVIDED in section 529A of the Companies Act, 1956, the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002, [SARFAESI Act 2002] be the first charge on the property of the assessee or the person, as the case may be..

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SIMILAR SEC IN CUSTOM (6) Liability under the Customs Act, 1962 to be first charge [Section 142A inserted] Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under this Act, shall, save as otherwise provided in section 529A of the Companies Act, 1956, the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002, be the first charge on the property of the assessee or the person, as the case may be. (7) Central Government empowered to apply the provisions of the Customs Act to the excise duties imposed under section 3A also [Section 12] Prior to amendment Earlier as per Section 12, CG can apply provisions of the Customs Act, 1962 relating to the levy of and exemption from customs duties, drawback of duty, warehousing, offences and penalties, confiscation, and procedure relating to offences and appeals in regard to like matters in respect of the duties imposed by section 3 of the Central Excise Act, 1944. After Amendment by Finance Act, 2011 Now, Section 12 has been amended so as to provide that Central Government has been empowered to the apply the provisions of the Customs Act, 1962 to the duties charged on the basis of capacity of production under section 3A in the following manner:S.NO Provisions of the Customs shall apply to like matters Act, 1962 relating to covered by section 3A 1. Offences and penalties with effect from 08.04.2011 2. Levy of and exemption from with effect from 10.05.2008 customs duties, drawback of duty, warehousing, confiscation, and procedure relating to offences and appeals Write a detailed note on power of Search and Seizure under Central Excise Act, 1944. OR Can a document which is relevant for a proceeding under the Central Excise Act, 1944 be searched by a Central Excise Officer? Explain the relevant provisions. Applicable for May 2012 (8) Insertion of new section 12F [ F act 2011] 12F. Power of search and seizure. (1) Where the Joint Commissioner of Central Excise or Additional Commissioner of Central Excise has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any Central Excise Officer to search and seize or may himself search and seize such documents or books or things. (2) The provisions of the Code of Criminal Procedure, 1973 relating to search and seizure, shall, so far as may be, apply to search and seizure under this section as they apply to search and seizure under that Code..

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Applicable for May 2012 (9) In section 27 of the Customs Act, for sub-section (1), the following sub-sections shall be substituted, namely: [F.Act 2011] (1) Any person claiming refund of any duty or interest, (a) paid by him; or (b) borne by him, may make an application in such form and manner as may be prescribed for such refund to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of 1 year, from the date of payment of such duty or interest: Provided that where an application for refund has been made before the date on which the Finance Bill, 2011 receives the assent of the President, such application shall be deemed to have been made under sub-section (1), as it stood before the date on which the Finance Bill, 2011 receives the assent of the President and the same shall be dealt with in accordance with the provisions of sub-section (2): Provided further that the limitation of 1 year shall not apply where any duty or interest has been paid under protest. Explanation. For the purposes of this sub-section, the date of payment of duty or interest'' in relation to a person, other than the importer, shall be construed as the date of purchase of goods by such person. (1A) The application under sub-section (1) shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C) as the applicant may furnish to establish that the amount of duty or interest, in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty or interest, has not been passed on by him to any other person. (1B) Save as otherwise provided in this section, the period of limitation of 1 year shall be computed in the following manner, namely: (a) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 25, the limitation of 1 year shall be computed from the date of issue of such order; (b) where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of 1 year shall be computed from the date of such judgment, decree, order or direction; (c) where any duty is paid provisionally under section 18, the limitation of 1 year shall be computed from the date of adjustment of duty after the final assessment thereof.' (2) If on receipt of any such application, AC/DC is satisfied that the duty is refundable, he may make an order and the amount so determined shall be credited to the fund. Exception of doctrine of unjust enrichment However the amount so determined shall, instead of being credited to the fund, be paid to the applicant, if such amount is relatable to: (a) the export duty on re-import of goods as specified in section 26 (b) drawback of duty payable under sections 74 and 75 (c) the duty and interest paid by importer or exporter, if he has not passed on incidence of the duty (d) the duty and interest paid on imports made by an individual for his personal use. (e) the duty and interest borne by buyer if he has not passed incidence of the duty to another person Applicable for May 2012 (10) Sec 28.[ F. Act 2011] (1) Where any duty has not been levied or has been short-levied or erroneously refunded, or any interest payable has not been paid, part-paid or erroneously refunded, for any reason other than the reasons of collusion or any wilful mis-statement or suppression of facts,

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(a) the proper officer shall, within 1 year from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with the duty or interest, may pay before service of notice under clause (a) on the basis of, (i) his own ascertainment of such duty; or (ii) the duty ascertained by the proper officer, the amount of duty along with the interest payable thereon under section 28AA or the amount of interest which has not been so paid or part-paid. (2) The person who has paid the duty along with interest or amount of interest under clause (b) of sub-section (1) shall inform the proper officer of such payment in writing, who, on receipt of such information shall not serve any notice under clause (a) of that sub-section in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest. (3) Where the proper officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that subsection in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under subsection (2). (4) Where any duty has not been levied or has been short-levied or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of, a. collusion; or b. any wilful mis-statement; or c. suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within 5 years from the relevant date, serve notice on the person chargeable with duty or interest which has not been so levied or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. (5) Where any duty has not been levied or has been short-levied or the interest has not been charged or has been part-paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or the employee of the importer or the exporter, to whom a notice has been served under subsection (4) by the proper officer, such person may pay the duty in full or in part, as may be accepted by him, and the interest payable thereon under section 28AA and the penalty equal to 25% of the duty specified in the notice or the duty so accepted by that person, within 30 days of the receipt of the notice and inform the proper officer of such payment in writing. (6) Where the importer or the exporter or the agent or the employee of the importer or the exporter, as the case may be, has paid duty with interest and penalty under sub-section (5), the proper officer shall determine the amount of duty or interest and on determination, if the proper officer is of the opinion (i) that the duty with interest and penalty has been paid in full, then, the proceedings in respect of such person or other persons to whom the notice is served under sub-section (1) or subsection (4), shall, without prejudice to the provisions of sections 135, 135A and 140 be deemed to be conclusive as to the matters stated therein; or (ii) that the duty with interest and penalty that has been paid falls short of the amount actually payable, then the proper officer shall proceed to issue the notice as provided for in clause (a) of sub-section (1) in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of 1 year shall be computed from the date of receipt of information under sub-section (5). (7) In computing the period of 1 year referred to in clause (a) of sub-section (1) or 5 years referred to in sub-section

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(4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded. (8) The proper officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice. (9) The proper officer shall determine the amount of duty or interest under sub-section (8), (a) within 6 months from the date of notice in respect of cases falling under clause (a) of subsection (1); (b) within 1 year from the date of notice in respect of cases falling under sub-section (4). (10) Where an order determining the duty is passed by the proper officer under this section, the person liable to pay the said duty shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately. Explanation. For the purposes of this section, relevant date means, (a) in a case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of goods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest.'. (11) Notwithstanding anything to the contrary contained in any judgement, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub-section (1) of section 4 before the sixth day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section. AUTHOR NOTE- 28(11) INSERTED TO Validate SCN issued before 6th july 2011 from THE SC JUDGEMENT OF SAYED ALI CASE- Cir-44/2011 Applicable for May 2012 (11) For sections 28AA and 28AB of the Customs Act, the following section shall be substituted, namely: Sec 28AA. [ F. Act 2011] (1) Notwithstanding anything contained in any judgment, decree, order or direction of any court, Appellate Tribunal or any authority or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty in accordance with the provisions of section 28, shall, in addition to such duty, be liable to pay interest, if any, at the rate fixed under sub-section (2), whether such payment is made voluntarily or after determination of the duty under that section. (2) Interest at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid by the person liable to pay duty in terms of section 28 and such interest shall be calculated from the first day of the month succeeding the month in which the duty ought to have been paid or from the date of such erroneous refund, as the case may be, up to the date of payment of such duty. (3) Notwithstanding anything contained in sub-section (1), no interest shall be payable where, (a) the duty becomes payable consequent to the issue of an order, instruction or direction by the Board under section 151A; and (b) such amount of duty is voluntarily paid in full, within 45 days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment..

(12) Assessment under Service Tax SECTION [73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. (1) Where any service tax has not been levied or paid or has been short-

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levied or short-paid or erroneously refunded, [Central Excise Officer] may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words one year, the words five years had been substituted. Explanation. Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be. (2) The [Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined : (3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid : Provided that the [Central Excise Officer] may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation.[1] For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this subsection. [Explanation 2. For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon.] (4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of (a) (b) (c) (d) fraud; or collusion; or wilful mis-statement; or suppression of facts; or

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(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. [(4A) Notwithstanding anything contained in sub-sections (3) and (4), where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, but the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under section 75 and penalty equal to 1%. of such tax, for each month, for the period during which the default continues, up to a maximum of 25%. of the tax amount, before service of notice on him and inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded : Provided that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). Explanation. For the purposes of this sub-section and section 78, specified records means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.] (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. (6) For the purposes of this section, relevant date means, (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been shortlevied or short-paid (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.] (13) SECTION [75. Interest on delayed payment of service tax. Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest [at such rate not below 10%. and not exceeding 36% cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette] for the period] by which such crediting of the tax or any part thereof is delayed.] [Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed 60 lakh rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent. per annum.]

MANOJ BATRA

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Specified Residents- who can make application 1) Public sector company specified as class of persons eligible for advance ruling Explanation. - a public sector company shall have the same meaning as is assigned to it in clause (36A) of section 2 of the Income-tax Act, 1961 [NN 21/2009} 2) Project import by Resident 3) RESIDENT PUBLIC LIMITED COMPANY [NN-67/2011] Explanation. For the purposes of this notification.(1) public limited company shall have the same meaning as is assigned to public company in clause (iv) of sub-section (1) of section 3 of the Companies Act , 1956 ( 1 of 1956) and shall include a private company that becomes a public company by virtue of section 43A of the said Companies Act, 1956; (2) resident shall have the same meaning as is assigned to it in clause (42) of section 2 of the Income-tax Act, 1961 in so far it applies to a company. Appeals (1) TECHNO ECONOMIC SERVICES PVT. LTD.(2010)(Bom) it is relevant to note that number of appeals are being filed before this Court; wherein the customs duty and/or central excise duty involved is negligible. One of the appeals bearing Central Excise Appeal No. 1/2005 involved stake of Rs. 5,000/- only. It is noticed that most of the times the duty impact ranges between Rs. 2 to 3 lakh; wherein, normally, senior advocates appear on behalf of Revenue assisted by two junior advocates. In spite of engaging multiple advocates, adjournments are sought. The matters are allowed to remain pending in the Court for a substantially long period of time. With the result, they come up for hearing on more than two or three occasions. Adjournments are always taken and granted by the Court considering the substantial cause shown for the adjournment. All this results in payment of heavy professional charges to the advocates appearing for the department. Sometimes the expenses incurred by the Revenue are disproportionate to the stakes involved in the appeal and/or petition filed by the department. 4. In the aforesaid scenario, one can take judicial notice of the fact that the Centre and the States have acquired the government is largest litigant tag, accounting for 70% of the 3 crore cases over 2.1 crore pending in various Courts. 5. Now, the Central Government has formulated a National Litigation Policy (NLP) to shed the tag Largest Litigant. Thus, keeping in view the policy of the Central Government, the time has come to invite attention of the Chairman of the Central Board of Excise and Revenue (the Board) to consider the necessity of taking policy decision not to file cases; wherein the duty/tax impact is negligible. The similar policy is already in vogue so far as Income Tax Department is concerned. The Central Board of Direct Taxes (CBDT for short) vide its circular dated 27th March, 2000 followed by other circulars dated 24th October, 2005 and 15th May, 2008 has taken a policy decision not to file appeals or references wherein the tax effect is less than the amount prescribed in the instructions issued from time to time, so as to reduce litigation before the High Courts and the Supreme Court. The said policy decision taken by the CBDT has definitely reduced volume of litigation, with the result, their officers are in a position to concentrate on the cases involving heavy stakes. It has, therefore, become necessary for the Board to impress upon the departmental heads not to go for appeals and litigation wherein tax or duty impact is not substantial, otherwise it results in harassment to the assessees and creates unnecessary burden on the infrastructure of the Revenue department. The let the Court to decide attitude needs to be given go bye. Author Note- CBEC issued instruction on 20 oct 2010 on the basis of above judgement which is later amended on 17th Aug 2011 and sec 35R (5) inserted to give effect to instruction of 20-1-2010.

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CBECINSTRUCTION-17 AUG 2011-Reduction of Government litigation - providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme court In exercise of the powers conferred by Section 35R of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance Act,1994 and Section 131BA of the Customs Act, 1962 the Central Board of Excise & Customs (hereinafter referred to as the Board) fixes the following monetary limits below which appeal shall not be filed in the Tribunal, High Court and the Supreme Court: Sl.No. 1. 2. 3. Appellate Forum CESTAT HIGH COURTS SUPREME COURT Monetary limit Rs.5,00,000/Rs.10,00,000/Rs.25,00,000/-

2. For ascertaining whether a matter would be covered within or without the aforementioned limits, the determinative element would be duty/tax under dispute. To illustrate it further in a case involving duty of Rs. 5 lakhs or below with equal penalty and interest, as the case may be, no appeal shall be filed in the Tribunal. Similarly, no appeal shall be filed in the High Courts if the duty involved does not exceed Rs.10 lakhs with or without penalty and interest. Further, the Commissionerates shall not send proposal to the Board for filing Civil Appeal or Special Leave Petition in the Supreme Court in a case involving duty up to Rs.25 lakhs, whether with penalty and interest or otherwise. However, where the imposition of penalty is the subject matter of dispute and the said penalty exceeds the limit prescribed, then the matter could be litigated further. Similarly, where the subject matter of dispute is the demand of interest and the amount of interest exceeds the prescribed limit, then the matter may require further litigation. 3.Adverse judgments relating to the following should be contested irrespective of the amount involved: a) Where the constitutional validity of the provisions of an Act or Rule is under challenge. b) Where Notification/ Instruction/ Order or Circular has been held illegal or ultra vires 4. Several queries connected with application of monetary limits have been raised by the field formations which were considered by the Board and are being clarified as below:Issues Whether duty involved mentioned in the Instruction dated 20.10.2010 refers to duty outstanding to be collected or the total duty demanded for deciding the threshold limit prescribed therein. Clarifications In a case where a part of the duty demanded is not disputed and is paid and the outstanding duty under dispute is less than the monetary limit prescribed by the Board, no appeal shall be filed. In other words, monetary limit shall apply on the disputed duty and not on the total duty demanded in a case. It is clarified that the monetary limits being prescribed by the Board would apply to cases of refund as well. The limit specified herein will not be applicable to application filed before the Joint Secretary (Revision Application).

a)

b) Whether monetary limits would apply to cases of refund. c) Whether applications being filed by the Department before office of Joint Secretary (Revision Application) would also be covered under the stipulation of monetary limits.

MANOJ BATRA d) Whether exclusion of audit objections mentioned in para 6(c) of Instruction dated 20.10.2010 would cover internal audit objection cases also or whether they would be limited to cases of revenue audit alone.

| 56 The intention was to apply the exclusion clause mentioned at para 6(c) only to disputes arising out of revenue audit objections accepted by the Department. It has now been decided to delete the said exclusion clause (refer para 3 of this Instruction). Therefore, in all cases of audit objections accepted by the Department, while protective demands may continue to be issued but the same would be subjected to the monetary limits for filing appeal in the Tribunal, High Courts and the Supreme Court.

1. The revised monetary limits shall come into force from 1.9.2011. Applicable for May 2012 Insertion of new section 35R [ F act 2011] (2) 35R. Appeal not to be filed in certain cases. CBEC CAN FIX MONETARY LIMITS FOR FILING APPEAL, APPLICATION ETC. BY THE CEO (1) The Central Board of Excise and Customs may, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal, application, revision or reference by the Central Excise Officer under the provisions of this Chapter. Non- filing of Appeal due to monetary limit will not preclude CEO from filing appeal in other cases (2) Where, in pursuance of the orders or instructions or directions, issued under sub-section (1), the Central Excise Officer has not filed an appeal, application, revision or reference against any decision or order passed under the provisions of this Act, it shall not preclude such Central Excise Officer from filing appeal, application, revision or reference in any other case involving the same or similar issues or questions of law. Non- filing of Appeal due to monetary limit- assessee cant contend that Dept accepted decision (3) Notwithstanding the fact that no appeal, application, revision or reference has been filed by the Central Excise Officer pursuant to the orders or instructions or directions issued under sub-section (1), no person, being a party in appeal, application, revision or reference shall contend that the Central Excise Officer has acquiesced (acceptance without protest) in the decision on the disputed issue by not filing appeal, application, revision or reference. Appellate Tribunal Or Court Must Have Regard To The Circumstances For Non-Filing Of Appeal (4) The Appellate Tribunal or court hearing such appeal, application, revision or reference shall have regard to the circumstances under which appeal, application, revision or reference was not filed by the Central Excise Officer in pursuance of the orders or instructions or directions issued under sub-section (1). Orders/instructions issued between 20.10.2010 and 08.04.2011 for monetary limit deemed to issued under this section (5) Every order or instruction or direction issued by the Central Board of Excise and Customs on or after the 20th day of October, 2010, but before the date on which the Finance Bill, 2011 receives the assent of the President, fixing monetary limits for filing of appeal, application, revision or reference shall be deemed to have been issued under sub-section (1) and the provisions of sub-sections (2), (3) and (4) shall apply accordingly..

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Rishabh Internationals Limited (RIL) cleared the goods to Sambhav Enterprises (SE) paying excise duty @ 14% in the month of March, 2011 although the rate of duty on the said goods had been reduced to 10% in the Union Budget 2011-12. However, SE refused to pay the higher duty paid by RIL by mistake and subsequently raised a debit note. RIL applied for the refund of excess excise duty paid of ` 4,90,000 which was rejected by the Department on the ground that a debit note could not form the basis for refund. An appeal was filed to the Commissioner of Central Excise (Appeals) which passed an order accepting RILs refund claim. You are required to examine whether, in the instant case, Revenue being aggrieved by the order of the Commissioner of Central Excise (Appeals) can file an appeal to the CESTAT against such order.

Anti Dumping Duty on parts/components of Compact Fluorescent Lamps (CFL) from China and Hong Kong as per Customs Notification No.138/2002-Customs dated 10.12.2002 cir 43/2010 In this regard, it is observed that Rule 2(a) of the General Interpretative Rules is relevant for the purpose of classification of goods imported in CKD/SKD condition. In terms of the said Rule 2(a), any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled. Thus, when any article such as CFL is imported in CKD/SKD condition, its classification for purpose of assessment would be done as complete or finished article in terms of the said Rule 2(a). Accordingly, when anti-dumping duty is attracted on any article then it is also to be levied if the said article is imported in CKD/SKD condition either together in one lot or in part shipments.

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CUSTOM- Applicable for May 2012

(1) assessment includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil; [F act 2011] (2) SEC 46. Entry of goods on importation [ELECTRONIC FILING OF BOE] (3) (i) The importer of any goods, other than goods intended for transit or transshipment, shall make entry by presenting electronically [ f. act 2011] a bill of entry for home consumption or warehousing in prescribed form. Note- words electronically inserted by F Act 2011 Bill of entry to be filed even if goods exempt- CBEC INSTRUCTION Commissioner may relax the condition of electronic filing Commissioner of Customs may, where it is not feasible to make an entry by presenting electronically, allow an entry to be presented in any other manner. Cir- 17/2011- it is now mandatory to file BOE electronically but where it is not feasible then importer can approach commissioner to allow him to file manually which is in exceptional cases.

PRIOR ENTRY BILL OF ENTRY (ii)A bill of entry may be presented at any time after the delivery of the import manifest However the bill of entry may be presented before the import manifest if the vessel or aircraft is expected to arrive in India within 30 days of such presentation. The importer while presenting a bill of entry shall at the foot thereof make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, relating to the imported goods. Note- words at the foot thereof [ deleted F.Act 2011] ---Applicable for May 2012 CONVERSION FROM HOME CONSUMPTION TO WAREHOUSING AND VICE-VERSA If the proper officer is satisfied that the interests of revenue are not prejudicially affected and that there was not fraudulent intention, he may permit o Substitution of a bill of entry for home consumption for a bill of entry for warehousing or vice versa. (4) SECTION 50. Entry of goods for exportation. (1) The exporter of any goods shall make entry thereof by presenting electronically [ F Act 2011] to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in the prescribed form. Note- words electronically INSERTED VIDE FA 2011 Applicable for May 2012 Applicable for May 2012- Following proviso Inserted by F Act 2011 Provided that the Commissioner of Customs may, in cases where it is not feasible to make entry by presenting electronically, allow an entry to be presented in any other manner.; (2) The exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.

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Note- words at the foot thereof [ deleted F.Act 2011] ---Applicable for May 2012 (5) Sec 19 Goods consist of Articles Liable to different rate of duty a) where the goods consist of a set of articles, duty shall be calculated as follows a) articles liable to duty with reference to quantity shall be chargeable to that duty b) articles liable to duty with reference to value shall if they are liable to duty at same rate, be chargeable to duty at that rate, And if they are liable to duty at different rates, be chargeable to duty at the highest of such rates. C) articles not liable to duty shall be chargeable to duty at the rate at which articles liable to duty with reference to value are liable under clause (b) Chargeable to duty separately at the rate applicable to it. Provided that - if the importer produces evidence to the satisfaction of the proper officer or the evidence is available [ f act 2011] regarding the value of any of the articles liable to different rates of duty, such article shall be chargeable to duty separately at the rate applicable to it. Note- words or the evidence is available Applicable for May 2012 Que6 Define accessory. Rate of import duty on accessories supplied compulsorily with the article? Rate on accessories and part Accessories (condition) Rules 1963 Accessories of and spare parts and maintenance or repairing implements for, any article when imported along with that article shall be chargeable at the same rate of duty as that article, if the proper officer is satisfied that in the ordinary course of trade i) Such accessories, parts, implements are compulsorily supplied along with that article and ii) No separate charge is mad for such supply, their price being included in price of the article. (6) Anti dumping duty sec 9A

1) Where [any article is exported by an exporter or producer] from any country or territory (hereinafter in this section referred to as the exporting country or territory) to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article. 2) This duty cannot exceed the margin of dumping Margin of dumping it means the difference between export price and normal price. 3) Export price It means the price at which the article is exported If export price is not available Because of association of importer and exporter or For any other reason Then the price at which imported goods are sold to independent buyer. Price shall be determined as per rules made for this purpose, if it cant be determined on above basis. 4) Normal price It means sale price of like article in country of exportation determined in accordance with rules If articles are not sold in the country of exportation or

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For any other reason if the comparison is not possible Then normal price shall be i) Cost of production and overheads and profits or ii) Comparable price of the like article when exported to appropriate third country 5) Provisional duty- pending final determination of injury, ADD may be imposed provisionally.even retrospective imposition on provisional basis is possible for a maximum period of 90 days The provisional duty collected shall be refunded if it is finally determined that provisional duty was imposed in excess of margin of dumping. 6) Duty once imposed is valid for 5 Years unless revoked earlier. This period can be extended However total period cannot exceed 10 years from the date of first importation. 7) Not applicable for 100% EOU Notwithstanding anything contained in notification imposing anti-dumping duty shall not apply to articles imported by a 100% EOU unless, (i) specifically made applicable in such notifications or such impositions, as the case may be; or (ii) the article imported is either cleared as such into the domestic tariff area or used in the manufacture of any goods that are cleared into the domestic tariff area, and in such cases anti-dumping duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India. 8) The margin of dumping shall, from time to time, be ascertained and determined by the CG, after such inquiry as it may consider necessary and the CG may, by notification in the OZ, make rules for the purposes of this section, and without prejudice to the generality of the foregoing, such rules may provide for the manner in which articles liable for any anti-dumping duty under this section may be identified, and for the manner in which the export price and the normal value of, and the margin of dumping in relation to, such articles may be determined and for the assessment and collection of such anti-dumping duty. [ 9A(6)] 9) The margin of dumping in relation to an article, exported by an exporter or producer, under inquiry under sub-section (6) shall be determined on the basis of records concerning normal value and export price maintained, and information provided, by such exporter or producer : [9A(6A) ]

Provided that where an exporter or producer fails to provide such records or information, the margin of dumping for such exporter or producer shall be determined on the basis of facts available.] 10) Where the CG on such inquiry as it may consider necessary is of the opinion that circumvention of anti-dumping duty has taken place- [F.ACT 2011] Either by altering the description or name or composition of the article subject to such anti-dumping duty or By import of such article in an unassembled or disassembled form or By changing the country of its origin or export or In any other manner Whereby the anti-dumping duty so imposed is rendered ineffective, it may extend the anti-dumping dutyto such article originating in or exported from such country as the case may be 11) Provisions of custom Act 1962 apply (Amendment w.r.e.f 1-1-95) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act.

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(7) Sec 9AA Refund of anti-dumping duty If an importer proves to the satisfaction of the central government That he has paid any anti-dumping duty in excess of the actual margin of dumping He shall be entitled to refund of such excess duty. The central government shall make rules for providing the manner and time of making application. For may 2012 following inserted for the words if an importer----------------------------------------- refund of excess duty By F Act 2011- Where upon determination by an officer authorised in this behalf by the Central Government under clause (ii) of sub-section (2), an importer proves to the satisfaction of the Central Government that he has paid anti-dumping duty imposed under sub-section (1) of section 9A on any article, in excess of the actual margin of dumping in relation to such article, the Central Government shall, as soon as may be, reduce such anti-dumping duty as is in excess of actual margin of dumping so determined, in relation to such article or such importer, and such importer shall be entitled to refund of such excess duty.

SELF ASSESSMENT CONCEPT INTRODUCED IN CUSTOM BY F ACT 2011 AND CONSEQUENTIAL AMENDMENT IN FOLLOWING SECTIONS (i) Applicable for May 2012 Self assessment concept introduced- due to this sec-2(2)- ( definition of assessment), sec 17, 18 , 19 and sec 157(2)(d) amended (ii) Sec 2(2)- Assessment includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil. (iii) Sec 17 [F Act 2011] Self Assessment Of Duty By Importer Or Exporter (1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall, save as otherwise provided in section 85, self-assess the duty, if any, leviable on such goods. Verification by proper officer (2) The proper officer may verify the self-assessment of such goods and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary. (3) For verification of self-assessment under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, brokers note, insurance policy, catalogue or other document, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which is in his power to produce or furnish, and thereupon, the importer, exporter or such other person shall produce such document or furnish such information. Reassessment of duty by the PO if self-assessment not done correctly (4) Where it is found on verification, examination or testing of the goods or otherwise that the self assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods. Speaking Order For Re-Assessment Passed If Importer Doesntagrees With The Reassessment (5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment

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done by the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefor under this Act and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said reassessment in writing, the proper officer shall pass a speaking order on the re-assessment, within 15 days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be. Audit At Custom Office Or Premises Of Importer/ Exporter (6) Where re-assessment has not been done or a speaking order has not been passed on reassessment, the proper officer may audit the assessment of duty of the imported goods or export goods at his office or at the premises of the importer or exporter, as may be expedient, in such manner as may be prescribed. Explanation. For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received..

Que6- state the circumstances in which provisional assessment resorted to. (iv) In section 18 of the Customs Act, F Act 2011 (1) Notwithstanding anything contained in this Act but without prejudice to the provisions of section 46, (a) where the importer or exporter is unable to make self-assessment under sub-section (1) of section 17 and makes a request in writing to the proper officer for assessment; or (b) where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test; or (c) where the importer or exporter has produced all the necessary documents and furnished full information but the proper officer deems it necessary to make further enquiry; or (d) where necessary documents have not been produced or information has not been furnished and the proper officer deems it necessary to make further enquiry, the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed.; (2) When the duty leviable on such goods is assessed finally [or re-assessed by the proper officer] in accordance with the provisions of this Act, then (a) In the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty [finally assessed or re-assessed, as the case may be,] and if the amount so paid falls short of, or is in excess of [the duty [finally assessed or re-assessed, as the case may be,], the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be; (b) In the case of warehoused goods, the proper officer may, where the duty [finally assessed or reassessed, as the case may be,] is in excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty. (3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order [or re-assessment order] under sub-section (2), at the rate fixed by the Central Government under section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof. (4) Subject to sub-section (5), if any refundable amount referred to in clause (a) of sub-section (2) is not refunded under that sub-section within three months from the date of assessment of duty finally [or re-assessment of duty, as the case may be], there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount.

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(5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to (a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use; (c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (d) the export duty as specified in section 26; (e) drawback of duty payable under sections 74 and 75.]

(v) SEC 19 SET OF ARTICLES LIABLE TO DUTY REFER ABOVE

(vi) CBEC empowered to prescribe regulations for specifying the manner of conducting audit at the office of the proper officer of customs/at the premises of the importer [Clause (d) to section 157(2) inserted] Section 157 empowers the Central Board of Excise and Customs to make regulations generally to carry into effect the purposes of the Customs Act, 1962. Sub-section (2) specifies the matters in respect of which such regulations may provide for. Finance Act, 2011 has inserted clause (d) in sub-section (2) which reads as under:In particular and without prejudice to the generality of the foregoing power, such regulations may provide for the manner of conducting audit of the assessment of duty of the imported or export goods at the office of the proper officer or the premises of the importer or exporter, as the case may be VOLUNTARY PAYMENT OF DUTY BEFORE FINAL ASSESSMENT- cir 40/2011 An importer or exporter can be allowed to pay customs duties voluntarily in the period intervening provisional assessment and final assessment. whenever any importer or exporter intimates to the proper officer in writing that he desires to pay voluntarily certain amount of duty of customs, at any time before finalization of the provisional assessment, the following may be drawn to his attention, namely:(a) (b) (c) Such duty should be paid along with interest on the amount of duty so being paid, at the rate fixed by the Central Government under section 28B of the Customs Act, 1962, from the first day of the month in which the duty is provisionally assessed till the date of payment thereof; The term and conditions of the bond and the amount of security of surety furnished at the time of provisional assessment shall remain unchanged; and No refund of duty will be granted till the assessment is finalised.

Wherever the importer or exporter pays any amount of duty before finalisation of assessment, he shall not incur interest on the amount of duty so paid for the period from the date of such payment till the finalization of assessment. DUTY DRAWBACK Section 75 Drawback on imported materials used in the manufacture of goods, which are exported.i.e after Processing 1) Where it appears to the CG that in respect of any goods manufactured, processed or on which an Operation has been carried out in India, Are entered for export and an order permitting the clearance and loading thereof for exportation has

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been made by the proper officer or being goods entered for export by post under section 82 and in respect of which an order permitting clearance for exportation has been made by the proper officer], 2) Drawback shall be allowed of duties of customs on any materials used in the manufacture or processing of such goods or carrying out any operation on such goods, as the CG may direct that drawback shall be allowed in respect of such goods 3) However no drawback shall be allowed if The export value of such goods is less than the value of the imported materials used in the Manufacture or processing of such goods or The export value of such goods is not more than such percentage of the value of the imported Materials used in the manufacture or processing of such goods as the CG may specify. However if the drawback has been allowed and the sale proceeds of such goods are not received in time under FEMA, such drawback shall except under such circumstances or such conditions as the CentralGovernment may, by rules, specify [f act 2011] be recovered. 4) The Central Government may make rules for the purpose of carrying out the provisions of sub-section Note- words except under such circumstances or such conditions as the CentralGovernment may, by rules, specify [ inserted by F.Act 2011] ---Applicable for May 2012

Rules- [Custom, central excise duties and Service tax drawback rules 1995]- u/s 75 Circular 7/2010--Sub: Recovery of drawback amount on the portion of the FOB value of export not realized by the exporter but compensated by ECGC - reg. Section 75 of the Customs Act provides that where any drawback has been allowed on any goods and the sale proceeds in respect of such goods are not realized within the time allowed under the Foreign Exchange Management Act, 1999 such drawback shall be deemed never to have been allowed and the Central Government may, by Rules made under section 75 (2), specify the procedure for the recovery of the amount of such drawback. A procedure has also been laid down under the Customs, Central Excise and Service Tax Drawback Rules, 1995 for recovery of drawback in case of non-realization of export proceeds. Therefore, the amount of drawback paid in all such cases where export proceeds have not been realized has to be recovered. 2. However, it has been brought to notice of the Board that some exporters are resisting recovery of drawback in cases where export proceeds have not been realized citing provisions in Handbook of Procedure (HBP) MISCELLANEOUS SECTION [110A. Provisional release of goods, documents and things seized pending adjudication. Any goods, documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require.] Applicable for May 12 F act 2011- for the words adjudicating officer and Commissioner of Customs, the words adjudicating authority shall be substituted 124 of Custom Act 1962. SECTION 124. No order Issue of show cause notice before confiscation of goods, etc.

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confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person (a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of a DC, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter : Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral. Applicable for May 12 . In section 124 of the Customs Act, for the words a Deputy Commissioner of Customs, the words an Assistant Commissioner of Customs shall be substituted

Applicable for May 12 Sec 131BA [f act 2011] . (1) The Board may, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal, application, revision or reference by the Commissioner of Customs under the provisions of this Chapter. (2) Where, in pursuance of the orders or instructions or directions, issued under sub-section (1), the Commissioner of Customs has not filed an appeal, application, revision or reference against any decision or order passed under the provisions of this Act, it shall not preclude such Commissioner of Customs from filing any appeal, application, revision or reference in any other case involving the same or similar issues or questions of law. (3) Notwithstanding the fact that no appeal, application, revision or reference has been filed by the Commissioner of Customs pursuant to the orders or instructions or directions issued under subsection (1), no person, being a party in appeal, application, revision or reference shall contend that the Commissioner of Customs has acquiesced in the decision on the disputed issue by not filing appeal, application, revision or reference. (4) The Appellate Tribunal or court hearing an appeal, application, revision or reference shall have regard to the circumstances under which the appeal, application, revision or reference was not filed by the Commissioner of Customs in pursuance of orders or instructions or directions issued under sub-section (1). (5) Every order or instruction or direction issued by the Board on or after the 20th day of October, 2010, but before the date on which the Finance Bill, 2011 receives the assent of the President, fixing monetary limits for filing appeal, application, revision or reference shall be deemed to have been issued under sub-section (1), and the provisions of sub-sections (2), (3) and (4) shall apply accordingly.. SECTION 150. Procedure for sale of goods and application of sale proceeds. (1) Where any goods not being confiscated goods are to be sold under any provisions of this Act, they shall, after notice to the owner thereof, be sold by public auction or by tender or with the consent of the owner in any other manner. (2) The proceeds of any such sale shall be applied (a) firstly to the payment of the expenses of the sale, (b) next to the payment of the freight and other charges, if any, payable in respect of the goods sold, to the carrier, if notice of such charges has been given to the person having custody of the goods, (c) next to the payment of the duty, if any, on the goods sold,

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(d) next to the payment of the charges in respect of the goods sold due to the person having the custody of the goods, (e) next to the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to customs, and the balance, if any, shall be paid to the owner of the goods. Applicable for May 12 Proviso inserted by F Act 2011 Provided that where it is not possible to pay the balance of sale proceeds, if any, to the owner of the goods within a period of 6 months from the date of sale of such goods or such further period as the Commissioner of Customs may allow, such balance of sale proceeds shall be paid to the Central Government.. SECTION [151A. Instructions to officers of customs. The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of goods or with respect to the levy of duty thereon, or for the implementation of any other provisions of this Act or of any other law for the time being in force, in so far as they relate to any prohibition, restriction or procedure for import or export of goods [ F Act 2011] issue such orders, instructions and directions to officers of customs as it may deem fit and such officers of customs and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board : Provided that no such orders, instructions or directions shall be issued (a) so as to require any such officer of customs to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the [Commissioner of Customs (Appeals)] in the exercise of his appellate functions.] Applicable for May 12 The words inserted by F Act 2011 , or for the implementation of any other provisions of this Act or of any other law for the time being in force, in so far as they relate to any prohibition, restriction or procedure for import or export of goods Additional duty of customs Sec 3 of CTA Countervailing duty a) CVD PAYABLE ON 3 BASIS (1) MRP LESS ABATEMENT {MRP NOTIFIED GOODS} (2) ON TARIFF VALUE { TARIFF VALUE NOTIFIED GOODS} (3) ON AV U/S 14 + BCD { OTHER GOODS} Value in case of RSP required to be declared under SWM act [Legal Metrology Act, 2009] If in case of imported article in relation to which retail price is required to be declared under SWM Act [Legal Metrology Act, 2009] and such article is notified u/s 4A of central excise Act. The value of the imported article shall be [ retail sale price declared less abatement notified,] If more than one retail sale price is declared, The maximum of such retail sale price shall be deemed to be the retail sale price for this section. Applicable for may 2012 Note- the words Legal Metrology Act, 2009 inserted by [ F Act 2011] Que3 MRP 1500 and AV -1000 u/s 14(1) abatement-40%. BED- 16% + ed. Cess-2%. BCD- 15% Calculate CVD Que4 Computation of additional duty of custom A.V u/s 14- 1000, BCD-20%, EXCISE DUTY-16%

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Service tax
Rule 5B- STR 1994. Date for determination of rate. The rate of tax in case of services provided, or to be provided, shall be the rate prevailing at the time when the services are deemed to have been provided under the rules made in this regard.] Payment of service tax Rule 6- STR 1994

(1) The service tax shall be paid to the credit of the central government by 6th of month, if the duty is deposited electronically through internet banking and 5th of the month, in any other case following the calendar month in which the payment are received towards the value of taxable services, service is deemed to be provided as per the rules framed in this regard [ for May 12] Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the central government by 6th of month, if the duty is deposited electronically through internet banking and 5th of the month, in any other case immediately following the quarter in which the payments are received towards the value of taxable services, service is deemed to be provided as per the rules framed in this regard [ for May 12] [ for May 12-words payment are received is replaced by service deemed to be provided as per point of taxation Rules 2011, service deemed to be provided means point of taxation. Provided also that the service tax on the value of taxable services received during the month of march, or the quarter ending in march, as the case may be shall be paid to the credit of the central government by the 31st day of march of calendar year.

[ for May 12] - following proviso substituted instead of above proviso [Provided also that the service tax on the service deemed to be provided in the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.]

SECTION [75. Interest on delayed payment of service tax. Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest [at such rate not below 10%. and not exceeding 36%. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette] for the period] by which such crediting of the tax or any part thereof is delayed.]- [presently w.e.f- 1-4-2011- 18%p.a] [Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed 60 lakh rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by 3% per annum.]

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Service tax is not chargeable on delayed payment charges collected by Stock Brokers CBEC has clarified that service tax would not be payable on the additional amount that is collected towards the delay in making payment to the stock brokers by their customers (delayed payment charges) in respect of Stock Broker's services. The Board has referred to two of its earlier circulars on the issue. The circulars are: (i) Circular No. 96/7/2007 - ST dated 23.08.2007 which clarifies that an amount collected for delayed payment of a telephone bill is not to be treated as consideration charged for provision of telecom service and therefore, does not form a part of the value of taxable service. (ii) Circular No. 121/02/2010 - ST dated 26.4.2010 which clarifies that detention charges in respect of detained containers are not in respect of service provided on behalf of client (under BAS) nor is it on account of infrastructure support services (under BSS). Such charges can at best be called as 'penal rent' for retaining the containers beyond the predetermined period. Therefore, the amount collected as 'detention charges' is not chargeable to service tax. Applying the same analogy, CBEC has clarified that delayed payment charges received by the stock brokers are also therefore, not includible in taxable value as the same are not the charges for providing taxable services. Such charges are on account of delay in making payments by the service recipient to the service provider and are in the nature of a penal charge for not making the payment within stipulated time. It may be noted that the Board has stated that this principle will also apply to other service providers. However, section 67 of the Finance Act 1994 provides that service tax is chargeable on taxable value which shall be the 'gross amount charged' by the service provider. Therefore, if in the account statement / invoice / bill etc issued by the service provider, only the gross amount is shown without indicating the delayed payment charges separately, the service tax would be payable on the entire amount. Delayed payment charges would not be includible in 'gross value charged' only if these charges are shown separately in the account statement/invoice/bill etc Suhani Securities Ltd. (SSL) collected late payment charges of ` 3,00,000 in the month of January 2012 from its clients as they did not make the required payments for their share purchases. SSL was ambiguous regarding the leviability of service tax on such payments. It referred to the practice being followed in other similar segments and found that an amount collected for delayed payment of a telephone bill did not form part of the value of taxable service. Consequently, SSL also did not deduct service tax on the said amount. The Department issued a show cause notice on SSL raising a demand of service tax on the said late charges collected by it. You are required to examine whether the show cause notice issued by Department is valid in law or not. Note: The delayed payment charges were indicated separately in the invoices raised by SSL Ans- No, the show cause notice issued by Department is not valid in law. POINT OF TAXATION RULES, 2011 The Central Government has notified the following rules for the purpose of collection of service tax and determination of rate of service tax, namely,RULE 1. Short title and commencement. (1) These rules shall be called the Point of Taxation Rules, 2011. (2) They shall come into force on the 1st day of April, 2011. RULE 9. Transitional Provisions. Nothing contained in [these rules] shall be applicable, (i) where the provision of service is completed; or (ii) where invoices are issued prior to the date on which these rules come into force. (i.e 1/4/2011) Provided that services for which provision is completed on or before 30th day of June, 2011 or where the invoices are issued upto the 30th day of June, 2011,

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the point of taxation shall, at the option of the taxpayer, be the date on which the payment is received or made as the case may be. RULE 2. Definitions. In these rules, unless the context otherwise requires,Rule 2(d) invoice means the invoice referred to in rule 4A of the Service Tax Rules, 1994 and shall include any document as referred to in the said rule; Rule 2 (e) point of taxation means the point in time when a service shall be deemed to have been provided; Rule 2 (f) taxable service means a service which is subjected to service tax, whether or not the same is fully exempt by the Central Government under Section 93 of the Act; RULE [3. Determination of point of taxation. For the purposes of these rules, unless otherwise provided, point of taxation shall be,(a) the time when the invoice for the service provided or to be provided is issued : Provided that where the invoice is not issued within 14 days of the completion of the provision of the service, the point of taxation shall be date of such completion. (b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment. Explanation For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance. Cir- 144/13/2011 Representations requesting clarification on completion of service as provided under the Point of Taxation Rules, 2011 and Service Tax Rules, 1994 have been received from certain sections of service providers that in many situations it is not possible to issue invoices within 14 days of the completion of the service since the exact date of completion of service is difficult to identify. Instances have been given where after the task of providing the service may be physically accomplished, but certain other formalities are required to be completed from the clients end before an invoice can be issued. 2. These representations have been examined. The Service Tax Rules, 1994 require that invoice should be issued within a period of 14 days from the completion of the taxable service. The invoice needs to indicate interalia the value of service so completed. Thus it is important to identify the service so completed. This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities like measurement, quality testing etc which may be essential pre-requisites for identification of completion of service. The test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. However such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice. The above interpretation also applies to determination of the date of completion of provision of service in case of continuous supply of service. RULE 4. Determination of point of taxation in case of [change in effective rate of tax]. Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a [change in effective rate of tax] in respect of a service, shall be determined in the following manner, namely :(a) in case a taxable service has been provided before the [change in effective rate of tax],-

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(i) where the invoice for the same has been issued and the payment received after the [change in effective rate of tax], the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or (ii) where the invoice has also been issued prior to [change in effective rate of tax] but the payment is received after the [change in effective rate of tax], the point of taxation shall be the date of issuing of invoice; or (iii) where the payment is also received before the [change in effective rate of tax], but the invoice for the same has been issued after the [change in effective rate of tax], the point of taxation shall be the date of payment; (b) in case a taxable service has been provided after the [change in effective rate of tax],(i) where the payment for the invoice is also made after the [change in effective rate of tax] but the invoice has been issued prior to the [change in effective rate of tax], the point of taxation shall be the date of payment; or (ii) where the invoice has been issued and the payment for the invoice received before the [change in effective rate of tax], the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or (iii) where the invoice has also been raised after the [change in effective rate of tax] but the payment has been received before the [change in effective rate of tax], the point of taxation shall be date of issuing of invoice. Explanation For the purposes of this rule, change in effective rate of tax shall include a change in the portion of value on which tax is payable in terms of a notification issued under the provisions of Finance Act, 1994 or rules made thereunder.] RULE 5.-Payment of tax in cases of new services. Where a service, not being a service covered by rule 6, is taxed for the first time, then, (a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable; (b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within the period referred to in rule 4A of the Service Tax Rules, 1994. RULE 6. Determination of point of taxation in case of continuous supply of service. Notwithstanding anything contained in rules 3, 4 or 8, in case of continuous supply of service, the point of taxation shall be,(a) the time when the invoice for the service provided or to be provided is issued : Provided that where the invoice is not issued within 14 days of the completion of the provision of the service, the point of taxation shall be date of such completion. (b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment. Explanation 1. For the purpose of this rule, where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service. Explanation 2. For the purpose of this rule, wherever any advance, by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.] NoteRule 2(c)-continuous supply of service means any service which is provided, or to be provided continuously, under a contract, for a period exceeding 3 months, or where the CG, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition; FOLLOWING SERVICES NOTIFIED- [Notification No. 28/2011-S.T., dated 1-4-2011] as amednded CG notifies that the provision of taxable services referred to in (i) 65(105) (zzq)- COMMERCIAL OR INDUSTRIAL CONSTRUCTION

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(ii) 65(105) (zzzh)-CONSTRUCTION OF RESIDENTIAL COMPLEX (iii) 65(105) (zzzx)- TELECOMMUNICATION SERVICE (iv) 65(105) (zzzu) INTERNET TELECOMMUNICATION SERVICE and (v) 65(105) (zzzza)- WORKS CONTRACT SERVICE shall be treated as continuous supply of service, for the purpose of the said rules.

RULE 7. Determination of point of taxation in case of specified services or persons. Notwithstanding anything contained in these rules, the point of taxation in respect of,(a) the services covered by sub-rule (1) of rule 3 of shall be the date on which payment is received Export of Services Rules, 2005; (b) the persons required to pay tax as recipients under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Finance Act, 1994; individuals or proprietary firms or partnership firms providing taxable services referred to in 65(105) (g)- consulting engineer 65(105) (p)- Architect 65(105) (q),interior decorator 65(105) (s)/ (t)/(u)- CA/CWA/CS 65(105) (za)- scientific or technical consultant 65(105) (zzzzm)- legal consultant shall be the date on which payment is made

(c)

shall be the date on which payment is received

Provided that in case of services referred to in clause (a), where payment is not received within the period specified by the Reserve Bank of India, the point of taxation shall be determined, as if this rule does not exist. Provided further that in case of services referred to in clause (b) where the payment is not made within a period of 6 months of the date of invoice, the point of taxation shall be determined as if this rule does not exist. Provided also that in case of associated enterprises, where the person providing the service is located outside India, the point of taxation shall be the date of credit in the books of account of the person receiving the service or date of making the payment whichever is earlier.] Note- associated enterprises shall have the meaning assigned to it in section 92A of the Income Tax Act, 1961- Rule 2(b) Author noteEarlier explanation to sec 65 provides Transaction between associated enterprise Explanation- for the removal of doubts, it is hereby declared that Where the transaction of taxable service is with any associated enterprise Any payment received in such case towards the value of taxable service shall include Any amount debited or credited as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay service tax. RULE 8.-Determination of point of taxation in case of copyrights, etc. In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and subsequently the use or the benefit of these services by a person other than the provider gives rise to any

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payment of consideration, the service shall be treated as having been provided each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier. Question 1 Determine the Point of Taxation in each of following independent cases in accordance with Point of Taxation Rules, 2011: S. No. Date of completion of service 1. 10.04. 2011 2. 10.04. 2011 3. 10.04. 2011 Date] of Invoice, Bill or Challan as the case may be 20.04.2011 20.04.2011 20.04.2011 Date on which payment received Point of Taxation 20-04-2011 15-4-2011 13.04.2011 (Part) and 20.04.2011 for balance 06.04.2011(Part) and 08.04.2011 for respective amt 08.04.2011(Part) and 15.04.2011 for respective amt 10-4-2011 05.04.2011(Part) and 10.04.2011 for respective amt 05.04.2011(Part) and 10.04.2011 for respective amt 05.04.2011(Part) and 10.04.2011 for respective amt 05-04-2011

30.04.2011 15.04.2011 13.04.2011 (Part) and 25.04.2011 (remaining)

4.

10.04. 2011

20.04.2011

06.04.2011(Part) and 08.04.2011 (remaining) 08.04.2011(Part) and 15.04.2011 (remaining) 30.04.2011 05.04.2011(Part) and 25.04.2011 (remaining)

5. 6. 7.

10.04. 2011 10.04. 2011 10.04. 2011

22.04.2011 26.04.2011 26.04.2011

8.

10.04. 2011

26.04.2011

05.04.2011(Part) and 15.04.2011

9. 10.

10.04. 2011 10.04. 2011

26.04.2011 26.04.2011

05.04.2011(Part) and 27.04.2011 05.04.2011

POINT OF TAXATION RULE - 3 Point of Taxation shall be (a) A provision of service shall be treated as having taken place at the time when service is provided or to be provided; THE TIME WHEN THE INVOICE FOR THE SERVICE PROVIDED OR TO BE PROVIDED IS ISSUED : PROVIDED THAT WHERE THE INVOICE IS NOT ISSUED WITHIN 14 DAYS OF THE COMPLETION OF THE PROVISION OF THE SERVICE, THE POINT OF TAXATION SHALL BE DATE OF SUCH COMPLETION. Invoice Actu Poi Particulars amount al nt in Due date Receipt time for taxation 1) Date of 10th 1st commencement of April 2011 Point -

MANOJ BATRA Service 2) Date of 25th completition of Service April 2011 4) Date of issue of 30th invoice April 2011 4) Receipt of Fees 15th May 2011

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2nd Point 3rd Point 4th Point

300000

3000 000

300

5th//6th May or 5th /6th july

300000

00 3000

300

00 000 For Ind./prop firm/ Part. Firm- 5th july, For others- 5th May. In case of E-payment- 5th replaced by 6th Invoice Actu Poi Particulars amount al nt in Due date Receipt time for taxation 1) Date of 10th 1st commencement of April 2011 Point Service 2) Date of 25th 2nd completition of Service April 2011 Point 4) Date of issue of 5th 3rd 300000 300 5th//6th invoice May 2011 Point 000 june or 5th /6th july 4) Receipt of Fees 15th 4th 3000 May 2011 Point 00 300000 3000 300 00 000 For Ind./prop firm/ Part. Firm- 5th july, For others- 5th june. In case of E-payment- 5th replaced by 6th (b) If, before the time specified in clause (a), the person providing the service issues an invoice or receives a payment, the service shall, to the extent covered by the invoice or the payment made thereof, be deemed to have been provided at the time the invoice was issued or the payment was received, as the case may be, whichever is earlier. IN A CASE, WHERE THE PERSON PROVIDING THE SERVICE, RECEIVES A PAYMENT BEFORE THE TIME SPECIFIED IN CLAUSE (A), THE TIME, WHEN HE RECEIVES SUCH PAYMENT, TO THE EXTENT OF SUCH PAYMENT. EXPLANATION FOR THE PURPOSE OF THIS RULE, WHEREVER ANY ADVANCE BY WHATEVER NAME KNOWN, IS RECEIVED BY THE SERVICE PROVIDER TOWARDS THE PROVISION OF TAXABLE SERVICE, THE POINT OF TAXATION SHALL BE THE DATE OF RECEIPT OF EACH SUCH ADVANCE. Invoic Actu Point in Particulars e amount al time for Due Receipt taxation date 1) Date of 1st may 1s commencement of 2011 t Point Service 2) Date of Receipt 15th May 2n 1000 100000 5th//6th Advance payment 2011 d Point 00 june or 5th /6th july 3) Date of Issue of 25th May 3r 17000 7000 70000 5th//6th part Invoice 2011 d Point 0 0 june or 5th /6th july 4) Date of 28th May 4t

MANOJ BATRA

| 74 13000 0 30000 0 00 1300 00 3000 300000 130000

completion of service 2011 h Point 5) Date of issue of 8th june 5t balance invoice 2011 h Point 6) Date of Receipt 15th june 6t of balance Fees of Rs. 2011 h Point

5th//6th july or 5th /6th july

Illustration 1: Tata consultancy opts for Point of taxation w. e. f. 01.07.2011. earlier i.e prior to 30.06.2011, it was depositing the service tax on receipt basis. During the month of July11, it has issued the invoice within 14 days of completion of provision of service. For the purpose of computation of liability of its service tax liability, relevant details are as under: Balance sheet extract as on 30.06.2011: Liability Current liability Advance Received as on 30.06.2011 including service tax- 82400 Asset Current Asset 8,82,400 Amount Receivable as on 30.06.2011 including service tax- 51,500/-

5,51,500

Particulars for the month July11 1. Invoice issued during the month of july 2. Advance Received during July 3. Advance adjusted against billing done in July11 4. Amount Received out of receivable standing as on 30.06.2011 SOLUTION Amount Received out of receivable standing as on 30.06.2011 Invoice issued during the month of july ADD- Advance Received during July LESS- Advance adjusted against billing done in July11 VALUE OF TAXABLE SERVICE INCLUDING SERVICE TAX SERVICE TAX 773000*10.3/110.3 11,03000 3,30,900 8,82,400 2,20,600

2,20,600 11,03000 3,30,900 8,82,400 7,72,100 72,100

Illustration 2: PQR ltd is engaged in providing construction service and has entered into an agreement with XYZ & Company to construct a building for Rs.10,00,000/-. Following is the payment schedule as per agreementEvents % of payment advance at the time of signing the agreement 10% On Completion of 20% On Completion of 50% 15% 20%

MANOJ BATRA On completion of 100%

| 75 55%

The actual dates of completion are as under: S. No. Events % of Amount Due payment

Date of expected completion of service 04.07.11 02.08.11 25.08.11 20.10.11

Date of issue of invoice

Date of receipt of payment

advance 20% Completion 50% Completion 100% Completion

10% 15% 20% 55% . 100

1,00,000/ 1,50,000/ 2,00,000/ 5,50,000/10,00,000/-

25.07.11 19.08.11 01.09.11 7.11.11

04.07.11 25.07.11 25.09.11 29.11.11

Point of Taxation of each invoice/payment shall be as under: 1) advance : Here, since invoice is not issued within 14 days, point of taxation shall be as under: Earlier of 2 (i) Date of completion of provision of service..Not applicable in this case; (ii) Date of receipt of payment Therefore, point of taxation in this case is 04.07.2011. Thus, liability in respect of advance received amounting to Rs.1,00,000/- shall fall in the month of July11. 2) 20% Completion: Relevant dates in this case are as under: Since in this case, invoice is not issued within 14 days from date of completion of service, point of taxation shall be determined as under: Earlier of 2 (i) Date of completion of provision of service---.02.08.11 (ii) Date of receipt of payment---.25.07.11 Accordingly, point of taxation in this case is 25.07.11. Thus, liability on 20% completion of project amounting to Rs.1,50,000/- shall fall in the month of July11 3) 50% Completion: Since in this case, invoice is issued within 14 days from date of completion of service, point of taxation shall be determined as under: Earlier of 2 (i) Date of issue of invoice---01.09.11 (ii) Date of receipt of payment---25.09.11 Accordingly, point of taxation in this case is 01.09.11 Thus, liability on 50% completion of project amounting to Rs.2,00,000/- shall fall in the month of Sept11. 4) 100% Completion: Since in this case, invoice is not issued within 14 days from date of completion of service, point of taxation shall be determined as under: Earlier of 2 (i) Date of completion of provision of service---20.10.11

MANOJ BATRA (ii) Date of receipt of payment----29.11.11

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Accordingly, point of taxation in this case is 20.10.11 Thus, liability on 100% completion of project amounting to Rs.5,50,000/- shall fall in the month of Oct11. Question 4 Harpreet Ltd. provides Business or Management Consultancy Services to a foreign based company on 20.07.2011 for agreed consideration of $ 50,000/-. The invoice is raised by Harpreet Ltd. on 25.07.2011. However, the said company receives the payment in convertible foreign exchange in accordance with following brief table: CASE I CASE II 03.01.2012 14.11.2012

Determine Point of Taxation in each of above two cases. Point of Taxation in each of above two cases will be as under: CASE CASE I Point of Taxation Date of receipt of payment i.e. 03.01.2012. Date of invoice i.e. 25.07.2011 Detailed Reason/Remark Since payment RECEIVED within the period prescribed by RBI, AS PER Rule 7(a) date on which payment is received will be considered as Point of Taxation.(Note 1) SINCE PAYMENT IS NOT RECEIVED within the period prescribed by RBI, provisions of Rule 7(a) will not apply. Point of Taxation will be determined as if Rule 7(a) does not exist. POT WILL BE AS PER RULE 3 EARLIER OF 2 (i) Date of Invoice; or (ii) Date of payment to the extent it is received.

CASE II

Note1: According to Regulations 9 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, the amount representing the full export value of goods or software exported shall be realised and repatriated to India within 12 from the date of export. Question 5 MB Ltd. imports Business Auxiliary Services from ANDERSON Ltd. of USA on 1-08-.2011. The relevant invoice for $ 45,00,000 is raised by Green Ltd. 18.08.2011. Manoj Ltd. makes the aforementioned payment as per following table: 20.11.2011 CASE I 2.03.2012 CASE II Answer Point of Taxation in each of above two cases will be as under: CASE CASE I
CASE II

Point of Taxation Date of payment i.e. 22.11.2011

Date of completion of service i.e. 13.07.2011

Detailed Reason/Remark Since the payment is made within 6 months, point of taxation will be date of payment Since the payment is not made within 6 months, point of taxation will be as per rule 3, in this case invoice not made within 14 days (date of completion of service or date of payment) whichever is earler.

i.e 13-7-2011

MANOJ BATRA Question 8

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ABC Ltd. is located in India and holding 65% shares of ANDERSON LTD., of USA. ANDERSON LTD provides Business Auxiliary Services to former company ABC Ltd. The other relevant details are given in the following table: Agreed Consideration Date on which services are provided by ANDERSON LTD Date on which invoice is sent by ANDERSON LTD Date on which invoice is received and recorded by ABC Ltd. Date on which payment is made by ABC Ltd. Determine Point of Taxation for ABC Ltd. Answer The relationship of both the companies is of Holding and Subsidary. These are associated enterprises as per section 92A of Income Tax Act, 1961. Point of Taxation will be: Earlier of the following two dates: Date of credit in the books of account of person receiving the service i.e ABC LTD. Date of making the payment [by ABC LTD.] Thus, Point of Taxation will be 30.08.2011. 30.08.2011 15.09.2011 $ 5,00,000/20.08.2011 25.08.2011 30.08.2011. 15.09.2011

Question 9 Mansoor Ltd is the owner of a coal-mine in ORISA. It obtained a patent from the concerned competent authorities FOR coal-mine in February, 2011. Further, the company has entered into an agreement with PQR Ltd in April, 2011 for allowing the latter party to extract coals for the next 3 years. The consideration payable by PQR Ltd. for using the coal -mine has been fixed @ ` 2000 per tonne.The quantum of coal extracted by PQR Ltd and other relevant details are given in the following table: Consideration for using the coal-mine @ ` 2000/- per tonne 60,00,000 20,00,000 80,00,000 Date of Issuance of Invoice 03.1.2012 15.05.2013 1.07.2014 Date of Receipt of Payment

Year

Output (in Tonnes] 3,000 1,000 4,000

2011-12 2012-13 2013-14 Answer

6.07.2012 03.05.2013 20.09.2014

Mansoor ltd. is the service provider and PQR Ltd. is the service recipient. Rule 8 is applicable when (1) 100% consideration for patent is not ascertainable at the time when service was performed and (2) subsequently the use of these services by a person other than the provider gives right to any payment of consideration. The Point of Taxation of Mansoor ltd. for the various Financial Years will be Point of Taxation 03.01.2012 Reason/Remarks Date of Issuance of Invoice or Date of Payment] w.i earlier

MANOJ BATRA 03.05.2013 1.07.2014

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Date of Issuance of Invoice or Date of Payment] w.i earlier Date of Issuance of Invoice or Date of Payment] w.i earlier

Question 10 SONY Ltd. is having the copyright of songs of Lata Mangeshkar. The company gave the copyright to FABULOUS Cassettes Ltd. [FC LTD] on 20.04.2011. The consideration payable by FC Ltd. to SONY Ltd for copyright has been fixed @ ` 10/-per CD sold by it. The No. of CDs Sold by FC Ltd. & other details during different financial years is: Relevant Year No. of CDs sold Consideration Payable @ ` 10per CD sold [Rs.] 50,00,000 30,00,000 90,00,000 Date of Issuance of Invoice by SONY Ltd 2.05.2012 02.07.2013 1.08.2014 Date of Receipt of Payment from SCI Ltd. 12.08.2012 25.06.2013 1.08.2014

2011-12 2012-13 2013-14 Answer

5,00,000 3,00,000 9,00,000

Point of Taxation for different financial years will be determined in the following manner: Point of Taxation 2.05.2012 25.06.2013 Reason/Remarks Date of Issuance of Invoice or Date of Payment] w.i earlier Date of Issuance of Invoice or Date of Payment] w.i earlier Date of Issuance of Invoice or Date of Payment] w.i earlier

1.08.2014 Question 11

Manoj Batra is the author and copyright-owner of Amendment Booklet for May 2012.. He enters into an agreement with POOJA Publishers on 1.05.2011. MANOJ BATRA Transfers copyright to said publishers for a lump sum consideration of ` 80,00,000/-. Futher Relevant Date 1-5-2011 10-5-2011 Particulars Issue of invoice by MANOJ BATRA Receipt of lump sum consideration of ` 80,00.000/-

Determine Point of Taxation in the above case.

Answer In the above case Point of Taxation will be determined as under: RULE 8 of POTR 2011 IS Not applicable because the whole amount of consideration for the provision of service should not be ascertainable at the time when service was performed [ in present case . when the agreement is entered between parties will be date of performance of service]. Point of Taxation will be determined in accordance with Rule 3 of Point of Taxation Rules, 2011 in the following manner: Since invoice has been issued within 14 days from the date of completion of provision of service [i.e the date of entering into agreement] , earlier of the following dates will be the Point of Taxation:

MANOJ BATRA Date of invoice Date of payment Thus, Point of Taxation is 1-5-2011

| 79 1-5-2011 10-5-2011

(1) R- 6(3) SELF ADJUSTMENT OF ST PAID IF SERVICE NOT PROVIDED Where an assessee has paid to central government service tax in respect of a taxable service Which is not so provided by him either wholly or partially for any reason, The assessee may adjust the excess service tax so paid by him (calculated on pro rata basis) Against his service tax liability for the subsequent period. If the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. Rule 6 (3) - for [ for May 12] following rule substituted Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or [or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract], the assessee may take the credit of such excess service tax paid by him, if the assessee.(a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or] (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued.]

Time limit (1) Every person liable for paying the service tax shall make an application to the concerned superintendent of Central excise in form ST-1 for registration within a period of 30 days from the date on which the service tax is levied: Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of 30 days from the date of such commencement. FOR MAY 2012 (1A) For the purposes of sub-rule (1), the Central Board of Excise and Customs may, by an order specify the documents which are to be submitted by the assessee alongwith the application within such period, as may be specified in the said order. Issue of invoice by service provider and ISD Rule 4A (1) Every person providing taxable service shall not later than 14 days From the date of completion of provision of ( added from 1-4-11)- [ for May 12] such taxable service or Receipt of any payment towards the value of such taxable service Whichever is earlier issue an invoice, a bill or a challan signed by such person or person authorized by him in respect of such taxable service and such invoice, bill or as the case may be a challan shall be serially numbered and shall contain the following namely (i) the name, address and the registration number of such person (ii) name and address of the person receiving the taxable service (iii) description, classification and value of taxable service provided or to be provided (iv) The service tax payable thereon.

Registration Rule 4 of Service Tax Rules 1994

MANOJ BATRA

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Provided that in case the Provider of taxable service is a banking company Providing service to a customer, in relation to banking and other financial services, An invoice, a bill or challan shall include any document by whatever name called Whether or not serially numbered, and whether or not containing address of the receiver But containing other information in such documents as required under this sub-rule. Provided further that in case of transport of goods by road, an invoice a bill or a challans shall include any document by whatever name called, Which shall contain the details of the consignment note number and date gross weight of the consignment and also contain other information as required under this sub-rule, Provided also that where any payment towards the value of taxable service is not received and such taxable service is provided continuously for successive periods of time and The value of such taxable service is determined or payable periodically An invoice, a bill or a challan shall be issued by a person providing such taxable service, not later than 14 days from the last day of the said period. [omitted w.e.f 1-4-11]- for Nov 11] FOLLOWING PROVISO SUBSTITUTED FOR ABOVE PROVISO- NOV 11 Provided also that in case of continuous supply of service, every person providing such taxable service shall issue an invoice, bill or challan, as the case may be, within fourteen days of the date when each event specified in the contract, which requires the service receiver to make any payment to service provider, is completed.] Provided also that in case the provider of taxable service is aircraft operator providing the service of air transport of passenger, an invoice, a bill or as the case may be, challan shall include ticket in any form by whatever name called and whether or not containing registration number of the service provider, classification of the service received and address of the service receiver but containing other information in such documents as required under this sub-rule.. Section 70 of Finance Act, 1994 Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish a return in such form and at such frequency and with late fee not exceeding Rs. 20,000 for delayed filing of return, as may be prescribed. Author note- with F Act 2011- Rs 2000 replaced with Rs 20,000 . RULE [7. Returns. (1) Every assessee shall submit a half-yearly return in Form ST-3 or ST-3A, as the case may be, along with a copy of the Form GAR-7, in triplicate for the months covered in the half-yearly return. (2) Every assessee shall submit the half yearly return by the 25th of the month following the particular half-year. i.e. 1st April to 30th Sept. 25th October and 1st Oct. to 31st March. 25th April [Provided that where an assessee has paid a total service tax of rupees 10 lakh or more including the amount paid by utilisation of CENVAT credit, in the preceding financial year, he shall file the return electronically.] FOR MAY 2012- RULE 7(3) (3) Every assessee shall submit the half-yearly return electronically. (4) The Central Board of Excise and Customs may, by an order extend the period referred to in sub rule (2) by such period as deemed necessary under circumstances of special nature to be specified in such order. ORDER NO. 1 /2011 Service Tax In exercise of the powers conferred by Rule 7(4) of the Service Tax Rules 1994 read with notification No. 48/2011-Service Tax dated 19th October 2011, Central Board of Excise and Customs hereby extends the date of submission of half yearly return for the period April 2011 to September 2011 from 25th October 2011 to 26th December 2011.

MANOJ BATRA

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This is being done in view of the fact that the e-filing of service tax returns for all class of service tax assesses has been made mandatory for the first time vide notification no. 43/2011- Service Tax dated 25.8.11, as such leaving less time for the trade to adjust to the requirement of e-filing. AUTHOR NOTE- Further extended to 6 jan 12 an then to 20 jan 2012.

Rule 7C of Service Tax Rules, 1994 Penalty for delay in Furnishing Return (Inserted by Finance Act 2007) Where the return prescribed under Rule 7 is not furnished within due date, the person liable to furnish the return shall pay to the Central Government, for the period of delay. Period of Delay Amount to be paid 15 days from the due date Rs. 500 More than 15 days but 30 days Rs. 1,000 Rs. 1,000 + Rs. 100 for every day from the 31st day till More than 30 days the date of furnishing the said return Provided that the total amount payable as late fee shall not exceed the amount specified in Section 70. ( Rs 20000) Provided further that where the assessee pays the amount for delay in furnishing the return, all proceedings against the assessee, in respect of such delayed submission shall be deemed to be concluded. Provided also that where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty. Answer the following:(a) Padma Ltd. is engaged in providing taxable services. For the half year ending on 31.03.2011, it furnished its return on 24.07.2011. On the basis of the information provided, answer the following questions:(i) What is the due date for filing return for Padma Ltd.? (ii) Compute the amount of late fee payable by Padma Ltd. (b) Bhavani Consultants Ltd. paid service tax of ` 9.8 lakh in cash in the financial year 2010-11. For the half year ended September 30, 2011, it did not file its return electronically. You are required to examine whether, in the instant case, Bhavani Consultants Ltd. is required to file its return electronically. SOLUTION- (a) (i) As per rule 7(2) of the Service Tax Rules, 1994, due date for filing the service tax return for the half year ending on 31.03.2011 is 25.04.2011. (ii) Padma Ltd. furnished its return on 24.07.2011. Hence, as per rule 7C, it is liable to pay the late fee as follows:Delay in submission of return = 5+31+30+24 = 90 days As per rule 7C of the Service Tax Rules, 1994, in case the period of delay in filing of return is beyond 30 days from the date prescribed for submission of return, amount of late fees is an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return. However, total fees for delayed submission of return shall not exceed ` 20,000. Amount of late fees payable by Padma Ltd. is ` 1,000 + (` 10060 days) = ` 7,000 (b) Yes, in the instant case, Bhavani Consultants Ltd. is required to file its return electronically. Service Tax Rules, 1994 have been amended to provide that with effect from 01.10.2011, every assessee will have to submit half-yearly service tax return electronically, irrespective of the amount of service tax paid by him in the preceding financial year. Hence, now all assesses are required to file service tax returns electronically. Therefore, for the half year ended September 30, 2011, Bhavani Consultants Ltd. shall file its return electronically.

MANOJ BATRA 1) E/N SEZ EXEMPTION

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Notification No. 17/2011-S.T., dated 1-3-2011]- FOR NOV11 Exemption to taxable services received by unit or developer of Special Economic Zone Notification No. 9/2009-S.T., superseded 1) CG exempts the taxable services received by a Unit located in a Special Economic Zone or Developer of SEZ for the authorised operations, from the whole of the service tax, education cess and secondary and higher education cess leviable thereon. 2) The exemption contained in this notification shall be subject to the following conditions, namely : (i) the EXEMPTION SHALL BE PROVIDED BY WAY OF REFUND OF SERVICE TAX PAID on the specified services received for the authorised operations in a SEZ : Provided that where the specified services received and used for authorised operations ARE WHOLLY CONSUMED WITHIN THE SEZ, the provider of such services or the receiver of such services on reverse charge basis, as the case may be, HAS THE OPTION NOT TO PAY THE SERVICE TAX AB INITIO instead of the Unit or Developer claiming exemption by way of refund in terms of this notification. Explanation.- For the purposes of this notification, the expression wholly consumed refer to following taxable services, received by a Developer or Unit of a SEZ, for the authorised operations, namely : (i) services listed in clause (i) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005 IN RELATION TO AN IMMOVABLE PROPERTY SITUATED WITHIN THE SEZ; OR (ii) services listed in clause (ii) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005, as ARE WHOLLY PERFORMED WITHIN THE SEZ; OR (iii) services other than those falling under (i) and (ii) above, provided to a Developer or Unit of SEZ, WHO DOES NOT OWN OR CARRY ON ANY BUSINESS OTHER THAN THE OPERATIONS IN THE SEZ; (i.e standalone sez) (ii) for the purpose of claiming exemption, the Developer or Unit of SEZ shall obtain a LIST OF TAXABLE SERVICES as are required for the authorised operations APPROVED BY THE APPROVAL COMMITTEE (hereinafter referred to as the specified services) of the concerned SEZ; (iii) THE DEVELOPER OR UNIT OF SEZ WHO DOES NOT OWN OR CARRY OUT ANY BUSINESS OTHER THAN SEZ OPERATIONS, shall FURNISH A DECLARATION TO THAT EFFECT IN FORM A-1, verified by the Specified Officer of the SEZ, in addition to obtaining list under condition (b) above, for the purpose of claiming exemption; (iv) where the specified services received by Unit or Developer, are not wholly consumed within SEZ, i.e., SHARED BETWEEN AUTHORISED OPERATIONS IN SEZ UNIT AND DOMESTIC TARIFF AREA (DTA) UNIT, refund shall be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates, i.e., service tax paid on Export turnover specified services used for of SEZ Unit for the SEZ Authorised Operations period shared with DTA Unit for the Maximum refund period = Total turnover for the period Explanation.- For the purposes of condition (d), (1) total turnover means the sum total of the value of, (i) all output services and exempted services provided, including the value of services exported; (ii) all excisable and non-excisable goods cleared, including the value of the goods exported; (iii) bought out goods sold,

MANOJ BATRA

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during the period to which the invoices pertain and the exporter claims the facility of refund under this notification. (2) turnover of SEZ Unit shall mean the sum total of the value of final products and output services exported during the period of which the invoices pertain and the exporter claims the facility of refund under this notification; (v) any Developer or Unit of SEZ claiming the exemption SHALL DECLARE THAT THE SPECIFIED SERVICES on which exemption and/or refund is claimed to have been ACTUALLY USED FOR THE AUTHORISED OPERATIONS; (vi) the Developer or unit of SEZ CLAIMING THE EXEMPTION, BY WAY OF REFUND HAS ACTUALLY PAID THE AMOUNT INDICATED IN THE INVOICE, BILL or as the case may be, challan, including the service tax payable, to the person liable to pay the said tax or the amount of service tax payable under reverse charge, as the case may be, under the provisions of the Finance Act; (vii) NO CENVAT CREDIT of service tax paid on the specified services used for the authorised operations in a SEZ has been taken under the CENVAT Credit Rules, 2004; (viii) EXEMPTION OR REFUND OF SERVICE TAX PAID ON THE SPECIFIED SERVICES OTHER THAN WHOLLY CONSUMED services used for the authorised operations in a SEZ shall not be claimed except under this notification; (ix) the developer or unit of a SEZ, who intends to avail exemption and or refund under this notification, shall MAINTAIN PROPER ACCOUNT of receipt and use of the specified services on which exemption is claimed, for authorised operations in the SEZ. (3) The following procedure should be adopted for claiming the benefit of the exemption contained in this notification, namely : (a) the Developer or Unit of a SEZ, who has paid the service tax under sections 66 of the Finance Act, shall avail the exemption by FILLING A CLAIM FOR REFUND OF SERVICE TAX paid on specified services used for the authorised operations; (b) the Developer or Unit of a SEZ who is REGISTERED AS AN ASSESSEE under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, or the said Finance Act or the rules made thereunder, shall file the claim for refund to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-2; (c) the Developer or Unit of a SEZ who is NOT SO REGISTERED under the provisions referred to in clause (b), shall, before filing a claim for refund under this notification, FILE A DECLARATION with the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-3; (d) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after due verification, ALLOT A SERVICE TAX CODE NUMBER to the Developer or Unit of SEZ, referred to in clause (c), within seven days from the date of receipt of the said declaration, in Form A3; (e) claim for REFUND SHALL BE FILED, WITHIN 1 YEAR FROM THE END OF THE MONTH IN WHICH ACTUAL PAYMENT OF SERVICE TAX WAS MADE by such developer or unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit; (f) THE REFUND CLAIM SHALL BE ACCOMPANIED WITH PRESCRIBED DOCUMENTS, NAMELY :-

Explanation.- For the purposes of this notification, statutory auditor refers to a Chartered Accountant who audits the annual accounts of the Developer or Unit of a SEZ for the purposes of the Companies Act, 1956 (1 of 1956) or the Income Tax Act, 1961 (43 of 1961).

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Refund of Service tax to SEZ units/developers Clarifications Circular No. 142/11/2011-S.T., dated 18-5-2011 Sl. No. 1. To claim the refund arising out of service tax In the notification, there is no difference in treatment paid under section 66A, no proforma is of service tax paid under section 66 and section 66A of prescribed in the notification; how to claim it? Finance Act, 1994. Where refund arises, Table-A, in Form A-2 can be used for making a refund claim. In the (i) notification, what is the treatment All taxable services (under section 66 or section 66A) for service tax paid on taxable services which do received by a SEZ Unit/Developer for the authorised not fall in the category of wholly consumed operations, have been exempted in the first paragraph of services, and also are not shared services? Is notification 17/2011-S.T., subject to conditions. refund available? In Paragraph 2, conditions attached to this exemption Whether (ii) in the case of category (iii) are prescribed. In terms of paragraph 2(a), refund route is services referred in paragraph 2(a) of the the default option for all who intend to claim the exemption notification, proportionate refund applies to only granted by the notification in its first paragraph. However, shared services i.e. services that are used both an exception is provided in the form of ab initio (upfront) for SEZ (Special Economic Zone) authorised exemption, to the wholly consumed services. operations as well as DTA (Domestic Tariff Area) Services which fall outside the definition of wholly operations? consumed services can be categorized as those which are used exclusively by the SEZ Unit/Developer, for the authorised operations in SEZ or shared with DTA operations. Para 2(d) of the notification is applicable to refund arising from shared services only. Thus exemption to services exclusively used for the authorised operations of SEZ Unit/Developer, will continue to be available by way of refund, as specified in paragraph 2(a) itself, subject to other conditions. To claim this refund, Table-A, provided in Form A-2 may be used. It is clarified that only such services shall be considered as exclusively used by SEZ Unit/Developer, for the authorised operations, as they satisfy the following criteria : (i) Invoice is raised in the name of the SEZ Unit/Developer or in the invoice, it is mentioned that the taxable services are supplied to the SEZ Unit/Developer for the authorised operations; (ii) Such services are approved by the Unit Approval Committee (UAC), as required for the authorised operations; (iii) Receipt and use of such services in the authorised operations are accounted for in the books of accounts of the SEZ Unit/ Developer. Meaning of the expression who does The expression refers to an entity which is carrying not own or carry on any business other out business operations in SEZ and also DTA. Merely than the operations in the SEZ appearing in having an office in the DTA for purpose of liaison/business Questions Clarifications

2.

3.

MANOJ BATRA Sl. No. Questions

| 85 Clarifications

4.

5.

6.

7.

8.

paragraph 2(a)(iii) of the notification, which promotion, does not restrict a SEZ Unit from availing creates a difference between standalone and benefit extended to a standalone unit. non-standalone SEZ Unit/Developer, may be clarified. Whether Approval by UAC is necessary, to Yes. Unit Approval Committee (UAC) of the SEZ claim benefit under the notification? determines goods and services required for the authorised operations of a Unit/Developer, under the SEZ law. Hence approval of the UAC is necessary for availing the notification benefit, on the taxable services. In respect of category (i) and (ii) services listed in Does (i) condition (c) prescribed in paragraph 2 of the notification, restrict the non- paragraph 2(a), upfront exemption is made available to all standalone Units/Developers, from availing SEZ Units/Developers, who fulfill the conditions of upfront exemption for wholly consumed notification; only in the case of category (iii), services, which fall under category (i) and (ii) of para difference is created between standalone and non2(a) of the notification? standalone SEZ Units/Developers. For whom (ii) and for what purpose, Declaration in Form A-1 is required to be produced, to a service provider, to claim upfront exemption (after Declaration in A-1 is required? striking out the inapplicable portion). This is a one-time Declaration. Original Declaration can be retained with the SEZ Unit/Developer for business record or for production to the jurisdictional Central Excise/Service Tax authorities, if need be, for any verification; a copy has to be retained by SEZ Specified Officer; self-attested photocopies of the Declaration can be submitted to service provider to avail upfront exemption, subject to fulfillment of other conditions mentioned in the notification. Meaning of the expression total turnover Total turnover includes turnover of DTA Unit and also found in paragraph 2(d) of the notification is not export turnover of SEZ Unit. This is the way to calculate clear : whether it refers to turnover of SEZ Unit proportionate refund. Table-C in Form A-2, illustrates this or the entity (including DTA and SEZ Unit). This aspect. may be clarified. A Developer may not have export turnover; Generally, SEZ Developers will be using category (i) therefore, he cannot get refund of service tax services listed in paragraph 2(a), relating to immovable based on the formula provided for shared property located within SEZ; upfront exemption is available services in paragraph 2(d) of the notification : for these services, and category (ii) services, irrespective therefore, it may be explained how a Developer of whether the Developer is standalone or not. As another can claim exemption under the notification? option, refund route is also available. In the case of category (iii) services if Developer is standalone, upfront exemption is available. If Developer is not standalone, on service tax paid on category (iii) services, which are exclusively used for the authorised operations in SEZ, he can avail exemption through refund route. Exclusive use explained in clarification for question No. 2. may also be referred in this connection. Whether proportionate amount of service Yes. Available. tax paid on shared services that have not been

MANOJ BATRA Sl. No. Questions

| 86 Clarifications

9.

10.

refunded after applying the formula in paragraph 2(d), shall be available to the DTA Units of the entity as cenvat credit? Whether consolidated refund claim under If an entity is having multiple SEZ Units with a 17/2011-ST can be filed by an entity having centralized service tax registration, consolidated refund more than one SEZ unit and a centralized claim can be filed, provided separate accounts are service tax registration. maintained for receipt and use of services for the authorised operations in SEZ Unit. Whether certified copies of invoices can be In terms of the notification, original invoices are used for claiming refund, if originals are needed needed for claiming refund; after receiving the refund, for other statutory purpose; Whether on the originals can be taken back on submission of copies basis of single invoice, one can claim certified by Chartered Accountant. On a single invoice, if proportionate refund for SEZ Unit and balance proportionate refund (by SEZ Unit) and cenvat credit (by as cenvat credit. DTA Unit) needs to be obtained, then also similar system shall be followed.

A unit in SEZ received services for authorized operation in SEZ (1) Value of taxable service wholly consumed within SEZ 5 lakh (2) Value of taxable service not wholly consumed within SEZ 4 lakh (3) Value of shared services between SEZ and DTA units- 10 lakh (4) Value of services used wholly for DTA units 2 lakj (5) Export turnover of SEZ 80 lakh (6) Total turnover- 100 lakh Calculate service tax and refund allowed to SEZ UNIT. SOLUTION Taxable service wholly consumedTaxable service not wholly consumed 5 lakh Shared services Services for DTA total Note CCR ALLOWABLE = 41200 ( 175100-133900) Service tax exempt 51500 103000 20600 175100 Refund -------51500 82400 -----133900

Sec 76 Failure to pay service tax a) Rs. 200 per day of failure or (b) 2% p.m of service tax, whichever is higher, starting with the first day after due date till the date of actual payment of outstanding amount of service tax, subject to maximum of tax not paid. SECTION [76. Penalty for failure to pay service tax. Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, o in addition to such tax and o the interest on that tax in accordance with the provisions of section 75, o a penalty which shall not be less than Rs 100 for every day during which such failure continues or at the rate of 1% of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax : Provided that the total amount of the penalty payable in terms of this section shall not exceed 50% the service tax payable.

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Note- sec 76 not to apply Sec 78 If the penalty is payable under this sec, the provisions of sec 76 shall not apply. [Illustration X, an assessee, fails to pay service tax of ten lakh rupees payable by the 5th March. X pays the amount on the 15th March. The default has continued for ten days. The penalty payable by X is computed as follows : 1% of the amount of default for 10 days 10,00,000* Rs. 1% * 10/31 = 3,225.80 Penalty calculated @ Rs.100 per day for 10 days = Rs.1,000 Penalty liable to be paid is Rs. 3226.00.] CA June 2009 M, an assessee fails to pay service tax of Rs 15 lakh payable by 5th January. He pay s the amount on 16th January. What is the penalty payable by M? Ans- (11 days) SECTION 78. Penalty for suppressing etc of value of taxable service. for may 12 [SECTION 78. Penalty for suppressing, etc., of value of taxable services. (1) Where any service tax has not been levied or paid or has been short-levied or short- paid or erroneously refunded, by reason of (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded : Provided that where true and complete details of the transactions are available in the specified records, penalty shall be reduced to 50% of the service tax so not levied or paid or short-levied or short-paid or erroneously refunded : Provided further that where such service tax and the interest payable thereon is paid within 30 days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first proviso shall be 25% of such service tax : Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso : Provided also that in case of a service provider whose value of taxable services does not exceed 60 lakh rupees during any of the years covered by the notice or during the last preceding financial year, the period of 30 days shall be extended to 90 days. (2) Where the service tax determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the service tax as reduced or increased, as the case may be, shall be taken into account : Provided that in case where the service tax to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the second proviso to sub-section (1), shall be available, if the amount of service tax so increased, the interest payable thereon and 25% of the consequential increase of penalty have also been paid within thirty days or ninety days, as the case may be, of communication of the order by which such increase in service tax takes effect : Provided further that if the penalty is payable under this section, the provisions of section 76 shall not apply .

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Explanation. For the removal of doubts, it is hereby declared that any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the second proviso to subsection (1) or the first proviso to sub-section (2) shall be adjusted against the total amount due from such person.] SECTION 80. Penalty not to be imposed in certain cases. Notwithstanding anything contained in the provisions of section 76, [section 77 or [first proviso to sub-section (1) of section 78] ], no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure. Author note- after amendment by F Act 2011- penalty shall be waived only in cases where true and complete details of the transactions are available in the specified records, i.e., the information is captured properly in the specified records Sec 77 1) failure to take registration as per provisions of Penalty which may extend to (a) Rs. 200 for every sec 69 or rules made under this chapter day during which such failure continues starting with the first day after the due date, till the date of actual compliance, or (b) Rs. 5000 10000 whichever is higher. 2) failure to keep, maintain or retain books of Penalty which may extend to Rs. 5000 10000 account and other documents as required by this law 3) Failure to Penalty which may extend to(i) Furnish information called by an officer in b) Rs. 200 for every day during which such failure accordance with the provisions of this chapter continues starting with the first day after the due or rules made there under or date, till the date of actual compliance or (ii) Produce documents called for by a CEO in c) Rs. 5000 10000 accordance with the provisions of this chapter Whichever is higher. or rules made thereunder; or (iii) Appear before the CEO, when issued with a summon for appearance to give evidence or to produce a document in an enquiry 4) Failure to pay tax electronically, internet Penalty which may extend to Rs. 5000 10000 banking, through required to pay tax electronically. 5) Issuing invoice in accordance with the provisions of the Act or rules made thereunder, with incorrect or incomplete details or failure to account for an invoice in his books of account 6) Contravention of any of the provisions of this chapter or any rules made thereunder for which no penalty is separately provided

Power to search premises Sec 82 (1) if the CCE has reason to believe that any documents or books or things will be useful for to any proceeding under this chapter are secreted in any place, he may authorize any other AC/DC to search or may himself serarch for documents or books or things. (2) The provisions of the code of criminal procedure 1973 relating to searches, shall apply to searches under this sec as they apply to searches under that code.

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SECTION 82. Power to search premises. (1) [If the [Joint Commissioner of Central Excise] has reason to believe] that any documents or books or things which in his opinion will be useful for or relevant to any proceeding under this Chapter are secreted in any place, he may authorise [any] [Superintendent of Central Excise] [to search for and seize or may himself search for and seize such documents or books or things]. (2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches, shall, so far as may be, apply to searches under this section as they apply to searches under that Code. CERTAIN PROVISIONS OF EXCISE APPLICABLE IN SERVICE TAX Section No. 9A 9AA 9B Act 9E 34A 38A 35R Application of section 562 of the Code of Criminal Procedure, 1898, and of the Probation of Offenders Act, 1958 Confiscation/penalties not to interfere with other punishments [Appeal not to be filed in certain cases] Offences and penalties Certain offences to be non-cognizable Power of Court to publish name, place of business, etc., of persons convicted under the Title

SECTION 89.

Offences and penalties. [ F ACT 2011]

(1) Whoever commits any of the following offences, namely : Provision of service without issuance of invoice (a) provides any taxable service chargeable to service tax under sub-section (1) of section 68 or receives any taxable service chargeable to tax under sub-section (2) of said section, without an invoice issued in accordance with the provisions of this Chapter or the rules made thereunder; or Availment and utilization of CCR without actual receipt of inputs/input services (b) avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or Maintaining false books of accounts/failure to supply any information/submitting false information (c) maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or Non-payment of amount collected as service tax for a period of more THAN 6 months from the due date of payment (d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of 6 months from the date on which such payment becomes due, shall be punishable, (i) in the case of an offence where the amount exceeds 50 lakh rupees, with imprisonment for a term

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which may extend to 3 years : Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than 6 months; (ii) in any other case, with imprisonment for a term, which may extend to 1 year. (2) If any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to 3 years : Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term less than 6 months. (3) For the purposes of sub-sections (1) and (2), the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than 6 months, namely : (i) the fact that the accused has been convicted for the first time for an offence under this Chapter; (ii) the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay a penalty or any other action has been taken against him for the same act which constitutes the offence; (iii) the fact that the accused was not the principal offender and was acting merely as a secondary party in the commission of offence; (iv) the age of the accused. (4) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Chief Commissioner of Central Excise.]

Rule 4 Export without payment of service tax Any service may be exported without payment of service tax Rule 5 Rebate of service tax Where any taxable service is exported, the central government may grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, used in providing such taxable service and the rebate shall be subject to specified conditions or limitations and procedure AUTHOR NOTE- FROM FACT 2011 Central Government empowered to allow rebate in certain circumstances even if the sale proceeds/consideration are not received within the stipulated period [Proviso to section 93A]

MANOJ BATRA

| 91 (1) MANAGEMENT OR BUSINESS CONSULTANT

(i) Taxable service Means any service provided or to be provided to any person, by a management or business consultant in connection with the management of any organisation or business, in any manner;] (ii) Management or business consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation or business(e.g service relating to merger & acquisition) in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management

Now Exemption in respect of ERP software system by a management consultant not allowed (iii) Note1) refer circular 115/9/2009 in business auxiliary service. 2) Chandan metal Products Pvt. Ltd.(2009)(Tri) THE Assessee a manufacturing unit engaged in manufacture of iron and steel furniture. The assessee advised to customer to rearrange the furniture in office primes in order to save space and charged fee of Rs. 180000. And further charged Rs. 250000 for advise regarding investment in shares and securities. Department charged service tax under Interior decorator and management consultant service respectively. It was held that (i) For charging service tax under interior decorator he must be engaged in business of interior decorator. Isolated case of giving advice not covered under engaged in providing service. (ii) Further, the appellant has admitted that they merely advised their client as to in which company or security, he should make investment. they have not managed any organization and they have not advised the client of conceptualizing, development, modification or upgradation of any working system of any organization. Therefore, service mentioned above is not taxable. Parasmal Bam (2007)(Tri) No particular qualification is necessary in order to be a management consultant. In fact, years of experience in management, gives persons insights into management which an academic could not gather. Therefore, even if the person does not posess any MBA degree/ diploma, he shall be liable to pay service tax on any advice, consultancy or technical assistance relating to management or business. Que- a management consultant started providing consultancy provides you the following details Rs in lakh 1) amount received from Bharti Airtel for Human Resource Management 2) amount received from Satyam Computers for Procurement & management of IT resource Amount received form LG Electronics for effective utilization of machines for enhancing production i.e production management Amount received for making effective financial structure i.e Ratio of Capital & Loans from Bharti Airtel Amount received from HUL for marketing management Amount received for merger & acquisition constancy from Bharti Airtel with Zain Amount received from ABC Ltd. Where he is full time Director Calculate service tax liability solution

3) 4) 5) 6) 7)

5 4 3 1 2 1 7

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Rs in lakh 1) 1) amount received from Bharti Airtel for Human Resource Management (w.n-1) 5 2) 2) amount received from Satyam Computers for Procurement & management of IT resource 4 (w.n-2) 3) Amount received form LG Electronics for effective utilization of machines for enhancing 3 production i.e production management (w.n-3) 4) Amount received for making effective financial structure i.e Ratio of Capital & Loans from Bharti 1 Airtel (w.n-4) 5) Amount received from HUL for marketing management (w.n-5) 2 6) Amount received for merger & acquisition constancy from Bharti Airtel with Zain (w.n-6) 1 7) Amount received from ABC Ltd. Where he is full time Director (w.n-7) ---Total value of taxable service 16 Service tax on above 10% 1,60,000 Education cess 2% 3200 Secondary and higher education cess 1% 1600 June 2008 Sunil is engaged as a management consultant by Rana Sugar Ltd. His duty is to advise the company on matters relating to Production, marketing etc. service tax is demanded from him under the category of management consultant on the professional charges paid to him by Rana Sugar Ltd. Sunil filed objections to the demand by contending that he cannot be considered as a management consultant as he does not possess any professional qualification in the area of management and therefore cannot be asked to pay service tax under the category of management consultant. Is the stand of sunil justified? Give your views in the light of decided case law, if any.

McKinsey & Company Deloitte Consulting LLP Pricewaterhou seCoopers Ernst & Young KPMG

Mgt of organisation Planning+ org + staffing + controlling Financial Mgt Cap structure + cap bgting + w. cap Human resource
Advice, consultan cy or technical assistance

Marketing mgt Disc policy + policy on advt. Production mgt Max utilisation of machine, time & Logistic management Inventory Mgt + whing +storage Mgt of information of IT Other similar areas of mgt. -quality control, mgt of R& D

MANOJ BATRA

| 93 (2) PRACTICING CHARTERED ACCOUNTANT (CS,ICWA)

(i) Taxable service Means any service provided or to be provided to any person, By a Practicing Chartered accountant in his Professional capacity, in any manner. (ii) Practicing CA/CS/CWA means a person who is member of the ICAI,ICSI,ICWA institutes and holding a certificate of practice AND includes any concern RENDERING SERVICES IN THE FIELD OF CA/CS/COST ACCOUNTANCY. (iii) Exemption Notification (i) As per NN/25/2006 CG Exempt Taxable service provided or to be provided By a practicing chartered accountant, in his professional capacity to a client Relating to representation the client before any statutotry authority In the course of proceedings initiated under any law for the time being in force By way of issue of notice is exempt from the whole of service tax leviable thereon. Representational services by Chartered Accountants, Cost Accountants and Company Secretaries Exemption withdrawn from 1-5-2011 Notification No. 25/2006-S.T., rescinded In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby rescinds the notification No. 25/2006-Service Tax, 2. This notification shall come into force on the 1st day of May, 2011. [Notification No. 32/2011-S.T., dated 25-4-2011] (iv) Case Laws (i) JAYARAM & ASHWAJITH (TRI) (2008)Non-professional activity - Billing, ledger maintenance and meter reading on outsourcing by client Chartered Accountants undertaking impugned activities by employing non-professional persons - Tribunal in 2008 (9) S.T.R. 239 (Tribunal) holding such activities as not covered under Chartered Accountant service, applicable NOTE- Presently covered under Business Support service. Whether ST levied 1. MANOJ BATRA (C.A) represented the client before Service tax department for getting registration. 2. M/s M.K Batra & Associates Charging Rs. 20 Lakh for maintaining A/cs, Furnishing Excise/service tax/Income tax return/Audit. 3. M/s M.K Batra & Associates issue certificate for valuation of Asset for getting loan by Katrina kaif from ICICI Bank 4. MANOJ BATRA (C.A) providing coaching service to CA/CS/CWA student of INDIRECT TAX. 5. Service Tax department has issued a Demand notice to Rani Mukherjee, she approached Mr. MANOJ BATRA to represent her before service tax Department RTP Nov 2007 Mr. Ajay, a chartered accountant represents his client Mr. Vijay in a case relating to evasion of income tax before the Income-tax Appellate Tribunal. Mr. Ajay charges Rs. 25000 as consideration for this service. Discuss whether Mr. Ajay is liable to pay service tax on such service. .

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TAXABLE A/C WRITING, IT RETRN, AUDIT, REGISTRATION UNDER EXCISE/ S. TAX

CA
Taxable SCN ISSUED UNDER ANY LAW REPRESENTATION BY CA

TAXABLE UNDER ANY OTHER SERVICE MANPOWER RECRUTIMENT BY CA TO CLIENT- MANPOWER RECURUITMENT AGENCY

NOT TAXABLE UNDER ANY OTHER SERVICE

MANOJ BATRA

| 95 (3) LEGAL CONSULTANCY SERVICE

(i) Taxable service Means any service provided or to be provided to a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner : Provided that any service provided by way of appearance before any court, tribunal or authority shall not amount to taxable service (i) to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner; (ii) to any business entity, by any person, in relation to representational services before any court, tribunal or authority; (iii) to any business entity, by an arbitral tribunal, in respect of arbitration. Explanation. For the purposes of this item, the expressions arbitration and arbitral tribunal shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996 AUTHOR NOTE- IT means Services provided by individuals to other individual will remain outside the levy. Meaning of arbitration and arbitral tribunal (a) Arbitration means any arbitration whether or not administered by permanent arbitral institution [Section 2(a) of the Arbitration and Conciliation Act, 1996]. (b) Arbitral tribunal means a sole arbitrator or a panel of arbitrators [Section 2(d) of the Arbitration and Conciliation Act, 1996]. E/N- 45/2011- (May 2012) Taxable service provided or to be provided to any business entity, by an arbitral tribunal, in respect of arbitration have been exempted from service tax. Service tax after Finance Act 2011 Type of service Service provider

Service receiver

service tax Prior amendment No Yes No No No No No No to After amendment No Yes Yes Yes Yes No Yes No

Advice, consultancy or assistance in any branch of law, in any manner

Individual Business entity Business entity Individual

Business entity Business entity Individual Business entity Business entity Individual Business entity Individual

Representational services before any Court, Tribunal or Authority

Business entity Business entity Arbitration Arbitral authority Any legal consultancy Individual service

Denis Ltd., a law firm, is engaged in providing the legal consultancy services. Compute the service tax payable by Denis Limited, for the following amounts received in the month of December, 2011:-

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Receipts (`) Technical consultancy in relation to incorporation of company provided to Rockland Private Limited Assistance in filing the service tax return of Elley Enterprises for the half year ending September 30, 2011 Advice to Modi Group provided in July, 2011 with regard to compliance with the provisions of the Competition Act, 2002 Appearance before Labour Court on behalf of Swapnil in the month of October, 2011

5,50,000 4,00,000 6,75,000 6,10,000

Note: All the receipts are exclusive of service tax. Denis Limited is not eligible for small service providers exemption under Notification No. 6/2005 ST dated 01.03.2005 in the financial year 2011-12. Technical consultancy in relation to incorporation of company provided to Rockland Private Limited Assistance in filing the service tax return of Elley Enterprises for the half year ending September 30, 2011 Advice to Modi Group provided in July, 2011 with regard to compliance with the provisions of the Competition Act, 2002 Appearance before Labour Court on behalf of Swapnil in the month of October, 2011 Value of taxable services 5,50,000 4,00,000 6,75,000 ----16,25,000

Service tax 162500 Education cess 2% 3250 Secondary and higher education cess- 1% 1625 Notes: 1. As per section 65(105)(zzzzm), (a) Service provided to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner is liable to service tax. Hence, receipts from Rockland Private Limited, Elley Enterprises and Modi Group are liable to service tax. (b) Service provided by any person, in relation to representational services before any court, tribunal or authority, to an individual is not liable to service tax. Hence, the amount of ` 6,10,000 received from Swapnil for appearance before Labour Court is not liable to service tax. 2. As per rule 7 of the Point of Taxation Rules, 2011, in case of legal consultancy services service tax is payable on receipt basis. Hence, the value of taxable services has been computed accordingly. (4) MANPOWER RECRUITMENT AGENCY

(i) Taxable service Means any service provided or to be provided to any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner;] [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate;]

(ii) manpower recruitment or supply agency means any commercial concern person(academic institutes assist in manpower recruitment on receipt of money) engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, [to any other person];] Note- Labour contractors are taxable.

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Exemption Notification- 1/09 dtd 5-1-09 If the service is provided to a GTA by manpower recruitment agency then it is exempt. Que- ICAI/IIM charges fees from Employers who come to Institute to conduct campus interviews Q- Manoj Batra (CA) needs marketing executive for Next Batch Advt., just for 2 months for which he contacted placement agency. (iii) CBEC clarification 1. Trade Notice 53 dated 4-7-97 It would be pertinent to note that the coverage of the term manpower recruitment agency is wide and shall include within its ambit the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, whether white collar or blue collar, whether for employment in India or overseas; determining manpower requirement for the client preliminary identification, short listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media etc. In short, service tax on manpower recruitment agency shall cover within its fold the entire gamut of services provided by a manpower recruitment agency to a client from the incipient stage of selecting/identifying manpower required for any prospective employment, till the stage of actual selection for the same.

2. Clarification by TRU in 2005 A large number of business or industrial organizations engage the services of recruitment agency for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Service tax is to be charged on the full amount of consideration for the supply of manpower, whether full-time or part-time. The value includes recovery of staff costs from the recipient e.g. salary and other contributions. Even if the arrangement does not involve the recipient paying these staff costs to the supplier (because the salary is paid directly to the individual or the contributions are paid to the respective authority) these amounts are still part of the consideration and hence form part of the gross amount. 3. Circular chief comm. 2006 Inclusion : The following activities are also included under this category : a) Manpower recruitment agencies such as head hunters, placement agencies etc. which provide domestic help, maids etc., to households. b) The agencies or contractors who supply manpower to different industries, units etc., for contract/temporary jobs. c) Temporary supply of manpower to business or industrial organisations for a specified period or for a project or task. d) Service Tax is to be paid on the fees charged from both the parties viz. the employer and employees. Inclusion : Direct hiring by an organisation or business, without engaging the services of any other person is not covered under this category. 4. Master circular 96/7/2007

MANOJ BATRA (i) Campus recuitment

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Que- Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate houses/ MNCs, who come to the institutes for recruiting candidates through campus interviews. Whether services provided by such institutions in relation to recruitment of manpower are liable to service tax under manpower recruitment or supply agency service [section 65(105)(k)]? Ans- Educational institutes such as IITs and IIMs fall within the definition of manpower recruitment or supply agency, and service tax is liable on services provided by such institutions in relation to campus recruitment under section 65(105)(k). (ii) Supply of manpower on temporary basis Business or industrial organisations engage services of manpower recruitment or supply agencies for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Whether service tax is liable on such services under manpower recruitment or supply agencys service [section 65(105 ANS-In the case of supply of manpower, individuals are contractually employed by the manpower recruitment or supply agency. The agency agrees for use of the services of an individual, employed by him, to another person for a consideration. Employer-employee relationship in such case exists between the agency and the individual and not between the individual and the person who uses the services of the individual. They fall within the definition of manpower recruitment or supply agency [section 65(68)] and are liable to service tax. 1) Temporary supply of labour to DLF , it includes salaries paid to employees directly 12 lakh. 2) Supply of manpower to Raj Transporters 3) Employment opportunity provided to individual candidates, who get registered with them & 15 days salary charged. 4) An MNC Wants 2000 employee for new project (i) Amt charged for report prepared for requirement of manpower (ii) Amt charged for placing advertisment (iii) Amt charged for short listing and screening of prospective candidate (iv) Amt charged for verifying the credentials and history of candidates selected, 5) Amt charged for Supply of manpower for permanent basis to Tata Teleservices Calculate taxable value of service ANS 1. Temporary supply of labour to DLF , it includes salaries paid to employees directly 12 lakh. 2. Supply of manpower to Raj Transporters 3. Employment opportunity provided to individual candidates, who get registered with them & 15 days salary charged. 4. An MNC Wants 2000 employee for new project (i) Amt charged for report prepared for requirement of manpower (ii) Amt charged for placing advertisment (iii) Amt charged for short listing and screening of prospective candidate (iv) Amt charged for verifying the credentials and history of candidates selected, 5. Amt charged for Supply of manpower for permanent basis to Tata Teleservices TAXABLE VALUE OF SERVICE 20 5 1 1 2 1 2 4

20 ---1 1 2 1 2 4 31

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MANPOWER RECRUITMENT AGENCY

PERMANENT TEMPORARY

MRA IS COMMERCIAL CONCERN

MRA IS NOT COMMERCIAL CONERN E.G ICAI/IIM CAMPUS RECRUITMENT TEMPORARY LABOUR

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(5) Real Estate agent (i) Taxable service means any service provided or to be provided to any person by a real estate agent in relation to real estate (ii) real estate agent means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant; (iii) real estate consultant means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate;

(iv) CBEC Clarification 1) It may be noted that some international realty concerns, such as Richard Ellis, Colliers and Jardine etc. have opened shop in India and they are providing comprehensive realty services. Apart from the traditional services in respect of sale/purchase/leasing of real estate, such concerns are, inter alia, providing services to real estate developers and promoters in respect of evaluation of a proposed real estate scheme/project by conducting techno-economic studies, providing feasibility reports and by even helping in marketing real estate projects. Such services shall also attract service tax. However, it is clarified that activity of actual construction of any building, carried out by builders/developers does not attract service tax levy as it is not a service within the meaning of the term real estate agent or real estate consultant. ( Cir 5/98 dtd. 14-10-98) Practical que M/s 1) 2) 3) Jardine property consultant rendered following services Commission received for sale, purchase of real estate Commission received for leasing/ renting of real estate Commission received from real estate developer i.e DLF for following a. Evaluation of proposed Real Estate scheme b. Feasibility report and helping in marketing of real estate project At Gurgaon. 8 5 2 10

CALCULATE TAXABLE VALUE solution 1) Commission received for sale, purchase of real estate 2) Commission received for leasing/ renting of real estate 4) Commission received from real estate developer i.e DLF for following a. Evaluation of proposed Real Estate scheme b. Feasibility report and helping in marketing of real estate project At Gurgaon. 8 5

2 10

MANOJ BATRA Total value of taxable service Less- exemption for SSP (w.note 1) Net taxable value

| 101 25 10 15 (6) Architect

(i) Taxable service means any service provided or to be provided by an architect in his professional capacity in any manner. (ii) architect means any person whose name is, for the time being, entered in the register of architects maintained under section 23 of the Architects Act, 1972 and also includes any commercial concern engaged in any manner, whether directly or indirectly, in rendering services in the field of architecture Practical que 1) Unitech Received services of firm of Architect in USA for construction of mall in Gurgaon for Rs. 2 lakh 2) Unitech Received services of firm of Architect of india for construction of mall in Gurgaon for Rs. 3 lakh 3) Unitech Received services of charitable institution of Architecture of USA for construction of mall in Mumbai for Rs. 3 lakh Comment on service tax liability. Ans1) In this case Unitech is liable to pay service due to reverse charge. It will be treated as import of service. 2) In this case Architect is liable to pay service tax 3) In this case unitech is not liable to pay service tax because the definition of architect prescribes liability if the firm is commercial conern. 1) 2) 3) 4) 5) 6) M/s XYZ an Architect received the following Amount Received for design of mall to be constructed in Gurgaon Amount Received for design of mall to be constructed in USA Payment received for approval of drawings on actual basis Amount received for service of approval of drawing Amount received for supervision at regular intervals during const. Amount received from client after receiving completion certificate Calculate the taxable value under this service 1) 2) 3) 4) 5) 6) Amount Received for design of mall to be constructed in Gurgaon Amount Received for design of mall to be constructed in USA Payment received for approval of drawings on actual basis Amount received for service of approval of drawing Amount received for supervision at regular intervals during const. Amount received from client after receiving completion certificate Taxable value of service (7) Interior Decorator 2,00,000 ------------20000 25000 55000 3,00,000 -Rs. 2 lakh -Rs. 5 lakh 3 lakh 20000 25000 55000

(i) Taxable service means any service provided or to be provided by an interior decorator to any person in relation to planning, design or beautification of space, whether man- made or other wise and includes as landscape designer.

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(ii) interior decorator means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether man-made or otherwise and includes a landscape designer; E.G 1. Decoration of house- interior thereof 2.Decoration of exterior of house- like decoration of garden, passage and so on. 3. Decoration of landscape/parks/street etc. (iii) CBEC clarification 1) Services of VASTU/FENG SHUI CONSULTANTS TAXABLE- They provide advice relating to planning and designing of spaces. vastu and feng shui are covered (DGST clarification) 2) the services rendered by Art directors of films and others who render services of design etc. for setting up temporary structures/settings for shootings etc. do not attract the service tax levy as such interior decoration has no permanency and is only of a temporary nature. (Cir 5/98 dtd. 14-10-98)

Vastu & feng shui Practical que An interior decorator received the following amounts 1) advice, consultancy for placement of furniture for effective utilization of space 2) charges for interior decoration made for new office of Reliance industries 3) amount received for Vastu and Feng shui consultancy 4) amount received for designing & BEAUTIFICATION of Airport 5) amount received for decoration of Garden of Mukesh Ambani residence. 6) Amount received for design of temporary structure for shooting of film RAJNEETI 1) Calculate service tax liability Ans advice, consultancy for placement of furniture for effective utilization of space charges for interior decoration made for new office of Reliance industries amount received for Vastu and Feng shui consultancy amount received for designing & BEAUTIFICATION of Airport amount received for decoration of Garden of Mukesh Ambani residence. Amount received for design of temporary structure for shooting of film RAJNEETI Total value of taxable service Service tax on above 10% 150000 Education cess 2% 3000 Secondary and higher education cess 1% 1500 1) 2) 3) 4) 5) 6) 1 3 4 2 5 ---15

1 3 4 2 5 1

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(i) Taxable service means any service provided or to be provided to a franchisee by a franchisor in relation to franchise. (ii) Franchise means an agreement by which franchisee is granted representational right to Sell or manufacture goods or to provide service or Undertake any process identified with franchisor Whether or not a trade mark, service mark, trade name or logo or any such symbol as the case may be is involved. (iii) Franchisor Means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by franchiser to enter into franchise on his behalf and the term franchisee shall be construed accordingly; NOTES (i) Licensing To Produce Or Sell Under Brand Name Taxable E.G of franchisee- Coca-cola, Pepsi, NIIT, Aptech, Mc- Donald, IIJT (ii) FRANCHISOR LOCATED ABROAD IF franchisor is normally resident in India, service tax is payable by service receiver in India. (iv) CBEC Clarification License Production Agreements where principal allows production of goods bearing his brand name by another person would be covered under the purview of service tax under this category. Similarly, if rights are granted for rendering services identified with the principal on his behalf, such services by the principal to the service recipient would be taxable. (B1/6/2005-TRU, dtd 27-7-2005) (v) Case laws 1) Vocational training provided through franchisee- if vocational training is provided through franchisee, the service will be taxable under franchisee service (jetking information (2007)(CESTAT)

Practical que M/s NIIT dealing in Education of Software/Accounts/Multi-Media courses grants franchisee all over India. Manoj Batra approaches NIIT for a franchisee at Laxmi Nagar. 1) NIIT gives business Proposal with Initial investment of Rs 25 Lakh consisting of Licence fees (initial fees- 5lac+ S.tax) and balance infrastructure cost etc. 2) While making infrastructure following expense incurred Ac installation cost 3000 Electrician installation cost of voltage and wiring 5000 Installation of water cooler 2000

MANOJ BATRA Service tax paid on above 10.3%

| 104

3) Shares purchased of Reliance capital for which brokerage paid Service tax paid on brokerage 10.3 %

5000 25000 1 crore 50000 + cess 25%

4) 20 computer installed and computer networking done by making service payment Service tax paid on installation & networking of computers 10.3% 5) Fees recovered from Students 6) Service tax paid on telephone 7) Royalty paid on fees What will be the amount of service tax paid by NIIT & Franchisee [Manoj Batra ] respectively. Ans Service tax to be paid by franchisor i.e NIIT License fees Taxable value500000 Service tax 10.3% 51500

royalty 25,00,000 2,57,500

Service tax to be paid by franchisee Service tax on Fees recovered from Students Less- cenvat credit Royalty- 25,00,000 Service tax paid on telephone License fees 5,00,000 Erection, commissioning & installation of Ac etc.- 10,000 Service tax on networking service -25,000 Net service tax payable Stax 10,00,000 2,50,000 50,000 50,000 1,000 2,500 646500 e. cess 20000 5,000 1000 1000 20 50 12930 SHEC 10000 2500 500 500 10 25 6465

1) 2) 3) 4) 5)

Working notes 1) no cenvat credit allowed on service tax paid on brokerage of shares, since it is not used for providing output service.

(9) Stock- Broker (i) Taxable Service Means any Service provided or to be provided to any person, by a stock-broker in connection with the sale or purchase of securities listed on a recognised stock exchange (ii) stock-broker means a person, who has either made an application for registration or is registered as a stock-broker [x x x], in accordance with the rules and regulations made under the Securities and Exchange Board of India Act, 1992 (iii) CBEC Clarification 1) Person liable to service Tax Stock-broker & sub-broker both are liable to service tax. The sub-broker will be able to avail the cenvat credit of service tax paid by the main broker while providing service to him. Stock broker--------------investor Stock broker--------------sub-broker------------------investor

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Note- With effect from 1-6-2005, SEBI regulations have prohibited sub-brokers from these activities. The role of sub-brokers has thus reduced substantially. the sub-brokers have been excluded from the purview of service tax by making suitable amendment in the definition of stock-broker. It is also clarified that such sub-brokers should also not be charged to service tax as commission agents under Business Auxiliary Service. For this purposes, specific exemption notification has been issued. (Cir 334/13/2009- TRU) Covered under the service. 2) Transaction involving 2 stock brokers operating on different stock exchange. If a Calcutta based investor buys a security quoted on the Bombay stock exchange through his broker in Calcutta, he ends up paying service tax twice, first to the Bombay stock exchange broker & then to the Calcutta stock exchange broker through whom the initial order was placed. In a situation like this, it has been represented that, it amounts to double taxation on a transaction of one single security. Ans(i) In the situation pointed out above, the investor is provided with taxable service by two brokers. First by the Bombay stock exchange broker through the Calcutta stock exchange broker and then by the Calcutta stock exchange broker. (ii) Since, the Commission/brokerage is charged at both the ends, the charge of service tax at both the ends is both conceptually & legally correct. (iii) Mumbai based broker shall be liable to service tax on the amount of brokerage charged by him from Kolkata based broker (iv) Kolkata based broker charge brokerage including brokerage payable to Mumbai based broker. (v) The investor placed his order for buying a security quoted at the Bombay stock exchange for the reason that either it is not available at the Calcutta stock exchange or the price is more beneficial at the Bombay stock exchange. It is open to the investor to either place his order on the Bombay stock exchange broker direct or through his Calcutta stock exchange broker. 3) a. Jobbing - Transactions entered on principal to principal basis between member brokers of the same stock exchange. jobbing transaction entered into principal to principal basis between members of same stock exchange taxable since service provided to any person are taxable. b. Own Trading - Transactions entered on their own account by the brokers. Where a broker enters into a transaction on his own account with an investor who is a non-member of the stock exchange the service provided will be taxable service and subject to service tax. c. Arbitrage - Transactions entered into by two brokers of different stock exchange in order to profit from price difference between two markets. In case of arbitrage transaction i.e. the transaction between two brokers of different stock exchanges, the service is provided by a broker i.e. the member of a stock exchange to a non-member of that stock exchange even though the investor may be a member of another stock exchange. Their being an investor involved in the transaction, the service so provided to the investor will be a taxable service subject to service tax. (iv) Valuation issue * As per rule 6(1)(i) of service tax valuation rules the value of taxable services shall include 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. Valuation Inclusions for Stock Broker service Expenses includible when service provider liable therefor Instruction F. No. 187/107/2010-CX. 4, dated 17-9-2010

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Subject : Service tax - Show Cause Notices issued to various NSE Members of Association for recovery of Service Tax on Transaction charges of NSE, SEBI fees, DEMAT charges, Stamp Duty Regarding. Kindly refer to your letter F. No. V/30-32/CCO/S. Tax/2009 dated 13-4-2010 on the subject mentioned above. The matter has been examined and the views of DGST and 2. Commissioners of Service Tax has also taken into consideration. Turnover charges, NSE/BSE/NSDL/CSDL transaction charges, DEMAT charges and SEBI fees that are recovered by the brokers from their clients are found to be includible in the taxable value for payment of service tax. The Security Transaction Tax (STT) and Stamp duty are not includible in the taxable value for charging service tax. In the clarification issued from F. No. B1/4/2006-TRU dated 3. 19-4-2006, it is mentioned at para 4.1.7 that Value for the purpose of charging service tax is the gross amount received as consideration for provision of service. All expenditures or costs incurred by the service provider in the course of providing a taxable service forms integral part of the taxable value and are includible in the value. It is not relevant that various expenditure or costs are separately indicated in the invoice or bill issued by the service provider to his client. Para 4.1.8 states that the service provider in the course of providing any taxable service may incur certain expenditure or cost as a pure agent of the client. The service provider seeks to exclude such expenditure or cost incurred by him as a pure agent of his client (generally known as reimbursable expenditure) from the value of the taxable services. It is also mentioned therein at para 4.1.10 that Indication of different elements of the transaction in the invoice or bill could often be misleading. One has to carefully examine the exact legal nature of the transactions and other material facts before taking a view as to whether or not the expenditure sought to be excluded from the value is reimbursable expenditure. Not only the form, but also the substance of the transaction should be duly taken into account. Para 4.1.12 of the said letter mentions that the service provider who seeks to claim exclusion of certain value from the taxable value should also fulfill all the conditions specified in Rule 5(2). Since the Stamp duty and Security Transaction Tax, are the 4. liability of the buyer/seller of securities and the broker pays the same acting as a pure agent the same are not includible in the taxable amount in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. All other charges by whatever name called recovered by the broker from the buyer/seller of securities are includible in the taxable value in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. From the above it is clear that in case the expense is the 5. liability of the service provider it has to be included in the taxable value. In case it is the liability of the service receiver and the service provider pays the same acting as a pure agent then such amount is not includible in the taxable value.

(v) Services not covered 1) Taxable service means any service provided to an investor, by a stock-broker in connection with the sale or purchase of securities listed on a recognised stock exchange. The commission charged by stock-broker as underwriters is for floating securities. Hence, it is not covered. (Trade Notice 3/94) 2) charges for non-squaring up of settlement in time also known as Badla charges are not commission received for sale or purchase of securities, hence, such charges will not be leviable to service tax. 3) The handling charges are the expenses incurred for handling shares on delivery. The appellants have clarified that prior to 2001, there used to be physical delivery of scrips and certificates and the appellants were charging towards handling of scrips and certificates. The handling charges were collected from certain investors/clients. In respect of speculative transactions, no handling charges were collected from the investors/clients as there was no handling of scrips and certificates. We are convinced that the handling charge is not in the nature of commission or brokerage for purchase of securities. They are incurred in connection with the delivery of scrips. In fine, we hold that the value of taxable services in respect of a stock broker will not include transaction charges and handling charges. (FIRST SECURITIES PVT. LTD (2007)(Tri) followed in Steel City Securities Ltd. (Tri) (2009) 4) Amount recovered from customers towards fees for depositories whether includible - Department clarifying that Service tax not payable on fees charged by depositories and recovered from customers on actual basis (saufor urin investment Pvt. Ltd. (2009)(Tri) Practical que ParasRam holding Ltd. Registered as Broker on KolKata Stock Exchange

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1) 2) 3) 4)

Brokerage charged from customer for buying & selling securities Jobbing transaction done for other broker of same Stock exchange (KSE) Brokerage for Arbitradge charges Brokerage paid by Parasram to Mumbai stock Exchange broker for purchase Of securities at Mumbai Stock Exchange.

Rs in lakh 1 2 1.5 1

5) 6) 7) 8)

Brokerage charged for above transaction from investors Handling charges recovered for handling shares for physical delivery of shares. Underwriting commission for underwriting IPO of NTPC. Depository charges recovered on actual expense basis and which will be paid to NSDL/CSDL 9) STAMP duty charges recoverd from customer on actual basis 10) Badla charges recovered for non-squaring up of settlement in time. . Determine the taxable value under stock broker service Ans-

3 1 2.5 1.7 1.3 1

1) 2) 3) 4)

Rs lakh Brokerage charged from investors for buying & selling securities 1 Jobbing transaction done for other broker of same Stock exchange (KSE) 2 Brokerage for Arbitradge charges 1.5 Brokerage paid by Parasram to Mumbai stock Exchange broker for purchase Of securities ----at Mumbai Stock Exchange. (w.n- 1) 3 ---------------7.5

in

5) 6) 7) 8)

Brokerage charged for above transaction from investors Handling charges recovered for handling shares for physical delivery of shares. (w.n-2) Underwriting commission for underwriting IPO of NTPC. (w.n-3) Depository charges recovered on actual expense basis and which will be paid to NSDL/CSDL (W.n-4) 9) STAMP duty charges recoverd from customer on actual basis( w.n-4) 10) Badla charges recovered for non-squaring up of settlement in time. (w.n-5) Total value of taxable service

Working notes 1) Brokerage paid by Parasram will be available as cenvat credit 2) Handling charges are not related to purchase or sale of securities and hence not taxable. 3) Underwriting commission is not taxable under this service because not related to purchase or sale of securities. But presently taxable under Underwriter service. 4) Depository charges and stamp duty since charged as pure agent will not form part of gross value charged. 5) Badla charges are not related to purchase or sale of securities hence not included in value of taxable service.

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STOCK BROKER

OWN TRADING

BROKER JOBBING BSE BROKER

INVESTOR

BSE BROKER

ARBITRAGE

BSE BROKER
SUB- BROKER PROVIDING SERVICE TO CLIENT (INVESTOR) ON BEHALF OF STOCK BROKER

NSE BROKER

TRANSACTION INVOLVING 2 STOCK BROKER

BSE BROKER

CALCUTTA BROKER

INVESTOR NOT TAXABLE

SUB- BROKER PROVIDING SERVICE TO STOCK BROKER SERVICE PROVIDED AS UNDERWRITER

BADLA CHARGES FOR NON-SQUARING UP OF SECURITIES HANDLING CHARGES FOR SECURITIES IN

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(10) Credit Rating Agency (i) Taxable Service Means any Service provided or to be provided to any person, by a credit rating agency in relation to credit rating of any financial obligation, instrument or security; Credit rating agency means any person engaged in the business of Credit Rating of any debt obligation or of any project or programme requiring finance whether in the form of debt or otherwise, and includes credit rating of any financial obligation, instrument or security, which has the purpose of Providing a potential investor or any other person any information pertaining to the The relative safety of Timely payment of interest or principal Fees for surveillance of existing rating are also covered. (i) CBEC CLARIFICATION cir 5/98 dtd 14-10-98 1) main credit rating agencies in India are CRISIL, ICRA, CARE and Duffs & Phelps. The credit rating agencies are registered with the Reserve Bank of India. These agencies provide, among others, ratings in respect of corporate bonds, commercial paper, fixed deposits, municipal debt, infrastructure bond, utilities, asset backed securities, structured obligations, toll road bonds, mutual funds etc. All public issues of debt are statutorily required to be rated. These ratings help individual and institutional investors frame their investment policies based on bench mark ratings. 2) After the rating is given it is communicated to the client. The rating of any instrument remains under surveillance until the entire debt is repaid. The surveillance is a mandatory exercise for rating agencies. Service tax is payable both on the fees received for credit rating of the debt instrument and the surveillance fees. 3) It is clarified that information and advisory services, if any, rendered by credit rating agencies would not attract service tax for the reason that taxable service in respect of a credit rating agency means services provided to a client only in relation to credit rating of any financial obligation, instrument or security. Services of research and information such as analysis of industries in specific sectors, of financial and business outlook of a company, other customised services on say business houses and capital markets, indexing services, and information services, such as, privatisation policy for infrastructure projects, macro studies of infrastructure sector, implication of Government policy in respect of any sector, financial modelling, bid evaluation, power purchase agreements, restructuring of SEBs etc. are not services in relation to the credit rating of any financial obligation, instrument or security and are hence outside the gamut of service tax on the services of credit rating 4) in the case of ongoing projects, where rating has been done subsequently, the relevant date for determining the service tax liability would be the date when rating has been assigned to a particular instrument practical que ONGC wants to bring Public issue for which approached ICRA/CRISIL for credit rating Rs lakh 5 4 1 5 6 5 2 in

1) amount charged for credit rating of public issue 2) surveillance fees charged 3) amount charged for information and advisory service a. analysis of privatization/divestment in ONGC b. macro studies of Gas Sector c. analysis of impact by increase in prices of gas on power generation and steel sector d. capital market and indexing service e. making financial model of ONGC

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Calculate taxable value of service AnsRs lakh 5 4 ------------------in

1. amount charged for credit rating of public issue 2. surveillance fees charged 3. amount charged for information and advisory service (w.note-1) a. analysis of privatization/divestment in ONGC b. macro studies of Gas Sector c. analysis of impact by increase in prices of gas on power generation and steel sector d. capital market and indexing service e. making financial model of ONGC

Total value of taxable service 9 Working note 1) information and advisory service is not taxable, because service in relation to credit rating is taxable.

(11) Mailing list services (i) Taxable Service Means any Service provided or to be provided to any person, by any other person, in relation to mailing list compilation and mailing;

(ii) mailing list compilation and mailing means any service in relation to (i) compiling and providing list of name, address and any other information from any source; or (ii) sending document, information, goods or any other material in a packet, by whatever name called, by addressing, stuffing, sealing, metering or mailing, for, or on behalf of, the client; e.g Google selling data to various educational institutes (iii) CBEC clarification Business establishments such as banks, insurance companies, companies listed on stock exchanges, real estate agents and other similar commercial entities engage the services of persons who compile and provide lists of names, addresses and other information from telephone directories, internet or any other source of information for the benefit of the business. Some agencies also provide services of sending documents, materials, information or any other goods by addressing, stuffing, sealing, metering or mailing the envelope or packet for or on behalf of the client. Such services are taxable under this category of service. Mail order business companies may engage the services of mailing companies to dispatch goods to customers. Such mailing companies are also covered under this service. Amt in lakh 1 2 2.5 1.5

1) Yellow Ambrella compiled the list of CA from ICAI publication and provided to HDFC to consider it for granting loan 2) It compiled the list of data from naukri.com and provided to Institute granting diploma of MBA for admission of candidates 3) Charges recovered from reliance Industries of stufiing, metering and mailing for AGM Notice 4) Charges recovered from GAIL for addressing & mailing the package

MANOJ BATRA 5) Franking charges recovered Calculate taxable value of service Ans

| 111 0.25

1) Yellow Ambrella compiled the list of CA from ICAI publication and provided to HDFC to consider it for granting loan 2) It compiled the list of data from naukri.com and provided to Institute granting diploma of MBA for admission of candidates 3) Charges recovered from reliance Industries of stufiing, metering and mailing for AGM Notice 4) Charges recovered from GAIL for addressing & mailing the package 5) Franking charges recovered (w.n-1) Taxable value of service Working note It is assumed Franking charges are recovered on actual basis, if any expense is recovered as shall not form part of value of taxable service. (12) Market research agency (i) Taxable Service

Amt in lakh 1 2 2.5 1.5 Nil 7 a pure agent it

means any service provided or to be provided to any person by a market research agency in relation to market research of any product, service or utility in any manner. (ii) market research agency means any commercial concern [person] engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services; (iii) CBEC Clarification (i) Market research inter alia, includes research based services in respect of consumer markets, industrial marketing, business to business marketing, social and rural marketing etc. and is based on the requirements of the client. Such research services may be carried out by various techniques and may take the form of brand and advertising research. Such market research services include studies such as, strategic research & brand positioning development, new product development research, creative development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research etc. Thus, it is apparent that the market research services are of a very diverse nature and of a very vide variety. (trade notice 5/98)

(13) courier agency (i) Taxable Service means any service provided or to be provided to a customer( so services provided to intermediary not taxable.) any person by a courier agency in relation to door-to door transportation of time sensitive documents, goods or articles. (ii) Courier agency means commercial concern any person(speed post services provided by post office)

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Engaged in door-to-door transportation Of time sensitive (express cargo service) documents, goods or articles Utilizing the services of a person, either directly or indirectly To carry or accompany such documents, goods or articles. (iii) Cbec clarification

1) Cir. 341/43/96- liability of co-loaders It has been pointed out that in some cases one . courier agency, who undertakes to deliver the documents, goods or articles received from customers, utilises the services of another company for intransit movement of such documents etc. from one point to another. These are, technically, called coloaders. co-loader are also liable to service tax 2) Trade notice 138/96The courier agency is liable to pay service tax even if goods or documents are delivered abroad. In respect of goods or article received from abroad and delivered to customers in India, courier agency is not liable to service tax, if it has not collected any amount from customers 3) Master circular 96/7/2007 (i) Some transporters under-take door-to-door transportation of goods or articles and they have made special arrangements for speedy transportation and timely delivery of such goods or articles. Such services are known as Express Cargo Service with assurance of timely delivery-- liable to service tax under courier agency service [section 65(105)(f)]. (ii) Angadia undertakes delivery of documents, goods or articles received from a customer to another person for a consideration-- liable to service tax under courier agency service (iii) Department of Posts provides a number of services. What is the status of those services for the purpose of levy of service tax? Ans- (i) Following services provided by Department of Posts are not liable to service tax. Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations. Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services. (ii) In addition to the services mentioned in (i) above, Department of Posts also provides a number of services such as COURIER SERVICES (SPEED POST), insurance services (Postal Life Insurance), agency or intermediary services on commission basis (distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills), which are also provided by other commercial organizations. Such services are liable to service tax under appropriate taxable services. 4) Cir 104/7/2008 Issue :Whether time sensitive transportation of goods by road in a goods carriage by a GTA shall be classified under courier service and not GTA service? Clarification :On this issue, it is clarified that so long as, (a) the entire transportation of goods is by road; and (b) the person transporting the goods issues a consignment note, it would be classified as GTA Service Practical que M/s PQR has taken Franchisee of Speed Safe Courier Service The following are the service provided 1) Amount charged for door-to door transportation of express cargo service.

40 lakh

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| 113 5 lakh 2 lakh 1 lakh 0.7 lakh 2 lakh

2) Amount charged from Jindal steel by collecting goods from their premises and Sending goods to customers of jindal steel. 3) Amount charged from individuals delivering goods at Safe Courier office in Delhi by customer itself and sending to Kolkata client. 4) Mr. S send the goods to M/s Safe Courier office for delivering goods to Mumbai 5) For above M/s Safe courier sub- contracted to M/s DHL who will send the goods. Payment made 6) Co-loader service provided The following payment made. Motor car purchased for delivering goods 20 lakh on which excise duty paid @ 10.3% Telephone bill paid of 25000 on which service tax paid at 10.3% Advertisement exp. Of 2 lakh on which service tax paid at 10.3% Calculate net service tax liability

1) Amount charged for door-to door transportation of express cargo service 2) Amount charged from Jindal steel by collecting goods from their premises and Sending goods to customers of jindal steel. 3) Amount charged from individuals delivering goods at Safe Courier office in Delhi by customer itself and sending to Kolkata client. 4) Mr. S send the goods to M/s Safe Courier office for delivering goods to Mumbai 5) Co-loader service provided Total value of taxable service s. tax Service tax on courier service 0 Less- CCR On co-loader service Telephone service Advertisement service Excise duty on motor vehicle Net service tax payable 7000 2500 20000 100000 372500 140 50 400 2000 7410 5,00,00 Education cess 10000

Rs in lakh 40 5 2 1 2 50 SHEC 5000 70 25 200 1000 3705

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| 114

COURIER AGENCY

DOOR- TO DOOR TRANSPORTATION OF TIME SENSITIVE DOCUMENTS GOODS OR ARTICLES

EXPRESS CARGO SERVICE ANGADIA CO-LOADER

COURIER AGENCY

COLOADER

CUSTOMER

TIME SENSITIVE TRANSPORT OF GOODS BY ROAD IN GOODS CARRIAGE BY GTA

NOT COVERED IN COURIER SERVICE COVERED IN GTA
(i) IF BY ROAD (ii) ISSUE CONSIGNMENT NOTE

POST OFFICE

BASIC MAIL SERVICES STAUTORY FUNCTION- NO S. TAX

OTHERSERVICES

SPEED POST- COVERED IN COURIER SERVICE INS SERVICE- GEN INSURANCE OR LIFE INSURANCE AGENCY SERVICE ( e.g- Collection of telephone bill, distribution of MF units/ bonds- BUS AUXILIARY SERVICE

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(14) Transport of goods other than water through Pipeline or other conduit (i) Taxable Service means any service provided or to be provided to any person by any other person (petroleum products, natural gas, LPG etc) in relation to transport of goods other than water, through pipeline or other conduit; (ii) B1/6/2005 Transportation of goods, other than water, through pipeline or conduit is generally employed to transport petroleum and other petroleum products, natural gas, LPG, chemicals, coal slurry and other similar products. Such transport services are liable to service tax under sub-clause (zzz) of section 65(105) of the Finance Act, 1994. Consideration for the said transportation service provided may be payable periodically or from time to time. The service provider is required to pay service tax as and when payment is received for the services provided or to be provided. CBEC Clarification

(15) Custom house agent (i) Taxable Service means Any services provided or to be provided to any person By a custom house agent in relation to the entry or departure of conveyances or import or export of goods (ii) Custom house agent means A person licensed, temporarily or otherwise, under the regulation made under sub-section (2) of sec 146 of customs act1962.

He files IGM/EGM/BOE/SHIPPING BILL, Obtain entry inward/entry outward, arranges for loading of cargo for client. (iii) CBEC Clarification While the principal job of a CHA is to get the import or export consignments cleared through customs, they, being the `persons on the spot, also at times arrange services for packing, unpacking, loading, unloading, bringing or removing the goods to or from the customs area, vessels or aircrafts for their customers (i.e. importers or exporters). These services are provided by different agencies such as Port Trust, Steamer Agents, Cargo Handlers, Warehouse keepers, Packers, Goods Transport Agents. Normally the CHAs initially pay the service charges to these agencies and later recover these charges from the customer along with their own charges CHAs. Similar arrangement can occur for payment of statutory levies like Custom Duties, Port charges, Cesses etc. leviable on the said goods. 3. Issue was raised at the initial stage itself as to whether the charges, which are said to be paid by the CHAs and later recovered from the customers (i.e. reimbursable charges) should be added to the value for charging service tax from CHAs.

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4. In 2006 (w.e.f. 19-4-2006) the Service Tax (Determination of Value) Rules were prescribed. Consequently all previous circulars relating to valuation were withdrawn. The said rules brought in the concept of pure agent and provided that expenditure or costs incurred by the service provider as pure agent alone will be eligible for exclusion from taxable value. 5. It is reported that disputes have arisen on the issue of inclusion of such reimbursable charges, which are currently pending at various stages of dispute settlement mechanism. Certain field formations have also issued communications, directing that charges on certain activities incurred by CHAs are not covered under exclusions available to pure agent. It is also reported that divergent practices as regards the records & documentations, are being followed by the CHAs in relation to the charges for receiving services from other service providers as well as to their billings to their customers. This has added to the conflict and litigation. 6. With a view to resolve the disputes and to bring it clarity, the issue has been examined. The divergent practices followed at different places and lack of consistency in the manner of maintaining records and issuance of documents by the CHAs, make it impossible to lay down any specific guidelines or issue any specific directions. In the circumstances, it is clarified that essentially, the exclusion should be allowed to such charges from the taxable value of CHA services, where all the following conditions are satisfied, (a) The activity/service for which a charge is made, should be in addition to provision of CHA service (as mentioned in paragraph 1); (b) There should be arrangement between the customer & the CHA which authorizes or allows the CHA to (i) arrange for such activities/services for the customer; and (ii) make payments to other service providers on his behalf; (c) The CHA does not use the activities/services for his own benefit or for the benefit of his other customers; (d) The CHA recovers the reimbursements on actual basis i.e. without any mark-up or margin. In case of CHA includes any mark-up or profit margin on any service, then the entire charge (and not the mark-up alone) for that particular activity/service shall be included in the taxable value; (e) CHA should provide evidence to prove nexus between the other (than CHA) services provided and the reimbursable amounts. It is not necessary such evidence should bear the name or address of the customer. Any other evidence like BE No./Container No./BL No./ packing lists is acceptable for the establishment of such nexus. Similar would be the case for statutory levies, charges by carriers and custodians, insurance agencies and the like; (f) Each charge for separate activities/services is to be covered either by a separate invoice or by a separate entry in a common invoice (showing the charges against each entry separately) issued by the CHA to his customer. In the latter case, if certain entries do not satisfy the conditions mentioned herein, the charges against those entries alone should be added back to the taxable value; (g) Any other miscellaneous or out of pocket expenses charged by the CHA would be includable in the taxable value for the purposes of charging tax on CHA services. 7. The conditions mentioned at paragraph (6) would be applicable for services provided with effect from 19th April 2006, i.e. after the introduction of the valuation rules. For the prior period, the taxable value should be determined in accordance with the prevailing instructions issued by Board as referred to foregoing paragraph 3 of this circular. Any communication issued by any of the subordinate offices which are contrary to the conditions referred to in paragraph 6 of this circular, or as the case may be, the prevailing Boards circulars stands superceded to the extent of the contradiction. Practical que A custom house agent charged from the client 25 lakh which includes the following.

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| 117 Amt in lakh

1) Reimbursement of freight charged by shipping line 2) Reimbursement of port & demurrage charges 3) Reimbursement of custom duty 4) Reimbursement of warehouse charges paid to custom warehouse 5) Transportation charges from port to warehouse Calculate value of taxable service Ans

2 1 3 5 4

Amt in lakh Total amount charged 1) 2) 3) 4) 5) less Reimbursement of freight charged by shipping line Reimbursement of port & demurrage charges Reimbursement of custom duty Reimbursement of warehouse charges paid to custom warehouse Transportation charges from port to warehouse Taxable value 25 2 1 3 5 4 10

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| 118 (16) Cargo handling service

(i) Taxable Service means Any service provided or to be provided to any person, by a cargo handling agency in relation to cargo handling services; (ii) cargo handling service means Loading, unloading, Packing or unpacking OF CARGO and includes a) cargos handling service provided for freight in special containers or for non-containerized freight Services provided by a container fright terminal or any other freight terminal FOR ALL MODES OF TRANSPORT AND cargo handling services incidental to freight and b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, BUT DOES NOT INCLUDE, handling of EXPORT CARGO OR(EVEN IN CASES WHERE GOODS SENT FOR TRANSSHIPMENT FOR FURTHER TRANSPORT FOR EXPORT) PASSENGER BAGGAGE OR MERE TRANSPORTATION OF GOODS;

Author Note- Transportation Is Must For Cargo Handling Service Because Cargo Means Handling Of Goods While In Process Of Transportation (iii) Exemption Notification NN- 10/2002 the CG, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided to any person by a cargo handling agency in relation to, agricultural produce or goods intended to be stored in a cold storage, from the whole of the service tax. NN1/2009 CARGO handling service provided to a GTA will be exempt from service tax. NN- 41/2010- CG exempts the services when provided wholly within the port or other port or airport, namely,(i) taxable service provided by a cargo handling agency in relation to, agricultural produce or goods intended to be stored in a cold storage; (iv) CBEC clarification B11/1/2002 (i) The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. (ii) Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax. But presently covered under GTA or other transport services.

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(iii) Cargo handling services are provided in the port also. the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises. (iv) All goods meant for export are excluded from the scope of this levy. There may be cases where goods may be transhipped at a place other than the place of packing before reaching a place from where it is exported. For example goods are packed say at Agra for transportation to Bhopal where it is transhipped and ultimately reaches Mumbai, from where it is exported. A doubt has been raised as to whether service tax would be leviable on cargo handling service at Agra. It is clarified service provided in relation to any cargo which is meant for export, would not be taxable irrespective of the fact that it reaches the place of export after transhipment. However, the relevant documents should show that the Goods are for export. a) A. point has been raised by Airports Authority of India (AAI) as to whether service tax will be leviable in respect of handling of transhipment of export cargo from one international carrier to another international carrier or from a domestic carrier to an international carrier. It is clarified that so long as the cargo is for export, no service tax on handling of such cargo is leviable. For domestic cargo service tax will be applicable. (v) Passenger baggage has been excluded from the levy of service tax. it is clarified that unaccompanied baggage of a passenger will not be leviable to service tax. (vi) It has been pointed out that Container Freight Stations that they do not have any direct contact with the importer and they only provide facility to the Customs House Agents (CHA) to handle the container and import cargo for which they have a contract on a mutually agreed rate. It is the CHA who claims all the charges from the importer including the charges made by the CFS on CHA and remit to the CFS. Since services of a CHA is already covered under the tax net, the CFS service providers should be exempt from tax when the billing is done on CHAs; otherwise there will be double taxation. The above contention is not correct. In the case of CHAs, the service tax is levied only on the agency or agency and attendance charges and not on the reimbursible expenses (on actuals basis) such as port fees, statutory levies, landing and container charges, dock fees, examination charges, terminal handling charges, etc. The CHA does not pay service tax on the handling charges charged by the CFS. Thus there is no double taxation. Further, as per the law, whatever charges, the cargo handling agency charges from any person (including the CHA) is liable to service tax. (vii) A clarification has been sought as to whether service tax is payable on abandoned cargo which are auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods, the proceeds of the auction goes first to the cost of auction, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore service tax is not leviable. (viii) Some of the. cargo handling agencies may also act as marketing agents for individual airlines for which they get a commission, which seems to range from 5% to 15% of the freight. The question is whether service tax is payable on this. Marketing or canvassing for cargo for airlines does not come within the ambit of cargo handling services. Hence no service tax is payable under the category of cargo handling service. (ix) CFSs also sometimes undertake storing/washing/repairing and handling of empty containers for the shipping lines for which they charge the shipping lines. Empty containers cannot be treated as cargo. Therefore, the activities mentioned above do not come within the purview of cargo handling services. (x) Another doubt raised in relation to 15. cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of goods in their individual capacity, whether he would be liable to service tax as a cargo handling agency. It is clarified that such activities will not come under the purview of service tax as a cargo handling agency. Cir 104/7/2008- Issue 2 :GTA providing service in relation to transportation of goods by road in a goods carriage also undertakes packing as an integral part of the service provided. It may be clarified whether in such cases service provided is to be classified under GTA service. Clarification : Where service is provided by a person who is registered as GTA service provider and issues consignment note for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing, then the service shall be treated as GTA service and not cargo handling service.

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cir 334/1/2008- Cargo handling service does not cover mere transportation of goods. Mere transportation of goods by road is covered under Goods transport agency service. Service providers, commonly known as packers and movers provide services of packing together with transportation, with or without other services like unpacking, loading, unloading etc. Such composite services, at present, are classifiable under cargo handling service Note -Mere supply of labour for packing and loading of cement not covered under cargo handling service but covered under Manpower supply service . Rs in lakh 1 2 2.5 1 2 1.5 3 4 3.5 5 4 5 1

1) 2) 3) 4) 5) 6)

Charges for packing, loading, unloading, unpacking goods for transport of goods Transport of goods with packing for which consignment note issued Packing, loading with transport of goods Cargo handling in port Cargo handling of export goods Packing at Agra for transport to Bhopal where it is transshipped to Mumbai for export to USA 7) Cargo handling of agriculture products 8) Cargo handling of goods to be stored in cold storage. 9) Charges for Handling of passenger baggage 10) Charges for Handling of unaccompanied baggage. 11) Handling of empty containers 12) Cargo handling charges for tansport of goods by tippling system 13) Rake handling charges. Calculate the value of taxable service under cargo handling service Ans 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) Charges for packing, loading, unloading, unpacking goods for transport of goods Transport of goods with packing for which consignment note issued [w.n-1] Packing, loading with transport of goods [w.n-1] Cargo handling in port [W.n-2] Cargo handling of export goods [W.n-3] Packing at Agra for transport to Bhopal where it is transshipped to Mumbai for export to USA [W.n-3] Cargo handling of agriculture products [W.n-4] Cargo handling of goods to be stored in cold storage. [W.n-4] Charges for Handling of passenger baggage [W.n-3] Charges for Handling of unaccompanied baggage. [W.n-3] Handling of empty containers [W.n-5] Cargo handling charges for transport of goods by tippling system [W. n- 6] Rake handling charges.

Rs in lakh 1 ---2.5 ---------------3.5 5 ------1

Working notes 1) As per CBEC clarification vide circular Number 104/7/2008 that pre-dominant character of service provided will determine the nature of taxable service, if consignment note is issued by GTA for transportation of goods for which packing is integral part will be classified under GTA service. Whereas if transportation is merely incidental to packing then it will be classified as cargo handling service. 2) As per CBEC clarification cargo handling in port is covered under Port service. 3) Cargo handling service doesnt include handling of export cargo or passenger baggage. Even transshipment of export goods is not covered. Exclusion of baggage will apply on unaccompanied baggage also.

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4) Exemption notification- 10/2002, exempts the taxable service provided by cargo handling agency in relation to agricultural produce or goods intended to be stored in cold storage. 5) Empty containers are not cargo. Hence not taxable. 6) Transportation of goods is must through any mode of transport. But tippling system is not mode of transport. Hence not taxable. Cargo handling for freight In containers or Non containerised freight Loadin, unloading, packing or unpacking of cargo

Cargo handling service

Tax able

Exempt

Service provided by ICD/CFS for all modes of transport

Packing with transport Service i.r.t Agriculture produce Goods stored in cold storage Not Taxable under this service Transport With Packing

Handling of Export cargo Passenger Baggage including unaccompanied baggage Handling of empty containers Mere transport of goods

note- it includes Rake handling charges. Mere Packing of goods Service provided in port

Transhipment of export goods Auction of abandoned cargo

Marketing of cargo for Airlines

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| 122 (17) Storage and warehousing

(i) Taxable Service means Any service provided or to be provided to any person, by a storage or warehouse keeper in relation to storage and warehousing of goods; (ii) Storage and warehousing includes storage and warehousing services for goods including liquids and gases but does not include any service provided FOR STORAGE OF AGRICULTURAL PRODUCE OR any service provided BY A COLD STORAGE; (iii) Agriculture Produce agricultural produce means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but make it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food, processed tobacco. Exemption NN- 41/2010- CG exempts the services when provided wholly within the port or other port or airport, namely,taxable service provided by storage or warehouse keeper in relation to storage and warehousing of agricultural produce or any service provided for storage of or any service provided by a cold storage; (iv) cbec clarification (i) B 11/1/2002 Storage and warehousing service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central Ware Housing Corporation, Air Port Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service. (ii) Master circular 96/7/2007 Whether services provided in relation to handling/ storage and warehousing of empty containers is liable to service tax under storage and warehousing service [section 65(105)(zza)]? Ans-Empty containers are covered within the meaning of goods [section 65(50)]. Thus, services provided in relation to storage and warehousing of empty containers is liable to service tax under storage and warehousing service [section 65(105)(zza)].

(v) Case laws (1) mere renting of space not taxable, if Owner of LPG Tanks, rented out premises along with necessary and associated machineries without undertaking security/stacking etc. it was held that such service was not liable to service tax under storage & warehousing service(Finolex Industries ltd. 92007)(tri)) But presently

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renting of immovable property and supplying of tangible goods for use are liable to service tax. (2) in a case it was held that service of storage of imported cargo outside the port premises is taxable under storage and warehousing of goods service. (3) As per circular storage and warehousing of empty container would be covered under storage and warehousing service as empty containers are goods. Rs in lakh 2 1 3 2.5 3.5 4 5 2 1 1.5

1) Storage & warehousing of vegetables, copra, sugar cane 2) Storage & warehousing of sugar 3) Storage & warehousing of indigo, unmanufactured tobacco 4) Storage & warehousing of manufacture tobacco 5) Storage & warehousing of betel leaves, rice, cereals, pulses, tea & coffee 6) Storage & warehousing of edible oils for government. 7) Storage & warehousing of empty containers 8) Storage & warehousing of goods for Raj Transport 9) Storage & warehousing in Ports. 10) Mere renting of premises Calculate the value of taxable service under storage and warehousing service. Ans

1) Storage & warehousing of vegetables, copra, sugar cane [w.n-1] 2) Storage & warehousing of sugar 3) Storage & warehousing of indigo, unmanufactured tobacco [w.n-2] 4) Storage & warehousing of manufacture tobacco 5) Storage & warehousing of betel leaves, rice, cereals, pulses, tea & coffee[w.n-2] 6) Storage & warehousing of edible oils for government. 7) Storage & warehousing of empty containers [w.n-3] 8) Storage & warehousing of goods for Raj Transport [W.n-4] 9) Storage & warehousing in Ports. [w.n-5] 10) Mere renting of premises [W.n-6] Working notes 1) Storage & warehousing in relation to agriculture produce & service provided by cold storage is not covered 2) The products are agricultural produce and hence not coveed. 3) Empty containers are goods and hence covered. 4) Storage and warehousing provided to GTA is exempt. 5) Storage and warehousing in ports is covered in port service. 6) Mere renting of premises is covered under renting of immovable property.

Rs lakh ---1 --2.5 ---4 5 ----------

in

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PG-162 Storage & warehousing of Goods including Liquid or gases Storage of empty container because these are goods

Storage & warehousing service

Tax able

Exempt

Storage of agriculture produce Service provided to GTA Not covered under this service Service provided by cold storage Renting of premises for storage of goods

Storage in ports

Cloak room service

(18) Technical testing & analysis (i) Taxable Service means Any service provided or to be provided to any person, by a technical testing and analysis agency, in relation to technical testing and analysis; (ii) technical testing and analysis means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or [information technology software or] any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals;

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[Explanation. For the removal of doubts, it is hereby declared that for the purposes of this clause, technical testing and analysis includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations; but does not include 1) testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals;]

(iii) technical testing and analysis agency means any agency or person engaged in providing service in relation to technical testing and analysis;

(iv) Exemption 1) CG Exempt Taxable service provided or to be provided by a Government owned state/District level laboratory in relation to testing and analysis of water quality is exempt.[ NN 6/2006] 2) NN-11/2007- Clincal testing service provided or to be provided by a Clinical research organization (approved by Drug controller general of India) in relaion to testing and analysis of newly developed drugs (including vaccines and herbal remedies) on human participants so as to ascertain the safety and efficacy of such drugs on human participants shall be exempt. 3) Technical Testing & Analysis services and Technical Inspection & Certification service Exemption to services provided by specified agencies in relation to seeds the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a Central or State Seed Testing Laboratory and Central or State Seed Certification Agency notified under the Seeds Act, 1966 to any person, in relation to technical testing and analysis and technical inspection and certification of seeds from the whole of the service tax .[NN- 10/2010] (v) Case laws Facts in brief are that there is a lab known as M/s. Dr. Lal Path Lab (P) Ltd. Collection Centre at Ludhiana, which is engaged in the collection of blood, urine and stool samples on behalf of its Principal M/s. Dr. Lal Path Lab (P) Ltd., New Delhi for conducting biological tests. The assessee-respondent based at Ludhiana are given 25% of commission. Sh. Vaneet Grover, proprietor of Centre at Ludhiana, in his statement dated 26-5-2004 recorded by the Superintendent (Anti-Evasion) at the time of investigation has stated that he is the sole proprietor of the assesseefirm, which is Franchisee of the company based at Delhi in pursuance of an agreement between them. According to the statement made, the samples so drawn are collected by the collection centre and then sent by them to the company at New Delhi through a courier. Out of the total collection, 75% of amount was transferred to the principal lab at Delhi by the assessee-respondent through demand drafts. It was held that merely because the assessee renders it doesnt get covered under business auxiliary but covered by exception to technical testing and analysis service. Amt in lakh 1 2 3 4 2

1) 2) 3) 4) 5)

Technical testing and analysis of computers Technical testing and analysis of computers software Chemical testing of drugs Biological testing of earth for farming Scientific testing or analysis of information technology software

MANOJ BATRA 6) 7) 8) 9) 10) 11) 12)

| 126 5 2 3 1 3 1 2

Biological testing and analysis of agriculture land Testing or analysis for diagnosing a disease in human Testing or analysis for diagnosing a disease in animals Clinical testing drug or formulation Clinical testing and analysis of newly developed drugs on human participants Testing and analysis of water quality Testing and analysis of seed quality.

Calculate the amount of taxable service under this service Ans Amt in lakh 1 2 3 4 2 5 ------1 -----1 2 21

1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

Technical testing and analysis of computers Technical testing and analysis of computers software Chemical testing of drugs Biological testing of earth for farming Scientific testing or analysis of information technology software Biological testing and analysis of agriculture land Testing or analysis for diagnosing a disease in human [w.n-1] Testing or analysis for diagnosing a disease in animals [w.n-1] Clinical testing drug or formulation [W.n-2] Clinical testing and analysis of newly developed drugs on human participants [W.n2] 11) Testing and analysis of water quality [W.n-3] 12) Testing and analysis of seed quality. [W.n-4] Taxable value of service Working notes

1) Testing or analysis in relation to human beings or animals is not covered. 2) As per explanation to sec 65(106) testing and anlaysis includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations; but does not include testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals;] 3) Testing and analysis of water quality is exempt only if done by government owned laboratory. 4) Testing and analysis of seed quality is exempt is provided by central or state seeed testin or certification agency notified under seeds Act 1966.

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Of goods/material

Technical Testing & analysis service

Tax able IT SOFTWARE

ANY IMMOVABLE POPERTY Exempt TESTING IN RELATION TO Human beings or Animals

Not covered under this service

Water quality by State/ district laboratory

Clinical testing of newly developed drug Approved by DCGI ON HUMAN participants

Testing of seeds by Central /State Seed Testing Laboratory

(19) Public relation Service (i) Taxable Service

means any service provided or to be provided to any person, by any other person, in relation to managing the public relations of such person, in any manner;

[(86c) public relations includes strategic counselling based on industry, media and perception research, corporate image management, media relations, media training, press release, press conference, financial public relations, brand support, brand launch, retail support and promotions, events and communications and crisis communications;]

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(20) Business support services Fact06 Taxable service means any service provided or to be provided to any person by any other person in relation to support services of business or commerce in any manner Support services of business or commerce means service provide in relation to business or commerce and includes evaluation of prospective customer, tele-marketing, processing of purchase order and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transaction, operational assistance for marketing, operational or administrative assistance in any manner[f act 2011], formulation of customer service and pricing policies, and infrastructural support services such as providing office alongwith office utilities, reception with competent personnel to handle messages, secretarial services, internet and security etc. CBEC CLARIFICATION 1) 334/3/2006 Business Support Services : Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and tele-marketing. There are also business entities which provide infrastructural support such as providing instant offices along with secretarial assistance known as Business Centre Services. It is proposed to tax all such outsourced services. If these services are provided on behalf of a person, they are already taxed under Business Auxiliary Service. Definition of support services of business or commerce gives indicative list of outsourced services. 2) 334/1/2007 Development and supply of content service [section 65(105)(zzzzb)]: Content developed for use in telecommunication, advertisement and internet or websites are leviable to service tax presently under business support service. It is proposed to separately specify services provided by content developers in relation to development and supply of content for use by telecommunication service providers, advertising agencies and on-line information and database access or retrieval services such as internet or website service providers under this service. The term development and supply of content is defined separately [section 65(36c)]

3) Liability thereunder for charges towards conveyance of outward surface Indian Postal Mails and handling of cargo/passenger baggage Trade Notice No. 5/2008 Subject : Service Tax Clarification on Service tax on freight charges Reg. Postal Department has engaged shipping companies for conveyance of outwards surface Indian Postal Mails to various ports of foreign countries and handling of export cargo or passenger baggage etc., From the facts mentioned it appears that the service provided by shipping companies is in the nature of distribution, management and logistics and delivery order charges and inland haulage charges collected by shipping companies are for such distribution, management and logistics service. Such service is specifically covered under business support services and is liable to service tax. 4) Contract hatching of eggs not liable to Service taxLetter F. No. 137/92/2008-CX.4, Subject : Service Tax - Practice of treating process of contract hatching of eggs as a Service or manufacture - Regarding. It is clarified that contract hatching of eggs would not fall in any of the taxable services, namely, business auxiliary service or business support service.

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5) Movies Screening of, not liable to Service tax Circular No. 109/3/2009-S.T., dated 23-2-2009 (i) A query had been raised by the field formation as to whether the activity of screening of film supplied by a film distributor would fall under any of the taxable services and accordingly, whether the theatre owners are required to pay service tax on amount received by them from distributors. Divergent views have been expressed on this issue. One view is that the activity of screening of films supplied by a film distributor falls under the taxable service category of renting of immovable property; while an alternative view is that such activity falls under the category of Business Support Service. (ii) The matter has been examined. Normally a producer of a movie sells the rights of showing the movies in a region to a distributor. The distributor in turn enters into agreement with theatre owners. This agreement can be of different types. Thus it is necessary to examine different types of arrangements under which a movie is screened, in order to determine whether any tax liability arises on the activities undertaken by a theatre owner and a distributor. Typical types of arrangements normally entered into between a theatre owner and a distributor are as under :(iii) Under one type of arrangement, the distributor leases out the hall for screening of the movie. Here, the theatre owner gets a fixed rent from the distributor. The profit or loss from exhibiting the film is borne by the distributor. In such a case, the theatre owner provides the taxable service of Renting of immovable property for furtherance of business or commerce and is accordingly liable to pay service tax. (iv) Another type of arrangement is where the contract between the theatre owner and the distributor is on revenue sharing basis i.e. a fixed and pre-determined portion i.e. percentage of revenue earned from selling the tickets goes to the theatre owner and the balance goes to the distributor. In this case, the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an arrangement the activities are not covered under service tax. (v) In yet another type of arrangement, the theatre owner buys the print/CD of the film on payment of a fixed price and thereafter screens it in his theatre. This transaction is also not subject to service tax being in the nature of sale of goods. (vi) The arrangement most commonly entered into between a theatre owner and a distributor is that the theatre owner screens the movie for fixed number of days under a contract. The proceeds earned through sale of tickets go to the distributor but the theatre owner receives a fixed sum depending upon the number of days of screening. In this arrangement, the advertisement and display of posters etc. is done by the distributor. Under this arrangement, the fixed amount contracted is given to the theatre owner by the distributor irrespective of the fact whether the movie runs well or not. However, there is no rental arrangement between the theatre owner and the distributor as in the arrangement at paragraph 2.1 above. A view has been expressed that in this arrangement, the theatre owner provides Business Support Service to the distributor and hence is liable to pay service tax on the fixed amount received by the theatre owner. (vii) The matter has been examined. By definition Business Support Service is a generic service of providing support to the business or commerce of the service receiver. In other words the principal activity is to be undertaken by the client while assistance or support is provided by the taxable service provider. In the instant case the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under Business Support Service. (viii) In the light of above, it is clarified that screening of a movie is not a taxable service except where the distributor leases out the theatre and the theatre owner get a fixed rent. In such case, the service provided by the theatre owner would be categorized as Renting of immovable property for furtherance of business or commerce and the theatre owner would be liable to pay tax on the rent received from the distributor. The facts of each case and the terms of contract must be examined before a view is taken.

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Departmental clarification In this regard, DOF No. 334/3/2011-TRU dated 28.02.2011 clarifies as follows:The words operational and administrative assistance have wide connotation and can include certain services already taxed under any other head of more specific description. The correct classification will continue to be governed by section 65A. The scope will cover all support activities for others on a contract or fee, that are ongoing business support functions that businesses and organizations commonly do for themselves, but sometimes find it economical or otherwise worthwhile to outsource. Rs in lakh 1) Charges for telemarketing, evaluation of prospective customers for Tata Tele services 1 2) Charges for processing of purchase order for Jindal Steels 2 3) Charges for managing logistic of vehicles for timely delivery for Raj Transport 5 4) Charges for maintaining accounts and transaction processing & making pricing policies 4 5) Charges for providing office along with office utilities, lounge, reception staff to handle 2 messages, secretarial services, internet and telecom facilities etc. 6) Contract hatching of eggs 1 7) Charges for meter reading, preparation of electricity bills, delivery of bills for BSES. 5

[Circular No. 143/12/ 2011 ST dated 26.05.2011] 15. Client threshing of tobacco and client processing of raw cashew to recover kerenels thereof not liable to service tax Notification No. 14/2004-ST dated 10.09.2004 inter-alia exempts business auxiliary service in relation to processing of goods for, or on behalf of the clients when provided in relation to agriculture. It has been clarified that the following are covered within the expression in relation to agriculture and thus are eligible for exemption provided in the said notification: (i) process of threshing and drying of tobacco leaves and thereafter packing the same; and (ii) processing of raw cashew involving roasting/drying, shelling and peeling of raw cashew to recover kernel The Board has clarified that tobacco or raw cashew, which are subject to client processing retain their essential characteristics at the output stage and therefore the processes undertaken on behalf of client should be considered as covered by the expression in relation to agriculture. Further, it has been clarified that where the commission agents stationed abroad provide business auxiliary service to promote the export of rice, said business auxiliary service is covered by Notification 13/2003-ST (as amended) because, the word rice is mentioned under the explanation to the term agricultural produce, in the inclusive portion along with other items like cereals, pulses, etc. Sub-contractors liable even when principal exempted- Circular No. 138/7/2011-S.T., dated 6-5-2011 Subject : Representation by Jaiprakash Associates Limited, Noida, in terms of Judgement dated 14-2-2011 in W.P. No. 7705 of 2008 - Regarding.

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The Works Contract service (WCS) in respect of construction of Dams, Tunnels, Road, Bridges etc. is exempt from service tax. WCS providers engage sub-contractors who provide services such as Architects Service, Consulting Engineers Service, Construction of Complex Service, Design Services, Erection Commissioning or Installation Service, Management, Maintenance or Repair Service etc. The representation by Jaiprakash Associates Limited seeks to extend the benefit of such exemption to the sub-contractors providing various services to the WCS provider by arguing that the service provided by the sub-contractors are in relation to the exempted works contract service and hence they deserve classification under WCS itself. The matter has been examined. 2.

(i) Section 65A of the Finance Act, 1994 provides for classification of taxable services, which mentions that classification of taxable services shall be determined according to the terms of the sub-clauses (105) of section 65. When for any reason, a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected under the sub-clause which provides the most specific description and not the sub-clauses that provide a more general description. (ii) In this case the service provider is providing WCS and he in turn is receiving various services like Architect service, Consulting Engineer service, Construction of complex, Design service, Erection Commissioning or installation, Management, maintenance or repair etc., which are used by him in providing output service. The services received by the WCS provider from its sub-contractors are distinctly classifiable under the respective subclauses of section 65(105) of the Finance Act by their description. When a descriptive sub-clause is available for classification, the service cannot be classified under another sub-clause which is generic in nature. As such, the services that are being provided by the sub-contractors of WCS providers are classifiable under the respective heads and not under WCS. (iii) Attention is also invited to Circular No. 96/7/2007-S.T., dated 23rd August, 2007 [2007 (7) S.T.R. C69] regarding clarification on technical issues relating to taxation of services under the Finance Act, 1994. The relevant portion is reproduced below,A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor. Ser-vice tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work. A sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided.

Therefore, it is clarified that the services provided by 4. the subcontractors/consultants and other service providers are classifiable as per Section 65A of the Finance Act, 1994 under respective sub-clauses (105) of Section 65 of the Finance Act, 1994 and chargeable to service tax accordingly.

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Cir 147/16/2011 Subject: Commercial construction/infrastructure development projects of road, airports, dams, tunnels etc, levy of service tax on various service providers engaged / associated with such construction work Reference is invited to the Circular No. 138/07/2011 Service Tax dated 06.05.2011 wherein it was clarified that the services provided by the subcontractors / consultants and other service providers to the Works Contract Service (WCS) provider in respect of construction of Dams, Tunnels, Road, Bridges etc. are classifiable as per Section 65 A of the Finance Act, 1994 under respective sub clauses (105) of Section 65 of the Finance Act and are chargeable to service tax accordingly. Clarification has been requested as to whether the exemption available to the Works Contract Service providers in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc., is also available to the sub-contractors who provide Works Contract Service to these main contractors in relation to those very projects.

2. The matter has been examined. Vide the circular referred above, it was clarified that when the service provider is providing WCS service in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc. and he in turn is receiving various services like Architect service, Consulting Engineer service, Construction of complex, Design service, Erection Commissioning or installation, Management, maintenance or repair etc., which are used by him in providing output service, then while exemption is available to the main contractor (as per Section 65 (zzzza) of the Finance Act) , as regards the services provided by its subcontractors, the same are distinctly classifiable under the respective sub-clauses of section 65 (105) of the Finance Act, as per their description and that their taxability shall be decided accordingly. It is thus apparent that just because the main contractor is providing the WCS service in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc., it would not automatically lead to the classification of services being provided by the sub-contractor to the contractor as WCS. Rather, the classification would have to be independently done as per the rules and the taxability would get decided accordingly.

3. However, it is also apparent that in case the services provided by the sub-contractors to the main contractor are independently classifiable under WCS, then they too will get the benefit of exemption so long as they are in relation to the infrastructure projects mentioned above. Thus, it may happen that the main infrastructure projects of execution of works contract in respect of roads, airports, railways, transport terminals, bridges tunnels and dams, is sub-divided into several sub-projects and each such sub-project is assigned by the main contractor to the various sub-contractors. In such cases, if the sub-contractors are providing works contract service to the main contractor for completion of the main contract, then service tax is obviously not leviable on the works contract service provided by such sub-contractor.

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Amendments for Nov 2011

(3) ABC Textiles was engaged in manufacturing certain non-branded goods of textile sector. While one notification granted full exemption to the said goods without any condition, another notification prescribed a concessional rate of duty of 4% on these items, with the benefit of CENVAT credit. At the time of selling the said goods to PQR Industries, ABC Textiles opted to pay the excise duty at the concessional rate of 4% on such items under second notification with a view to claim the CENVAT credit of the duty paid on the inputs used in producing these goods. Further, PQR Industries availed the CENVAT credit of 4% excise duty paid by it on the said goods to ABC Textiles. In the light of the aforementioned facts, answer following questions:(a) Was ABC Textiles justified in paying duty @ 4% in respect of unconditionally fully exempted goods and can it avail the CENVAT credit of the excise duty paid on inputs on the plea that it has paid excise duty on the final goods? (b) Can PQR Industries avail the CENVAT credit of the excise duty paid on the goods purchased from ABC Textiles? (i) section 5A (1A) of the Central Excise Act- Cir- 937/27/2010 During the period between 07.12.2008 and 06.07.2009, while one notification granted full exemption to certain items of Textile Sector without any condition, another notification prescribed a concessional rate of duty of 4% on these items, with the benefit of CENVAT credit*. 2. The issue is whether an assessee can avail the benefit of either of the above said two notifications whichever is beneficial to him or he is bound to avail the unconditional exemption under notification No. 20/2004 as per section 5A(1A) of the Central Excise Act, 1944. 3. The Ministry of Law has opined that the language used in said section 5A(1A) is unambiguous and principles of harmonious construction cannot be applied in the instant case in view of specific provision under sub-section (1A) of section 5A of the Central Excise Act. The Law Ministry has accordingly concluded that in view of the specific bar provided under sub-section (1A) of section 5A of the Central Excise Act, the manufacturer cannot opt to pay the duty under notification 59/2008-CE dated 7.12.2008 and he can not avail the Cenvat Credit of the duty paid on inputs. (ii) Circular No. 940/01/2011-CX Subject: Application of provisions of Section 5A(1A) of the Central Excise Act, 1944 It is clarified that, the manufacturer cannot opt to pay the duty in respect of unconditionally fully exempted goods and he cannot avail the CENVAT credit of the duty paid on inputs. 2. It is further clarified that in case the assessee pays any amount as Excise duty on such exempted goods, the same cannot be allowed as CENVAT Credit to the downstream units, as the amount paid by the assessee cannot be termed as duty of excise under Rule 3 of the CENVAT Credit Rules, 2004. 3. The amount so paid by the assessee on exempted goods and collected from the buyers by representing it as duty of excise will have to be deposited with the Central Government in terms of Section 11D of the Central Excise Act, 1944 . Moreover, the CENVAT Credit of such amount utilized by downstream units also needs to be recovered in terms of the Rule 14 of the CENVAT Credit Rules, 2004.

Valuation (1) Clarification regarding Quantity discounts, bonus quantities, etc. cleared without payment of duty under MRP based assessment - Cir 938/28/2010

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A larger bench of CESTAT in the case of Indica Laboratories Vs CCE, Ahmedabad 2007(213) ELT 20(T-LB), has held that quantity discount, bonuses etc. are applicable for the valuation of goods under section 4 of the Central Excise Act, 1944 and not in case of goods valued under Section 4A. 2.The party has appealed against the said order before High Court of Gujrat. However, no stay has been granted by the High Court against the said order of the larger bench of tribunal. You may accordingly take necessary action as per the order of the larger bench of tribunal to protect the revenue interests. (2) Scope of Notification Nos.49/2003-CE and 50/2003-CE both dated 10.06.2003- Cir 939/29/2010 Kind attention is invited to Notification Nos. 49/2003-CE and 50/2003-CE both dated 10.06.2003 which provide full exemption from excise duties to goods cleared from industrial units in the states of Uttarakhand and Himachal Pradesh for a period of ten years from the date of commencement of commercial production. The exemption is available to new units set up or existing units which have undergone substantial expansion in terms of the said notifications and commence commercial production before the cut-off date, that is, on or before 31.3.2010 Representations have been received from Trade and Industry Associations seeking clarification on the availability of the exemption benefit under these notifications in the following situations: (i) (ii) (iii) (iv) Where a unit starts producing some new products after the cut-off date using plant and machinery installed up the said cut-off date and without any further addition to the plant and machinery. Where the installed capacity in a particular unit is upgraded after the cut-off date, so as to increase the efficiency of the machinery by installing ancillary machines or replacement of some parts etc but in such a way that it does not lead to increase in capacity of production. Where new dosage forms are manufactured after the cut-off date on the same line of production with the same machinery. Where a unit manufacturers a new product by installing fresh plant, machinery or capital goods after the cut-off date.

3. Board has examined the matter. Under the said notifications, any new unit set up or an existing unit which has undergone substantial expansion that commences commercial production before the cut-off date is entitled to excise duty exemption in respect of excisable goods (other than those appearing in the negative list) manufactured and cleared for a period of ten yeas from the date of commencement of commercial production. The provisions of these notifications do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date and during the exemption period of ten years as per the notification. Therefore, it is clarified that in all the above situations, the benefit of the excise duty exemption under the notifications would continue to be available to eligible industrial units. However the period of exemption would remain ten years and would not get extended on account of such modifications or additions under any circumstances.

Cenvat credit Rules (a) Capital Goods means (A) The following goods namely (i) All goods falling under Chapter 82, 84, 85, 90 heading no. 6805 and 6804 Of the first Schedule to central excise tariff act 1985 (ii) Pollution control equipment (iii) Components, spares and accessories of the goods specified at (i) and (ii) above; The components, spares and accessories may fall under any chapter but they should be components, spares and accessories of the capital goods.

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e.g Asbestos sheets used for connecting equipments for passing of gas/steam are accessories of plant even if fall under other chapters. (iv) Moulds and dies, jigs and fixtures; (v) Refractories and refractory materials; (vi) Tubes and pipes and fittings thereof; and (vii) Storage tank Used (1) In the factory of the manufacturer of the final products, but does not include any equipment or appliances used in an office or [(1A) outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory; or [for Nov 11] (2) For providing output services Air conditioner and refrigeration equipment and computers would be eligible to cenvat credit as capital goods. The only condition is that the manufacturers should use them in the manufacturer of final product. For e.g. an airconditioner used in the office premises or a computer used in the office premises of the factory shall not be eligible for cenvat credit.

(B) Motor vehicle registered in the name of provider of output service for providing specified taxable service which are courier agency, tour operator, Rent a cab Schedule, cargo handling agency, goods transport agency, outdoor caterer and pandal and shamiana contractor. For May 2011 (C) dumpers or tippers, falling under Chapter 87 of the First Schedule to the Central Excise Tariff Act, 1985, registered in the name of provider of output service for providing specified taxable services which are site formation and clearance, excavation and earthmoving and demolition, mining of mineral oil or gas (D) components, spares and accessories of motor vehicles, dumpers or tippers, as the case may be, used to provide taxable services as specified in sub-clauses (B) and (C); Author noteFor Nov 11 the following inserted, namely :(1A) outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory; or;

Rule 2(k) input means [ from Nov 11] (i) all goods used in the factory by the manufacturer of the final product; or (ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or (iii) all goods used for generation of electricity or steam for captive use; or (iv) all goods used for providing any output service; but excludes (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods,

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except for the provision of any taxable service specified in sub-clauses (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act; [ Port services , Other port services , Airport services , Construction in respect of commercial or industrial buildings or civil structures , Construction services in respect of residential complexes , Works contract services ] (C) capital goods except when used as parts or components in the manufacture of a final product; (D) motor vehicles; (E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product. Explanation. - For the purpose of this clause, free warranty means a warranty provided by the manufacturer, the value of which is included in the price of the final product and is not charged separately from the customer;] 943/4/2011 How is the no relationship whatsoever with the manufacture of a final product to be determined? Credit of all goods used in the factory is allowed except in so far as it is specifically denied. The expression no relationship whatsoever with the manufacture of a final product must be interpreted and applied strictly and not loosely. The expression does not include any goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. Only credit of goods used in the factory but having absolutely no relationship with the manufacture of final product is not allowed. Goods such as furniture and stationary used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of same is allowed.

Que- Determine the amount of CENVAT credit available to ABC Ltd. in respect of the following items
procured by them in the month of October, 2011:Items Raw materials Capital goods used for generation of electricity for captive use within the factory Motor spirit Inputs used for construction of a building Dairy and bakery products consumed by the employees Motor vehicle Ans- CCR available = 52000 + 50000 = 102000 Define INPUT SERVICE Input Service Means any service Used by a provider of Taxable service for providing an output service or Used by the manufacturer, whether directly or indirectly in or in relation to the manufacture of final products and clearance o final products from up to the place of removal And includes Services used in relation to Setting up, modernization renovation or repairs of factory premises of provider of output service or an office relating to such factory or premises Advertisement or sale promotion market research Storage putt the place or removal, procurement of inputs Excise duty paid (including EC and SHEC) 52,000 1,00,000 40,000 1,00,000 5,000 4,50,000

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Activities relating to business such as Accounting, Auditing, financing, Recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security inward transportation of inputs or capital goods and outward transportation up to the place of removal. Rule 2(l) input service means any service, -[ from Nov 11] (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services),[ Architects services , Port services, Other port services, Airport services , Construction in respect of commercial or industrial buildings or civil structures, Construction services in respect of residential complexes ,Works contract services ] in so far as they are used for (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, [ General insurance business, Rent-a-cab scheme operators services , Service Stations services , Supply of tangible goods services] in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;] 943/4/2011 Is the credit of only specified goods and services listed in the definition of inputs and input services not allowed such as goods used in a club, outdoor catering etc, or is the list only illustrative? The list is only illustrative. The principle is that cenvat credit is not allowed when any goods and services are used primarily for personal use or consumption of employees. 943/4/2011 Is the credit of input services used for repair or renovation of factory or office available? Credit of input services used for repair or renovation of factory or office is allowed. Services used in relation to renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services. Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression activities related to business? The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis.

MANOJ BATRA Duties eligible for Cenvat Credit

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(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of (i.e. CENVAT CREDIT) of i. The duty of excise specified in the First Schedule CETA(BED) [Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods in respect of which the benefit of an exemption under notification No. 1/2011-C.E., dated the 1st March, 2011 is availed;] ii. The duty of excise specified in the second Schedule to CETA(SED) iii. The additional duty of excise (ADE) leviable under sec. 3 of the Additional Duties of Excise (Textile & Textile Articles) Act. iv. The additional duty of excise leviable under sec 3 of the additional duties of excise (G SI) Act and v. The National calamity contingent duty (NCCD) leviable under sec 136 of the finance Act vi. The Education cess on excisable goods leviable under sec 93 of Finance Act2004 Via secondary and higher education cess of finance Act 2007. vii. Additional duty leviable u/s 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii),(iv),(v) and (vi), (via) Provided that CENVAT credit shall not be allowed in excess of 85%. of the additional duty of customs paid under sub-section (1) of section 3 of the Customs Tariff Act, on ships, boats and other floating structures for breaking up falling under tariff item 8908 00 00 of the First Schedule to the Customs Tariff Act;] vii-a Additional duty u/s 3(5) of customs tariff act (special CVD). It is levied to counter balance the sales tax, VAT, local tax leviable on like article on sale, purchase or transportation in India. However a provider of taxable service shall not be eligible to take credit of such additional duty. viii. The additional duty of excise leviable under Finance Act 2003 ix. Additional excise duty leviable on pan masala and tobacco products under Finance Act, 2005 x. The service tax leviable under sec 66 of the finance act and xi. The Education cess on taxable services leviable under sec 95 of the finance act 2004 xii. The Secondary and higher Education cess on taxable services leviable under F. act 2007 Paid on A) any input or capital goods received in the factory of the manufacturer of final product or premises of the provider of output service on or after the 10-09-04 B any input service received by the manufacturer of final product or by the provider of output service on or after the 10-9-04 Author NoteReason for the amendment D.O.F.No.334/ 3/2011-TRU provides the reason for the aforesaid amendment as follows:The process of obtaining goods and material mainly melting scrap and re-rollable scrap of steel, by breaking up of ships, boats and other floating structures is deemed to be a process of manufacture in terms of section note 9 of Section XV of the Central Excise Tariff. In the breaking of ships, a number of used serviceable articles such as pumps, air-conditioners, furniture, kitchen equipment, wooden panels etc. are also generated. These are generally sold as second hand goods by ship breaking units but no excise duty is payable as they do not emerge from a manufacturing process. At the same time, ship breaking units are allowed to avail full credit of additional duty of customs paid on the ship when it is imported for breaking it. This anomaly was resulting in misuse of the Cenvat credit scheme. Rule 3 has been amended to prescribe that Cenvat credit shall not be allowed in excess of 85% of the additional duty of customs paid on ships, boats etc. imported for breaking

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Utilization of CCR Rule 3(4) The CENVAT credit may be utilized for payment of a) Any duty of excise on any final product; or b) An amount equal to c) credit taken on inputs if such inputs are removed as such or after being partially processed; or d) An amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or e) An amount under rule 16(2) of central excise Rules 2002 f) Service tax on any output service Provided that while paying duty of excise or service tax, the cenvat credit shall be utilized only to the extent such credit is available on the last day of the month or quarter as the case may be for payment of duty or tax relating to such month or quarter. [Provided further that CENVAT credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an exemption under notification No. 1/2011-C.E., dated the 1st March, 2011 is availed :] Provided also that the CENVAT credit of the duty or service tax paid on the inputs or input services, used in the manufacture of final products cleared after availing area based exemption notification shall be utilized only for payment of duty on final product in respect of which exemption under said respective notifications is availed of. Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010

issue -- Valuation of Goods cleared in DTA by EOUs.- cir 933/23/2010 Board has received references seeking clarification with regard to the valuation of goods cleared from an EOU for sale in DTA, when actual sale transaction does not take place at the time of clearance but on a subsequent date. In such cases 100% of the goods are cleared from the EOU to depot from where the sale is effected through consignment agents. CBEC has earlier issued Circular No 268/85-CX.8 dated 29. 09.1994, clarifying that valuation of goods in such situations will have to be done in accordance with the Rule 8 of the Customs Valuation Rule (Determination of Price of Imported Goods), 1988 as it existed then. 2. The issue has been re-examined. As per the proviso to Section 3(1) of the Central Excise Act, 1944, the value of such goods need to be determined in terms of section 14 of the Customs Act, 1962, read with Customs Valuation Rules (Determination of Price of Imported Goods), 2007. 3. In terms of the said rules the value will have to be determined by sequential application of Rules 3 to 9. The same view has been expressed by the CESTAT in following cases Endress Hauser Flowtec (I) Pvt Ltd. [2009 (237) ELT 598 (T)] Morarjee Brembana Ltd. [2003 (154) ELT 500 (T)] Uniworth Textile Ltd. [2009 (244) ELT 401 (T)] Removal of inputs/ capital goods as such Rule 3(5) Where inputs or capital goods, On which cenvat credit has been taken Are removed as such from the factory, or premises of the provider of output service The manufacturer or provider of output service Shall pay an amount Equal to the credit availed in respect of such inputs or capital s goods and Such removal shall be made under the cover of an invoice referred to in rule 9

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Provided that such payments shall not be required to be made where any inputs or capital goods are removed outside the premises of provider of output service for providing output service: [Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products :] Rule 3(5B) of CCR 2004 Reversal of cenvat credit If the value of any (i) inputs or (ii) capital goods before being put to use on which CENVAT credit has been taken is fully written off fully or partially or any provision has been made in books of account to write it off fully or partially then, the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken on such inputs or capital goods. Provided that if the said input or capital goods is subsequently used in the manufacture of final products, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to other provisions of these rules.

Rule 4 Conditions for allowing cenvat credit Credit on inputs Rule 4(1)
The cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. [Provided that in respect of final products, namely, articles of [jewellery or other articles of precious metals falling under heading 7113 or 7114 as the case may be] of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.] Author noteBefore amendment- proviso to 4(1) provides that where articles of jewellery of precious metals ( heading 7113) are manufactured on job work, CCR of duty paid on inputs allowed at time of receipt of inputs in registered premises of principal manufacturer subject to condition that such inputs used in the manufacture of such final product by the job worker. After amendmentThe provisions relating to job work in case of articles of jewellery of precious metals ( falling in itme 7113 of CETA) have been extended to articles of goldsmiths or silversmiths wares of precious metals (falling in itme 7114 of CETA)

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Credit on capital goods Rule 4(2) (a) The cenvat credit in respect of capital goods Received in a factory or in the premises of the provider of output service [or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory] at any point of time in a given financial year Shall be taken only for amount not exceeding 50% of the duty paid on such capital goods in the same financial year. 100% CCR IN FIRST YEAR (i) Provided credit of additional duty of Customs u/s 3(5) of Customs Tariff Act shall be allowed immediately on receipt of the capital goods in the factory of manufacturer. (ii) Provided further that credit in respect of capital goods shall be allowed For the whole amount of the duty paid on such capital goods in the same financial year If the said capital goods are cleared as such in the same financial year (iii) [Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year. Explanation. - For the removal of doubts, it is hereby clarified that an assessee shall be eligible if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.] Author note- Full CENVAT credit on capital goods in one installment in the year of receipt of such capital goods in the factory to an SSI Prior to amendment CENVAT credit in respect of capital goods could be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the year of receipt of such capital goods in the factory in case of both SSI and non-SSI After Amendment SSI is allowed to take the CENVAT credit in respect of capital goods for the whole amount of the duty paid on such capital goods in the same financial year. Above relaxation is available to a unit who is eligible to claim SSI exemption regardless of whether he actually claims it or opts to pay duty.

Credit on capital goods Rule 6(4) No credit of duty shall be allowed on capital goods which are used exclusively in exempted goods or services other than final products which are wholly exempt under any notification where exemption is granted based upon the value of clearance made in a financial year Circular No.943/04/2011 Can credit of capital goods be availed of when used in manufacture of dutiable goods on which benefit under Notification 1/2011- CE is availed or in provision of a service whose part of value is exempted on the condition that no credit of inputs and input services is taken? Ans- As per Rule 6(4) no credit can be availed on capital goods used exclusively in manufacture of exempted goods or in providing exempted service. Goods in respect of which the benefit of an exemption under notification No. 1/2011-CE, dated the 1st March, 2011 is availed are exempted goods [Rule 2(d)]. Taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken, are exempted services [Rule 2(e)]. Hence credit of capital goods used exclusively in manufacture of such goods or in providing such service is not allowed.

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Explain the procedure to be followed if final product is exempt RULE 6. [Obligation of a manufacturer or producer of final products and a provider of taxable service.] (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services] except in the circumstances mentioned in sub-rule (2). [Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.] Exempted goods Means excisable goods which are exempt from the whole of the duty of excise leviable thereon, And includes goods which are chargeable to NIL rate of duty [and goods in respect of which the benefit of an exemption under notification No. 1/2011 is availed;] Exempted Services means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which No service Tax is leviable under sec 66 of the Finance Act [and taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken. Explanation.- For the removal of doubts, it is hereby clarified that exempted services includes trading;] 943/4/2011 Can the credit of input or input services used exclusively in trading, be availed? Trading is an exempted service. Hence the credit of any inputs or input services used exclusively in trading cannot be availed. Notification no. 67/95 as amended Goods manufactured in the factory And used within the same factory of production In the manufacture of final product Are fully exempt Provided that final product is not wholly exempt or chargeable to nil rates. Cenvat should not be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that cenvat credit is admissible so long as the inputs are used in or in relation to the manufacture of final products and whether directly or indirectly. Also it has been clarified by the board that cenvat credit shall not be denied on the capital goods used in manufacturing of intermediate goods exempt from payment of duty which are used captively in the manufacture of finished goods chargeable to duty.

Rule 6(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for (a) the receipt, consumption and inventory of inputs used

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(i) in or in relation to the manufacture of exempted goods; (ii) in or in relation to the manufacture of dutiable final products excluding exempted goods; (iii) for the provision of exempted services; (iv) for the provision of output services excluding exempted services; and (b) the receipt and use of input services (i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal; (ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; (iii) for the provision of exempted services; and (iv) for the provision of output services excluding exempted services, and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).] [(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow [any one] of the following options, as applicable to him, namely :[(i) pay an amount equal to five per cent. of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment : Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i) : Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be five per cent. of the value so exempted.] Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. [Explanation II.- For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services. Explanation III. - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.] (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :(a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :(i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,(i) the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured and removed plus the total value of

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taxable services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods [and their clearance upto the place of removal] or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :(i) the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods [and their clearance upto the place of removal] or provision of exempted services = (M/N) multiplied by P, where [M] denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, 1[N] denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and 1[P] denotes total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely :(i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); (h) where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i) where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. * * *] [Explanation I to III

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Banking company & financial institution (including NBFC) required to pay 50% of credit availed [(3B) Notwithstanding anything contained in sub-rules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, providing taxable service specified in sub-clause (zm) of clause (105) of section 65 of the Finance Act, shall pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month. Providers of service of life insurance or management of ULIP required to pay 20% of credit availed (3C) Notwithstanding anything contained in sub-rules (1), (2), (3) and (3B), a provider of output service providing taxable services as specified in sub-clauses (zx) and (zzzzf) of clause (105) of section 65 of the Finance Act, shall pay for every month an amount equal to twenty per cent. of the CENVAT credit availed on inputs and input services in that month. (3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken. Explanation I. - Value for the purpose of sub-rules (3) and (3A), (a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made thereunder; (b) in the case of a taxable service, when the option available under sub-rules (7), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, or the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 has been availed, shall be the value on which the rate of service tax under section 66 of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; or (c) in case of trading, [shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or 10% of the cost of goods sold, whichever is more.] Explanation II. - The amount mentioned in sub-rules (3), (3A), (3B) and (3C), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3), (3A), (3B) and (3C), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation IV.- In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, following month and month of March occurring in sub-rules (3) and (3A) shall be read respectively as following quarter and quarter ending with the month of March.] Author note Logic of amendment for banking& ins-.334/ 3/2011-TRU clarifies as follows:A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs, such amount will be equal to 20% of credit availed. Other options of payment of amount under rule 6 shall not be available for these taxpayers. Circular No.943/04/2011-CX Clarification on issues relating to CENVAT Credit Rules 2004 S.No. 1 Issue Can credit of capital goods be availed of when used in manufacture of dutiable goods on which benefit under Notification 1/2011- CE is availed or in Clarification As per Rule 6(4) no credit can be availed on capital goods used exclusively in manufacture of exempted goods or in providing exempted service. Goods in respect of which the benefit of an exemption under notification No. 1/2011-CE,

MANOJ BATRA provision of a service whose part of value is exempted on the condition that no credit of inputs and input services is taken?

| 146 dated the 1st March, 2011 is availed are exempted goods [Rule 2(d)]. Taxable services whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken, are exempted services [Rule 2(e)]. Hence credit of capital goods used exclusively in manufacture of such goods or in providing such service is not allowed. Trading is an exempted service. Hence the credit of any inputs or input services used exclusively in trading cannot be availed. Trading is an exempted service. Hence credit of any inputs or input services used exclusively in trading cannot be availed. Credit of common inputs and input services could be availed subject to restriction of utilization of credit up to 20% of the total duty liability as provided for in extant Rules. The method normally followed by the concern for its accounting purpose as per generally accepted accounting principles should be used. Generally accepted accounting principles need to be followed in this regard. All taxes for which set off or credit is available or are refundable/ refunded may not be included. Discounts are to be included. The definition of input is given in Rule 2(k) and Rule 6 only intends to segregate the credits of inputs used towards dutiable goods and exempted goods. While applying Rule 6, the expression in or in relation must be read harmoniously with the definition of inputs. The sub-rules 6(3B) and 6(3C) impose obligation on the entities providing banking and financial services (in case of a bank and a financial institution including a non-banking financial company) or life insurance services or management of investment under ULIP service. The obligation is applicable independently in respect of each registration. When such a concern is exclusively rendering any other service from a registered premises, the said rules do not apply. In addition to BoFS and life insurance services if any other service is rendered from the same registered premises, the said rules will apply and due reversals need to be done.

6 7

Can the credit of input or input services used exclusively in trading, be availed? What shall be the treatment of credit of input and input services used in trading before 1.4.2008?

While calculating the value of trading what principle to follow- FIFO, LIFO or one to one correlation? Are the taxes and year end discounts to be included in the sale price and cost of goods sold while calculating the value of trading? Does the expression in or in relation used in Rule 6 override the definition of input under Rule 2(k) for determining the eligibility of Cenvat credit? Sub-rules 3B and 3C of rule 6 apply to whole entity or independently in respect of each registration?

10

11

12

Is the credit available on services received before 1.4.11 on which credit is not allowed now? e.g. rent-a-cab service

The credit on such service shall be available if its provision had been completed before 1.4.2011.

Rule 6(3) Mr. X manufactures dutiable & Exempted goods a) CCR of input A of Rs. 2000 used only in manufacture of exempted goods.

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CCR of Input B of Rs 800 used only in Dutiable goods CCR of 2500 of input c used only in Non-Excisable Final product. CCR of Common input D of Rs. 4000 used in manufacture of dutiable & exempted goods. Value of exempted goods 20000 Value of dutiable goods 50000 Excise duty 14%

Q2 Mr. X is providing taxable as well as exempted services a) CCR of IS 3000 used exclusively in exempted service b) CCR of IS 5000 used exclusively in Non-taxable service c) CCR of IS of 10000 used in providing taxable as well as exempted service d) CCR of IS of 15000 used in providing taxable & Non-taxable service. e) Value of taxable service 100000 f) Value of exempted service 70000 g) Value of non-taxable service 80000 Q 3 Mr. X provides dutiable as well as exempted goods & also taxable as well as exempted service 07-08 April 08 a) CCr of IP, commonly used for all goods & Services. (10000 units * 10 p.u 8 14.42% b) CCR of IS commonly used c) value of EG removed @ 50 p.u d) value of DG removed value of ES provided v alue of TS provided Every 1 unit of EG requires 2 units of IP 14420 6000 1200000 2800000 1050000 1150000 150000 230000 170000 130000

Rule 6(5) Common input Service Notwithstanding anything contained in sub-rule (1), (2) & (3) Credit of whole of service tax paid on specified taxable service shall be allowed Unless Such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services Specified taxable services for e.g are banking & financial, consulting engineer, Management consultant, Real Estate agent, architect, interior decorator, construction service, security agency, erection, commissioning & installation services, foreign exchange brokers service, insurance auxiliary service concerning life insurance business, intellectual property related service, maintenance & repair, scientific or technical consultancy technical inspection & certification services, technical testing and analysis services. Rule 6(6A) (6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a Unit in a Special Economic Zone or to a Developer of a Special Economic Zone for their authorised operations.. Rule 9 (1) [(bb) a supplementary invoice, bill or challan issued by a provider of output service, in terms of the provisions of Service Tax Rules, 1994 except where the additional amount of tax became recoverable from the provider of service on account of non-levy or non-payment or short-levy or short-payment by reason of

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fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Finance Act or of the rules made thereunder with the intent to evade payment of service tax.] Rule 9(7) 1. The manufacturer of final products shall submit within 10 days from the close of each month to the Superintendent, a monthly return in the prescribed form. Provided that where a manufacturer is availing exemption under a notification based on the value of clearances in a financial year, he shall file a quarterly return in specified form within 10 days after the close of the quarter to which the return relates. Author note6. In rule 9 of the said rules, in sub-rule (7), in the proviso, for the words twenty days, the words ten days shall be substituted with effect from the 1st day of March, 2011. [Notification No. 3/2011-C.E. (N.T.), dated 1-3-2011]

Subject: Liability of interest where CENVAT credit was wrongly taken but reversed by assessee before utilization- Cir 942/3/2011 Attention is invited to the Boards Circular No. 897/17/2009-CX dated 03.09.09, wherein it was clarified that in light of clear and unambiguous provisions of Rule 14 of the CENVAT Credit Rules, 2004, the interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized. 2. References have been received to re-examine the issue in light of judgement of P&H High Court in the case of Ind-Swift Labs. V/s UOI [2009(240)ELT328(P&H)]. The said judgement of P&H High Court held that under provisions of Rule 14 of CENVAT Credit Rules, 2004, interest cannot be claimed from the date of wrong availment of credit. It is required to be paid from the date it is wrongly utlilized. 3. The matter has been examined. It is observed that the issue has now been conclusively settled by the Apex Court in the departmental appeal against the above mentioned judgement of P&H High Court. The Apex Court vide its judgement dated 21.02.11 in Civil Appeal No. 1976 of 2011 has set aside the aforesaid order of Honble High Court. The Apex Court has ruled that If the aforesaid provision is read as a whole we find no reason to read the word OR in between the expressions taken or utilized wrongly or has been erroneously refunded as the word AND. On the happening of any of the three circumstances such credit becomes recoverable along with interest. In effect, therefore, the view taken by the Board in circular dated 03.09.09 has now been endorsed by the Apex Court. SSI Exemption for labels manufactured bearing brand name of another Amendment to Notification No. 8/2003-C.E. In exercise of the powers conferred by sub-section (2A) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments IN NN- 8/2003 namely :Explanation- For the removal of doubts, it is hereby clarified that packing material includes labels of all kinds. [Notification No. 28/2011-C.E., dated 24-3-2011]

Central excise rules 2002 Provision Rule 8 CER 2002 Rule 7 CER 2002 Particulars Int. on delayed payment of duty Provisional assessment Int. on differential duty on Before amendment Rate of Interest 13% p.a 13% p.a After amendment Rate of Interest 18% p.a 18% p.a

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| 149 final assessment Goods exported under bond (i.e without payment of duty)int payable on goods diverted for home consumption Int. on duty recovered u/s 11A

Rule 19 CER 2002

13% p.a

18% p.a

Sec 11AB CEA 1944

13% p.a

18% p.a

Author Note- interest rate @ 24% p.a u/r 6(3)(ii) of CCR 2004 and interest rate @ 15% p.a Under sec 11DD has not been changed. Mines engaged in the production/manufacture of specified goods exempt from obtaining registration if the producer/manufacturer of such goods has a centralized billing/accounting system in respect of such goods Every mine engaged in the production/manufacture of of goods falling under chapter heading 2701, 2702, 2703, 2704 and 2706 is exempt from obtaining registration where the producer or manufacturer of such goods has a centralized billing or accounting system in respect of such goods produced by different mines and opts for registering only the premises or office from where such centralized billing or accounting is done. Author note 1) Coal, briquettes, ovoids and similar solid fuels manufactured from coal [Chapter heading 2701] 2) Lignite, whether or not agglomerated, excluding jet [Chapter heading 2702] 3) Peat (including peat litter), whether or not agglomerated [Chapter heading 2703] 4) Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon [Chapter heading 2704] 5) Tar distilled from coal, from lignite or from peat and other mineral tars, whether or not dehydrated or partially distilled, including reconstituted tars [Chapter heading 2706]

Quarterly return to be filed by manufacturers of goods subject to 1% duty under Notification No. 1/2011-C.E8/2011--- In the Central Excise Rules, 2002, (i) in rule 12, in sub-rule (i), after the fifth proviso, the following proviso shall be inserted, namely, Quarterly return to be filed by manufacturers of goods subject to 1% duty under NN 1/2011- 8/2011 Provided also that, where an assessee is availing the exemption notification No. 1/2011and does not manufacture any other excisable goods other than those specified in the said notification, he shall file a quarterly return in the form specified by notification by the Board, of production and removal of goods and other relevant particulars, within 10 days after the close of the quarter to which the return relates Special provisions relating to job work in case of articles of jewellery extended to articles of goldsmiths or silversmiths wares [Rule 12AA(1)] Rule 12AA(1) provides that in case of job work for the article of jewellery of precious metals falling under heading 7113, principal manufacturer (not being an EOU or a unit located in SEZ) shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee. Amendment made by the Notification No. 08/2011-C.E. (N.T.) dated 24.03.2011 The aforesaid provisions relating to job work in case of articles of jewellery of precious metals (falling under heading 7113 of the Central Excise Tariff) have been extended to articles of goldsmiths or silversmiths wares of precious metals (falling under heading 7114 of the Central Excise Tariff).

Departmental Instruction

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Subject: Enforcement of penal provisions for non-submission of returns- F.No.267/117/2010-CX8 Under Central Excise Law, the assessee is required to file different categories of returns depending on its applicability to them. Some of them are monthly viz.ER-1, ER-2 and ER-6, some are quarterly viz. ER-3 and some others are yearly viz. ER-4, ER-5 and ER-7. Central Excise Law envisages self-assessment of duty by the assessee and filing of the prescribed returns periodically, so that department is kept informed about the assessment and duty payment by the assessee. Fundamental ingredient of this trust based scheme, is the regular filing of returns by the assessee. These returns enable the department to verify the duty payment, cenvat credit taken and other such parameters related to assessment. 2. It has been brought to the notice of the Board, that many assessees are not filing the returns at all and some others are submitting the same after long delays. This problem has been found to be more pronounced in the case of specialized returns like ER-5, ER-6 and ER-7. It has also been brought to the notice of Board that the field formations do not identify the defaulters and take necessary follow up action to ensure submission of these returns. 2.1 It is stated that scrutiny of returns is the essential and basic job of the Central Excise Ranges in the field formations. Scrutiny includes identifying the assessees who have not submitted the prescribed returns, and taking follow-up action to ensure that these returns are filed at prescribed periodicity. In this regards, it is also pointed out that penalty under Rule 27 of Central Excise Rules, 2002 and Rule 15A of CENVAT Credit Rules, 2004 can be invoked against such errant assessees. Classification Whether documents of title for IT software/documents that enable the transfer of the right to use such software at the time of its sale i.e. paper licenses of software and PUK cards, when imported without the packaged software should be classified under Customs Tariff Heading 8523 i.e. the heading applicable to IT software? Circular No. 15/2011 The documents conveying the right to use software by themselves do not satisfy the definition of information technology software provided in the supplementary note to Chapter 85 and therefore, do not qualify for classification under this tariff item because they do not contain any representation of instructions, data, sound or image recorded in a machine readable form, which is capable of being manipulated or providing interactivity to a user.
Classification of paper licenses of software Tariff item 49070030 of heading 4907 refers directly to Documents of title conveying the right to use Information Technology software. Hence, as per rule 1 of the Rules for the interpretation of the Tariff Schedule, such paper licenses which are essentially documents conveying the right to use such IT software, merit classification under Customs Tariff Heading 49070030. Classification of PUK cards PUK cards are not documents of title conveying the right to use Information Technology software per se, but are actually printed matter containing numbers which when entered; enable the importer to access right to use such IT software. Hence, they are liable to classified under Customs Tariff Heading 4911 as other printed matter

Treatment of Packaged software- AFFIXATION OF MRP MANDATORY Before amendment upto 20th Dec 2010 After amendment W.e.f 20th Dec 2010 Excise duty on media portion Excise duty payable on value u/s 4A. i.e [MRP- 15% Service tax on license portion abatement ] Service tax- exempt Note- however Packaged/ customized software downloaded through internet is only liable to service tax on full value and not liable to excise duty.

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Treatment of Packaged software- AFFIXATION OF MRP NOT MANDATORY UNDER SWMA 1976 EXCISE DUTY- Assessment on Value u/s 4 of CEA 1944. Excise duty on value excluding consideration for transfer of right to use packaged/canned software. Service Tax- S. tax under IT software service on value for transfer of right to use such packaged/ canned software. Classification of Polyester Bonded Fabrics and other Bonded Fabrics cir 2/2011 References have been received that divergent practices are being followed by field formations regarding classification of polyester bonded fabrics and that classification disputes of polyester bonded fabrics are pending at various fora. The issue was also discussed in the Chief Commissioners Conference on Tariff and Allied Matters held on 29.10.2010 at New Delhi where it was decided that the Board may issue a circular clarifying the issue. 2. The issue has been examined by the Board. Accordingly, it is clarified that,(i) Classification of a fabric produced by mixing two or more textile materials prior to spinning or during spinning or twisting or weaving should be determined on the basis of principles contained in Note (2) to Section XI and the relative Explanatory Notes. Classification of bonded fabrics produced, after weaving or knitting, by assembling two or more layers of textile fabrics of different composition by sewing or gumming etc. should be determined by application of Rule 3 of the General Interpretative Rules. However, where it is necessary to determine the textile material that predominates by weight for the purpose of deciding classification of each layer of fabric, before determining the classification of the bonded fabric as a whole, the principles contained in Note (2) to Section XI should be applied and the examples provided in the relative Explanatory Notes should be taken as a guideline. Laminated fabrics of heading 5903 or covered fabrics of heading 5907 should not be confused with the fabrics mentioned at Para 2 (ii) above, by relying upon dictionary meanings or other technical opinions. In this context it is clarified that the terms of headings and any relative Section or Chapter Notes are paramount i.e., they are the first consideration in determining classification. Further, Explanatory Notes being the official interpretation of the Harmonized System take precedence over dictionary meanings or other technical opinions. Therefore, as clarified by Explanatory Note (I) (A) to Section XI, classification of fabrics consisting of two or more layers of fabrics of different composition, bonded by plastic or other adhesive should be determined by application of Rule 3 of the General Interpretative Rules. Another type of bonded fabrics are those defined in Note 9 to Section XI. These are fabrics consisting of layers of textile yarns superimposed on each other at acute or right angles. The essential character of these fabrics is that the yarns are not interlaced as in a conventional weaving, but are held in place by bonding at the intersections with an adhesive or by a process of thermal bonding. Although this kind of fabrics are not woven in the conventional way, these fabrics are to be classified in the same manner the normal non bonded woven fabrics are classified, in chapters 50 to 55 depending on the composition, by application of the principles contained in Note (2) to section XI. There are also some bonded fabrics that are stitch bonded. Stitch bonded knitted fabrics are those that have undergone a type of warp knitting technique in which an extra yarn runs through the loops to bind two or more layers of fabric as they are being knitted. These types of stitch bonded fabrics are classified in chapter 60. Further, there are some stitch-bonded fabrics classifiable under 5602. The essential feature of these fabrics is that they consist of a web of textile fibres, the cohesion of which is enhanced by picking up fibres from the web itself, and not by means of textile yarns. The fibres are drawn by needles through the web, and form on the surface rows of chain stitches. Some of these fabrics may have a pile surface (whether or not cut) and may be reinforced by a ground of textile or other material.

(ii)

(iii)

(iv)

(v)

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Duty drawback Rule 16A Recovery of DDB where export proceeds are not realized Where amount of DDB has been paid to exporter (or his authorized person) but the sale proceeds in respect of such goods have not been realized by the exporter within the period permissible under FEMA (including the extension), such DDB shall EXCEPT UNDER CIRCUMSTANCES OR CONDITIONS SPECIFIED IN SUB-RULE (5),, be recovered in the following manner; AC/DC shall cause notice to be issued to the exporter for production of evidence of realization of sale proceeds within 30 days from receipt of notice. Where the exporter fails to produce such evidence, AC/DC shall pass an order to recover the said amount and thereupon, the exporter shall repay the amount of DDB within 30 days of receipt of the said order. Provided that where a part of the sale proceeds has been realised, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realised bears to the total amount of sale proceeds : Where the exporter fails to repay the amount under within said period of [thirty days] , it shall be recovered in the manner laid down in rule 16. Where the sale proceeds are realised by the exporter after the amount of drawback has been recovered from him and the exporter produces evidence about such realisation [within a period of three months from the date of realisation of sale proceeds], the amount of drawback so recovered shall be repaid by the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] to the claimant.] [,provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India] [Provided that (i) the Commissioner of Customs or Commissioner of Customs and Central Excise, as the case may be, may extend the aforesaid period of three months by a period of nine months provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India; (ii) an application fee equivalent to 1% of the FOB value of exports or Rs. 1000/-whichever is less, shall be payable for applying for grant of extension by the Commissioner of Customs or Commissioner of Customs and Central Excise, as the case may be.] Sub-rule (5) Where sale proceeds are not realised by an exporter within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), but such non- realisation of sale proceeds is compensated by the Export Credit Guarantee Corporation of India Ltd. under an insurance cover and the Reserve Bank of India writes off the requirement of realisation of sale proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer, the amount of drawback paid to the exporter or the claimant shall not be recovered Amendment in interest Provision Sec 47 Sec 61(2) Particulars Goods cleared for home cons., import duty not paid within 5 working days Warehoused goods- cleared after specified period Fo 100% EOU- after 3/5 yrs For other- after 90 days Before amendment Rate of Interest 13% p.a 13% p.a After amendment Rate of Interest 18% p.a 18% p.a

Author note- interest u/s 59 @ 24% p.a has not been changed. Int. u/s 59 is for delay in payment of rent and warehousing charges by due date.

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Service tax(2) R- 6(3) SELF ADJUSTMENT OF ST PAID IF SERVICE NOT PROVIDED Where an assessee has paid to central government service tax in respect of a taxable service Which is not so provided by him either wholly or partially for any reason, The assessee may adjust the excess service tax so paid by him (calculated on pro rata basis) Against his service tax liability for the subsequent period. If the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. Condition & Monetary limit for self adjustment (4B)The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the following conditions, namely :(i) amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification, (ii) excess amount paid by an assessee registered under sub-rule (2) of rule 4(i.e centralized registration), on account of delayed receipt of details of payments towards taxable services may be adjusted without monetary limit, For Nov 11 Limit 1 Lac Revised To 2 Lac (iii) in cases other than specified in clause (ii) above, the excess amount paid may be adjusted with a monetary limit [Rs 1 lac] [ 2 lac substituted w.e.f 1-4-11 ] for a relevant month or quarter, as the case may be, (iv) the details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of 15 days from the date of such adjustment. For Nov 11 Rule 6(6A) Where an amount of service tax payable has been self-assessed under sub-section (1) of section 70 of the Act, but not paid, either in full or part, the same, shall be recoverable alongwith interest in the manner prescribed under section 87 of the Act.] Author note- the amendment has been made for recovery of self assessed tax but not paid without service of SCN and demand order not passed.

Special manner of payment (1) R-6(7)- an air travel agent, shall have the option, to pay an amount calculated at the rate of [0.6%] of the basic fare in the case of domestic bookings, and at the rate of [1.2%] of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax [at 10%] and the option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances. Explanation. - For the purposes of this sub-rule, the expression basic fare means that part of the air fare on which commission is normally paid to the air travel agent by the airline. (2) R-6[(7A) An insurer carrying on life insurance business liable for paying the service tax in relation to the risk cover in life insurance provided to a policy holder shall have the option to pay an amount calculated at the rate of 1% of the gross amount of premium charged by such insurer towards the discharge of his service tax liability instead of paying service tax at 10% :

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Provided that such option shall not be available in cases where (a) the entire premium paid by the policy holder is only towards risk cover in life insurance; or (b) the part of the premium payable towards risk cover in life insurance is shown separately in any of the documents issued by the insurer to the policy holder.] Rule 6(7A)-NN35/11 dtd 25-4-11 effective from 1-5-11, so should be applicable for May 12 An insurer carrying on life insurance business shall have the option to pay tax: (i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service; (ii) 1.5 per cent of the gross amount of premium charged from a policy holder in all other cases; towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the said Act: Provided that such option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance.. (3) R-6[(7B) REFER BANKING SERVICE Export of taxable services Rule 3 The export of taxable service shall mean 3( Immovable property 1)(i) Specified taxable services Provision of such services as are provided in relation to e.g Renting of immovable property, an immovable property situated outside India Architect, interior decorator, construction, works contract 3( Physical performance 1)(ii) Specified taxable services Provision of such services as are performed outside e.g CA/CS/ICWA, technical testing India and analysis, technical inspection& Provided that where such taxable service is partly certification, management & repair service performed outside India, it shall be treated as performed outside India. Provided further that Where Management, maintenance or repair service or Technical testing and analysis service or Technical inspection and certification service o are provided in relation to any goods or material or any immovable property, as the case may be, o situated outside India at the time of provision of service, o through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed outside India, shall be treated as the taxable service performed outside India;]. 3( Residuary 1)(iii) Other taxable services (i) if such service provided in relation to business e.g. CA/CS/ICWA, manpower or commerce- the recipient of service is located recruitment, Banking and financial service, outside India business auxiliary service, life/general ins (ii) if not relating to business or commerce-the Except recipient of service is located outside India at the (i) Service of international air transport of theme of receipt of such service. passengers (ii) Service of transport of persons by cruise Provided that where such recipient has commercial establishment or any office relating thereto, in India, such

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(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:a) such service is provided from India and used outside India; and b) payment for such service is received by the service provider in convertible foreign exchange. Explanation- for the purposes of this rule India includes the designated areas in the continental shelf and exclusive economic zone of India. India includes the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof..

Note= nov 11 Amendments to Export of Services Rules, 2005 7.1 Globally the taxation of services across different taxing jurisdictions is increasingly moving towards destination-based levy in respect of B2B services while origin-based levy is largely applicable to B2C services. In tune with this practice, certain services are being rearranged as follows : (i) Service provided by builders [section 65(105)(zzzzu)] is being added to sub-rule 1(i) and will thus be considered as exported, subject to compliance with other conditions, if the immovable property is situated outside India. (ii) Rail travel agent [65(105)(zz)] and health check-up or preventive care [65(105)(zzzzo)] are being added to sub-rule 1(ii) and will thus be considered as exported, subject to compliance with other conditions, when they are performed outside India; and (iii) Services of credit rating agency [65(105)(x)], market research agency [65(105)(y)], technical testing and analysis [65(105)(zzh)], transport of goods by air [65(105)(zzn)], goods transport agency [65(105)(zzp)], opinion poll [65(105)(zzs)] and transport of goods by rail [65(105)(zzzp)] are being deleted from sub-rule 1(ii) and thus the additional condition of performance outside India will stand removed. Thus they will be considered as exported, subject to compliance with the relevant conditions, if the recipient is located abroad. Before amendmentAfter amendmentCATEGORY CATEGORY Service rovided by builders III I Credit rating agency II III Market research II III Technical testing & ANALYSIS II III Transport of goods II III By Air/Road/Rail Opinion poll services II III Rail travel agent III II Games of chance III II Electricity meter Hiring of, exempted from Service tax Circular No. 131/13/2010-S.T., dated 7-12-2010

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Subject : Electricity meter installed in consumers' premises and hire charges collected - Whether covered under exemption for transmission and distribution of electricity - Regarding. A doubt has been raised whether renting of electricity meter by a service provider rendering the service of transmission or distribution of electricity, is covered by the exemption available under Notification No. 11/2010-S.T., dated 27-2-2010 and/or 32/2010-S.T., dated 22-6-2010. The matter has been examined. It is a general practice among electricity transmission (TRANSCO)/distribution companies (DISCOM) to install electricity meters at the premises of the consumers, to measure the amount of electricity consumed by them and hire charges are collected periodically. Supply of electricity meters for hire to the consumers being an essential activity having direct and close nexus with transmission and distribution of electricity, the same is covered by the exemption for transmission and distribution of electricity, extended under the relevant notifications. Circular No. 137/6/ 2011 ST- for Nov 11 Subject: - Assistance provided for processing visa applications reg. An issue has been brought before the Board, seeking a clarification as to whether service tax liability would arise on the assistance provided by visa facilitators, to individuals directly, for processing of visa applications. 1. The same has been examined. Assistance provided by a visa facilitator, for obtaining visa, to a visa applicant or for foreign employer does not fall within the scope of supply of manpower service. Visa facilitators, while providing visa assistance directly to individuals does not act on behalf of the embassies, as agents of the principal and hence service tax is not leviable within the meaning of business auxiliary service. Also where the assistance is rendered to an individual directly, by a visa facilitator, and the visa applicant pays the service charge on his own (meaning such service charge is not borne by any business entity), the same cannot be considered as support service for business or commerce. 2. Visa facilitators, merely facilitate the procurement of visa and directly assist individuals who intend to travel abroad, to complete the immigration formalities. Visa facilitators collect certain statutory charges like visa fee, certification fee, attestation fee, emigration fee, etc. from the visa applicant, which are remitted to the respective authorities, and in addition collect service charges for themselves as remuneration for the assistance provided by them to obtain the visa. Such a service provided by a visa facilitator, in the form of assistance to individuals directly, to obtain a visa, does not fall under any of the taxable services under section 65(105) of the Finance Act, 1994. Hence service tax is not attracted. 3. However, service tax is leviable on any service provided other than assistance directly to individuals for obtaining visa, falling under the description of any taxable service, as classifiable under the appropriate heading. To cite a few instances, where in addition to rendering assistance directly to individuals for obtaining visa, visa facilitators may also act as agents of recruitment or of foreign employer, in which case, service tax is leviable to the extent under the service of supply of manpower. In certain other cases, for example, a visa facilitator, may be rendering visa assistance to individuals who are employed in a business entity, but the service charge may be paid by the business entity on behalf of those individuals, to the visa facilitator, in which case, service tax is leviable under business support service. Education Cess and Secondary and Higher Education Cess also exempted when notifications exempt whole of Service tax- Circular No. 134/3/2011-S.T., dated 8-4-2011 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 Tribunals Order in the matter of M/s.

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Balasore Alloys Ltd. v. CCE, Customs and Service Tax, BBSR-I (2010-TIOL-1659-CESTAT-KOL) = 2010 (20) S.T.R. 506 (Tribunal). 2. The issue has been examined. Though Tribunals 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.

Audit of service tax Assessees

Frequency of Audit as per following normsSl No Taxpayers with service tax payment ( cash + Cenvat) 1 Above Rs 3 crore 2 Between 1 crore and 3 crore 3 Between 25 lakh and 1 crore 4 Upto Rs. 25 lakh To be audited Every year Once in every 2 years Once in every 5 years 2% of taxpayers to be audited every year

Telecommunication service FOR NOV 11 Explanation- for the telecommunication service, the value of taxable service shall be the gross amount paid by the person to whom telecom service is provided by the telegraph authority. Clarification- 334/3/2011 the value shall be the gross amount paid by the person to whom the service is provided by the telegraph authority. Thus in case of service provided by way of recharge coupons or prepaid cards or the like, the value shall be the gross amount charged from the subscriber or the ultimate user of the service and not the amount paid by the distributer or any such intermediary to the telegraph authority.

Construction of complex service

(i) Abatement There is option to pay tax on 33% of gross amount charged. Commercial The gross amount charged shall include the value of goods and materials supplied or of complex provided or used for providing the taxable service by the service provider.

67%

The gross amount charged shall include the value of goods and materials supplied or 75 % provided or used for providing the taxable service by the service provider. Cost of land included in gross amount charged.

Note1) Abatement shall not apply in such cases where the taxable services provided are only completion and finishing services in relation to residential complex,

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2) Abatement will be available even when construction of complex wholly within port or other port or Airport, Conditions (i) (ii) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004; or the service provider has not availed the benefit of exemption in respect of value of goods and materials sold by him to the recipient of service under NN. 12/2003-

Departmental Clarification:- D.O.F. No. 334/1/2010-TRU dated 26.02.2010 illustrates the types of agreements that are covered under the commercial or industrial construction service/construction of residential complex service:Where the buyer and the builder enter into an agreement called agreement to sell to ultimately sell the property under settled terms without transferring the ownership of the property to the buyer. At the conclusion of the contract and completion of the payments relating thereto, property is transferred from promoter to buyer by executing a Sale Deed on payment of appropriate stamp duty. Where, at the initial stage, the promoter and all the prospective buyers enter into agreement by executing the Sale of Undivided Portion of The Land which transfers the property right to the buyers without demarcating a part of land, which can be associated with a particular buyer. In many cases, an instrument called Construction Agreement is simultaneously executed under which the obligations of the promoter to get property are constructed and that of the buyer to pay the required consideration are incorporated. EN- 28/2010 CG exempts the taxable service of construction of complex, when provided to Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana, from the whole of the service tax leviable thereon under section 66 of the Finance Act.

Banking & financial service (i) Taxable service means any service provided Or to be provided to a customer, by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, in relation to banking and other financial services;; to any person, by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorised money changer, other than a banking company or a financial institution including a nonbanking financial company or any other body corporate or commercial concern referred to in sub-clause (zm);; (ii) banking and other financial services means b) the following services provided by a Banking co. or a financial institution including a non-banking financial company (or any other body corporate) or any commercial concern, namely(i) financial leasing services including equipment leasing and hire-purchase; Explanation. For the purposes of this item, financial leasing means a lease transaction where

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(i) contract for lease is entered into between two parties for leasing of a specific asset; (ii) such contract is for use and occupation of the asset by the lessee; (iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and (iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment;; (ii) credit card services; (ii) merchant banking services; (iii) securities and foreign exchange (forex) broking and purchase or sale of foreign currency, including money changing;; (iv) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include cash management; (v) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; (vi) provision and transfer of information and data processing; (vii) banker to an issue services; and (viii) other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts;; (b) foreign exchange broking and purchase or sale of foreign currency, including money changing provided by a foreign exchange broker or an authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a); Explanation- for the purposes of the above, purchase or sale of foreign currency, including money changing includes purchase or sale of foreign currency, whether or not the consideration for such purchase or sale as the case may be, is specified separately. (iii) [rule 6(7B) of S.tax Rules 1994 (4) R-6[(7B)The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer, shall have the option to pay an amount calculated at the rate of 0.25 %of gross amount of currency exchanged, [at following rate] towards discharge of his service tax liability instead of paying service tax at 10% namelya) 0.1 per cent. of the gross amount of currency exchanged for an amount upto rupees 100,000, subject to the minimum amount of rupees 25; and b) rupees 100 and 0.05 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding rupees 100,000 and upto rupees 10,00,000; and c) rupees 550 and 0.01 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding 10,00,000, subject to maximum amount of rupees 5000 :

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Provided that the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.] Provided that such option shall not be available in cases where the consideration for the service provided or to be provided is shown separately in the invoice, bill or, as the case may be, challan issued by the service provider. Illustration Buying rate $US 1 = Rs. 38, selling rate $US 1 = Rs. 40 (i) Person exchanged $100 for equivalent rupees Transaction value = Rs. 3800 (Rs. 38 x 100) Service tax payable = Rs. 9.5 (0.25% x 3800) (ii) Person exchanged equivalent rupees for $100 Transaction value = Rs. 4000 (40 x 100) Service tax payable = Rs. 10 (0.25% x 4000).] Note- the above proviso and illustration deleted and for 0.25% clause (a), (b), (c) inserted- applicable for Nov 11

For Nov 2011 Rule 2B of valuation Rules 2006 Determination of value of service in relation to money changing.- Subject to the provisions of section 67, the value of taxable service provided for the services referred to in sub-clause (zm) and (zzk) of clause (105) of section 65 of the Act, so far as it pertains to purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner :For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) [reference rate for that currency at that time], multiplied by the total units of currency. Example I : [US $ 1000] are sold by a customer at the rate of Rupees 45 per US $. RBI reference rate for US $ is Rupees 45.50 for that day. The taxable value shall be Rupees 500. Example II : INR 70000 is changed into Great Britain Pound (GBP) and the exchange rate offered is Rupees 70, thereby giving GBP 1000. RBI reference rate for that day for GBP is Rupees 69. The taxable value shall be Rupees 1000. Provided that in case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money: Provided further that in case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI.]

(iv) Exemptions 1) CG hereby exempts the taxable service provided by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, to the Government of India or the Government of a State in relation to collection of any duties or taxes levied by the Government of India or the Government of a State from the whole of the service tax leviable thereon under section 66 of the said Act. (NN 13/2004 dtd 10-9-2004) 2) CG exempts so much of the value of taxable service provided to a customer, by a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, in relation to,a) overdraft facility

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b) cash credit facility or c) discounting of bills, bill of exchange or cheques as is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount, from the service tax leviable thereon under section 66 of the said Act, subject to the condition that the said interest amount is shown separately in an invoice, a bill or, as the case may be, a challan issued for this purpose.(NN- 29/2004 dtd.229-04) Note- As per Rule 6(2)(iv) of valuation rules, interest on loan will not be included in the value of taxable service. However file charges or other charges shall form part of TV. 3) CG exempts the taxable service financial leasing services including equipment leasing and hire-purchase provided or to be provided to any person, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is equivalent to the service tax calculated on 90% of an amount, forming or representing as interest, i.e. the difference between the installment paid towards repayment of the lease amount and the principal amount contained in such installment paid. Explanation. - This exemption shall not apply to any amount, other than an amount forming or representing as interest, charged by the service provider such as lease management fee, processing fee, documentation charges and administration fee. (NN- 4/2006 dtd. 1-3-2006) 4) Foreign Currency Sale and purchase of, exempted from Service tax for inter-bank transactions / any bank/money changer [Notification No. 19/2009-S.T., amended by 27/2011] CG exempts the taxable service, provided to a Scheduled bank, by any other Scheduled bank, any bank, including a bank located outside India, or money changer, by any other bank or money changer in relation to inter-bank transactions of purchase and sale of foreign currency, from the whole of the service tax leviable thereon under section 66 of the said Finance Act. NOTE- for the words a Scheduled bank, by any other Scheduled bank, the words any bank including a bank located outside India, or money changer, by any other bank or money changer substituted. W.E.F-1-4-11 [FOR NOV 11] 5) Banking and other Financial Services Abatement of 30% to Chit Fund Service Notification No. 1/2006-S.T. amended Explanation. - Chit means a transaction whether called chit, chit fund, chitty, kuri, or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount Provided that this notification shall not apply in cases where, (i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or (ii) the service provider has availed the benefit of exemption in respect of value of goods and materials sold by him to recipient of service under NN. 12/2003

(v) CBEC CLARIFICATION (ii) Services provided by RBI are exempt (iii) merchant banks who are required to play only a statutory role under any act or regulation such as Takeover Regulations of SEBI, and do not provide any advice or consultancy but merely verify and submit a report to the concerned authorities, in connection with merger and acquisition transaction are not treated as management consultant. However, with the changes brought in by the Finance Act, 2001, the services provided by such agencies would also be covered specifically under the banking and other financial services (cir 11/1/2001) (iv) banking and other financial services provided by a banking company or a financial institution or a nonbanking financial company or any other service provider similar to a bank or a financial institution are liable

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to service tax under section 65(105)(zm) of the Finance Act, 1994. Department of Posts is not similar to a bank or a financial institution and hence does not fall within the category of any other similar service provider. In view of the foregoing, it is clarified that services such as transfer of money through money orders, operation of savings accounts, issue of postal orders provided by the Department of Posts are not liable to service tax under section 65(105)(zm) read with section 65(12) of the Finance Act, 1994. (Cir 83/1/2006) (v) Master Circular 96/7/2007 (i) No S.tax on entry/exit load charged by Mutual fund Entry load and exit load charged by a mutual fund are not for the purpose of management of assets. Thus, amount charged as entry and exit load are not to be treated as consideration received by an Asset Management Company for asset management and hence not liable to service tax under Banking and other Financial service (ii) whether depository services and electronic access to securities information (EASI) services provided by CDSL is liable to service tax under banking and other financial services? Ans- Definition of Banking and other financial services specifically includes within the scope of provision and transfer of information and data processing. These services are not in nature of online information and data base access or retrieval services. Therefore the depository services provided by CDSL including electronic access to securities information for a fee are liable to service tax under Banking and other financial services. (iii) services provided by banking company or a financial institution including a NBFC or any other body corporate or commercial concern in relation to asset management including portfolio management, and all forms of fund management, is leviable to service tax under banking and other financial services. The said taxable service also includes cash management service provided. Ans Services are provided in relation to chit funds. Chit funds of 2 types namely:Simple chit funds: in this case, members agree to contribute to the fund a certain amount at regular interval. Lots are drawn periodically and the member, whose name appears, gets the periodical collection. No separate amount is charged from the members. Business chit funds: in this case, there is a promoter known as foreman who draws up the terms and conditions of the scheme and enrolls subscribers. Every subscriber has to pay his subscription in regular instalments. The foreman charges a separate amount for the services provided. Some states prescribe a ceiling limit for the amount to be charged by such Promoter for the services provided. Commission amount is retained by the promoter as consideration for providing the services in relation to chit fund. (iv) whether services provided in relation to chit fund is leviable to service tax under banking and other financial services or not? Ans- RBI has clarified that the business of a chit fund is to mobilize cash from the subscribers and effectively cause movement of such cash to keep it working and, therefore, the activity of chit funds is in the nature of cash management. AccordinglyIn the case of simple chit funds, no consideration is paid or received for the services provided and therefore the question of levy of service tax does not arise. In the case of business chit funds, cash management service is provided for a consideration and, therefore, leviable to service tax under banking and other financial services (vi) At present cash management is specifically excluded from the scope of this service. Specific exclusion of cash management is being omitted. Consequently, cash management services will be leviable to service tax under this service. Cash management services includes services of collection of receivables, execution of payment, management of liquidity and providing customized Management Information System (MIS) reports, provided by banks to clients such as corporate clients, and (334/1/2007) (vi) CASE STUDY FEDERATION OF CHIT FUNDS(2009)(AP)

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(1) CHIT FUND NOT COVERED In this case, the petitioner was engaged in the business of chit funds. The petitioner questioned the correctness of CBEC Master Circular No. 96/7/2007-S.T. dated 23-8-2007. Considering the definition of chit fund and Supreme Court decision in case of M/s. Shriram Chits & Investment (P) Ltd. v. Union of India AIR 1993 SC 2063, It was held that Specific statutory definition of cash management or asset management absent and wider interpretation to include or exclude transactions not arises - Definition of financial institution in RBI Act not relevant as tax not levied using such definition before 1-6-2007 - No policy decision or statutory legislative act to levy Service tax on chit funds mentioned - Finance Act, 1994 not includes or excludes chit business - Chit funds not covered in view of absence of inclusive definition in statute - Levying Service tax based on C.B.E. & C. Circular not permissible. Hence, the High Court held that the chit fund activity does not fall within the expression cash management under banking and other financial services. Section 65(12) of the Finance Act, 1994 2. Whether the levy of service tax on hire purchase and leasing transactions falling under section 65(12) of the Finance Act, 1994 is constitutionally valid? Madras Hire Purchase Association & Others v. Union of India, 2009TIOL-3338-HC-MAD-ST. Facts: Appellant was non banking financial company engaged in the business of hire purchase & leasing. State Government levied sales tax on hire purchase & leasing transaction. Appellant did not collect any charges for service. Issue: Whether imposing of service tax on hire-purchase and leasing transactions by Central Government is constitutionally valid? Decision: High Court of Madras upheld the legislative constitutional validity of service tax levy on hire purchase and lease services. It also said service tax would be chargeable only to extent of servicesinvolved in such transaction and not on the value of the transaction. It implies that service tax was levied on service and not on sale or purchase of goods. The High Court rejected the plea that levy of service tax on hire purchase/leasing transaction is violative of Articles 14 and 19(1)(g) of the Constitution after observing that a taxing statute was not per se, a restriction of the freedom under Article 19(1)(g) and policy of a tax, in its effectuation, might, bring in some hardship in some individual cases but that was inevitable. Nov 2010 X Bank Ltd., furnishes the following information relating to services provided and the gross amount received: ` (lakhs) Merchant banking services 8 Asset Management (including portfolio management) 3 Service charges for services to the Government of India 1.5 Interest on overdraft and cash credits 2 Banker to the issue 5 Locker rent 2 Repayment of financial lease made by the customer to the bank ` 80 lakhs which includes a principal amount of ` 50 lakhs. Compute the value of taxable service under banking and other financial services under the Finance Act, 1994 and the service tax liability of X Bank Ltd., considering the rate of service tax at 10.3%. (5 Marks) (d) Calculation of value of taxable services of X Bank Ltd. Rs. Rs. Particulars Amount received for merchant banking services 8,00,000 Amount received for asset management (including portfolio management) services 3,00,000

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| 164 Nil Nil 5,00,000 2,00,000

Service charges for services provided to Government of India (Note 1) Interest received on overdraft and cash credits (Note 2) Amount received for acting as banker to an issue Amount received as locker rent Installment amount received towards repayment of financial lease 80,00,000 Less: Principal amount included in the above installments 50,00,000 Interest on financial lease 10% of the interest amount [Rs. 30,00,000 10%] (Note 3) Total value of taxable services Service tax payable thereon @ 10% Education Cess @ 2% Secondary and Higher Education Cess @ 1% Total service tax payable including Cess

30,00,000 3,00,000 21,00,000 2,10,000 4,200 2,100 2,16,300

Notes: (1) Service charges for banking and other financial services provided to Government of India are exempt from service tax (Notification No. 13/2004 ST dated 10-09-04). (2) Interest received on cash credit and overdraft is exempt from service tax (Notification No. 29/2004 ST dated 22-09-2004). (3) Service tax is payable only on 10% of the interest on financial lease. The interest is the difference between the installment paid towards repayment of the lease amount and the principal amount contained in such installment (Notification No. 4/2006 ST dated 01-03-2006). 1) [Notification No. 8/2011-S.T., dated 1-3-2011]- for Nov 11 Transport of goods by air/road/rail services Exemption to goods transported from outside India and to, final destination outside india w.e.f. 1-4-2011 CG exempts the taxable services provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, from the whole of service tax leviable

Transport by air (i) Taxable Service means Any services provided or to be provided to any person By an aircraft operator In relation to transport of goods by aircraft. (ii) Aircraft operator means any commercial concern any person who provides the service of transport of goods or passengers by aircraft) (iii) exemption Notification (1) Exemption to service in relation to export cargo Service provided by an aircraft operator to any person in relation to transport of export cargo by aircraft is fully exempt from service tax. (NN29/2005) (2) NN- 41/2010- CG exempts the services when provided wholly within the port or other port or airport, namely,taxable service in relation to transport of export goods in an aircraft by an aircraft operator; (3) [Notification No. 8/2011-S.T., dated 1-3-2011]- for Nov 11 Transport of goods by air/road/rail services Exemption to goods transported from outside India and to, final destination outside india w.e.f. 1-4-2011 CG exempts the taxable services provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, from the whole of service tax leviable (4) [Notification No. 9/2011-S.T., dated 1-3-2011] - for Nov 11

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Transport of Goods by Air service Exemption to value equal to air freight w.e.f. 1-4-2011 CG exempts the taxable services from service tax leviable to the extent so much of the value as is equal to the amount of air freight included in the value determined under section 14 of the Customs Act, 1962 or the rules made thereunder for the purpose of charging customs duties.

Transport of goods by rail

Note- Service tax on Govt railway and non-containersied freight will be taxable from 1-1-2012, but ICAI has included the amendment. (i) Taxable Service means any service provided or to be provided to any person, by any other person, in relation to transport of goods in containers by rail, in any manner]; Does not apply to Government railways (ii) Abatement 1) NN-1/2006 as amended Service tax is payable on 30% of the gross amount charged. i.e abatement in respect of transport by rail- 70% Provided that this notification shall not apply in cases where, (i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004; or (ii) the service provider has not availed the benefit of exemption in respect of value of goods and materials sold by him to the recipient of service under NN. 12/2003Note- Abatement will be available when Transport of goods by rail service are rendered wholly within port or other port or airport ( in that case they are classifiable in port or other port or airport service) 2) Exemption to transport of goods by rail by government railways -NN 8/2010 Transport of goods by rail service provided to any person in relation to transport of specified goods shall be wholly exempt (1) Defence/ military equipments (2) Railway equipments/ materials (3) Postal mail bags (4) Relief materials meant for victims of natural or manmade disasters, calamities, accidents and mishap (5) Luggage of train passengers, whether carried as personal luggage in the train compartments or booked separately in the luggage van/Household effects
(6) Kerosene oil meant for supply through public distribution system; Petroleum products including LPG

Cylinders (filled and empty) booked by public sector Oil Marketing Companies transported by Indian Railways.
(7) Other specified goods.

3) [Notification No. 8/2011-S.T., dated 1-3-2011]- for Nov 11

M A CHARGED T sending goods to Mumbai | 166 FREIGHT N O J B A forR A Freight charged for exporting goods to USA Freight charged for importing goods from USA- FOB Value- 60 lakh Freight charged for importing goods from USA- FOB Value- 30 lakh Freight charged for transport of goods from Zermany to USA- FoB 30 lakh

Tran spor t of goo ds by air/road/rail services Exemption to goods transported from outside India and to, final destination outside india w.e.f. 1-4-2011 CG exempts the taxable services provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, from the whole of service tax leviable

20 lakh 30 lakh 10 lakh 10 lakh 10 lakh

Transport of goods by Air (i) Taxable Service means Any services provided or to be provided to any person By an aircraft operator In relation to transport of goods by aircraft.

(ii) Aircraft operator means any commercial concern any person who provides the service of transport of goods or passengers by aircraft) (iii) exemption Notification (1) Exemption to service in relation to export cargo Service provided by an aircraft operator to any person in relation to transport of export cargo by aircraft is fully exempt from service tax. (NN29/2005)
(2) NN- 41/2010- CG exempts the services when provided wholly within the port or other port or airport,

namely,taxable service in relation to transport of export goods in an aircraft by an aircraft operator; (3) [Notification No. 8/2011-S.T., dated 1-3-2011]- for Nov 11 Transport of goods by air/road/rail services Exemption to goods transported from outside India and to, final destination outside india w.e.f. 1-4-2011 CG exempts the taxable services provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, from the whole of service tax leviable
(4) [Notification No. 9/2011-S.T., dated 1-3-2011] - for Nov 11

Transport of Goods by Air service Exemption to value equal to air freight w.e.f. 1-4-2011 CG exempts the taxable services from service tax leviable to the extent so much of the value as is equal to the amount of air freight included in the value determined under section 14 of the Customs Act, 1962 or the rules made thereunder for the purpose of charging customs duties. QUE CALCULATE VALUE OF TAXABLE SERVICE

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| 167 (1) MANAGEMENT, MAINTENANCE OR REPAIR

(i) EXEMPTION Roads Exemption from Service Tax to management, maintenance or repair of roads-- [Notification No. 24/2009-S.T., dated 27-7-2009] CG exempts the taxable service, provided to any person by any other person in relation to management, maintenance or repair of roads, bridges, tunnels, dams, airports, railways and transport terminals from the whole of the service tax leviable thereon under section 66 of the said Finance Act. Applicable for Nov 11 Note- bridges, tunnels, dams, airports, railways and transport terminals exempted by NN-54/2010

Miscellaneous Underwriting commission received by the Primary Dealers for the auction of Government Securities not liable to service tax - [Circular No.126/08/2010 ST dated 10.08.2010] The terms underwriting and underwriter as provided in the Finance Act, 1994 and further defined in the Securities and Exchange Board of India (Underwriters) Rules, 1993, pertain to dealing in securities of a body corporate. In other words, service tax is leviable on underwriting only when the securities of a body corporate are underwritten. Though the Government securities are issued by the Reserve Bank of India (RBI), which is a 'body corporate' in terms of section 3(2) of the RBI Act, 1934, Government securities are not securities of a body corporate as the Government securities are sovereign securities having zero default risk and RBI of India only manages the issue as also the auction of Government Securities on behalf of the Government of India. The Primary Dealers registered with the RBI (as opposed to registration with the Securities Exchange Board of India) deal in Government Securities, issued by the RBI on behalf of the Government of India, as a part of the Central Government's market borrowing program. Therefore, it has been clarified that service tax liability does not arise on Underwriting Fee or Underwriting Commission received by the Primary Dealers during the course of the dealing in Government Securities. Clarification of the scope and meaning of Janata Personal Accident Policy (JPAP) exempt under Notification No. 3/1994 dated 30.06.1994 - [Circular No. 133/2/2011-S.T., dated 18-1-2011] Notification No. 3/1994 dated 30.06.1994 inter alia provides that Janata Personal Accident Policy (JPAP) is exempt from whole of the service tax leviable thereon. Since a description of JPAP is not available in the relevant notification, it is clarified that customized group JPAP insurance schemes floated by various insurance companies as per the specifications of State Governments concerned, to extend risk cover to target populations, and to fulfill the prescribed rural or social sector obligation, are covered by the subject service tax exemption. Janata Personal Accident Policy (JPAP) JPAP is a customized group insurance policy scheme floated by various insurance companies as specified by State Governments, to extend risk cover to certain specified target populations, under varying terms of insurance. Generally, a standard JPAP is an individual oriented policy with a fixed sum assured. The sum assured in these JPAP policies is often as low as Rs. 25,000/- , so that even people without regular income can afford to purchase a risk cover for themselves. For the insurers, JPAP offers a vehicle to fulfill the rural or social sector obligation prescribed by the Insurance Regulatory Development Authority (IRDA).

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Whether the activity of fumigation of export cargo including agricultural/horticultural produce, whether loaded into containers or otherwise, does not satisfy the statutory definition otherwise is a taxable service falling under cleaning services or not?- [Circular No. 132/1/2011 ST dated 12.01.2011]

It is clarified that fumigation*, per se, is a cleaning activity. However, fumigation of export cargo including agricultural/horticultural produce, whether loaded into containers or otherwise, does not satisfy the statutory definition of cleaning activity under section 65(24b) of the Finance Act, 1994.
Specialised cleaning services of containers used for export goods are exempt from the service tax by virtue of an exemption notification. This is in line with the international practice of making the export consignments free from taxation in the country of its origin. However, the wordings of the exemption notification cannot be used to interpret the scope of service defined under Section 65(105)(zzzd) of the Finance Act, 1994. .

Amendments for MAY 2011

See summary EXPORT of Final product without duty- Notification No. 42/2001 amended Export of all excisable goods, except to Nepal and Bhutan without payment of duty Conditions (i) The exporter shall furnish a general bond in the prescribed form (B-1) to the AC/DC or the Maritime commissioner or the authorized officer, Equal to the duty chargeable on the goods with such surety or sufficient security, For the due arrival thereof at the place of export and their export there from. (ii) The manufacturer-exporter may furnish a letter of undertaking in specified form (UT-1) instead of bond. (iii) Goods shall be exported within 6 months or extended period, from the date on which these were cleared for export from the factory. (iv) that export of excisable goods which are chargeable to nil rate of duty or are wholly exempted from payment of duty, other than goods cleared by a hundred per cent export-oriented undertaking, shall not be allowed under this notification; Amendment to Notification no. 42/2001-CE (NT) dated 26.06.2001 It has been brought to the notice of the Board that some of the manufacturers of exempted goods are exporting such goods under bond. Subsequently, they claim refund of accumulated input credit under Rule 5 of the CENVAT Credit Rules, 2004. The department had objected to this procedure on the ground that if the goods are exempted from payment of excise duty, in that case the goods cannot be exported under bond for the reason that bond is executed only when goods are liable for payment of excise duty and if there is no excise duty, there is no Question of exporting under bond. However, it has been observed that in some cases, the judicial pronouncements on the issue have been against the department. 2. The matter has been examined. The policy of the govt. is not to tax the exports. There are different methodologies and procedures for refund in different situations. If the goods are exempted, then the department has prescribed a detailed procedure for refund of input taxes through Notification No. 21/2004-

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CE (NT) dated 06.09.2004, wherein a detailed procedure requiring verification of details like manufacturing process, input-output ratio, wastages etc., by the departmental officer is prescribed. The reason for the same is that in case of exempted goods, the department does not exercise control. It appears that the exporters are exporting the exempted goods under bond to avoid detailed verification and scrutiny by the department for claiming of refund of input taxes. Accordingly, it was felt necessary to correct the anamoly. 3. In view of above, an amendment to the conditions for exporting under bond under the Notification No. 42/2001-CE (NT) dated 26.06.01, has been notified through Notification No. 24/2010-CE (NT) dated 26.05.10, wherein, goods which are exempted from payment of duty or chargeable to nil rate of duty, have been disallowed to be exported under bond. Since, 100% EOUs are also required to export the goods under bond, in terms of Customs and Excise notifications, the exports from 100% EOUs have been specifically excluded from the purview of this amendment Author note1. Excisable goods which are wholly exempt or chargeable to Nil rate of duty cant be exported under Bond/LUT under rule 19. But after amendment such goods can be exported u/r 18 ( under rebate of duty claim) 2. CCR on Input used for exempted excisable goods to be exported cant be claimed [ R- 6(1) + R- 6(6)CCR 2004 ] 3. Refund on CCR not allowed under Rule 5 of CCR 04, because CCR not allowed- no Que of Refund 4. 100 % EOU can export Exempted goods under Bond, CCR allowed on IP to 100% EOU, can claim refund of CCR on input, input service under rule 5 of CCR 04.

Settlement commission Before amendment (1) in Excise, applications for the settlement of cases could not be admitted in cases where an assessee admitted short-levy for goods in respect of which he had not maintained proper records in his daily stock register (i.e. cases of misdeclaration, clandestine removal etc.). IN CUSTOM applications for the settlement of cases could not be admitted in cases where assessee admitted short levy in respect of the goods which were not included in the Bill of entry or Shipping Bill, as the case may be. (2) The time-limit for passing the settlement order is 9 months from the last day of the month in which the application was made. Earlier, no extension in the said time-limit was allowed. (3) Earlier, as per section 32-O, the assessee was allowed to apply for settlement under section 32E not more than once. After Amendment made by Finance Act, 2010 (1) In excise, applications for the settlement of cases can be made where an assessee admits short-levy for goods in respect of which he has not maintained proper records in his daily stock register (i.e. cases of misdeclaration, clandestine removal etc.). In Custom applications for the settlement of cases can be made where assessee admits short levy in respect of the goods which were not included in the Bill of entry or Shipping Bill, as the case may be. (2) The proviso added to the said sub-section provides that the aforesaid period may be extended, for reasons to be recorded in writing, by the Settlement Commission for a further period not exceeding three months. (3) The said section has been amended so as to provide that now the assessee can apply for settlement more than once which provides as follows-

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Bar on subsequent application for settlement in certain cases. he shall not be entitled to apply for settlement under section 32E in relation to any other matter if (i) an order of settlement passed for the imposition of a penalty on the person who made the application under section 32E for settlement, on the ground of concealment of particulars of his duty liability; or (ii) after the passing of an order of settlement in relation to a case, such person is convicted of any offence under this Act in relation to that case; or (iii) the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission Que- A show cause notice dated 09.08.2010 demanding duty to the tune of Rs.10,00,000 with interest as applicable has been received by AB Ltd. on the ground of clandestine removal of the products manufactured by it in the month of July, 2009. Penalty equal to duty demanded was also imposed. AB Ltd. had filed the ER1 for the month of July on time. AB Ltd. wants to approach the Settlement Commission for this matter and accept the additional duty liability of Rs.10,00,000. In the year 2006, AB Ltd. had one of its case settled at Settlement Commission. Neither any penalty was imposed on it nor was it convicted for any offence in relation to this case. AB Ltd. has approached you as a counsel for advising it in this regard. You are required to give your views with particular reference to the amendments made in the provisions of Settlement Commission by the Finance Act, 2010. Ans The advice to AB Ltd. would be two fold. First would be regarding the eligibility to make an application before Settlement Commission and second would be regarding the conditions to be fulfilled by AB Ltd. for making an application to the Settlement Commission. Eligibility to make an application before Settlement Commission: AB Ltd. can make an application to Settlement Commission as the following conditions prescribed under section 32E of the Central Excise Act, 1944 are being fulfilled in this case: (i) A show cause notice has been received by AB Ltd. (ii) The additional amount of duty which AB Ltd. would be accepting in the application to the Settlement Commission exceeds Rs.3,00,000. (iii) AB Ltd. has filed ER-1 showing production, clearance and central excise duty paid for the month of July, 2009. (iv) Prior to 08.05.2010, cases involving short levy of duty on goods in respect of which no proper record were maintained by the assessee in his daily stock register could not be settled in the Settlement Commission. However, with effect from, 08.05.2010, the Finance Act, 2010 has amended section 32E so as to remove the prohibition on filing of applications for the settlement of cases where an assessee admits short-levy for goods in respect of which he has not maintained proper records (i.e. cases of misdeclaration, clandestine removal etc.). (v) Prior to 08.05.2010, the assessee was allowed to apply for settlement under section 32E only once. However, with effect from, 08.05.2010, the Finance Act, 2010 has relaxed this restriction. Now, the assessee can apply for settlement more than once if it does not fall in any of the three cases mentioned in section 32-O of the Central Excise Act, 1944. The said three cases where the assessee cannot apply for settlement more than once are: (a) where the order of settlement provides for imposition of penalty on the ground of concealment of particulars of duty liability; or (b) where after passing of the settlement order, the applicant is convicted of any offence under the Central Excise Act in relation to that case; or (c) the case of the applicant is sent back to the Central Excise Officer by the Settlement Commission. The case of AB Ltd. does not fall in any of the three cases mentioned in section 32-O. Conditions to be fulfilled by AB Ltd. for making an application to Settlement Commission: (i) AB Ltd. will have to make full and true disclosure of his duty liability not disclosed before the Central Excise Officer, the manner in which such liability has been derived and the particulars of the goods in respect of which it admits short levy on account of clandestine removal. (ii) Application will have to be accompanied with a fees of Rs.1000. (iii) AB Ltd. will have to pay Rs.10,00,000 (additional amount of excise duty accepted by him) along with applicable interest.

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AB Ltd. will be informed that once it makes an application under section 32E, it will not be allowed to withdraw the same.

Classification Polyester Staple Fibre manufactured out of PET scrap and waste bottles is a textile material classifiable under Section XI of the Central Excise Tariff - [Circular No. 929/19/2010 It has been clarified that polyester staple fibre manufactured out of PET scrap and waste bottles is nothing but a textile material and hence will be classified as textile material under heading 55032000 under Section XI and not as article of plastic in Chapter 39. Classification of TEA fortified with Vitamins TEA fortified with Vitamins comprises tea along with stabilizers and vitamins. Chapter Note 1 (c) of chapter 21- this chapter will not cover flavoured Tea. 1. Preparation of tea and preparation with the basis of tea are classifiable under the chapter heading 2101 20. Preparation of tea as well as preparation with a basis of tea is a product containing tea as one of the major component and has other added ingredients to it. Flavoured tea contains tea along with at least one flavouring agent and is a preparation of tea, though not classifiable under this chapter by virtue of Chapter Note 1(c) to the Chapter 21. However all other preparations of tea not specifically excluded by virtue of any Section/Chapter Note will get classified in this chapter only. 2. The issue has been examined, the samples of the product were perused and the commercial understanding of the product and the details of the product mentioned on the packing materials were taken note of. The tea fortified with vitamins as described in para 1 is nothing but a preparation of tea having added ingredients like stabilizers and vitamins in addition to tea. Since no Section/Chapter Note excludes this preparation from the purview of Chapter 21, it is clarified that such preparations of tea namely tea fortified with vitamins will be classified under Chapter 21. Subject: Classification of rice parboiling machinery Cir 924/14/2010 It has been brought to the notice of the Board that classification of Rice parboiling machinery is being disputed in certain jurisdictions. Two tariff headings under consideration for its classification are 8419 or 8437. It has been represented by the Rice Mill Machinery Manufacturers Association that the practice so far followed by the department was not to charge excise duty for many years but suddenly it has been sought to charge duty on these machines by proposing classification under heading 8419. The matter has been examined by the Board. 5.0 Therefore, Board is of the view that Rice parboiling machinery and drier which are essentially for use in conjunction with the rice mill will merit classification under heading 8437. Custom [Notification No. 33/2010 CE dated 19.10.2010] Goods supplied to UN or an international organisation exempted from additional and special additional duty of excise All goods falling under the Schedule to the Central Excise Tariff Act, when supplied to the United Nations or an international organisation for their official use, have been exempted from the whole of the additional and special additional duty of the excise. Condition to be satisfied

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Above exemption will be available only if the manufacturer produces a certificate before the jurisdictional Assistant /Deputy Commissioner of Central Excise from the United Nations or the international organisation that the goods are intended for such use. Meaning of international organization "International organisation" means an international organisation to which the Central Government has declared, in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947, that the provisions of the Schedule to the said Act shall apply. Duties of custom Refund of 4% Additional Duty of Customs (4% Special CVD) - Applicability to manufacturers in textile sector Circular 34/2010- dated 15 sep 2010 Your kind attention is invited to the Notification No. 102/2007-Customs dated 14th September 2007 whereby exemption from Special CVD of 4% leviable under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 has been provided subject to the fulfillment of certain conditions. 2. Representations have been received from trade and industry (especially the textile sector) through the Department of Commerce to allow the benefit of this exemption to manufacturer-importers, especially those who have opted out of the CENVAT Credit Scheme and do not pay excise duty on their final products. 3. The matter has been examined. Special CVD is one of the duties specified under sub-rule (1) of rule 3 of the CENVAT Credit Rules, 2004. Credit of this duty, when paid on inputs (imported) used in or in relation to the manufacture of excisable goods, is available. This credit can be used for payment of duty on the final product. Hence a textile manufacturer who opts to pay excise duty on his final product can avail of CENVAT credit of 4% Special CVD paid on his inputs. But this benefit obviously cannot be extended to a manufacturer who opts to avail of full exemption (and hence not pay excise duty) on his final product. Further, if the imported inputs on which 4% Special CVD has been paid are used by such a manufacturer for the manufacture of final products, the benefit of exemption (by way of refund) under Notification No. 102/2007-Customs dated 14th September 2007 would also not be available. This is because the condition regarding payment of State VAT on imported inputs cannot be fulfilled in this situation where inputs are consumed and not sold as such. Valuation Clarification on determination of assessable value in case of sale of warehoused goods before being cleared for home consumption - [Circular No.11/2010 dated 03.06.2010] The following issue has been clarified: Issue: Whether the assessable value of the warehoused goods which are sold before being cleared for home consumption should be taken as the price at which the original importer has sold the goods, before a Bill of Entry for home consumption is filed? Clarification: With effect from 10.10.2007, section 14 of the Customs Act has been amended to provide that the value of the imported goods shall be the transaction value of goods. Transaction value is defined to mean the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. In the instant case, the goods are sold after being warehoused, therefore, it cannot be said that export of goods is not complete and thus the sale of warehoused goods cannot be considered a sale for export to India. Hence, the price at which the imported goods are sold after warehousing them in India does not qualify to be the transaction value as per section 14. However, as per erstwhile section 14, applicable to period prior to October 2007, the value of the imported goods is deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, or as the case may be, in the course of international trade. In this case also, the sale of imported goods made after warehousing cannot be considered to have been made in the course of international trade and hence, the price at which such sale takes place cannot be the assessable value in terms of erstwhile section 14.

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Duty drawback Notifications: 1. Extension of time period for filing drawback claim under rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - [Notification No. 48/2010 Cus. (N.T.) dated 17.06.2010] Proviso to rule 5(1) of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 has been substituted with a new proviso. Rule 5(1) provides that a claim for drawback shall be filed within three months from the date on which an order permitting clearance and loading of goods for exportation is made by proper officer of customs. The new proviso lays down that the said period of three months may be extended by a period of three months by Assistant/Deputy Commissioner on an application accompanied with a fees of 1% of the FOB value of exports or Rs. 1000/- whichever is less and a further period of six months by Commissioner of Customs/Commissioner of Customs and Central Excise on an application accompanied with a fees of 2% of the FOB value or Rs. 2000/- whichever is less. 2. Change in time periods available under rules 6, 7, 15 and 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 Rule 6 cases where amount or rate of drawback has not been determined. If No AIR is specified, the manufacturer or exporter has to apply To CCE/CC&CE for fixation of rate or amount of DDB Within 60 3 months of the relevant date Authority for extension Assistant or Deputy Commissioner commissioner Period of extension Further 3 months Fees payable with application for extension 1% of the FOB value of exports or Rs. 1000/- whichever is less 2% of the FOB value or Rs. 2000/- whichever is less

Further 6 months

Note- AC or DC or commissioner may on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal; Provisional amount may be granted to him as DDB pending the determination of such rate or amount. Rule 7 cases Where amount or rate of drawback determined is low Even if AIR is fixed, special brand rate can be claimed. This is when AIR is lower than 4/5 of the duty or tax paid. Application can be submitted to CCE/CC&CE within 60 3 months . Amended by NN 49/2010 Authority for extension Period of extension Fees payable with application for extension Assistant or Deputy Further 3 months 1% of the FOB value of Commissioner exports or Rs. 1000/- whichever is less commissioner Further 6 months 2% of the FOB value or Rs. 2000/- whichever is less Note- AC or DC or commissioner may on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal;

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Rule 15 Supplementary Claim Where an exporter finds that the amount of DBK paid to him is less than what he is entitled to on the basis of amount/rate of DBK as dertermined by CG/CCE/ CC & CE, he may prefer a supplementary claim in prescribed form.

The claim shall be made within 3 months (+ Extension see Note ) of following dates:Where rate of DBK is determined/revised under Rule 3 / 4 : date of publication of such date. Where rate is determined under Rule 6 / 7 : the date of Communication of rate to person. Note amended by NN 49/2010 Authority for extension Period of extension Fees payable with application for extension Assistant or Deputy Further 9 months 1% of the FOB value of Commissioner exports or Rs. 1000/- whichever is less commissioner Further 6 months 2% of the FOB value or Rs. 2000/- whichever is less Note- AC or DC or commissioner may on an application and after making such enquiry as he thinks fit, grant extension or refuse to grant extension after recording in writing the reasons for such refusal; Author note The time period for the following has been extended from 60 days to 3 months: (a) making an application to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback [Rule 6]. (b) making an application to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback where the amount or rate of drawback is low (i.e Where the exporter finds that the drawback rate fixed under Rule 3 or Rule 4 is less than 4/5th of the duty or taxes paid on inputs or input services) [Rule 7]. Further extension of period allowed with payment of fees. Rule 16A Recovery of DDB where export proceeds are not realized Where amount of DDB has been paid to exporter (or his authorized person) but the sale proceeds in respect of such goods have not been realized by the exporter within the period permissible under FEMA (including the extension), such DDB shall be recovered in the following manner; AC/DC shall cause notice to be issued to the exporter for production of evidence of realization of sale proceeds within 30 days from receipt of notice. Where the exporter fails to produce such evidence, AC/DC shall pass an order to recover the said amount and thereupon, the exporter shall repay the amount of DDB within 30 days of receipt of the said order. Provided that where a part of the sale proceeds has been realised, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realised bears to the total amount of sale proceeds : Where the exporter fails to repay the amount under within said period of [thirty days] , it shall be recovered in the manner laid down in rule 16. Where the sale proceeds are realised by the exporter after the amount of drawback has been recovered from him and the exporter produces evidence about such realisation [within a period of three months from the date of realisation of sale proceeds], the amount of drawback so recovered shall be repaid by the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] to the claimant.] [,provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India]

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[Provided that (i) the Commissioner of Customs or Commissioner of Customs and Central Excise, as the case may be, may extend the aforesaid period of three months by a period of nine months provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India; (ii) an application fee equivalent to 1% of the FOB value of exports or Rs. 1000/-whichever is less, shall be payable for applying for grant of extension by the Commissioner of Customs or Commissioner of Customs and Central Excise, as the case may be.]

Rule 3 of the Baggage Rules, 1998

Baggage --- Circular No. 25/2010-CX dated 4.8.2010

It has been clarified that Rule 3 shall apply in case of persons returning from Hong Kong. As Hong Kong is a separate Customs Territory from China.

Amendments under Service Tax (1) Circular No. 125/7/2010-ST dated 30.7.2010 Subject: Services provided by state governments under Centrally Sponsored Schemes (CSS) In the recent past, instances have come to the notice of the Board, where field formations have demanded service tax from State governments or their departments/ agencies, for providing certain services under the centrally sponsored schemes (CSS). To cite an illustration, in the case of the centrally sponsored National Biogas and Manure Management Program operating under Ministry of New and Renewable Energy, State government agencies were involved in setting up of bio-gas plants in villages. Certain expenses incurred by the State governments or their departments/ agencies during the course of setting up of such bio-gas plants were reimbursed by the central government by way of a grant under the CSS. Jurisdictional service tax authorities demanded service tax from the State government department/agency, saying that the reimbursements received by the concerned State government department/agency (as service provider) are nothing but consideration for installation and commissioning service received from the central government (service receiver). 2. Implicit in this service tax demand is an assumption that the relationship between Central government and the State government is an equivalent of a relationship between principal and the agent. This assumption is questionable as under administrative arrangement, State governments are bound to implement the centrally sponsored schemes on receipt of a grant. The fact that State governments are implementing agencies for the Central government within the framework of CSS does not make them service providers. Consequently, Central government cannot be taken as service receiver. Grant released by the Central government under a centrally sponsored scheme cannot be presumed as consideration for providing a taxable service. 3. Levy and collection of service tax on State government agencies/departments implementing CSS under a central grant, is not legally tenable and therefore in such cases service tax should not be demanded. (2) Sec 65A provisions shall not apply to any service when the same is rendered wholly within the port or other port or the airport or civil enclave- [For Detail refer respective service.] (3) Exemption to services provided for transmission of electricity CG exempts the taxable service provided to any person, by any other person for transmission of electricity, from the whole of service tax leviable thereon under section 66 of the said Finance Act. [Notification No. 11/2010-] (4) Exemption to services provided for DISTRIBUTION of electricity

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The CG exempts the taxable service provided to any person, by a distribution licencee, a distribution franchisee, or any other person by whatever name called, authorized to distribute power under the Electricity Act, 2003(36 of 2003), for distribution of electricity, from the whole of service tax leviable thereon under section 66 of the said Finance Act. [NN 32/2010] Note- the above exemptions for transmission and distribution of electricity have been given retrospective effect. i.e service tax exempt before issue of notification. (5) Exemptions to advance received before 1-7-2010 Advance received prior to 1-7-2010 towards 8 new services introduced and specified existing services expanded by Finance Act, 2010 are exempt to the extent of amount of advance payment received before 1-7-2010 in respect of them. However any advance payment relating to retrospective amendments in Commercial Training & Coaching Centre and Renting of immovable property shall not be exempt. CBEC Clarification- 334/03/2010 Vide Finance Act, 2010, 8 new services were added to the list of taxable services while the scopes of 9 existing services were modified. As these changes become effective from 01.07.2010, activities that are covered under taxable service categories due to above additions or modifications, would start attract service tax from this date. It is however, possible that a part or full payment of the consideration for such services provided after the appointed date has already been received prior to that date, i.e. advance payments. The examples are: where a domestic air journey performed after 1st July 2010, but the ticket is issued on payment prior to such date or where a construction activity falls within the taxable service only after the said date but the payment (full or in part) has been made before this date. While legally tax is payable on such amounts received, it has been decided to specifically exempt service tax on that partial or full amount which is received by the service provider/ person liable to pay the tax (and not by an agent, who in turn transfers such amount to such person after this date) before 01.07.2010, pertain to a service which has become taxable on account of the provisions of the Finance Act, 2010 and is provided on or after 01.07.2010. Any amount received after 01.07.2010 by the service provider/ person liable to pay the tax would be subjected to tax. (Refer Notification No.36/2010) (1) (2) (3) (4) (5) (6) (7) (8) (1) (2) (3) (4) (5) (6) (7) (8) (9) New services Introduced by Budget 2010 Lottery service Maintenance of health record service Health care and treatment service Promotion of brand service Permitting commercial use or exploitation of an event service Electricity exchange service Copyright service Preferential location or development service Scope of existing services extended Commercial or industrial construction service Residential complex construction service Air travel service Sponsorship service Commercial training or coaching centre service Port (other port ) service Airport service Renting of immovable property service IT software service

CBEC CLARIFICATION

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Subject: Service tax on commercial training and coaching clarification whether donation is consideration - NO whether donations and grants-in-aid received from different sources by a charitable Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as consideration received for such training and subjected to service tax under commercial training or coaching service. The important point here is regarding the presence or absence of a link between consideration and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to service tax. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training Promotion of lottery (5) Rule 6(7C) The distributor or selling agent, liable to pay service tax for the taxable service of promotion, marketing, organising or in any other manner assisting in organising lottery, shall have the option to pay an amount at the rate specified in column (2) of the Table given below, subject to the conditions specified in the corresponding entry in column (3) of the said Table, instead of paying service tax at the rate specified in section 66 of Chapter V of the said Act: Table Sl. Rate Condition No. (1) 1. (2) (3) Rs 6000/- on every Rs 10 Lakh (or part of Rs If the lottery or lottery scheme is one where 10 Lakh) of aggregate face value of lottery tickets the guaranteed prize payout is more than 80% printed by the organising State for a draw 2. Rs 9000/- on every Rs 10 Lakh (or part of Rs If the lottery or lottery scheme is one where 10 Lakh) of aggregate face value of lottery tickets the guaranteed prize payout is less than 80% printed by the organising State for a draw Face value -it is the amount mentioned on the lottery ticket.
Aggregate Face Value -- face value of lottery x the number of tickets printed Guaranteed Prize Payout -the agreed aggregate prize money distributed to all the winners Provided that in case of ONLINE LOTTERY, the aggregate face value of lottery tickets for the purpose of this subrule shall be taken as the aggregate value of tickets sold, and service tax shall be calculated in the manner specified in the said Table. Provided further that the distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year. Provided also that the distributor or selling agent shall exercise such option for financial year 2010-11, within a period of one month of the publication of this sub-rule in the Official Gazette or, in the case of new service provider, within one month of providing of service under the said sub-clause and such option shall not be withdrawn during the remaining part of that financial year. Explanation.- For the purpose of this sub-rule(i) distributor or selling agent shall have the meaning assigned to them in clause (c) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India and shall include distributor or selling agent authorised by the lottery organising State. (ii) draw shall have the meaning assigned to it in clause (d) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India (iii) online lottery shall have the meaning assigned to it in clause (e) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India (iv) organising state shall have the meaning assigned to it in clause (f) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India Exemption notification CG exempts persons marketing the lottery tickets (hereinafter referred to as such person), OTHER THAN the distributors or selling agents appointed or authorised by the lottery organising State (hereinafter referred to as such distributor

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or selling agent), from the whole of service tax leviable thereon on the taxable service of marketing of lottery, if the optional composition scheme under sub-rule (7C) of rule 6 of Service Tax is availed of by such distributor or selling agent, in respect of such lottery during the financial year: Provided that if such person also markets lottery tickets for distributors or selling agents who have not so opted, then nothing contained in this notification shall apply to the value of service provided to the distributors or selling agents who have not so opted. Explanation.- For the purpose of this notification, distributor or selling agent shall have the meaning assigned to them in clause (c) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India and shall include distributor or selling agent authorised by the lottery organising State. Following is the detail of lotteries of a distributor to be organized by state of Maharashtra Maha Laxmi- Printed No. of tickets proposed 25,00,000 Face value of ticket 10 Value of guaranteed pay out 70% Actual No. of ticket sold 23,00,000 Calculate service tax under composition scheme Maha Laxmi- Printed 25,00,000 10 2,50,00,000 70% 25 9000 225000

Golden laxmi- online 3,00,000 300 90% 2,35,000

No. of tickets proposed Face value of ticket Total face value Value of guaranteed pay out Service tax payable for every 10 lakh or part service tax Aggregate service tax of lotteries Education cess- 2% Secondary and higher education cess- 1% Total service tax

Golden laxmi- online 2,35,000 300 7,05,00,000 90% 71 6000 426000 651000 13020 6510 670530

(9) Rule 4A of Service Tax Rules, 1994 Provided also that in case the provider of taxable service is aircraft operator providing the service of air transport of passenger, an invoice, a bill or as the case may be, challan shall include ticket in any form by whatever name called and whether or not containing registration number of the service provider, classification of the service received and address of the service receiver but containing other information in such documents as required under this sub-rule..

Amendments for Nov 2010 BASIC CONCEPT

Circular 910/30/2009 Subject : Clarification regarding labelling and repacking etc. amounting to manufacture. It has been brought to the notice of Board that certain dealers are receiving liquid chemicals in bulk in containers and offloading the same at the dealers premises or godown into drums of 200 ltrs for subsequent marketing of these materials to customers. Doubts have been raised as to whether such activity would amount to manufacture in terms of Chapter Note 10 to Chapter 29. As the said Chapter Note has been amended in 2008 budget, it has been contested that the said activity is covered by the present wordings of the Chapter note. Activity of transferring the goods from tankers into smaller drums not amounts to manufacture

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As per note 10 to Chapter 29, the activity of repacking products mentioned in the said Chapter from bulk packs to retail packs shall amount to manufacture under section 2(f)(iii) of the Central Excise Act, 1944. In this regard, it has clarified that the activity of transferring the goods from tankers into smaller drums cannot be said to be covered by the said chapter note 10 because the tankers cannot be termed as bulk packs. Valuation (1) [Circular No. 902/22/2009- for job work refer in expected case law

(2) Samples Valuation of free samples 915/5/2010 V. imp

when product assessed under MRP- Circular No.

, the value for payment of excise duty for physician sample would be the value determined under Section 4A for the similar goods (subject to adjustment for size & pack etc.) (3) Que- A company manufacturing Tobacco unmanufactured and chewing, whether pay duty on the basis of value u/s 4(1)(a) Ans- no duty payable on basis of production capacity u/s 3A of CEA 1944 PRODUCTS NOTIFIED UNDER SECTION 3A-EXCISE DUTY CHARGED ON THE BASIS OF CAPACITY OF PRODUCTION Chewing tobacco, jarda scented tobacco and branded unmanufactured tobacco notified under section 3A. Following mentioned goods manufactured with the aid of packing machine and packed in pouches have been notified for the purpose of section 3A: Unmanufactured tobacco bearing a brand name (tariff item heading 2401 of the First Schedule to Central Excise Tariff Act, 1985) Chewing tobacco (tariff item 2403 99 10 of the said Act) Jarda scented tobacco (tariff item 2403 99 30 of the said Act) Cenvat credit 1. Cir 911/1/2010 Subject: Irregular availment of Cenvat credit on certain activities not amounting to manufacture-reg. In view of above, following instructions are issued:(i) In cases where the process undertaken by an assessee indisputably does not amount to manufacture, the department should inform the assessee about the correct legal position and advise him not to pay duty and not to avail credit on inputs. (ii) If the assessee has already paid duty, and in a situation where there is no manufacture as held by the Courts subsequently, and facts of the case are covered by the provisions of Section 5B of the Central Excise Act, 1944, the assessee is at liberty to approach the Central Govt. for issue of appropriate notification for regularization of the Cenvat credit availed. Removal of inputs/ capital goods as such Rule 3(5) Where inputs or capital goods On which cenvat credit has been taken Are removed as such from the factory, or premises of the provider of output service. The manufacturer or provider of output service Shall pay an amount Equal to the credit availed in respect of such inputs or capital s goods and Such removal shall be made under the cover of an invoice referred to in rule 9 Provided that such payments shall not be required to be made where any inputs or capital goods are removed outside the premises of provider of output service for providing output service:

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Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit;. [Provided further that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely :(b) for computers and computer peripherals :

for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @5% for each quarter in the fourth and fifth year @1% (c) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter.] Author Note- Lower percentage of CENVAT credit reversal required in case of used computers and computer peripherals Prior to amendment Earlier, if the capital goods, on which the CENVAT credit has been taken, are removed after being used, the manufacturer/output service provider was required to pay an amount equal to CENVAT credit taken on the said capital goods reduced by 2.5% for each quarter of the year or part thereof from the date for taking the CENVAT credit AFTER Amendment THE percentage 2.5% has been changed in case of computers & computer peripherals but for other goods the percentage 2.5% is retained. b) Circular dated 7-12-09 c) Leviability of duty on capital goods cleared after being put into use for over 10 years - It is clarified that in view of specific provisions under Rule 3(5A) of the CENVAT Credit Rules, 2004, if the capital goods, on which Cenvat credit has been taken, are cleared as waste and scrap, even after a period of 10 years, an amount equal to the duty leviable on the transaction value for such capital goods cleared as waste and scrap, would be payable.

Cenvat credit for goods sent for job work Rule 4(5) 1. Removal for job work CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final product to (i) (ii) another manufacturer for the production of goods; or a job worker for the production of goods on his behalf,

MANOJ BATRA according to his specifications.]

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Author note- Removal of jigs, moulds, dies, fixtures and dies to vendors permitted without reversal of CENVAT credit Earlier The CENVAT credit, in respect of jigs, fixtures, moulds and dies sent by a manufacturer to a job allowed. After Amendment CENVAT credit is allowed, in respect of jigs, fixtures, moulds and dies sent by manufacturer of final products to:(a) another manufacturer for the production of goods, or (b) a job worker for the production of goods on his behalf according to his specifications. Rule 3(5C) of CCR 2004 Reversal of cenvat credit--- Circular 907/27/2009 (1) Author note Case 1 excise duty remitted on Final product u/r 21 of CER 2002 Case 2 excise duty not remitted on Final product u/r 21 of CER 2002 For Work-in progress Case 1 -- WIP can be considered as manufactured goods Treatment as in above table Case 2 excise duty not remitted on Final product u/r 21 of CER 2002 Treatment considering as Input Rule 6(6) Credit allowed even if final product is exempt The provision of sub-rule (1), (2), (3) and (4) shall not be applicable in case of excisable goods removed without payment of duty are either (i) Cleared to a unit in a special economic Zone or to a developer of a SEZ for their authorized operations or (ii) Cleared to a 100% EOU or (iii) Cleared to a unit in EHTP or Software Technology parks or (iv) Supplied to the united nations pr an international organization for their official use or supplied to projects funded by them on which exemption of duty is available under notification of Central Government or (v) Cleared for export under bond in terms of the provisions of Central Excise Rules. (vi) Gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting. (i) Goods exempted from BCD and CVD supplied against international competitive bidding. [(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied, a) against International Competitive Bidding; or b) to a power project from which power supply has been tied up through tariff based competitive bidding; or c) to a power project awarded to a developer through tariff based competitive bidding, in terms of notification No. 6/2006-Central Excise, dated the 1st March, 2006.]. Author note

CCR reversal on input No CCR reversal

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CENVAT credit admissible on the inputs and input services used in the manufacture of exempted goods supplied to specified mega power projects Prior to amendment Earlier CCR allowed for the goods supplied against International Competitive Bidding if such goods are exempt from customs duty when imported into India. After Amendment Now CCR allowed on all the excisable goods exempt from customs duty when imported in India and are supplied:(a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding.

Records of principal inputs to be maintained for deterring the evasion of duty Notification No. 32/2006 CE (NT) dated 30.12.2006 amended Notification No. 32/2006 CE (NT) dated 30.12.2006 provides that if a manufacturer, first stage or second stage dealer, or an exporter is found to be knowingly involved in any of the specified contraventions, certain facilities would be withdrawn or certain restrictions would be imposed on them. The above notification has been amended in the following manner: (i) Following contravention also added to the list of specified contraventions: If a manufacturer, first stage or second stage dealer, or an exporter is found to be knowingly involved in the removal of inputs as such on which CENVAT credit has been taken, without paying an amount equal to credit availed on such inputs in terms of rule 3(5) of the CENVAT Credit Rules, 2004, withdrawal of facilities or impose certain restrictions may be ordered. (ii) Two more restrictions imposed Following restrictions may also be imposed if a manufacturer is prima facie found to be knowingly involved in committing the specified offences:(a) the assessee may be required to maintain records of receipt, disposal, consumption and inventory of the principal inputs on which CENVAT credit has not been taken. (b) the assessee may be required to intimate the Superintendent of Central Excise regarding the receipt of principal inputs in the factory on which CENVAT credit has or has not been taken, within a period specified in the order and the said inputs shall be made available for verification upto the period specified in the order. Meaning of principal inputs Principal inputs means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw materials for the manufacture of unit quantity of a given final product. [Notification No. 15/2009 CE (NT) dated 10.06.2009] RULE 15 Confiscation and penalty. (1) If any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, o o wrongly or in contravention of any of the provisions of these rules,

then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty

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not exceeding the duty or service tax on such goods or services, as the case may be, or 2000, whichever is greater. (2) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of Section 11AC of the Excise Act. (3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act. (4) Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer following the principles of natural justice.]

Small Scale Industry SSI exemption not available if the goods bear brand name of other However in following 5 cases exemption available even if goods bear BN of others (i) Branded component to be used in the machinery:If the specified goods, being components or parts of any machinery or equipment or appliances, are cleared for use as equipment in the manufacture of the said machinery, equipment etc. by following the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 or Provided that Manufacturers, whose aggregate value of clearances of the specified goods for use as original equipment Does not exceed rupees 100 lakh In the preceding financial year May submit a declaration regarding such use Instead of following the procedure laid down in the said Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 or (ii) (iii) Specified brand names Where the specified goods bear brand name of KVIC, NSIC, SSIDC, and SSIC OR Factory in rural area Where the specified goods are manufactured in a factory located in rural area. (iv) (v) where the specified goods are registers, file folders, writing pads and account books where the specified goods are in the nature of Packing Materials, namely printer cartons of paper/paper Board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP Caps, crown corks, metal label, plastic bags, printed laminated rolls, plastic containers and plastic bottles

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Provided that in respect of plastic containers and plastic bottles, the exemption under this notification shall apply only where such plastic containers or plastic bottles are meant for use as packing materials by the person whose brand name such goods bear. Author note- Relaxation from brand name restriction under the SSI exemption scheme extended to plastic containers and plastic bottles used as packing materials on 27 feb 2010 by NN 4/2010 and then amendment made on 30th april 2010 and now word only packing material mentioned meaning thereby every type of packing material eligible for exemption

CER 02 Que- if excise duty liability for a company for April month is Rs 35000, but for financial year 2009-10 duty paid in cash was Rs. 3.5 lac and through Cenvat credit was 6.7 lac. Whether E-Payment and E-filing for April month mandatory Ans- yes Que- whether a Company engaged in manufacture of Bidi or matches without aid of machine required to furnish annual installed capacity statement Ans- No Rule 12(2A) (a) Every assessee shall submit to the SCE, an annual installed capacity statement declaring the annual production capacity of the factory for the financial year to which the statement relates in the form (ER-7) by 30th day of April of succeeding financial year: (b) The CG may, by notification and subject to such conditions or limitations as may be specified in such notifications, specify assessee or class of assesses who may not require to submit such an annual installed capacity statement

Exemption from annual installed capacity statement-NN 26/09 Exempts the assessees, from the submission of the Annual Installed Capacity Statement, who manufacture the following goods, namely,(i) biris, manufactured without the aid of machines falling under tariff item 2403 10 31 (ii) matches manufactured without the aid of power falling under heading 3605 (iii) reinforced cement concrete pipes falling under heading 6810 AUTHOR NOTE- in above 3 cases now there is no requirement to file annual installed capacity statement Export procedure Que- whether Rebate under Rule 18 of CER 2002 is admissible when the goods are supplied from unit in DTA to SEZ

MANOJ BATRA Ans- yes

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Circular 6/2010- cus dated 19-3-2010 A view has been put forth that rebate under Rule 18 of the Central Excise Rules, 2002 read with Notification 19/2004C.E. (N.T.), dated 6-9-2004 is admissible only when the goods are exported out of India and not when supplies are made to SEZ. The matter has been examined. The Circular No. 29/2006-Cus., dated 27-12-2006 [2007 (207) E.L.T. T35] was issued after considering all the relevant points and it was clarified that rebate under Rule 18 is admissible when the supplies are made from DTA to SEZ. The Circular also lays down the procedure and the documentation for effecting supply of goods from DTA to SEZ, by modifying the procedure for normal export. Clearance of duty free material for authorised operation in the SEZ is admissible under Section 26 of the SEZ Act, 2005 and procedure under Rule 18 or Rule 19 of the Central Excise Rules is followed to give effect to this provision of the SEZ Act, as envisaged under Rule 30 of the SEZ Rules, 2006. Therefore, it is viewed that the settled position that rebate under Rule 18 of the Central Excise Rules, 2002 is admissible for supplies made from DTA to SEZ does not warrant any change even if Rule 18 does not mention such supplies in clear terms.

Misc issue Activity performed by Sovereign/Public authority not service Sovereign/public authorities perform functions assigned to them under the law in force, known as statutory functions. For example, a) Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; b) Regional Transport Officers (RTO) issue fitness certificate to motor vehicles; c) Directorate of Boilers inspects and issues certificates for boilers; or d) Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Authorities providing such functions, required to be performed as per law, may collect specific amount or fee and the amount so collected is deposited into government account. Whether such activities of a sovereign/public authority, performed under a statute, can be considered as provision of service for the purpose of levy of service tax and the amount or fee collected, if any, for such purposes can be treated as consideration for the services provided?

Ans- Activities assigned to and performed by the sovereign/public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of a compulsory levy and are deposited into the Government account.

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Such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, such activities assigned to and performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purpose of levy of service tax. However, if a sovereign/public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined. NN- 18/09- No service tax on certification by Central Board of Film Certification because it is a statutory function. CBEC- 334/1/2008 Classification of taxable services : 3.1 Taxable services are defined separately under clause (105) of Section 65 of the Finance Act, 1994. For the purpose of levy of service tax, a single composite service is to be classified under any one of the specified taxable services. 3.2 For the purpose of classification of a service covering number of separate services, a view has to be taken as to whether an individual service is merely a component of the overall supply or is itself a distinct and independent supply i.e., whether the component is merely ancillary to the principal supply or the component can be considered as separate taxable service in its own right. A service, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply, is considered as a supply ancillary to the principal supply. 3.3 Section 65A states the principles for classification of taxable services. Classification of a composite service is based on that component of the service which gives the essential character. In the case of a transaction containing a major and ancillary elements, classification is to be determined based on the essential features or the dominant element of the transaction. A supply which comprises a single supply from an economic point of view should not be artificially split. The method of charging or invoicing does not in itself determine whether the service provided is a single service or multiple services. Single price normally suggests a single supply though not decisive. The real nature and substance of the transaction and not merely the form of the transaction should be the guiding factor for deciding the classification. 3.4 Seven services are being separately defined as taxable services. Specifying a service separately as a taxable service does not necessarily mean or suggest that services falling within the scope of newly specified service were not earlier classifiable under any one of the existing taxable services. Grouping of services under a specific taxable service may change. The scope and coverage of a taxable service are to be determined strictly in accordance with the language of the relevant statutory provision existing during the material period. 2) Exemption to services provided for transmission of electricity CG exempts the taxable service provided to any person, by any other person for transmission of electricity, from the whole of service tax leviable thereon under section 66 of the said Finance Act. [Notification No. 11/2010-]

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Amendments for May 2010

Custom Sec 26A. Refund of import duty in certain cases. (1) Where on the importation of any goods capable of being easily identified as such imported goods, any duty has been paid on clearance of such goods for home consumption, such duty shall be refunded to the person by whom or on whose behalf it was paid, if (a) the goods are found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods : Provided that the goods have not been worked, repaired or used after importation except where such use was indispensable to discover the defects or non-conformity with the specifications; (b) the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported; (c) the importer does not claim drawback under any other provisions of this Act; and (d) (i) the goods are exported; or (ii) the importer relinquishes his title to the goods and abandons them to customs; or (iii) such goods are destroyed or rendered commercially valueless in the presence of PO in such manner as may be prescribed and within a period not exceeding 30 days from the date on which the PO makes an order for the clearance of imported goods for home consumption under section 47 : Provided that the period of 30 days may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding 3 months : Provided further that nothing contained in this section shall apply to the goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force. (2) An application for refund of duty shall be made before the expiry of 6 months from the relevant date in such form and in such manner as may be prescribed. Explanation. For the purposes of this sub-section, relevant date means, (a) in cases where the goods are exported out of India, the date on which the proper officer makes an order permitting clearance and loading of goods for exportation under section 51; (b) in cases where the title to the goods is relinquished, the date of such relinquishment;

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(c) in cases where the goods are destroyed or rendered commercially valueless, the date of such destruction or rendering of goods commercially valueless. (3) No refund under sub-section (1) shall be allowed in respect of perishable goods and goods which have exceeded their shelf life or their recommended storage-before-use period. (4) The Board may, by notification in the Official Gazette, specify any other condition subject to which the refund under sub-section (1) may be allowed..

Author comments- now refund of import duty is allowed if goods are defective and these are exported or destroyed or life of goods Is over or title is relinquished.

Type of duties
Sec 8B Safeguard duty/ Sec 8C Specific safeguard duty/ Sec 9 Countervailing duty on subsidised articles Provisions of custom Act 1962 apply (Amendment w.r.e.f 1-1-95) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act. Author comments- now SEC 8B, 8C, 9, 9A amended retrospectively with regard to recovery of duty and granting refund , appeals etc. now this lacuna plugged, earlier there was no provision relating to this.

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Miscellaneous Que
Valuation 3. Examine the validity of the following statements:(i) Excise Department can challenge the reasonability of MRP printed on the package. (ii) Legal/penal actions can be taken in case the retail sale price is not mentioned or is unduly tampered after the removal. Ans (i) The statement is not Valid. The Central Excise Department cannot challenge the reasonability of MRP printed on the package. As held by Supreme court in ITC Ltd.2004 (SC) (i) The statement is valid If the retail sale price is not mentioned on the excisable goods or is unduly tampered after the removal, then such goods shall be liable to confiscation and the retail sale price of such goods shall be determined in the manner prescribed by the Central Government and such price shall be deemed to be the retail sale price.

Valuation Compute the assessable value of the goods manufactured by Bharat Enterprises, under section 4 of the Central Excise Act, 1944, with the help of the following particulars:Particulars Contracted sale price for delivery at buyers premises The contracted sale price includes the following elements of cost:(i) Cost of containers supplied by the buyer (ii) Design and engineering charges (iii) Loading and handling charges incurred after removal from the factory (iv) Cost of after sale service (v) Dharmada charges Ans- AV= 2420006000 =236000 Small scale industries Practical que Following is detail for the year 2009- 10 of X ltd. Determine whether small scale industry or not for the F.Y 2010-11 Rs. (1) Total value of clearances of goods with brand name of X ltd .75,00,000 (2) Total value of clearances of goods with brand name of PQR Ltd. 90,00,000 (3) Value of clearance of packing material manufactured by X ltd. With brand name of KISAN Industries used by them for their final product 80,00,000 (4) Clearances of goods which are totally exempt under another notification (other than an exemption based on quantity or value of clearances) 35,00,000 (5) Clearance of non excisable goods 40,00,000 (6) Clearance of excisable goods to SEZ unit 20,00,000 (7) Jobwork under NN- 214/86 70,00,000 (8) Jobwork under NN- 84/94 60,00,000 (9) Total exports during the year including to Nepal & Bhutan 30 lakh 200 lakh Ans- 75,00,000 + 80,00,000 + 35,00,000 + 30,00,000 =210 lakh The unit is small scale unit because total value of clearance doesnt exceed 400 lakh. Authors Note- Solve the question with proper working notes as suggested in the class. Amount (` ) 2,42,000 15,200 22,400 6,000 10,000 2,100

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Registration under central excise 6. Examine whether the following categories of persons are exempted from obtaining registration under rule 9(2) of the Central Excise Rules, 2002. (a) S Ltd. is a small scale unit exempt under Notification No. 8/2003 dated 01.03.2003. (b) Central Government undertakings manufacturing excisable goods. (c) Arahnath Enterprises is engaged in the manufacture of the excisable goods which are chargeable to nil rate of duty. Ans Every Manufacturer is liable to get registered but CG has exempted the small scale units for taking registration. However, they have to file the declaration when their clearances in preceding financial year eaual to or more than Rs. 90 lakh. Hence,S Ltd. is exempt from obtaining registration if it gives the declaration when their clearances in preceding financial year eaual to or more than Rs. 90 lakh. (b) No, the Central Government undertakings manufacturing excisable goods are not exempted from obtaining registration. (c) CG has exempted , for taking registration the persons who manufacture the excisable goods, which are chargeable to nil rate of duty or are fully exempt from duty by a notification subject provided declaration is filed. Hence, Arahnath Enterprises is exempt from obtaining registration provided it furnishes the declaration in the specified form.

CENVAT CREDIT RULES With reference to CENVAT Credit Rules, 2004, discuss giving reason whether the following statements are true or false: (i) Credit of duties of excise on inputs can be availed irrespective of whether payment is made or not against the invoice, whereas credit of service tax on input services can be availed only after making payment of the invoice. Ans- False. W.E.F. 01.04.2011 the CENVAT Credit of input service is allowed, on or after the day on which invoice, bill or challan is received as per provisions of Rule 4(7) of CENVAT Credit Rules, 2004. In simple words, w.e.f. 01.04.2011 the CENVAT Credit is allowed on accrual basis. Similarly, CENVAT credit in respect of excise duty paid in respect of inputs can be availed on accrual basis i.e. as soon as the goods are received in the factory as per provisions of Rule 4(1) of CENVAT Credit Rules, 2004. Thus, w.e.f. 01.04.2011 the CENVAT Credit both in r/o input and input service can be availed on accrual basis. Que I Ltd. was a manufacturer of excisable goods such as polyester yarn. A ground plan of the factory was provided by the assessee to the jurisdictional Central Excise Officer and the same was approved. The ground plan showed the area in which the manufacturing is carried out as also the areas occupied for purpose of storage godowns, cycle sheds, canteen as well as the housing complex for staff and workers. The assessee had a captive power plant in the approved area. The electricity generated was supplied to the housing complex as well as for use in the manufacturing activity. I Ltd. claimed CENVAT credit on the duty paid on furnace oil used for generation of electricity. The Central Excise Department wanted to deny the CENVAT credit on the duty paid on furnace oil for generation of electricity which in turn is supplied to the housing complex on the ground that it was not used in relation to manufacture of the final product. Examine whether the stand of the Department is correct in law.] Answer With effect from 01.04.2011, the definition of term input given under Rule 2(k) of CCR, 2004 has been substituted. According to the substituted definition, the term input specifically excludes any goods such as food items, goods used in a guest house, residential colony, club or a recreation facility when such goods are used primarily for personal use or consumption of any employee. In the given case excise duty has been paid on furnace oil for generation of electricity which is supplied to the housing complex of employees of the factory. Thus, furnace oil would not fall within the purview of term input. and hence, the stand taken by the Department is correct in law. Furthermore, the substituted definition of input also specifically excludes any goods which have no relationship whatsoever with the manufacture of a final product. In the given case, furnace oil used for generation of electricity which is supplied to the housing complex of employees of the factory has no relationship whatsoever with the manufacture of a final product. Thus, due to this specific exclusion also, furnace oil would not fall within the scope of term input

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Question With reference to CENVAT Credit Rules, 2004, discuss giving reason whether the following statements are true or false: (ii) A manufacturer can sell the inputs on which CENVAT credit has already been availed of, as they are, provided he pays the amount equal to the credit availed. But No payment is required to be made if the input removed outside for providing warranty. (iii) A manufacturer is eligible for CENVAT credit in the cases stated below: (1) Inputs used in trial runs; (2) Materials used for maintaining factory building. Answer (ii) True. Rule 3(5) of CENVAT Credit Rules, 2004 inter alia provides that a manufacturer of the final products can remove inputs on which CENVAT credit has been taken, as such, from the factory if he pays an amount equal to the credit availed in respect of such inputs and such removal is made under the cover of an invoice referred to in rule 9 of CENVAT Credit Rules, 2004. However, in the following case, no payment equivalent to CENVAT availed is required to made: If input removed for Providing free warranty for final products Second proviso to Rule 3(5) of CCR, 2004 (iii) (1) True. Inputs used in trial runs during the production or commissioning of plant are eligible for CENVAT credit as they are considered to have been used in the factory by the manufacturer of final product [Definition of Input, Rule 2(k)] (2) False. According to Rule 2(k) of CCR, 2004 w.e.f. 01.04.2011 the term input, amongst other things, means all goods used in the factory [by the manufacturer] of the final product. Materials used for maintaining factory building only facilitate manufacture and are not integrally used in the manufacture of final products. Hence, such materials are not eligible for CENVAT Credit. Question Discuss briefly the validity of the following statements with reference to the CENVAT Credit Rules, 2004: (i) Basic excise duty credit can be utilized for payment of basic excise duty and education cess and secondary and higher education cess. (ii) CENVAT Credit can be utilised for payment of any duty of excise on goods in respect of which the benefit of an exemption under Notification No. 1/2011-C.E. dated 01.03.2011 is availed. (iii) CENVAT Credit can be utilised for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010. (iv) Credit of duty paid @ 1% on inputs and input services in pursuance of Notification No. 1/2011-C.E. is available both to the manufacturer of these goods as well as manufacturer or service provider who buys them. (v) CENVAT credit on inputs lying in stock or in process or contained in the final product shall be reversed when the final product is subsequently exempted unconditionally in terms of an exemption notification issued under section 5A of the Central Excise Act, 1944. Answer (i) Correct. There is no restriction in the said rules on utilization of CENVAT credit of basic excise duty (BED) for payment of education cess (EC) and secondary and higher education cess (SHEC). Rule 3(4) of the said rules provides that credit of BED can be utilized for payment of any duty of excise on any final product. Since EC and SHEC are duties of excise,. as per statutory provisions. Hence, credit of BED can be utilized for payment of cesses. (ii) Incorrect. According to second proviso [inserted w.e.f. 01.03.2011] to Rule 3(4) of CENVAT Credit Rules, 2004 CENVAT Credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an

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exemption under Notification No. 1/2011-C.E. dated 01.03.2011.is availed. In simple words, excise duty liability on goods in respect of which the benefit of an exemption under Notification No. 1/2011-C.E. dated 01.03.2011 is availed has to be discharged in cash/ by cheque/ e payment only. (iii) Incorrect. According to sixth proviso [inserted vide Notification No. 26/2010-C.E.(N.T.) dated 29.06.2010]to Rule 3(4) of CENVAT Credit Rules, 2004 the CENVAT Credit of any duty specified under Rule 3(1) of CCR, 2004 shall not be utilised for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010. (iv) Incorrect. Credit of duty paid on input or input services is not available to the manufacturer of these goods. In addition, credit of the duty paid on these goods is also not available to the manufacturer or service provider who buys them (v) Correct. As per Rule 11(3) of CENVAT Credit Rules, 2004 when final product has been exempted absolutely under section 5A of the Central Excise Act, CENVAT credit on inputs, lying in stock or in process or contained in final product shall be reversed. The balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product or for payment of service tax on any output service. Question Discuss in detail whether interest can be recovered from an assessee who firstly wrongly takes and subsequently reverse CENVAT Credit before its utilisation. Answer According to Rule 14 of CCR, 2004 where the CENVAT Credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the provider of the output service and the provisions of Sections 73 and 75 of the Finance Act shall apply for effecting such recoveries. The moot question which is to be examined is whether in terms of abovementioned Rule 14 the interest can be recovered from an assessee who firstly wrongly takes and subsequently reverses CENVAT Credit before its utilisation. Until 20.02.2011 there was no unanimity of opinion on this issue. On one side, there were cases laws and Departmental Circular supporting the view that interest is not recoverable if the assessee merely avails the CENVAT Credit wrongly but reverses the same before its utilisation. For instance:(i) In CCE, Delhi III Vs Maruti Udyog Ltd.-2007 (214) E.L.T. (P & H) upholding the decision of the Tribunal it was held that assessee was not liable to pay interest on CENVAT Credit which was taken as an entry in the Modvat Record but was not in fact utilised. The Honble High Court perfectly agreed with the reasoning of the Tribunal that in the absence of utilisation of CENVAT Credit, the assessee was not liable to pay interest. (ii) The above view has also been upheld in CCE V Bombay Dyeings & Manufacturing Co. Ltd. (2007) 10 STT 286 (SC) it was inter alia held that reversal of credit by the assessee before utilisation implies that CENVAT Credit has not been taken. As per Circular No. 942/03/2011-CX dated 14.03.2011 ,the interest shall be recoverable when credit has been wrongly taken even if it has not been utilized. Conclusion After taking into consideration both the pros and cons of above topic, it can be safely inferred that the assessee is liable to pay interest where CENVAT Credit was wrongly taken by him but reversed subsequently before utilisation in the light of latest Circular No. 942/03/2011-CX dated 14.03.2011 [which is based on Apex Courts judgment dated 21.02.2011 in case of Ind-Swift Lab Ltd. Vs UOI] Question Based on the following particulars, arrive at the CENVAT credit available on clearance of goods to Domestic Tariff Area (DTA) from an Export Oriented Unit (EOU): Assessable value ` 20 lakhs Basic customs duty 10% Excise duty 10% Education cess 2% Secondary and Higher Education cess 1% VAT payable under State VAT law 4% Answer As per Notification No. 23/2003 CE dated 31.3.2003, 50% of basic customs duty is exempt in case of clearance of goods by an EOU to DTA. The amount of excise duty payable by EOU is calculated as under:

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(i) Assessable value 20,00,000 (ii) Customs duty @ 5% of `20,00,000 1,00,000 (iii) Additional customs duty (CVD) @ 10.30% of (`20,00,000 + `1,00,000) 2,16,300 (iv) Education cess of customs @ 2% of `(1,00,000 + 2,16,300) 6,326 (v) S & H education cess of customs @ 1% of `(1,00,000 + 2,16,300) 3,163 Add: Special additional customs (SAD) (It is exempt since VAT is payable) Nil Excise duty payable in terms of proviso to section 3(1) =`(1,00,000+2,16,300+6,326+3,163) 3,25,789 Education cess of excise=` (3,25,7892%) 6,515.78 Secondary and higher education cess of excise=` (3,25,7891%) 3,257.89 Total Excise duty liability of EOU (rounded off)=`(3,25,789+6,515.78+3,257.89) 3,35,563 As per second proviso to rule 3(7)(a) of CENVAT Credit Rules, 2004, the amount of CENVAT credit will be as under: ` Additional duty of customs (CVD) 2,16,300 Education cess of excise 6,515.78 S & H education cess of excise 3,257.89 Total amount of credit 2,26,073.67 Note. Notification No. 23/2003-CE dated 31-03-2003, granting partial exemption to EOU, states that duty of excise under section 3(1) in excess of duty of customs reduced by 50% is exempt. Thus this notification grants partial exemption only to duty of excise. A view can be taken that excise duty is not inclusive of education cess(EC) and secondary and higher education cess(SHEC) as EC is leviable under section 91 read with section 93 of the finance act,2004.Similarly SHEC is leviable under section 136 read with section 138 of Finance Act ,2007.Hence EC and SHEC need to be separately added to above calculated excise duty.

Question Madan Gopal Ltd. acquired the following assets on 1-4-2008:Kinds of Capital Assets Amount excluding excise duty (`) Computers and Computer Peripherals 5,00,000 Capital Assets other than Computers & 20,00,000 Computer Peripherals

Amount of Excise Duty (`) 50,000 2,00,000

The company removed of above capital Assets after use on 24th March 2011. Compute the amount to be paid by the company separately in case of disposal of Computer and Computer Peripherals and other capital assets respectively. Answer In accordance with substituted Third proviso to Rule 3(5) of CENVAT Credit Rules 2004, Madan Gopal Ltd will pay the following amounts:Date of Acquisition of Assets Date of Disposal of Assets 01-04-2008 24-03-2011 Time Gap in terms of number of quarters/part thereof between above two dates 12 quarters (A) Case of Computer & Computer Peripherals:Total CENVAT availed in case of Computers & Computer Peripherals: 50,000 Amount reduced for each quarter in the first year @ 10% i.e.4 x 10%=40% 20,000 Amount reduced for each quarter in the second year @ 8% i.e. 4x 8%=32% 16,000

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Amount reduced for each quarter in the third year @ 5% i.e. 4 x 5%=20% Total amount to be reduced Amount to be paid in cash by Madan Gopal Ltd.(`` 50,000 `` 46,000) (B) Case of disposal of other Capital Assets:-

(v) A supplementary invoice for ` 1,00,00 together with Service Tax of ` 10,300/-was received on 15.09.2011.The aforementioned supplementary invoice was in respect of Business Support Services received during the month of May 2011 and whose original invoice of ` 3,00,000 together with Service Tax of ` 30,900/- was received in the month of May 2011 itself. Would your answer in above case be different if the above supplementary invoice was issued consequent upon additional amount of tax became recoverable from the concerned provider of Business Support Services on account of short-payment by reason of fraud with intent to evade payment of service tax. Indicate the eligibility of CENVAT credit, in each case, under the CENVAT Credit Rules, 2004 with explanations where necessary. (v) Clause (bb) has been inserted in sub-rule (1) of Rule 9 of CENVAT Credit Rules, 2004 w.e.f. 01.04.2011. The aforementioned clause (bb) provides that CENVAT Credit can be availed on the basis of a supplementary invoice, bill or challan issued by a provider of output service, in terms of the provisions of Service Tax Rules, 1994. Thus, in the given case CENVAT Credit can be availed on the basis of supplementary invoice received on 15.09.2011 in respect of Business Support Services received during the month of May 2011. However, Rule 9(1)(bb) also specifies that CENVAT Credit in r/o supplementary invoice, bill or challan shall not be available in a case where the additional amount of tax became recoverable from the provider of service on account of non-levy or non-payment or short-levy or short-payment by reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of Finance Act or the rules made there under with the intent to evade payment of service tax. Since in the given case supplementary invoice has been issued consequent upon additional amount of tax became recoverable from the concerned provider of Business Support Services on account of short-payment by reason of fraud with intent to evade payment of service tax CENVAT Credit in r/o supplementary invoice in this case can not be availed.

Question M/s TCCL, providing management consultancy to its client, does not maintain any separate accounts and have paid `1,00,000 as service tax and excise duty towards input services and input material/capital goods used by them. It is assumed for the sake of simplicity that out of aforementioned ` 1,00,000 they have used the inputs for exempted and taxable services to the extent of ` 40,000 & ` 60,000 respectively. They are providing the output services amounting to ` 14,00,000 and exempted services amounting to ` 7,00,000. How much credit out of `1,00,000 can be availed by them for paying output service tax liability, if they do not maintain any separate accounts? Answer w.e.f. 01-04-2011 Rule 6(3) of the CENVAT Credit Rules, 2004 inter alia provides that where common input/input services are used for providing taxable as well as exempted services and separate accounts are not maintained, the output service provider has the following options at his disposal:(i) Pay an amount equal to 5% of the value of exempted services; OR (ii) Pay an amount as determined under Rule 6(3A) of CCR, 2004 i.e. Reverse the CENVAT Credit attributable to the inputs and input services used for providing exempted services (iii) Maintain separate accounts for inputs as provided for in Rule 6(2)(a) of CCR, 2004 and take credit of only those inputs which are used for provision of output services excluding exempted services. In addition, a service provider has to pay an amount determined in accordance with Rule 6(3A) in respect of input services.

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Accordingly, in the present case if the above options are applied then:(i) M/s TCCL has to pay ` 35,000/- (5% on ` 7,00,000) on value of exempted services. After making aforementioned payment, it can take entire CENVAT Credit of ` 1,00,000 available to it. (ii) TCCL has to reverse CENVAT Credit attributable to inputs and input services used for providing exempted services which are given as ` 40,000/- . (iii) In the absence of complete information for maintaining separate accounts for inputs, this option can not worked out in this case. Consequently, proportionate reversal option only in r/o input services can not be worked out.

Question Whether CENVAT Credit can be availed in respect of service paid under section 66A of Finance Act, 1994? Answer As per Rule 3(1)(ixa), a manufacturer or producer of final products or a provider of taxable service can take cenvat credit of the service tax leviable under section 66A of the Finance Act. Question Punjab National Bank provides the following information for the month of June 2011: CENVAT Credit available on Inputs ` 2,00,000 CENVAT Credit available on Input Services ` 4,00,000 Service Tax liability before availing eligible CENVAT ` 10,00,000 Determine the amount of CENVAT Credit available to Punjab National Bank for the month of June, 2011 in view of Rule 6(3B) of CENVAT Credit Rules, 2004. Also determine the net service tax liability of the Bank after availing the eligible CENVAT Credit. Answer According to Rule 6(3B) [inserted w.e.f. 01.04.2011] of CCR, 2004 w.e.f. 01.04.2011 notwithstanding anything contained in sub-rules (1)(2)(3) of Rule 6 of CCR, 2004 a banking company and a financial institution [including a nonbanking financial company] providing Banking or other Financial Services shall pay for every month an amount equal to 50% of the CENVAT Credit available on inputs and input service in that month. It is worth mentioning that previously mentioned a banking company etc. has necessarily to follow Rule 6(3B) of CCR, 2004. Looking from another perspective, a banking company is entitled to avail only 50% of CENVAT Credit in r/o inputs and input services. In view of above statutory provisions, CENVAT Credit available to bank for the month of June 2011 and its net service tax liability will be computed as under: CENVAT Credit available on Inputs ` 2000000 Less: Payment of 50% of CENVAT Credit available on Input by virtue of Rule 6(3B). It 1000000 effectively means 50% of available CENVAT Credit is to be disallowed `

Net CENVAT Credit available on Inputs ` CENVAT Credit available on Input Services ` Less: Payment of 50% of CENVAT Credit available on Input Services by virtue of Rule 6(3B). It effectively means 50% of available CENVAT Credit is to be disallowed. ` Net CENVAT Credit available on Input Services ` Determination of Net Service Tax liability of Bank for the month of June, 2011-07-09 Service Tax liability of bank before availing eligible CENVAT Credit ` Less: Net/Eligible CENVAT Credit available on Inputs ` Less: Net/Eligible CENVAT Credit available on Input Services ` Net Service Tax liability of bank after availing eligible CENVAT Credit `

1000000 4,00,000 2,00,000

2,,00,000 10,00,000 1,00,000 2,00,000 7,00,000

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Question LIC of India provides the following information for the month of June 2011: CENVAT Credit available on Inputs ` 2,00,000 CENVAT Credit available on Input Services ` 4,00,000 Service Tax liability before availing eligible CENVAT ` 10,00,000 Determine the amount of CENVAT Credit available to LIC India for the month of June, 2011 in view of Rule 6(3C) of CENVAT Credit Rules, 2004. Also determine the net service tax liability of the LIC of India after availing the eligible CENVAT Credit. Answer According to Rule 6(3C) [inserted w.e.f. 01.04.2011] of CCR, 2004 w.e.f. 01.04.2011 notwithstanding anything contained in sub-rules (1)(2)(3) of Rule 6 of CCR, 2004 a provider of output service providing Life Insurance Business Services and Management of Investment under ULIP Service shall pay for every month an amount equal to 20% of the CENVAT Credit available on inputs and input service in that month. It is worth mentioning that previously mentioned service provider has necessarily to follow Rule 6(3C) of CCR, 2004. Looking from another perspective, a service provider providing Life Insurance Business Services and Management of Investment under ULIP Services is entitled to avail only 80% of CENVAT Credit in r/o inputs and input services. In view of above statutory provisions, CENVAT Credit available to bank for the month of June 2011 and its net service tax liability will be computed as under: CENVAT Credit available on Inputs ` 2,00,000 Less: Payment of 20% of CENVAT Credit available on Input by virtue of Rule 40,000 6(3B). It effectively means 20% of available CENVAT Credit is to be disallowed ` Net CENVAT Credit available on Inputs ` 1,60,000 CENVAT Credit available on Input Services ` Less: Payment of 20% of CENVAT Credit available on Input Services by virtue of Rule 6(3C). It effectively means 20% of available CENVAT Credit is to be disallowed. ` Net CENVAT Credit available on Input Services ` Determination of Net Service Tax liability of LIC India for the month of June, 2011: Service Tax liability of LIC of India before availing eligible CENVAT Credit ` Less: Net/Eligible CENVAT Credit available on Inputs ` Less: Net/Eligible CENVAT Credit available on Input Services ` Net Service Tax liability of LIC of India after availing eligible CENVAT Credit ` 4,00,000 80,000

3,20,000 1000000 160000 320000 520000

Question PQR Ltd, a manufacturer of excisable goods purchases in the month of September, 2011 inputs of ` 1,00,000/- on which it pays excise duty of ` ,10,300/- . The company availed the aforementioned CENVAT of ` 10,300/- while discharging its excise duty liability for the month of September, 2011. In Dec. 2011 before the said inputs are put into use, the company has written off ` 20,000 against the said inputs. What economic consequences the company has to face for foregoing writing off of ` 20,000/- However, subsequently, in the month of March, 2012 the company put to use the entire inputs of ` 1,00,000/-. Can the company get some economic benefit now? Answer Finance Act, 2011 has amended Rule 3(5B) of CENVAT Credit Rules, 2004 w.e.f. 08.04.2011 to require a manufacturer or service provider to pay an amount equivalent to the CENVAT Credit taken in respect of inputs or capital goods even where the value of such inputs or capital goods is written off partially before being put to use. Until 07.04.2011 this provision used to apply only when the value was written off fully. In view of the above-mentioned amendment in CCR, 2004 PQR Ltd. will have to pay an amount equivalent to the CENVAT Credit taken in respect of inputs [which are ` 10,300 in the present case] consequent upon partial writing off to the extent of ` 20,000/- in respect of said inputs. However, proviso to Rule 3(5B) provides that if the said input or capital goods is subsequently used in the

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manufacture of final products or the provision of taxable service, the manufacturer or output service provider, shall be entitled to take credit of the amount equivalent to the CENVAT Credit paid earlier subject to the other provisions of CCR, 2004. Thus, in the present case, by virtue of proviso to Rule 3(5B) when in March 2012, the company puts to use entire inputs of ` 1,00,000 to use; the company will be entitled to take credit of the amount equivalent to the CENVAT Credit paid earlier i.e. ` 10,300/-.

Question 13 ABC, an assessee availing the SSI exemption scheme, paid central excise duty of `10,000 for the goods cleared in the month of March, 2011 on April 15, 2011. Discuss whether any interest will be charged from ABC for late payment of duty. If yes, what will be the interest liability? Answer The second proviso to rule 8(1) of the Central Excise Rules, 2002 lays down that where an assessee is availing the exemption under a Notification based on the value of clearances in a financial year, the duty on goods cleared during a quarter of the financial year shall be paid by the 6th day of the month following that quarter, if the duty is paid electronically through internet banking and in any other case, by the 5th day of the month following that quarter.. However, in case of goods removed during the month of March the duty shall be paid by the 31st day of March. Sub-rule (3) of rule 8 provides that if the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under section 11AA of the Central Excise Act on the outstanding amount. Such interest shall be paid for the period starting from the first day after the due date till the date of actual payment of the outstanding amount. The rate of interest has been specified as 18% vide Notification No. 6/2011 CE(NT) dated 01.03.2011. Therefore, since ABC has paid the duty for the month of March on 15th April, it will have to pay the duty with interest for the delay of 15 days. The amount of interest shall be computed as follows: = `10,000 x 18/100 x 15/365 = ` 73.97 = ` 74.00 [Rounded off] Question 9 Naman Ltd. is registered under Central Excise Act, 944. It has paid the following amounts under Central Excise Act, 1944: Central Excise Duty ` 1600000 Amount of Interest ` 100000 In addition, it is liable under the following Acts for the amounts indicated against each Act: The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ` 3,00,000 The Securitization and Reconstruction of Financial Assets and the Enforcement of ` Security 2,00,000 Interest Act, 2002 Factories Act, 1948 ` 3,00,000 Customs Act, 1962 ` 6,00,000 The company has a property worth ` 20 lakhs. What legal remedy is available to Central Excise Department for recovery of its above-mentioned dues of ` 17 lakhs. Answer According to provisions of Section 11E of Central Excise Act, 1944 Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest, or any other sum payable by an assessee or any other person under this Act or the rules made thereunder shall be the first charge on the property of the assessee or the concerned. However, aforementioned first charge shall be subject to the amounts payable under the following Acts: 1. Companies Act, 1956 [Section 529A]. 2. The Recovery of Debts Due to Banks and the Financial Institutions Act, 1993. 3. The Securitisation Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002.

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In view of above-mentioned provisions of Section 11E of Central Excise Act, 1944, the Department can create first charge on the property of defaulting assessee Naman Ltd. However, aforementioned first charge shall be subject to amounts payable under the following Acts: The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ` 3,00,000 The Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 ` 2,00,000 Thus, the Department will be able to create first charge of ` 15 lakh [` 20 lakh less 5 lakh payable under above Acts] only by virtue of Section 11E of Central Excise Act, 1944. Question 5 Can the Department file an appeal in respect of same assessee, if in respect of some years, no appeal was filed involving identical dispute? Answer It has been held by the Supreme Court in the case of C.K Gangadharan v. CIT, Cochin, 2008 (228) ELT 497 (SC) that merely because in some cases Revenue has not preferred an appeal that does not operate as a bar for the Revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the different High Courts. However, the Supreme Court has given a conflicting decision in the case of CIT vs. J.K. Charitable Trust 2008 (232) ELT 769 (SC 3 members bench) wherein it has held that if in respect of some years, in respect of same assessee, no appeal was filed involving an identical dispute, revenue can be precluded from filing an appeal if the fact situation in subsequent years remains the same Note: Further, it may be noted that section 35R inserted vide the Finance Act 2011 provides inter alia that where in pursuance of any instruction issued by CBEC , CEO has not filed any appeal against any decision passed under the provisions of the Act, then it shall not preclude such CEO from filing appeal in any other case involving the same or similar issues or questions of law. Mahavir Manufacturers, engaged in the manufacture of machines, sold a machine to Highland Enterprises. Cumduty sales price of the machine excluding sales tax is ` 3,50,000. Rate of excise duty is 10%, education cess is 2% and secondary and higher education cess is 1%. Sales price includes the following charges:S.No. Particulars Amount (`) (i) Secondary packing 5,500 (ii) Design and development charges of machine 20,000 (iii) Warranty charges 35,000 (iv) Cost of return fare of vehicles 2,000 (v) Trade discount 3,000 (vi) Advertisement and publicity expenses borne by Highland Enterprises 15,000 (vii) Pre-delivery inspection charges 20,000 Determine the amount of assessable value of the machine for the purposes of the levy of the excise duty Particulars Amount (`) Cum-duty sales price of the machine excluding sales tax Less: Cost of return fare of vehicles Less: Trade discount Cum-duty price for excise duty purposes Less- excise duty 10.3/110.3 *345000 Assessable value= 1.

3,50,000 2,000 3,000 3,45,000 3,12,783.30

While computing the assessable value:amount charged from the buyer in relation to packing, whether primary or secondary, will be included [Circular No. 643/34/2002 dated 01.07.2002]. 2. design and engineering charges will be included as such payment is in connection with sale. 3. advertisement and publicity expenses borne by the buyer shall not be excluded [Circular No. 643/34/2002 dated 01.07.2002]

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As per the definition of the transaction value under section 4(3)(d) of the Central Excise Act, 1944, warranty charges are includible. cost of return fare of vehicles is not includible [Circular No. 923/13/2010 CX dated 19.05.2010]. Trade discount is allowable as deduction. pre-delivery inspection charges are includible [Circular No. 936/26/2010-CX. dated 27-10-2010].

Value added Tax (1) RTP R ltd. Of Gujrat made a total purchase of input and capital goods of Rs 55 lac during the month of Jan 2010. Further information is (1) Goods worth Rs. 15 lac purchased from Assam on which CST @ 2% paid (2) Purchase made in January include purchase made from unregistered dealer Rs. 18.5 lac (3) It purchased capital goods (not eligible for credit) worth Rs. 6.5 lac and eligible for credit is Rs. 9 lac (4) Sale made in gujrat during January 2010 is 10 lac on which vat 12.5% is payable. Assume all purchase are exclusive of VAT 4%% paid on them Calculate (1) Amount of input tac credit available for January 2010 (2) VAT payable for the month of JANUARY 2010 AND (3) Input tax credit carried forward Note- input vat on capital goods is eligible in 36 equal monthly instalments. Solution Total purchase made in January 2010 Less(1) Goods purchased from Assam i.e interstate purchase (2) purchase made from unregistered dealer (3) purchased capital goods (not eligible for credit) total purchase eligible for credit input tax credit available 4% on [15 lac- 9 lac] Vat credit on eligible capital goods [4% of 9lac * 1/36] Input credit available for January 2010 Vat on sale of 12.5 % of 10 lac Less input tax credit Net vat payable Input tax credit carried forward == nil 24000 1000 25000 125000 25000 100000 55 lac 15 lac 18.5 lac 6.5 lac 15 lac

Nov 09 Determine the taxable turnover, input tax credit and net VAT payable by a works contractor from the details given below on the assumption that the contractor maintains sufficient records to quantify the labour charges. Assume output VAT at 12.5%: (i) (ii) (iii) (iv) Particulars Rs.(in lakh) Total contract price (excluding VAT) Labour charges paid for execution of the contract Cost of consumables used not involving transfer of property in goods Material purchased and used for the contract taxable at 12.5% VAT (VAT 100 35 5

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45 The contractor also purchased a plant for use in the contract for Rs. 10.4 lakhs. In the VAT invoice relating to the same, VAT was charged at 4% separately and the said amount of Rs. 10.4 lakhs is inclusive of VAT. Assume 100% input credit on capital goods. Make suitable assumption wherever required and show the working notes. (5 Marks) Ans Under the works contract, the turnover for imposition of VAT is the sale price of the goods in which there is a transfer of property. The amount representing the labour & other charges incurred for such execution is deductible. Computation of the taxable turnover, input tax credit and net VAT payable by the works contractor:Particulars Rs. Total contract price Less : Deductions admissible 1. Labour charges paid for executing the contract 35,00,000 2. Cost of consumables in which no property is transferred 5,00,000 Total deductions Taxable turnover Output VAT payable @ 12.5% (on Rs. 60,00,000) Less : Input tax credit admissible 1. On the material purchased (on Rs. 45,00,000 x 12.5/112.5) 5,00,000 2. On the plant purchases (on Rs. 10,40,000 x4/104) 40,000 Input tax credit 5,40,000 (B) Net VAT payable 2,10,000 (A-B) 1,00,00,000

40,00,000 60,00,000 7,50,000 (A)

Que- what are disadvantage of composition scheme? Vat chain under composition scheme Loss to seller-he cant avail input tax credit on purchase, which will add to the cost of goods. He cant pass ITC to buyer at time of sale Loss to buyer- buyer cant take credit for purchase from composition dealer. Therefore on option of composition scheme, Vat chain is broken.

may 2010 old (1) Banking and other financial services With reference to banking and other financial services, state whether service tax is applicable in the following cases: (i) Services provided by State Bank of India to the Central Board of Direct Taxes in relation to collection of advance income-tax. (ii) Discount charged by SB Ltd., a non-banking financial company, on the facility of bill discounting provided by it. Such discount is shown separately in the bill issued for this purpose. (iii) Rich Bank, a Scheduled Bank, purchases foreign currency from Generous Bank, another Scheduled Bank. (2) Construction services in respect of residential complexes With reference to construction services in respect of residential complexes, answer the following questions: (i) What does a residential complex mean? (ii) Which activities are covered within construction of complex?

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(iii) Does the service tax law provide for any exemption for this service? Explain. (3) Business auxiliary services With reference to business auxiliary services state whether service tax is applicable in following cases: (i) Manufacture of non-excisable goods on behalf of the client. (ii) Services provided by commission agents in relation to sale of jute. (iii) Commission received by distributors for distribution of mutual fund units. (4) Appeals The Finance (No. 2) Act, 2009 has substituted section 84 of the Finance Act, 1994 with a new section 84. Explain the provisions of new section. Ans (1) (i) Service tax will not be applicable in this case as Notification No. 13/2004 ST dated 10.09.2004 exempts the taxable services provided by a banking company or a financial institution including a non-banking financial company, or any other body corporate or ay other person to the Government of India or a State Government in relation to collection of any duties or taxes levied by the Government of India or a State Government from the whole of service tax leviable thereon. (ii) Service tax will not be applicable in this case as Notification No. 29/2004 ST dated 22.09.2004 exempts the value of taxable service provided to a customer, by a banking company or a financial institution including a nonbanking financial company, or any other body corporate or any other person, in relation to,a. overdraft facility; b. cash credit facility; or c. discounting of bills, bills of exchange or cheques, which is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount from the service tax subject to the condition that the said interest amount is shown separately in an invoice, a bill or, as the case may be, a challan issued for this purpose. (iii) Service tax will not be applicable in this case as Notification No 19/2009 ST dated 07.07.2009 exempts taxable services of the nature referred to in sub-clause (zm) or (zzk), as the case may be, of clause (105) of section 65 of the Finance Act, provided to a Scheduled bank, by any other Scheduled bank, in relation to interbank transactions of purchase and sale of foreign currency from the whole of the service tax leviable thereon. (2) (i) As per section 65(91a) of the Finance Act, 1994, a residential complex means any complex comprising of a. a building or buildings, having more than twelve residential units; b. a common area; and c. any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Here, a. "personal use" includes permitting the complex for use as residence by another person on rent or without consideration; b. "residential unit" means a single house or a single apartment intended for use as a place of residence. (ii) As per section 65(30)(a) of the Finance Act, 1994, construction of complex means (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex.

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(iii) Yes. Notification No. 1/2006 ST dated 01.03.2006 exempts 67% of the value of the taxable service provided to any person by any other person in relation to construction of complex from the service tax leviable thereon. This exemption shall not apply in cases where the taxable services provided in relation to a residential complex are only completion and finishing services. Further, this exemption is not available in cases where, (i) the CENVAT credit of duty paid on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service has been taken under the provisions of the CENVAT Credit Rules, 2004; or (ii) the service provider has availed the benefit under Notification No. 12/2003 ST dated 20.06.2003. The gross amount charged shall include the value of goods and materials supplied or provided or used for providing the said taxable service by the service provider. (3) (i) The Finance (No. 2) Act, 2009 has amended the definition of business auxiliary service under section 65(19) of the Finance Act, 1994 so as to exclude any activity that amounts to manufacture of excisable goods. Therefore, manufacture of nonexcisable goods for or on behalf of the client shall attract service tax. (ii) Notification No. 13/2003 ST dated 20.06.2003 exempts the business auxiliary services provided by commission agents in relation to sale or purchase of agricultural produce from service tax. Agricultural produce means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco. Therefore, services provided by commission agents in relation to sale of jute shall not attract service tax. (iii) Distributors receive commission from mutual fund for providing services relating to purchase and sale of mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, liable to service tax under business auxiliary service [Circular No. 96/7/2007 ST dated 23.08.2007]. (4) The Finance (No. 2) Act, 2009 has amended section 84 of the Finance Act, 1994 to abolish the revision procedure prescribed therein and to prescribe the procedure of filing departmental appeals before the Commissioner (Appeals) in service tax cases similar to the central excise procedure. Accordingly, section 84 pertaining to revision by Commissioner has been substituted with a new section relating to appeals to Commissioner of Central Excise (Appeals). The provisions of new section 84 are: (1) The Commissioner of Central Excise may, of his own motion, call for and examine the record of any proceedings in which an adjudicating authority subordinate to him has passed any decision or order under this Chapter for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority or any Central Excise Officer subordinate to him to apply to the Commissioner of Central Excise (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner of Central Excise in his order. (2) Every order under sub-section (1) shall be made within a period of three months from the date of communication of the decision or order of the adjudicating authority. (3) Where in pursuance of an order under sub-section (1), the adjudicating authority or any other officer authorised in this behalf makes an application to the Commissioner of Central Excise (Appeals) within a period of one month from the date of communication of the order under sub-section (1) to the adjudicating authority, such application shall be heard by the Commissioner of Central Excise (Appeals), as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Chapter regarding appeals shall apply to such application. Explanation For the removal of doubts, it is hereby declared that above mentioned provision would come into effect from 19.08.2009. All cases decided before this date would continue to be governed by the existing provisions only. RTP may 2010 new

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(1) Penalty for failure to pay service tax Examine, with the help of a decided case law, if any, whether the Tribunal could reduce the penalty imposable under section 76 of the Finance Act, 1994 as amended, below the minimum limit prescribed under that section? (2) Clearing and forwarding agents services Tulip Medicines entered into an agreement with M/s. Sipla for handling and distribution of their products and was entrusted with the job of receiving, storing and distributing Sipla products to their authorised stockists and distributing centres. For the services so rendered, the Tulip Medicines was entitled to commission based on agreed percentage of sales figures and also to reimbursement of recurring expenses. Revenue contended that the services provided by the assessee attracted service tax under the category clearing & forwarding agents services. On the other hand, the assessee pleaded that service tax could be levied under the said category only when clearing and forwarding agent would have carried out both clearing and forwarding operations and in the given case, the assessee had not rendered any clearing services. Examine, whether the contention of the Department is justified in law. (3) Appeals Discuss the provisions relating to the filing of appeals to Commissioner of Central Excise (Appeals) under section 84 of the Finance Act, 1994 as amended by Finance (No. 2) Act, 2009. (4) Taxable services Explain the validity of the following statements:(a) Money changer services provided by one Scheduled bank to another Scheduled bank in relation to sale and purchase of foreign currency is liable to service tax. (b) Services provided by a clearing and forwarding agent in relation to clearing and forwarding operations to a goods transport agency for transportation of goods by road are exempt from whole of the service tax. (5) Banking and other financial services Explain, with the help of a decided case law, if any, whether the chit fund activity falls within the expression cash management under banking and other financial services? (6) Stock transfer Briefly explain whether the input tax credit of the VAT paid on the purchases of goods which are stock transferred, is available. (7) Computation of VAT Compute the net VAT liability of Rishabh using the information given as follows:Particulars Rupees Raw material purchased from foreign market (including duty paid on imports @ 20%) 12,000 Raw material purchased from local market (including VAT charged on the material @ 4%) 20,800 Raw material purchased from neighbouring state (including CST paid on purchases @ 2%) 7,140 Storage, transportation cost and interest 2,500 Other manufacturing expenses incurred 600 Rishabh sold the goods to Rajul and earned profit @ 10% on the cost of production. VAT rate on sale of such goods is 12.5%. (8) Subtraction method Briefly discuss, under what circumstances subtraction method of computing VAT is normally applied? (9) Demerits of VAT Illustrate the demerits of VAT system. (10) Works Contract

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Is a works contract liable to VAT? What are the points that should be borne in mind to ascertain whether a transaction is a works contract as contemplated in Article 366(29A)(b) of the Constitution? Ans (1) It was held in Aakar advertising (2009)(Raj.) Penalty (Service tax) - Quantum of - Whether under Section 76 of Finance Act, 1994 reducible below the minimum prescribed therein - Minimum amount of penalty prescribed in Section 76 by use of expression not less than If reasonable cause is not shown, and penalty is required to be levied, then, the minimum penalty prescribed cannot be further reduced, under the garb of any existing discretion; assumed to be vesting with the authority, including the Tribunal. Where the two limits have been prescribed, being the minimum and upper limit, then obviously the free play is available between the two limits only, and the discretion can be exercised within those limits, but then that does not mean, that the authorities have any power to impose penalty less than the minimum prescribed by the section. (2) No, the contention of the Department is not justified in law. The facts of the given case are similar to the case of KULCIP MEDICINES (P) LTD. (2009)(P&H)- S.tax not leviable The assessee-respondent entered into an agreement with M/s. Cipla for handling and distribution of their products and were entrusted with the job of receiving, storing and distributing Cipla products to their authorised stockists and distributing centres. For the service so rendered, the assessee-respondent was entitled for commission based on agreed percentage of sales figures and also for reimbursement of recurring expenses. , the Tribunal concluded that even the circular clarified that levy would be attracted only when clearing and forwarding agent carries out both clearing and forwarding operations the Tribunal proceeded to hold that once there is no clearing activity taken by the dealer therefore the service rendered by him would not satisfy the requirement of clearing and forwarding agent and consequently it set aside the demand. . It is clear from the terms of the agreement that appellant herein does not attend to the clearing of the medicines manufactured by Cipla. Consignments of medicines are cleared from the factory by the manufacturer and delivered to the appellant at his premises. In this factual situation, it has to be held that there is no clearing by the appellant and for that reason, the service rendered by the appellant does not satisfy the requirement of clearing and forwarding. We, therefore, are of the view that the demand is not sustainable. To the same effect is our earlier decision in the case of M/s. Mahavir Generics (3) Refer que 4 of old RTP May 2010 (4) (a) No, the statement is incorrect. As per Notification No. 19/2009 CG has exempted the money changer services provided by one Scheduled bank to another Scheduled bank in relation to sale and purchase of foreign currency. (b) Yes, the statement is correct. Notification No. 1/2009 CG has exemptedt services provided by a clearing and forwarding agent in relation to clearing and forwarding operations to a goods transport agency for transportation of goods by road subject to the condition that the invoice issued by such service provider, providing services should mention the name and address of the goods transport agency and also the name and date of the consignment note. (2) The High Court, in case of Funds FEDERATION OF CHIT FUNDS(2009)(AP) CHIT FUND NOT COVERED Service tax levy on chit funds after deletion of exclusion to cash management from 1-6-2007 challenged Specific statutory definition of cash management or asset management absent and wider interpretation to include or exclude transactions not arises - Definition of financial institution in RBI Act not relevant as tax not levied using such definition before 1-6-2007 - No policy decision or statutory legislative act to levy Service tax on chit funds mentioned - Finance Act, 1994 not includes or excludes chit business - Chit funds not covered in view of absence of inclusive definition in statute - Levying Service tax based on C.B.E. & C. Circular not permissible. Hence chit fund activity does not fall within the expression cash management under banking and other financial services.

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(5) Yes, the tax paid on purchases of goods which are stock transferred will be available as input tax credit after deduction of 4% of such tax by the State Governments. (6) Computation of Sale Price and VAT payable thereon; Particulars Rupees Raw material purchased from foreign market (Note 1) Raw material purchased from local market (Rs. 20,800 Rs. 800) (Note 2) Raw material purchased from neighbouring state (Note 3) Storage, transportation cost and interest Other manufacturing expenses incurred Cost of production Add: Profit earned @10% on Rs. 42,240 Sale Price VAT @ 12.5% on sales 5,808 Net VAT liability of Rishabh:VAT on sale price 5,808 Less: Set-off of VAT on purchases On imports Nil On local purchases 800 Net VAT payable by Rishabh 5,008

12,000 20,000 7,140 2,500 600 42,240 4,224 46,464

(7) The subtraction method of computing VAT is normally applied where:(a) the tax is not charged separately and (b) the same rate of tax is attracted on all, including consumables and services, added at all the stages of production/distribution. (8) Demerits of VAT system:DEMERITS 1) No total elimination of cascading effect the merits accure in full measure only under a situation where there is only on rate of VAT and VAT applies to all commodities without any question of exemptions whatsoever. Once concessions like differential rates of VAR, composition schemes, exemption shemes, exempted category of goods etc are built inot the system, distortions are bound to occur and the fundamental principle that VAT will totally eliminate cascading effects of taxes will also be subject to qualifications. 2) No credit on inter-state purchase- Neutrality in the federal structure of india in the context of sales-tax, so long as CENVAT is not integrated with State VAT, it wil be difficult to put the purchases from other states at par with the state purchases. Therefore, the advantage of neutrality will be confined to only purchases within the state. 3) Increase in accounting cost For complying withe the VAT provisions, the accounting cost will increase. The burden of this increase may not be commensurate with the benefit to traders and small firms. 4) Increase in Working capital requirement Another possible weak point in introduction of VAT, which will have an adverse impact on it is that, since tha tax is to be imposed or paid at various stages and not on last stage , it would increase the working capital requrirments and the interest burden on the same. 5) Vat tends to be regressive VAT is a form of consumption tax. Since the proportion of income spent on consumption is larger for the poor than for the rich, VAT tends to be regressive. However, this weakness is inherent in all the forms of consumption tax. While it may be possible to moderate the distribution impact of VAT by taxing necessities at a lower rate,

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6) Increase in administration cost As a result of introduction ov VAT, the administration cost to the state can increae as the number of dealers to be administered will go up significantly. (10) The works contract is a deemed sale, which involves the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Under State VAT laws, works contract transactions too is subject to VAT within the purview of Entry 54 of the List II of the Seventh Schedule of the Constitution. To ascertain whether a transaction is a works contract as contemplated in Article 366(29A)(b), the following points should be kept in mind: (1) There must exist an individual works contract; divisible contracts are out side the scope. (2) Goods must be involved in the execution of the works. Transfer of property in goods does qualify as works contract when it is incorporated in the works. (3) Transfer of property in goods must pass as goods or in some other form. Form of goods has no relevance (may have a relevance for determination of rate of tax). (4) Property in goods must pass during the execution of works not before or after the execution of works. (5) Some work has to be done on the property of the contractee by the contractor. (6) In the works contract, transfer of property must be an integral part of its execution. (7) Pure labour contracts or service contracts are out side the purview of the sales tax/VAT law. (8) If during the execution of works contract goods are consumed and their identity is lost then no transfer of property occurs in those goods. (9) There must be a dominant intention to effect the transfer of property in goods in execution of works contract. However, even if the dominant intention of the contract is rendering of a service, and in that process if there is a transfer of property in goods, the contract will amount to a works contract.

RTP may 11 Registration and SSP exemption 12. Examine the validity of the following statements:(a) Exemption for small service providers under Notification No. 6/2005 ST dated 01.03.2005 as amended is not applicable to the taxable services provided by a person under a brand name or trade name of another person. (b) An assessee providing more than one taxable service is required to make a separate application of registration for each of the taxable services provided by him. Valuation of taxable services 13. Dolby Ltd. is engaged in providing services of renting of immovable property. For the month of March 2011, its receipts are as follows:Receipts Amount (Rs.) Rent of the building (including property tax of Rs. 1,50,000) 12,00,000 Vacant land, given on lease for construction of building at a later stage (Such building would be used for commercial purpose) 7,00,000 Let out vacant land solely used for farming purposes 15,00,000 Let out land to Dharmesh Circus 2,25,000 On the basis of the above information, compute the service tax payable by Dolby Enterprises under the category of renting of immovable property services for the month of March 2011. Note: All the receipts are exclusive of service tax. Composition scheme 14. Who are not eligible for composition scheme under the VAT regime? Discuss briefly. VAT in special transactions 15. Write a brief note to explain the impact of VAT on lease transactions. Computation of VAT 16. Compute the invoice value to be charged, amount of tax payable under VAT and input tax credit to be carried forward, if any, from the following information for the month of May, 2011:-

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Particulars Purchase price of the goods (excluding VAT) Rs. 1,20,000 Expenses incurred Rs. 10,000 Profit earned Rs. 15,000 VAT rate on purchase of goods 12.5% VAT rate on sale of goods 4% Ans 12. (a) The statement is valid. Exemption for small service providers under Notification No. 6/2005 ST dated 01.03.2005 as amended is not applicable to taxable services provided by a person under a brand name or trade name, whether registered or not, of another person. (b) The statement is not valid. As per rule 4(4) of the Service Tax Rules, 1994, where an assessee is providing more than one taxable service, he may make a single application mentioning therein all the taxable services provided by him. 13. Computation of service tax payable by Dolby enterprises for the month of March, 2011:Particulars Amount (Rs.) Rent of the building 12,00,000 Less: Property tax (Note 1) 1,50,000 10,50,000 Vacant land, given on lease for construction of building at a later stage to be used for commercial purpose Value of taxable services Service tax @ 10% = Rs. 17,50,000 10% Add: Education cess payable @ 2% = Rs. 1,75,000 2% Add: Secondary and education cess payable @ 1% = Rs. 1,75,000 1% Amount of service tax payable 7,00,000 17,50,000 1,75,000 3,500 1,750 1,80,250

14. Small dealers having gross turnover exceeding Rs 5 lakhs but less than Rs 50 lakhs have option of composition scheme. They will have to pay a small percentage (0.5 to 1%) of gross turnover. No input tax credit will be allowed to them. However, the following are not eligible for the composition scheme: (i) a manufacturer or a dealer who sells goods in the course of inter-State trade or commerce; or (ii) a dealer who sells goods in the course of import into or export out of territory of India; or (iii) a dealer transferring goods outside the State otherwise than by way of sale or for execution of works contract; or (iv) a manufacturer/dealer who makes inter-State purchases; or .

Bonne Ltd. is engaged in providing erection, commissioning or installation services. Compute the value of taxable services under the category of erection, commissioning or installation services for the month of October, 2011 with the help of the following particulars furnished by it:Installation of thermal insulation 12,00,000 Commissioning of Mechanized Food Grain Handling Systems 5,50,000 Installation of transformer 15,50,000 Installation of street lights 4,00,000 Erection of fire proofing system in the airport 95,00,000 All the receipts are excluding service tax. Bonne Ltd. is not eligible for small service providers exemption under Notification No. 6/2005 ST dated 01.03.2005.

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Tour operators services 13. Chandan Tours and Travels, Mumbai are engaged in providing the tour operators services. Compute the service tax payable by Chandan Tours and Travels for the month of November, 2011 on the basis of the information furnished as follows:Particulars Amount (`) Amount charged for a package tour* from Mumbai to Goa 10,00,000 Amount charged from Indian pilgrims for Haj and Umrah pilgrimage in Saudi Arabia 12,54,000 Amount charged for arranging a tour (transportation only) 22,50,000 Charges for arranging hotel accommodation in Bangalore in relation to a tour from Mumbai to 10,00,000 Bangalore (Cost of hotel accommodation included) *Note: The package tour includes transportation, accommodation, food, tourist guide and entry fees for monuments. All the charges are excluding service tax. Chandan Tours and Travels is not eligible for small service providers exemption under Notification No. 6/2005 ST dated 01.03.2005 Composition scheme under VAT 14. Who are not eligible for composition scheme under the VAT regime? Discuss briefly Registration under VAT 15. Under what circumstances registration can be cancelled under VAT? Computation of VAT 16. Mr. Ram, a dealer in Tamil Nadu dealing in consumer goods, submits the following information pertaining to the month of October, 2011: Details of purchases of goods:Particulars (raw material purchased from within the State) Amount (`) Rate of VAT Goods A 10,00,000 Exempt Goods B 20,00,000 1% Goods C 30,00,000 12.5% Detail of sale of goods Particulars (Sale of finished State in which goods are Amount (`) Rate of VAT goods) sold Produced from Goods A Tamil Nadu 5,00,000 12.5% Gujarat 7,00,000 1% Produced from Goods B Tamil Nadu 24,00,000 Exempt Produced from Goods C Tamil Nadu 35,00,000 4% Compute the amount of Value Added Tax (VAT) payable by Mr. Ram for the relevant month. There was no opening or closing inventory.

15. Impact of VAT on lease transactions:VAT and Lease Transactions 1) A lease is a special type of transaction, under which a party owing the asset (called the lessor) provides that asset for use over a certain period of time to another party (called the lessee) for consideration (called rentals). 1) The legal ownership of the asset remains with the lessor, but the lessee retains the possession and uses the asset over the period of the lease. The tax on these sales is referred to as lease tax. Such transfer of right to use the goods could be for any purpose and the period may or may not be fixed. Sub-lease 1) Transfer of the right to use goods does not require that the goods should be owned by the person effecting such transfer. 2) Accordingly, sub-lease of an asset too can be taxed. Sale of leased asset after lease period

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Sale of a leased asset after the lease period is over is taxable in the same manner in which normal sale of such asset would have been taxed. Maintenance of the asset 1) The maintenance of the asset involving supply of materials for maintenance/repair by the lessor would not amount to works contract, as there would be no transfer of property in such materials to the lessee. 2) Thus, there would be no VAT on the value of the materials supplied during maintenance/repair of the asset. Input tax credit allowed on purchase of the leased asset 1) Under the VAT legislations tax is to be charged on each stage of sale with the availing of input tax credit of the tax charged on the earlier stages. 2) The tenure of the lease agreements is generally spread over a long period of the time and lease rentals are collected over such lease periods. 3) The lessor would pay VAT at the time of procurement of goods. However, liability to pay VAT on lease rentals will be spread over the tenure of the lease. Input tax credit as Capital goods The assets given lease will be generally capitalized by the lessor in his books and will be treated as capital assets. Thus, provision relating to input tax credit on capital goods will apply, e.g. if VAT law provides to give input tax credit on capital goods in 36 months then irrespective of period of lease, input tax credit will be available only for 36 months. 16. Computation of invoice value:Particulars Rs. Rs. Cost of goods purchased 1,20,000 Add: VAT (Since credit of VAT paid is available, it is not added to the cost) Nil Add: Expenses 10,000 Add: Profit margin 15,000 25,000 Product Sale Value 1,45,000 Add: VAT @ 4% 5,800 Invoice Value 1,50,800 Computation of amount of tax payable under VAT:VAT charged on sales 5,800 Less: Input credit of VAT paid on purchases @ 12.5% on1,20,000 15,000 Tax Payable under VAT Nil Input tax credit of Rs. 9,200 (Rs. 15000-Rs. 5,800) is carried forward to the next month i.e. June, 2011.

custom
Re-importation of goods produced/manufactured in India 17. Goods manufactured or produced in India, which were earlier exported and thereafter imported into India will be treated at par with other goods imported into India. Is the said proposition correct? Has any concession been provided on such import? Discuss briefly. Importation, exportation and transportation of goods 18. Explain in brief the duty exemption to baggages under section 79(1) of the Customs Act, 1962. Valuation under Customs Act, 1962 20. Fraternity Corporations imported some goods by air at CIF price of 10,000 US$. Freight paid was 3,000 US$ and insurance cost was 1,000 US $. The banker realized the payment from Fraternity Corporations at the exchange rate of Rs.45 per dollar. Central Board of Excise and Customs notified the exchange rate as Rs.44.50 per US $. Find the value of the imported goods for the purpose of levying duty. Ans The given proposition is correct As per Section 20 of the Customs Act, 1962 goods produced in India, which were earlier exported and thereafter imported into India will be treated as if goods imported into India However in the case of re-import following exemptions are available under notifications (i) No duty re-imported for repairs, reprocessing

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| 210 No duty if (i) Goods are reexported within six months of the date of reimportation or such extended period not exceeding a further period of six months as the Commissioner of Customs may allow; and (ii) The Assistant Commissioner of Customs is satisfied as regards identity of the goods;

Goods manufactured in India and reimported into India (i) for repairs or for reconditioning. within 3 years from the date of exportation Provided that such re-importation takes place within 10 years from the date of exportation in case of Nepal.

(ii) For (a) reprocessing; or (b) refining; or(c) remaking; or(d) similar process within 1 year from the date of exportation

(ii)Re-imported within 3 years by same person if the same gods which were exported are re-imported within 3 years by same person, custom duty payable is equal to duty drawback and excise duty(which was exempted) (iii) goods exported for repairs goods exported for repairs abroad and reimported by the same person with in 3 years or extended period if any without being re-manufactured or re-processed then duty leviable on value fair cost of repairs carried out XXX add- cost of materials used in repairs XXX (whether such costs are actually incurred or not) Add- insurance and freight both ways XXX

18. Section 79(1) of the Customs Act, 1962 exempts the bona fide baggage of the passengers. Following baggage is exempt(i) articles in use by passenger/crew for the minimum period prescribed by the Baggage Rules, 1998. However, totally unused articles (new articles) may not be held as bona fide baggage. (ii) articles for use by passenger or his family or bona fide gifts or souvenirs within the limits prescribed in Baggage rules. 20. Computation of assessable value:CIF value Less: Freight Less: Insurance Therefore, FOB value Assessable value for customs purpose: FOB value 6,000 US $ Add: Freight (20% of FOB value) 1,200 US $ Add: Insurance (actual) 1,000 US $ CIF for customs purpose 8,200 US $ Add: 1% for landing charges 82 US $ Value for Customs purpose 8,282 US $ Exchange rate as per CBEC Rs. 44.50 per US $ Assessable value = Rs. 44.50 x 8,282 US $ = Rs. 3,68,549 10,000 US $ 3,000 US $ 1,000 US $ 6,000 US $

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From the following particulars, determine the assessable value of the imported equipment giving explanation for each item: Rs. (1) FOB cost of equipment (Japanese Yen) 2,00,000 Yen (2) Freight charges in Japanese Yen 20,000 Yen (3) Charges for development connected to equipment paid in India Rs. 60,000 (4) Insurance charge paid in India for transportation from Japan Rs. 15,000 (5) Commission payable to agent in India Rs. 15,000 Exchange rate as per RBI is 1 Yen = Rs. 0.45 Exchange rate as per CBEC is 1 Yen = Rs. 0.50 Landing charges: one percent of CIF cost (5 Marks) Answer Computation of assessable value:FOB value Add: Freight from Japan (Note 1) Total (in yen) Exchange rate applicable is 1 Yen = Rs. 0.50 (Note 4) Total (in rupees) Add : Insurance charges Total Add : Commission (Note 2) CIF value Add : Landing charges @ 1% of CIF value Assessable value

2,00,000 Yen 20,000 Yen 2,20,000 Yen Rs. 1,10,000 Rs. 15,000 Rs. 1,25,000 Rs. 15,000 Rs. 1,40,000 Rs. 1,400 Rs. 1,41,400

Notes: 1) As per Rule 10(2) OF Custom Valation rules Freight from Japan is includible in the assessable value. 2) As per rule 10(1) OF Custom Valation rules 2007 Agency commission paid in India is not a buying commission and hence will be added to CIF value. 3) Charges for development paid in India do not from part of assessable value because as per rule 10 OF Custom Valation rules, only the development charges at a place other than India shall be includible in assessable value. 4) Exchange rate as notified by CBEC will be taken.

1) May 2001/ Nov 2008 (New)

A consignment of 800 metric tons of skimmed milk powder of US origin was imported by a non-profit making organization for free distribution of milk to the children in a tribal area under a scheme designed by the Food and Agricultural Organisation. This being a special transaction of nominal price of US $ 10per metric ton was charged for the consignment to cover freight and insurance charges. The customs department found out at or about the time of importation of this gift consignment there were the following imports of skimmed milk powder of US origin

S.No. In metric tons 1. 2. 3.

Quantity imported US $ C.I.F 20 100 500 260 220 200

unit price in

MANOJ BATRA 4. 5. 6. 900 400 780

| 212 175 180 160

The rate of exchanges on the relevant date was 1 US $= Rs. 43 and the rate of BCD was 15% advalorem. There is no CVD and Special CVD. Calculate the amount of duty leviable on the consignment under the customs Act, 1962 with the appropriate assumption and explanations where required. Answer Determination of transaction value of the subject goods:In the instant case, while determining the transaction value of the goods, following factors need consideration:(1) In the given case, US $10 per metric tonne has been paid only towards freight and insurance charges and no amount has been paid or payable towards the cost of goods. Since there is no transaction value for the subject goods, rule 4 to 9 will be applied sequentially to determine the assessable value (2) Rule 4(1)(a) of import valuation Rules 2007, the value of imported goods shall be the transaction value of identical goods imported at or about the same time as the goods being valued. In the 6 imports given during the relevant time, the goods are identical in description and of the same country of origin. It may be presumed that they were produced by the same person. Even otherwise, such consignments can be accepted as identical goods. (3) Further, clause (b) of rule 4(1) of the said rules requires that the comparable import should be at the same commercial level and in substantially same quantity as the goods being valued. Since, nothing is known about the level of the transactions of the comparable consignments, it is assumed to be at the same commercial level. (4) As far as the quantities are concerned, the consignments of 20 and 100 metric tones cannot be considered to be of substantially the same quantity. Hence, remaining 4 consignments are left for our consideration. (5) However, the unit prices in these 4 consignments are different. Rules 4(3) of Customs Valuation (DVIG) Rules, 2007 stipulates that in applying rule 4 of the said rules, if more than one transaction value of identical goods is found, the lowest of such value shall be used to determine the value of imported goods. Accordingly, the unit price of the consignment under valuation shall be US $ 160 per metric tonne. Computation of amount of duty payable:CIF value of 800 metric tonnes:=800 x 160 At the exchange rate of $ 1 CIF Value (in Rupees) Add: Landing Charges at 1% 15% of Ad Valorem duty on Rs.55,59,040 Add: Education cess @ 2% (rounded off) Add: Secondary and higher education cess @ 1% (rounded off) Total custom duty payable

= US $ 1,28,000 = Rs.43 = Rs.55,04,000 = Rs.55,000 = Rs.55,59,040 = Rs.8,33,856 = Rs.16,677 = Rs.8,339 = Rs.8,58,872 IMPORTED MATERIAL VALUE 70000 35000 50000 25000 2000 125000 25000 MKT PRICE OF GOODS 1,00,000 40000 60000 30000 3500 135000 30000

Que- calculate DDB as per sec 75 read with rules of CA 1962 FOB VALUE OF EXPORT RATE OF DDB GOODS 2,00,000 0.5% 48000 1% 80000 0.5% 50000 30% 4000 1.2% 1,00,000 5% 50000 70%

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160001 3% 100000 Suppose in case 8 Minimum value addition to be achieved fixed by CG is 60%

ANS 1. DDB allowed, because 0.5% of 2 lac i.e 1000 is more than 500, even though less than 1% of FOB. 2. DDB allowed, because 1% of 48000 i.e 480 though less than 500, but DDB allowed if it is 1% or more of FOB. 3. DDB not allowed, because 0.5 % of 80000 i.e 400 less than 500,and also less than 1% of FOB. 4. DDB allowed will be restricted to Rs. 10000 (i.e 1/3rd of Mkt price) even though originally DDB comes to Rs 15000 ( i.e 30% of 50000). Hence DDB allowed is Rs 10000. 5. DDB not allowed as it comes to Rs 48 which is less than Rs 50 6. No DDB allowed as the export value of goods is less than vale of imported material used 7. DDB not allowed as market price is less than amount of Duty Drawback. Hence no DDB allowed. 8. DDB allowed , because as per sec 75 No DDB allowed if export value of such goods is not more than such percentage of value of imported material used in the manufacture.

Theoretical questions- Must do (1) Explain briefly the following with reference to Central Excise Act 1944:(a) Excisable goods (b) Assessee (c) related person (d) adjudicating authority (e) Place of Removal. (f) Taxable event (g) Assembly would amount to manufacture (2) Explain briefly with reference to the provisions of the Central Excise Act the term Deemed Manufacture. (3) Briefly explain any two of the following with reference to the provisions of Central Excise Act, 1944: (i) Wholesale dealer (ii) Factory (iii) Dutiability of waste and scrap (4) Discuss briefly, whether excise duty is attracted on the excisable goods manufactured in the following cases: (i) in the State of Jammu and Kashmir; (ii) by or on behalf of the Government (5) State briefly whether the following circumstances would constitute manufacture for purposes of section 2(f) of the Central Excise Act, 1944:

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(i) Both inputs and the final product fall under the same tariff heading under the first schedule to the Central Excise Tariff Act, 1985 (Tariff Act.) (ii) Inputs and final product fall under different tariff headings of the Tariff Act.

Classification (6) Does the maxim "Latter the Better" apply in classifying the excisable goods? (7) Short note on a. harmonized system of nomenclature b. power of CG to amend first and second sch to CETA 1985.

VALUATION (8) State the procedure for valuing excisable goods that are to be sold from depot/branch or premises of a consignment agent under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. (9) Short note on- Compounded levy scheme under rule 15 of CER 2002 or sec 3A of CEA 1944. (10) Determine the total amount of excise duty payable under section 4 of the Central Excise Act, 1944 from the following information: Particulars Rs. (i) Price of machinery excluding taxes and duties 5,50,000 (ii) Installation and erection expenses 21,000 (iii) Packing charges (primary and secondary) 11,500 (iv) Design and engineering charges 2,000 (v) Cost of material supplied by buyer free of charge 8,500 (vi) Pre-delivery inspection charges 500 Other information: (a) Cash discount @ 2% on price of machinery was allowed as per terms of contract since full payment was received before dispatch of machinery. (b) Bought out accessories supplied along with machinery valued at Rs. 6,000. (c) Central excise duty rate 10% and educational cess as applicable @ 3%. Make suitable assumptions as are required and provide brief reasons. (11) Determine the total amount of excise duty payable on a machine using the details given below: (I) Sale price of the machine excluding taxes and duties 2,00,000 (ii) Sales tax 20,000 (iii) Cost of durable and returnable packing included in the sale price given at (i) above 5,000 (iv) Design and development charges paid by buyer on behalf of seller to a third party 20,000 (v) Warranty charges charged separately by the seller 5,000 Rate of excise duty 10% Education cess 3% Calculations should be supported by notes, wherever required (12) How will the assessable value under the subject transaction be determined under section 4 of the CEA, 1944? Give reasons with suitable assumptions where necessary. Contracted sale price for delivery at buyer's premises as Rs. 9,00,000.

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The contracted sale price includes the following elements of cost: (i) Cost of drawings and designs Rs. 4,000 (ii) Cost of primary packing Rs. 3,000 (iii) Cost of packing at buyer's request for safety during transport Rs. 7,000 (iv) Excise duty Rs.1,11,200 (v) VAT (Sales tax) Rs. 37,000 (vi) Octroi Rs. 9,500 (vii) Freight and insurance charges paid from factory to place of removal Rs. 20,000 (viii) Actual freight and insurance from place of removal to buyer's premises Rs. 42,300 (13) What are the situations where transaction value under section 4 of the Central Excise Act does not apply? (14) A trader supplies fabrics to independent processor. Cost of fabrics is Rs.1,150. The processor charges Rs.450 which includes Rs.350 as processing charges and Rs.100 as his profit. After processing, goods are sent back to the trader who sells them at Rs.1,800. Transport charges for receiving goods at the premises of the processor is Rs.50 and the transport charges for sending goods after processing is Rs.60.Please determine the assessable value of the goods under Section 4 of the Central Excise Act. As per rule 10A of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000, the assessable value of the goods in question would the price at which the manufacturer ultimately sells them to the consumer, i.e. Rs. 1,800 in the given case. CENVAT CREDIT (15) Briefly explain any two of the following with reference to the provisions of Cenvat Credit Rules, 2004 : (i) Exempted goods (ii) Final products (iii) First stage dealer

(16)

Briefly explain EA 2000 and Special Audit u/s 14A & 14AA Central Excise Rules 2002

(17) Que- short note on Provisional assessment Annual financial Information Large taxpayer unit Daily stock account Prototypes Types of Bonds CT-1 certificate (18) Briefly explain the procedure for removal of goods by a unit which is an 100% EOU for Domestic Tariff Area. Offences and penalties (19) State briefly the provisions of the Central Excise Act, 1944 relating to arrest of a person.

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(20) Residuary penalty u/r 27 of CER 2002 (21) Describe power to summon persons under the Central Excise Act. (22) State the various circumstances where goods are liable for confiscation under the Central Excise Law. Can the assessee get back the confiscated goods and if so how? (23) Short note on (i) Provisional attachment u/s 11DDA (ii) Unjust enrichment and when unjust enrichment not applicable. (iii) Duty under protest (iv) Sec 11D of CEA 1944 (v) Consumer welfare fund Custom Short note on Bill of export Import report Entry Prohibited goods Goods stores Project import

Rules and regulation Person-in charge Smuggling Custom area Indian customs waters Foreign going vessel or aircraft

Adjudicating authority residual method of valuation first appraisement/second appraisement system boat notes Provisional assessment in custom Inland container depot and CFS

State the requirements to be satisfied to accept transaction value under rule 3(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. Discuss the provisions regarding transit of goods and transhipment of goods without payment of duty under the Customs Act

Summary of amendment for Nov 11 For Branded Ready 8. RULE-4(1A)- who will pay duty- RMS/BO (but jobworker may be authorised ) made Garments 9. RuLE-12D-CER 2002 Provisions apply to RMS/BO 10. RULE-9- Registration by RMS/BO 11. SSI Exemption-8/2003-AVAILABLE 12. Sec 3(2)-Tariff value-45% of RSP 13. R- 2(naa)-CCR 04- Manufacturer includes r- 4(1A) person (Means RMS/BO Can take CCR) 14. R-5 CER 02- CL. STOCK ON 28/2/11- When cleared liable to duty. On 130 items- 1% duty Rule 2(d)- 1% duty goods- exempted goods Rule 6 (1) CCR not allowed of IP/IS Rule 6 (4) CCR not allowed of CG Rule 3(4) - If he is also manufacturing goods attracting normal duty (e.g 10%)- CCR of IP related to those n allowed to be utilised for payment of 1%(Proviso To R-3(1) - Buyer Of 1% Duty Goods Shall Not Take Credit Of 1% Ed QUARTERLY RETURN- within 10 days after close of qtr Cir- 937/27/2010 If the FP is exempt under 2 notification & 1. 100% Exempt without any condition. 940/01/2011 2. 4% duty payable with availability of CCR of IP

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Cir 038/28/10 CCR 2004 Rule 2- cap goods R- 2- input

Then as per Sec 5A(1A), full exemption notification mandatory and any anount charged representing duty o exempted Final Product will have to be deposited u/s 11D . Further if the buyer has taken credit on such duty will be recoverable u/r 14 of CCR 2004. Quantity discount not deductible while calculating value based on MRP basis.

R- 2 input service

Proviso to Rule 3 Cir 933/23/10 Proviso rule 3(5) Rule 3(5B) Rule 4(2) Rule 6 6(3B) 6(3C) R- 6(5) deleted R- 6(6A) R- 9(1) R-9(7) Cir 942/3/11

8/2003 Rule 7/8/19 of CER 02 & sec 11AB Rule 9 CER 2002

Treated as Capital goods Even If used outside factory for generation of electricity for captive use within factory Means- all goods used within factory Any goods + accessory + goods used for Free warranty if there value included in FP All goods used for generation of electricity or steam for captive use All goods used for providing output service Excludes- 1) any goods for const of buildg or support of cap goods ( but treated as IP-for port/Airport/commercial const/ Res complex/ works contract service) 2) Cap goods ( when cap goods used as part or component then treated as input) 3) Motor vehicle, any goods for personal use, any goods which have no relationship Used by provider of taxable service or used by manufacturer directly or indirectly and includes -------------------------- excludes 1. Architect/port/Airport/ commercial const/ Res complex/ works contract service when used for for const of buildg or support of cap goods ( except when they used for providing these services) 2. General Ins/rent a cab/ service station/ supply of tangible goods when they are for motor vehicle ( For S. Providers who are allowed motor vehicle as capital goods can take credit of these services 3. Services which are for personal use of employee. CCR of 85% of CVD on ships, boats and other floating structure for breaking up When EOU clear to Depot in DTA than Value as per Rule 4 to 9 of import valuation rules sequentially . No payment if the input removed outside the factory for providing free warranty for final product. Payment of amount related to credit even if input or cap goods partially written off. CCR allowed on CG even if recd outside factory when used outside factory for generation of electricity for captive use within factory Refer chart made during class Banking Co/ NBFC/ shall pay monthly 50% of credit availed on IP/IS Life ins/ ULIP Service provider shall pay monthly 20% of credit availed on IP/IS Earlier 100 % CCR allowed on 16 services. Now proportionate CCR allowed for which either maintain separate A/cs or pay amt equal to 5% The provider of Output service to SEZ unit/Developer can take CCR CCR allowed on supplementary invoice issued by service provider. SSI will file return with in 10 days form end of quarter. Interest will be recovered under Rule 14 of CCR 2004 on Cenvat Credit wrongly availed even if not utilized [ Also Affirmed in -Ind-Swift Laboratories Ltd. the interest on irregular credit under rule 14 of the CENVAT Credit Rules, 2004 arises from date of availing such credit Packaging Material Include Label of all kinds Interest @13 % p.a has been changed to 18% p.a

classification

DDB SHALL NOT BE RECOVERED R-16A

If CBS/CAS maintained of goods produced by different mines and took registration of that premises then mines are exempt from registration. If ER-1 to ER- 8 not filed then penalty can be imposed upto Rs 5000. PAPER LICENSE OF SOFTWARE classifiable under 49070030 - Documents of title conveying the right to use IT software PUK CARDS - classifiable under 4911 Other printed matter Package software- ifaffixation of MRP mandatory- [Media + license]-excise duty Affixation of MRP not mandatory - EXCISE DUTY on AV U/S 4 excluding value of right to use and SERVIC Tax on value of right to use Sale proceed compensated by ECGC And RBI- waive off the requirement of realisation of proceeds on merit And

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R- 6(3) 6(6A) 6(7A)

Exporter produces a certificate from concerned foreign mission about the fact of non- recovery Limit of self adjustment of Rs. 1,00,000 has been increased to Rs. 2,00,000.

SERVICE TAX self assessed but not full or partially PAID then Service tax can be recovered without servic of SCN and Demand order u/s 73 If the whole premium is not towards risk cover in life then insurer has the option to pay (i) tax @ 10 % on the gross premium charged reduced by the amount of investment or savings on behalf of policyholder, if such amount is intimated to policy holder or (ii) in all other cases- 1.5 % of gross premium as tax. A foreign exchange broker, authorized dealer in foreign exchange or authorized money changer shall have the option to pay tax at following rate. Amount of currency exchanged Rate of service tax 1. Upto Rs. 1,00,000 0.1 %, minimum Rs 25. 2. Exceeding Rs. 1,00,000 upto 10 Lakhs Rs. 100 + 0.05% 3. Exceeding Rs.10 Lakhs Rs. 550 + 0.01% Maximum Rs 5,000 . Value of Money Changing Services shall be determined as under: (a) For a currency, when exchanged from, or to Indian Rupees Difference between buying rate or selling and RBI Reference rate for that currency at that time, multiplied by total units of currency. (b) Where RBI reference rate is not available 1% of gross amount of Indian Rupees provided or received (c) Where neither of the currencies exchanged is Indian Rupees

Rule 2B of Service Tax (Determination of value) Rules, 2006

1% of lower of the amount of two foreign currencies after converting them in to Indian currency on that day a the reference rate provided by the RBI. Rule 3

SEZ exemption 131/13/2010 137/6/2011

Export of Service Rules, 2005 & of Taxation of services (provided from outside India and received in India) Rules, 2006 Technical testing and analysis service and certain other services shifted from performance category to Residuary category Refer chart Hire charges collected for Electricity meters is exempt Visa application charges 1. not covered in Business Auxiliary Service- because not acting as agent of Foreign Embassay. [ i.e service not provided on behalf or client] 2. not covered in Business support Service- because individual directly making payment and that cant be considered as support service for business or commerce. 3. not covered in Manpower Recruitment Service- because doesnt act as agent of foreign employer for recruitment. 4. covered in bus support- if payment by business entity covered in Manpower Recruitment Service- if act as agent of foreign employer for recruitment.

134/3/2011 If service tax exempt then EC & SHEC ALSO EXEMPT. TAXABLE SERVICES TELECOMMUNICATION Explanation- for the telecommunication service, the value of taxable service shall be the gross amount pai by the person to whom telecom service is provided by the telegraph authority. CONST OF COMPLEX Services rendered for carrying out construction services under Jawaharlal Nehru Urban Renewable Mission (JNURM) & Rajiv Awaas Yojna.

MANOJ BATRA Works Contract Services

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Services rendered for carrying out construction services under Jawaharlal Nehru Urban Renewable Mission (JNURM) & Rajiv Awaas Yojna. The CENVAT credit of tax paid on taxable services as referred to under Erection, commissioning & installation service, commercial or industrial construction service and construction of complex service shall be available only to the extent of 40% of the service tax paid when such tax has been paid on the full value of the service after availing CENVAT credit on inputs..

BANKING & FINANCIAL Transport of goods by Air Transport of goods by Air/ Rail/ GTA MGT, MAINTENANCE OR REPAIR 126/08/2010 133/2/2011132/1/2011

CG exempts the taxable service, provided to a Scheduled bank, by any other Scheduled bank, any bank, including a bank located outside India, or money changer, by any other bank or money changer in relation to inter-bank transactions of purchase and sale of foreign currency, from the whole of the service tax Exempted to the extent air freight is included in the value of goods determined u/s 14 of the Customs Act

Services provided to a person located in India when the goods are transported from a place located outside India to a final destination which is also outside India.

CG exempts the taxable service, provided to any person by any other person in relation to management, maintenance or repair of roads, bridges, tunnels, dams, airports, railways and transport terminals from the whole of the service tax Underwriting commission received by the Primary Dealers for the auction of Government Securities not liable to service tax it is clarified that customized group JPAP insurance schemes floated by various insurance companies as pe the specifications of State Governments concerned, to extend risk cover to target populations, and to fulfill the prescribed rural or social sector obligation, are covered by the subject service tax exemption. Specialised cleaning services of containers used for export goods are exempt from the service tax by virtue of an exemption notification.

Basic concepts Clean energy cess [CEC]

Cir 927/17/2010 VALUATION Cir 936/26/2010 Rule 5

Rs 50 per tonne levied on raw coal, raw lignite and raw peat No EC,SHEC will be leviable. CEC exempt on goods produced or extracted as per traditional and customary rights enjoyed by local tribals in the state of Meghalya without any license or lease No CCR of CEC, For payment of CEC, CCR cant be utilised, CEC only paid through PLA. Pickling and oiling of metals as preparatory steps not manufacture. Pre-delivery Inspection charges and After-sale Service includible in Assessable value - Actual/average cost of transportation deductible except from factory to branch. Forward / return journey both transport deductible. Profit on transport includible, in case transportation charged more in invoice than actual incurred.

Accurate meters Ltd- if deemed delivery at factory gate as sec 39 of sale of goods act, then transport is irrelevant for TV. Bolting Cloth/screens/Silicon cylinders which carry design fitted on machine used in ceramic tile industry for priming of design on tiles are part/ component of machinery- CCR allowed. Cenvat credit Capital goods for specified service providers No.267/11/2010-

Dumper, tippers & its component, spares and accessories for Site formation service and mining service are capital goods. Similarly Motor vehicle and its component, spares and accessories are capital goods for specified services 1. No CCR on cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital

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2. Cir- 930/20/2010

Rule 6(6) Rule 9(8) Rule 19

if FP destroyed (i.e Bottled Beverage), Reverse CCR on IP as per rule 3(5C) of CCR Remission of duty on FP claimed under rule 21 2004 0f CER 2002 If the input (bottle) is written off by the assessee Reverse CCR on IP as per Rule 3(5B) of CCR as destroyed, 2004 CCr can be taken even if FP is exempt, no requirement to maintain separate accounts, no need to pay 5% of value of exempted goods, when the goods are supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents. first/second stage dealer submit Quarterly return electronically. that export of excisable goods which are chargeable to nil rate of duty or are wholly exempted from payment of duty, other than goods cleared by a hundred per cent export-oriented undertaking, shall not be allowed under this notification; Power of adjudication Amt of duty involved Superintendent upto 1 lakh ( excluding ROD/Value and cases involving EPL AC/DC upto 5 lakh except where superintendent empowered to adjudicate JC above 5 lakh upto 50 lakh Addl. Commisioner above 20 lakh and upto 50 lakh Commissioner without limit Central Government empowered to make rules for withdrawal of facilities/imposition of restrictions on CENVAT credit

Sec 33

Sec 37(2)(xiiia)

[Circular No. 929/19/2010

In excise, applications for the settlement of cases can be made where an assessee admits short-levy for goods in respect of which he has not maintained proper records in his daily stock register (i.e. cases of misdeclaration, clandestine removal etc.). In Custom applications for the settlement of cases can be made where assessee admits short levy in respect of the goods which were not included in the Bill of entry or Shipping Bill, as the case may be. 2. EXTENSION of order by the Settlement Commission for a further period by 3 months. 3. Now the assessee can apply for settlement more than once he CANT apply for settlement under section 32E in relation to any other matter if 1. an order of settlement passed for the imposition of a penalty On the ground of concealment of particulars of his duty liability; or 2. after the passing of an order of settlement in relation to a case, such person is convicted of any offence under this Act in relation to that case; or 3. the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission Polyester Staple Fibre manufactured out of PET scrap and waste bottles is a textile material classifiable under Section XI of the Central Excise Tariff Classification of TEA fortified with Vitamins will be classified under chapter 21

1.

Cir 924/14/2010

Rice parboiling machinery and drier which are essentially for use in conjunction with the rice mill will be classified under heading 8437. Goods supplied to UN or an international organisation exempted from additional and special additional duty of excise Goods notified under Medicinal and Toilet Preparations (Excise Duties) Act, 1955 Assessable value for CVD = MRP less abatement

NN. 33/2010

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Circular 34/2010- manufacturers in textile sector will not be allowed refund of special CVD Cir 933/23/2010 goods cleared from an 100% Export Oriented Undertaking to a depot which are subsequently sold in DTA will be valued as per Rule 3 to 9 of imported goods valuation Rules 2007 Circular Sec 14 of CA 1962- value of the imported goods shall be the transaction value of goods. No.11/2010 the price at which the imported goods are sold after warehousing them in India does not qualify to be the transaction value as per section 14. rule 5 of the Reexport of Imported Goods (Drawback of Customs Duties) Rules, 1995 rules 6, 7, 15 Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 claim for drawback shall be filed within 3 months from the date on which an order permitting clearance and loading of goods for exportation the said period of 3 months may be extended by a period of three months by AC/DC on an application accompanied with a fees of 1% of the FOB value of exports or Rs. 1000/- whichever is less and a further period of 6 months by Commissioner on an application accompanied with a fees of 2% of the FOB value or Rs. 2000/- whichever is less. The time period for the following has been extended from 60 days to 3 months: (a) making an application to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback [Rule 6]. (b) making an application to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback where the amount or rate of drawback is low (i.e Where the exporter finds that the drawback rate fixed under Rule 3 or Rule 4 is less than 4/5th of the duty or taxes paid on inputs or input services) [Rule 7]. Period of extension

Fees payable with application for extension Assistant or Deputy Commissioner Further 9 months 1% of the FOB value of exports or Rs. 1000/- whichever is less commissioner Further 6 months 2% of the FOB value or Rs. 2000/whichever is less RULE 16A of DDB Where sale proceeds are realized by exporter and duty drawback has been recovered from him , the Rules 1995 exporter produce evidence of realization with in 1 year [3 months] from date of such realization. The period may be extended by the Commissioner by 9 months subject to the condition that the amount has been realized on a date covered by the extensions of time limit given by the RBI for realizing export proceeds. Application fee equivalent to 1% of the FOB value of exports or Rs. 1000/-, whichever is less, shall be payable for applying for grant of extension by the Commissioner. Rule 3 of the Baggage Rules, 1998 Circular No. 125/7/2010N.No. 36/2010 Rule 3 shall apply in case of persons returning from Hong Kong. As Hong Kong is a separate Customs Territory from China. Services provided by state governments under Centrally Sponsored Schemes (CSS) not leviable to service tax. Grant cannot be presumed as a consideration for providing a service. Exemption to advances received prior to 1-7-2010 towards 8 new services introduced and specified existing services expanded by Finance Act, 2010 are exempt to the extent of amount of advance payment received before 1-7-2010 in respect of them. However any advance payment relating to retrospective amendments in Commercial Training & Coaching Centre and Renting of immovable property shall not be so exempt. CG exempts the taxable service provided to any person, by any other person for transmission of electricity, from CG exempts the taxable service provided to any person, by a distribution licencee, a distribution franchisee, or any other person by whatever name called, authorized to distribute power under the Electricity Act, 2003(36 of 2003), for distribution of electricity, Service tax on commercial training and coaching clarification whether donation is consideration - NO Rs 6000/- on every Rs 10 Lakh (or part of Rs 10 If the lottery or lottery scheme is one where the

Authority for extension

NN 11/2010 NN- 32/2010 CBEC CLARIFICATION Rule 6(7c)-

MANOJ BATRA promotion of Lottery ticketoptional S. Tax Rate Rule 4A of Service Tax Rules, 1994

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Lakh) of aggregate face value of lottery tickets guaranteed prize payout is more than 80% printed by the organising State for a draw Rs 9000/- on every Rs 10 Lakh (or part of Rs 10 If the lottery or lottery scheme is one where the Lakh) of aggregate face value of lottery tickets guaranteed prize payout is less than 80% printed by the organising State for a draw Provided also that in case the provider of taxable service is aircraft operator providing the service of air transport of passenger, an invoice, a bill or as the case may be, challan shall include ticket in any form by whatever name called and whether or not containing registration number of the service provider, classification of the service received and address of the service receiver but containing other information in such documents as required under this sub-rule..

Old amendment Cir- 910/30/2009 Cir- 915/5/2010 Sec 3A Cir 911/1/2010

the activity of transferring the goods from tankers into smaller drums cannot be said to be deemed manufacture because the tankers cannot be termed as bulk packs. the value for payment of excise duty for physician sample ( Free Sample ) would be the value determined under Section 4A for the similar goods Chewing tobacco, jarda scented tobacco and branded unmanufactured tobacco notified under section 3A- duty paid on basis of production capacity Regularisation of CCR taken If the assessee has already paid duty, and in a situation where there is no manufacture as held by the Courts subsequently, and facts of the case are covered by the provisions of Section 5B of the Central Excise Act, 1944, the assessee is at liberty to approach the Central Govt. for issue of appropriate notification for regularization of the Cenvat credit availed. SSI can take Full (100%) CENVAT credit on capital goods in one installment in the year of receipt of such capital goods in the factory. For computer & its peripherals if removed after use shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @5% for each quarter in the fourth and fifth year @1% for capital goods, other than computers and computer peripherals @ 2.5% for each quarter.] if the capital goods, on which Cenvat credit has been taken, are cleared as waste and scrap, even after a period of 10 years, an amount equal to the duty leviable on the transaction value for such capital goods cleared as waste CENVAT credit is allowed, in respect of jigs, fixtures, moulds and dies sent by manufacturer of final products to:another manufacturer for the production of goods, or Input Written off fully- pay amt equal to CCR taken WIP Written off fully if not considered as manufactured goods - pay amt equal to CCR taken Finished goods Written off fully, duty remitted u/r 21 CER 02- Reverse CCR WIP Written off fully if considered as manufactured goods - duty remitted u/r 21 CER 02- Reverse CCR CCR allowed on all the excisable goods exempt from customs duty when imported in India and are supplied:(a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive

Rule 4(2)

Cbec clarification Rule 4(5)

Cir 907/27/09-

Rule 6(6)

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bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding. Rule 5 Principal input IP/IS (C. GOODS)USED in or i.r.t FP/OS exported provides that if a manufacturer, first stage or second stage dealer, or an exporter is found to be knowingly involved in any of the specified contraventions, certain facilities would be withdrawn or certain restrictions would be imposed on them.

Other than fraud- Confiscation and penalty (duty or 2000) w.i greater Under Excise- Fraud- additional penalty equal to duty for manufacturer u/s 11AC Under S. Tax- Fraud- additional penalty equal to 100% to 200% of service tax for service provider u/s 78 Fibre Foils Ltd- penalty imposable u/r 15 cant be reduced. Green Alloys Ltd input cant be confiscated, If entered in stock register but not accounted in computer sheet. Ashok Kumar H. Fulwadhya penalty cant be imposed on directors, where CCR wrongly availed by company. Small Scale Industry NN- 8/03 Relaxation from brand name restriction under the SSI exemption scheme extended to plastic containers and plastic bottles used as packing materials on 27 feb 2010 by NN 4/2010 and then amendment made on 30th april 2010 and now word only packing material mentioned meaning thereby every type of packing material eligible for exemption Rule 15 CER 2002 pre-authentication of invoices is not required now. 1. 2. E-payment mandatory if total duty paid of Rs. 10 lakh or more (including the amount of duty paid by utilisation of CENVAT credit) in the preceding financial year. Now SSI can PAY DUTY ON QUARTERLY BASIS RATHER THAN ON MONTHLY BASIS upto 5th of next Quarter. For the Quarter of March 31st march

Rule 11 Rule 8

Rule 12(2A)

Rule 16

Rule 18 Sec 9A

Rule 24A

Annual installed capacity statement Exempt for assessee who manufactures biris, manufactured without the aid of machines falling under tariff item 2403 10 31 matches manufactured without the aid of power falling under heading 3605 reinforced cement concrete pipes falling under heading 6810 Indian Aluminum Co Ltd (2009)(Kerla)- there is no requirement for manufacturer to clear the returned goods to same party who returned the goods Circular 267/44/2009- dtd 25-11-09 1. CCR of duty paid on returned final product can be taken on basis of self-invoice issued at time of initial removal of final product goods are sold on 1-7-2010 of value of Rs 100000 by Raja by which duty payable is 10300, which are returend by customer on 6-7-2010. Duty will be paid by 5-8-2010, whether CCR can be taken on 6-72010 and on basis of which document.- yes Rebate under Rule 18 of CER 2002 is admissible when the goods are supplied from unit in DTA to SEZ Offences non cognisable i.e no arrest without warrant Compounding of offences- Any offence can be compounded by application to Chief CCE No compounding in following cases 1. If compounded allowed once to certain offences of sec 9 2. Any person who accused of offence under CEA 1944 & which is also offence in Narcotic Drugs Act. 3. Allowed to compound once for Value exceeding 1 crore 4. Who is convicted by court under CEA 1944 on or after 30th dec 2005 Return of records seized, if not relied upon- then return within 30 days of issue of SCN (or expiry of period

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permissible for issue of SCN) Note- CCE has power to further retain by reasons recording in writing and CEO intimate to assessee for such further retention CCE (A) cant remand the case back to Central excise officer No discretion to reduce the mandatory penalty under section 11AC even though the duty paid before the issuance of show cause notice Benefit of reduced penalty under provisos to section 11AC not available at the appeal stage

Cir- 889/09/2009 Cir No. 898/18/09 Cir 7/2010

Recovery of drawback amount on the portion of the FOB value of export not realized by the exporter but compensated by ECGC Any service provided for all activities pertaining to construction of installations, structures and vessels for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. Or services provides to such installations in continental shelf and EEZ liable to service tax E-payment mandatory if paid the total service tax of Rs. 10 lakh or more (including the amount of service tax paid by utilisation of CENVAT credit) in the preceding financial year. - value of Taxable service not include the taxes levied by any Government on any passenger travelling by air, if shown separately on the ticket, or the invoice for such ticket, issued to the passenger. No service tax on certification by Central Board of Film Certification because it is a statutory function CG exempts the taxable service provided to any person, by any other person for transmission of electricity, export & import rules amended in respect of following 1. India definition amended 2. CA/CS/CWA category changed from performance category to Residuary category

NN- 14/2010

Rule 6 STR 1994

Rule 6(2)(v)

NN- 18/09NN-11/2010 Export & import Rules for service tax

Jai Bhagwan oil and Flour Mills TARPAULIN INTERNATIONAL Sony Music Entertainment (I) Pvt Ltd. Cir 904/24/09 Bata India Ltd Bemcee Ltd Karnatka Vidyuth Karkhane Ltd. Solid & Correct engineering Works (2010)(sc) Larsen & Tourbo Limited (2009)(Bom) Virgo industries (Engineers) Pvt. Ltd.

Production of mustard oil and oil cake from mustard seeds amount to manufacture tarpaulin made-ups which are prepared after cutting and stitching the tarpaulin fabric and fixing the eye-lets would NOT manufacture Importing recorded audio and video discs in boxes each containing 50 discs. Each individual disc then packed in jewel boxes not amounting to manufacture. Baggase. Aluminium/zinc dross and other product termed as waste are capable of being sold for a consideration. Hence marketable and liable to excise duty. Theoretical possibility of product being sold is not sufficient to establish marketability of product. The fact that product is sent outside for job work doesnt establish its marketability. Process of Slitting and cutting coils to produce steel sheets and polyster films does not amount to manufacture. Repair of Transformers by replacing coils not manufacture. Affixation of Asphalt Drum/ Hot-mix Plant by nuts and bolts on foundation on earth to ensure wobble- free operation of the plant Movable Fabrication, assembly, erection of waste water treatment is immovable. Merely bringing of duty paid parts at site doesnt amount to manufacture. Signage Erected at Various petrol bunks of IOC are movable because capable of being shifted from one place to another without dismantling them.

MANOJ BATRA MEHTA & CO. MEDLEY PHARMACEUTICALS LTD. Textile corpn marathwada Ltd Remission of duty= R 21 CER 02 Hindustan Zinc Limited Gupta metal sheets Valuation Cir 902/22/2009 Ford India Pvt. Ltd. Maruti Suzuki India Ltd. Xerographic Ltd. Classification Pleasanttime products Godrej industries Chamdany industries CPS Textiles P Ltd

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chairs, beds, tables, desks, etc., affixed to the ground ARE movable SAMPLES of medicine are marketable even though cant be sold as Per Drug Act, and hence liable to excise duty. If assessee has to pay the excise duty at each and every stage of manufacturing, but not paid. No duty recovered because it would be entitled to Cenvat credit. if FP lost or destroyed or unfit for consumption for marketing before removal- Duty Remitted. As per rule 3(5C) CCR 04, CCR reversed on IP, if duty remitted on FP. Remission can be claimed on loss of goods due to de-bagging, shifting of concentrates, seepage of rain water, storage and loading on trucks, accounting method adopted. No remission of duty u/r 21 in case of theft or dacoity In case of job work value shall be determinder as per Rule 10 A on transaction value of Goods sold by Raw material supplier. Extended warranty charges were not includible in the assessable value of cars. cost of pre-delivery inspection and after sale services would form part of the assessable value In case of Related person TV acceptable if no extra commercial consideration followed. Scrabble cannot be said to be a puzzle rather it is a GAME. hair dye cannot be classified as hair lotion under tariff Item 14F. Carpet classifiable as Jute Carpet. In view of chapter note as per Rule 1 description of the goods as per the documents submitted along with the Shipping Bill be a relevant criterion for the purpose of classification, if not otherwise disputed on the basis of any technical opinion or test separate notice is not required to be issued for payment of interest which is mandatory and automatically applies for recovery of excess drawback Xerox Regal classified under heading 8471 cheetos Masala Balls, Cheetos Cheese Puff and cheetos X&O classified under heading 2108 100% EOU can take CCR of CVD, Special CVD, (EC, SHEC of excise0 Capital goods used in mines - Mines if captive mines so as to constitute one integrated unit with concerned cement factory, Cenvat credit available - Mines if not captive mines but supply to various other cement companies of different assessees and goods used in mines outside factory of assessee, credit not available steel plates and M.S. channel was accessory to diesel generating set and hence capital goods and credit thereon admissible The plastic dropper packed with the pediatric drops should be construed to be an input used in or in relation to the manufacture of the final product.- CCR allowed Transit loss- normal- CCR allowed as per industry norms for volatile and hygroscopics nature. Minor variation due to weighment difference by different machine ignored Welding electrodes are inputs and CCR allowable. No reversal of Credit on input service in respect of Goods Transportation Agency service CCR allowed on input consumed in quality control test and cleared as scrap. CCR allowed on Plastic crates either as input or capital goods. CENVAT credit be taken on the basis of private challans tribunal is not empowered to reduce penalty imposable under rule 15 of CCR 2004 Input cant be confiscated under rule 15 of CCR 2004 on the ground of non-accountal of

Xerox India Ltd Frito Lay India Cenvat credit Rule 3 (7) Madras cement Ltd

Rajasthan spinning & Weaving Mills Ltd Okasa Ltd Bhuwalka Steel Industries Ambuja cements Eastern Ltd BANSAL ALLOYS & METALS LTD. Tata engineering Locomotive Co Ltd Banco products (india) Ltd. Stelko Strips Ltd. Fibre foils ltd Green alloys pvt ltd

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Coca cola India Pvt. Ltd.Maruti suzuki Ambuja cement Alidhara Textool Engineers Pvt. Ltd. Tata Advance Material Jaya mills Ashok kumar h Fulwadhya Bipac India Corporation Ltd Karnatka Soaps & Detergents LtdRaymond Ltd-

inputs in the records maintained in computer CCR allowed on service tax paid on advertisement service, even if advertisement was of cold drinks manufactured out of concentrate on which duty has to be paid. CCR not allowed on naptha used for generation of electricity cleared to joint venture. Credit admissible on GTA serviceif ownership of goods remain with seller till delivery at customers doorstep CCR allowed on Erection, commissioning and installation service received at premises of buyer of machine, but not rendered at factory of manufacturer. If capital goods destroyed after 5 years, no CCR Reversal. But if cleared as waste then as per rule 3 (5A) pay amount equal to duty leviable on transaction value. If depreciation and CCR both claimed, subsequently if income tax return revised by withdrawing depreciation. CCR not required to be reversed. Penalty cant be imposed on directors of company for wrong availment of CCR. No reversal of CCR on Capital goods destroyed after many years of use. But if cleared as waste & scrap, then duty leviable on transaction value. CCR allowed on supplementary invoice issued due to fraud by one unit to another unit of same manufacturer in case of captive consumption

CCR allowed even if different name of manufacturer indicated in invoice, so long as there is no discrepancy in description or quatilty or value of goods and no fraud. SMALL SCALE INDUSTRY Unison Electronics in case of sale to Unite Tele-Shopping (UTS) and tele-Shopping Network (TSN), the supervisors ofr Pvt. Ltd UTS and TSN used to examine the goods and affix a sticker thereon containing the names of UTS/TSN. SSI exemption not allowed. Deora Engineering the clearances of two firms having common brand name, goods being manufactured in the Works same factory premises, having common management and accounts etc. can be clubbed for the purposes of SSI exemption Superior Products Where the 2 unit have separate legal identity with separate capital, premises, machinery and labour; the fact that they are managed by same person or that their products are same cannot mean that they are dummy units and their clearances should be clubbed for the purposed of SSI-exemption. Demand, Refund & Appeal Accrapac (India) Pvt. that non-disclosure as regards manufacture of Denatured Ethly Alcohol will not amounts to Ltd. suppression of material facts and hence it will not attract the larger period of limitation under section 11A. because Dept. was aware of Facts. Gem Properties (P) Ltd SICOM LTD SKF India Ltd RAJASTHAN SPINNING & WEAVING MILLS INTERNATIONAL AUTO LTD. Aman Medical products Ltd. Merely because assessee has sustained loss more than the refund claim, it is not a case of unjust enrichment since the assessee failed to prove that duty in the cost of production is not included Secured creditors have preference over Governemnt dues Differential duty is paid immediately upon the recovery of price difference through issuance of supplementary invoice, interest shall still be payable on such differential duty. 11 AC Penalty Not applicable to every case of Non- payment/ short payment Penalty If SCN under 11A (1) state that duty escaped due to conscious & deliberate doing and order u/s 11A(2) confirms this i.e fraud Penalty levied, even if duty paid before SCN in case of fraud Duty will be payable in case of retrospective recovery of increased value. Interest will also be payable. MRF case not applicable. refund claim of the appellant was maintainable under section 27 and the non-filing of the appeal against the assessed bill of entry did not deprive the appellant to file its claim for refund under section 27 of the Customs Act, 1962.

MANOJ BATRA Narayan Nambiar Meloths AP SPINTEX LTD Trilux Electronics Appeals Electronics Corponation of India Ltd.

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refund claim cant be denied only on the basis of contention that he had produced the attested copy of TR-6 challan and not the original of the TR-6 challan? ED recovered from buyer credit notes issued subsequently Doctrine of Unjust Enrichment not applicable an appeal against the consent order cannot be filed by the Revenue. One cannot possibly expect timely clearance by CoD for filing appeal by PSU. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario, time has come to recall the directions of the Supreme Court in its various earlier Orders setting up the said mechanism

Advance Ruling UAE Exchange a writ petition can be invoked against advance rulings. Centre Ltd. Settlement commission Vishwa Traders Pvt If case referred back to Department then Revenue shall continue the adjudication proceedings from ltd the stage at which the proceedings before Settlement Commission commenced Ashwani Tobacco Co. Pvt. Ltd. East and West Shipping Agency Sanghvi Reconditioners Pvt. Ltd. Cus. & C. Ex. Settlement Commission custom Decorative Laminates (I) Pvt. Ltd. Benefit under the proviso to section 11AC could not be granted by the Settlement Commission in cases of settlement. order of the Settlement Commission be considered to be a judicial proceeding the appellant could not be permitted to dissect the Settlement Commission's order with a view to accept what is favourable to them and reject what is not. Settlement Commission have jurisdiction to settle cases relating to the recovery of drawback erroneously paid by the Revenue

If imported goods warehoused and then extension taken and goods not cleared even after expiry of extended period. application for remission of duty under section 23 of the Customs Act, 1962 not allowed on the ground that the said goods had become unfit for use on account of non-availability of orders for clearance.

Paras Fab issue for use by 100% EOU would not amount to clearance for home consumption. International Miscellaneous - custom Alfred Menezes in case of prohibited goods, there is discretion in the officer to release the confiscated goods Poona Health In case the imported goods are confiscated, and goods are not redeemed by paying fine, the Services importer is bound to pay the customs duty Gawar Construction the notice for confiscation is required to be issued to owner when owner is in possession of goods Ltd. and goods are seized from his custody. In case of seizure of goods from the custody of person other than importer, notice must also be given to person from whose custody goods were seized Jaya Singh Vijaya Is the want of evidence from foreign supplier enough to cancel the confiscation order of Jhaveri goods undervalued?- No Sanghvi the appellant cannot be permitted to dissect the Settlement Commissions order with a view to Reconditioners Pvt accept what is favourable to them and reject what is not Ltd Finesse Creation improperly imported goods are liable for confiscation under sec 111 of the Customs Act, Inc. 1962, if the same are cleared and not available for seizure. Redemption fine cannot be imposed with regard to such goods. Infotech Software in the transactions taking place between the members of ISODA with its customers, the software is Dealers Association not sold as such, but only the contents of the data stored in the software are sold which would only

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amount to service and not sale. components of sale of photography, developing and printing etc. were clearly distinct and discernible than that of photography service. Photography was in the nature of works contract and it involved the elements of both sale and service, therefore, the service tax was not leviable on the sale portion. once the licence was given by the Airport Authority (i.e authorized ) to the assessee to permit entry and allow enjoyment of services provided to the visitors, the assessee was a service provider though he was acting only as an agent and therefore, was liable for service tax. e) The deeming provision under Rule 4(5) of Service Tax Rules, 1994 providing that registration certificate deemed to have been granted if not granted within seven days from the date of receipt of application is applicable only to registration granted by Superintendent of Central Excise and not to centralized registration granted under Rule 4(2). f) Though no time limit is specified for grant of centralized registration, however the same cannot be indefinitely delayed and be granted within reasonable time and seven days can be considered as reasonable time. service provided by way of advice, consultancy or technical assistance in the case of turnkey contracts attract service tax and turnkey contracts can be vivisected. the option for composition scheme under works contract service be exercised BEFORE payment of service tax on a particular works contract Service tax on renting of immovable property is constitutionally valid. commission agent also acting as a consignment agent be covered under the definition of clearing and forwarding agent Hire purchase finance not liable to service tax levy of service tax on hire purchase and leasing transactions falling under section 65(12) of the Finance Act, 1994 is constitutionally valid the value of SIM card supplied by the assessee would form part of the value taxable service on which service tax was payable by the assessee. service tax is not chargeable on the buffer subsidy provided by the Government for storage of free sale sugar, under the category of `storage and warehousing services

P. C. Paulose

Karamchand Thapar & Bros. (Coal Sales) Ltd.

BSBK Pvt. Ltd Nagarjuna Construction Company Ltd SHUBH timb Steels Ltd Mahavir generics Bajaj auto Finance Madras Hire Purchase Association Idea Mobile Communications Ltd. Nahar Industrial Enterprises Ltd.

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