TIOL-DDT 2108
20.05.2013
Monday

MORE than four years ago, in DDT 1077 dated 24.03.2009 we carried this story:

Relevance of relevant date for refund under Rule 5 for export of services

IN terms of Rule 5 of the CENVAT Credit Rules, 2004  if any input or input service is used in the manufacture of final product and cleared for export or used in providing output service which is exported, the manufacturer/service provider shall utilize the CENVAT credit in r/o the inputs or input services so used for payment of excise duty on any final products cleared for home consumption or for export or service tax on output service as the case may be.

In case if such utilization (adjustment as per the Rule) is not possible the manufacturer or service provider shall be allowed refund of such unutilized CENVAT credit if any lying in the books subject to the conditions/safeguards prescribed in terms of Notification No. 5/2006 CE (NT) dated March 14, 2006 as amended. One of the essential conditions prescribed is the applicability of time limit as per s. 11B of the Central Excise Act, 1944 for filing of such refund claims. The relevant date for the purpose of reckoning the time limit of one year is defined in terms of clause B to Explanation under s. 11B of the Act.

According to this clause the ‘Relevant date' means

(a) In the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,-

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India …………

This definition of ‘Relevant date' under s. 11B does not mention anything with regard to export of services. So, in the absence of a specific definition what could be regarded as the ‘relevant date'?

Is it the date of rendering the service or the date of invoice or the date of realization of export proceeds or the date of receipt of advance (which is also deemed as taxable - but exempted by virtue of it being export) that could be regarded as the ‘relevant date'?

As it is, the refund claims under Rule 5 are hard to come by for the service providers in spite of the repeated clarifications and directions issued by the CBEC for speedy sanction/disposal of refund claims. But in the absence of any clarity in the provisions with regard to relevant date for export of services the assessees are hard put to satisfy the authorities on this aspect.

It is learnt that nearly six hundred Crores of rupees of refund under Rule 5 on export services is pending and the responsive Board has asked daily reports from the field on refund status. Instead of merely asking for the reports, the Board could try process a sample claim to learn the complexities involved and iron out the creases and come up with a specific clarification in this regard to dispel any doubts in the minds of the refund sanctioning authorities, in the interim and bring in suitable amendments to s. 11B at the appropriate time (next budget).

It appears till today, there is no clarity on the above issue. Adding to the confusion, in 2011, Point of Taxation Rules, 2011 were notified, prescribing that the point of taxation in respect of export of services is the date of receipt of payment.

Now, there are three possible dates for processing refund claim filed under Rule 5 by a service exporter:

1. Date of receipt of payment

2. Date of invoice

3. Date of rendering the service

Recently, the Commissioner (Appeals), Pune III had to decide this ticklish issue. The appellant had received advance for exporting the service and export took place later. Department rejected part of the claim on the ground that it was filed beyond one year from the date of receipt of advance, which is a point of taxation as per Rule 7 of POT Rules, 2011.

The Commissioner (Appeals) allowed the appeal of the exporter by holding that:

On Sec 11 B:

Even though there is no clause given under Explanation (B) under Section 11B which categorically defines `relevant date' for the purpose of claiming refund of accumulated CENVAT credit, however clause (a) as quoted above, is most akin. I am therefore inclined to accept the same as applicable in the present case, in view of the fact that the present refund of accumulated CENVAT credit has arisen only on account of exports.

On Rule 7 of POT Rules, 2011:

I find that the above Rule defines the Point of Taxation in respect of export of services as the date on which payment is received. However I have also noticed that this Rule is not applicable wherein payment is not received within the period specified by the RBI. Further, the present case is of refund of input service CENVAT credit accumulated on account of exports and the said Rule 7 of Point of Taxation Rules does not refer to either Section 11B of the Act or Rule 5 of CENVAT Credit Rules/Notification No. 05/2006-CE(NT) under which the present refund claim of accumulated CENVAT credit has been filed. Further, Point of Taxation Rules, 2011 were made in exercise of powers conferred under clause (a) and clause (hhh) of sub-section (2) of Section 94 of the Act. The said clauses do not deal with export of services and hence POT Rules, 2011 are not made under clauses, which deal with export of services.

Provisions of Rule 7 of Point of Taxation Rules, 2011 have been amended vide Notification No.4/2012-ST dated 17.03.2012 and the reference to the date on which payment is received for export of service has been deleted from the said Rule. Thus, the confusion on account of Rule 7 of Point of Taxation Rules, 2011 (which came into effect on 01.04.2011) about the date of export of services with respect to refund of accumulated CENVAT credit was neither there prior to 01.04.2011 nor it is there after 01.04.2012 (when Rule 7 of PoT Rules was amended). Thus the application of Rule 7 of Point of Taxation Rules in respect of refund of accumulated CENVAT credit with respect to time bar aspect is not correct.

Conclusion:

The question of refund of accumulated CENVAT credit will arise only when export of services is completed by way of issuance of invoice as well as receipt of export proceeds. Unless services are provided for export & invoice is issued, it cannot be said that the service provider has accumulated CENVAT credit& for the same reason refund under Notification No. 05/2006 CE(N.T.) can be given only when both the conditions are fulfilled.

Thus for filing of the Application in Form `A' under Notification No. 5/2006CE(NT) before the expiry of the period of one year specified under Section 11B of the Act, the time limit has to take into account with respect to the completion of both - receipt of export proceeds (payment) as well as issuance of invoice. In the present case, the invoices were issued during the period July to September 2011 and refund application was filed on 27.07.2012. Thus I hold that the same was within the period of one year specified in Section 11B of the Act.

Even the above conclusion does not solve the problem completely. What if the claim is within one year if we take the date of receipt of payment and is beyond one year if we take the date of issue of invoice? Whether refund is admissible or not? To put an end to such disputes, why can't the Board issue a clarification on this important issue?

Please see the order:

Oil Exploration Sector - Exemption Notification 12/2012-Cus Amended - Clarification precedes Notification

IN DDT 2107, on Friday, we mentioned,

By the way, we are waiting for the notification 28/2013-Cus dated 16 th May, 2013 which has been presumably issued since the Circular refers to the same.

CBEC has made the notification available a day after the clarification was made public.

Notification No.28/ 2013-Cus., Dated: May 16, 2013

FTP - Export Promotion Schemes - Customs Notifications Amended

GOVERNMENT has amended the following Customs Notifications in tune with the recent changes in the Foreign Trade policy.

Similar amendments made in Central Excise also.

Notification No. 29/ 2013-Cus., Dated: May 16, 2013 and Notification No. 17/2013-CX., Dated: May 16, 2013

Anti Dumping Duty on Peroxosulphates - No Resurrection but re-birth

PROVISIONAL  anti dumping duty on ‘Peroxosulphates' also known as ‘Persulphates', originating in, or exported from, China PR and Japan, was imposed by Notification No. 40/2007-Cus dated 19.03.2007. Definitive anti dumping duty was imposed on this product with effect from the date of provisional imposition, by Notification No. 96/2007-Customs, dated 29th August, 2007. This notification was to be valid till 18th March 2012 and had expired on 19th March 2012.

But Government strongly believes in resurrection to take care of their slumber. They obviously forgot about this notification on 18th March 2012 and allowed it to lapse. Then, they extended till 18th March 2013 by Notification No. 20/2012-Cus.,(ADD), dated: April 4, 2012. This also coolly expired on 18 th March. They allowed it to expire and kept quiet for a month and now they have re-imposed the duty with effect from 16 th May. So there was no anti dumping duty during the period from 19 th March to 15 th May. Was there no dumping during this period?

The Designated Authority says, “there has been continued dumping of the subject goods” and has recommended continued imposition of definitive anti-dumping duty. Who is responsible for the loss during the last two months?

Notification No. 11/2013 - Cus.,(ADD), Dated: May 16, 2013

FTP - ANF3F for claiming benefit of Incremental Export Incentivisation Scheme notified

DGFT has notified the new Aayat Niryat form (ANF 3F) as given in annexure to the Public Notice which will be required to be filled up for claiming benefits of Incremental Export Incentivisation Scheme. 

Public Notice No. 13/2009-2014 (RE- 2013), Dated: May 17, 2013

FTP -   transfer/sale of imported weapons (firearms) by shooters has been liberalized

PARA 2.43.2 (c) of Handbook of Procedure Vol.I, 2009-2014 now reads as under:

“Prior Permission of DGFT shall also not be required for transfer of imported weapons (firearms) by the Renowned Shooters after 5 years from date of import. In respect of those shooters categorized as Renowned Shooter for at least 3 consecutive years, no permission would be required from DGFT after 3 years from date of import.”

It is amended to read as under:

“Prior Permission of DGFT shall also not be required for transfer of weapon/s (firearm/s) imported by a Renowned Shooter (as defined in Policy Condition 3 of Chapter 93 of ITC(HS) 2012) for the purpose of his/her pursuing shooting as a sport to any upcoming shooter as certified either by the National Rifle Association of India (NRAI) or the Department of Sports, Ministry of Youth Affairs & Sports after two years from the date of import. The transferee can subsequently transfer/resell to any buyer as certified by the NRAI or Department of Sports for the sole purpose of pursuing shooting as a sport after one year from the date of its first sale. Such transfer/sale is subject to the provisions of the Arms Act, 1959 and other rules/regulations by state/local police. NRAI/Department of Sports will maintain the required records.”

Public Notice No. 14 /2009-2014 (RE- 2013), Dated: May 17, 2013

Jurisprudentiol - Tuesday's cases

Central Excise

Can a 100% EOU export finished goods on payment of duty under claim of rebate under Rule 18? - Madras High Court orders cash refund of duty paid.

WHILE a 100% EOU can procure the raw materials and capital goods without payment of duty, there is no such facility as far as input services are concerned. But the EOUs are allowed to take credit of such service tax paid. This particular EOU had accumulated such CENVAT Credit of service tax and utilized it for payment of duty on finished goods exported. The EOU claimed rebate of such duty paid under Rule 18 of the Central Excise Rules, 2002. The rebate claim was rejected by the department on various grounds like, the goods manufactured by EOU are exempted under Notification No 24/2003 CE dated 31.03.2003, and as per Section 5A (1A) of the Central Excise Act, 1944, the EOU should avail exemption and cannot opt to pay duty.

Income Tax

Whether submission of audited accounts per se would oust jurisdiction of AO to pass a direction for special audit u/s 142 - NO: HC

THE issues before the Bench are - Whether the submission of audited accounts per se would oust the jurisdiction or authority of the AO to pass a direction for special audit u/s 142; Whether when a Government company provides unsatisfactory response to the queries and the show cause notice issued u/s 142 pursuant to discrepancies noticed by the AO, a special audit is rightfully warranted; Whether there can be any violation of principle of natural justice, when the assessee was duly served with a show cause notice, before issuing direction for special audit; Whether the expression 'accounts of the assessee' can be given a narrow interpretation, so as to confine it to only the accounts of the assessee; Whether the proceedings u/s 142 (2A) is strictly a judicial proceeding and requires elaborate reasoning and Whether when the opportunity has been given to the assessee along with proper reason for framing the opinion that the nature of the accounts is complex and in the interest of the revenue, special audit is necessary, the approval granted by the Commissioner cannot be said to be mechanical and without application of mind. And the verdict goes in favour of the Revenue.

Service Tax

CENVAT Credit on common area management, maintenance or repair service; employee mediclaim insurance; cab services; and car parking - eligible: CESTAT

CENVAT credit availed by the appellant for common area management, maintenance or repair service; employee mediclaim insurance; cab services; and car parking are eligible for the claim of CENVAT credit. The conclusion by the adjudicating authority to the contrary in the order under appeal is thus unsustainable and is accordingly quashed.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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