TIOL-DDT 2209
14.10.2013
Monday

WHAT is the amount of excise duty payable by EOUs for clearance of their goods to the DTA? This has been a confusing issue for nearly a decade and the issue had been almost settled by the decision of the Larger Bench in Kumar Arch Tech Pvt Ltd Vs Commissioner of Central Excise - 2013-TIOL-614-CESTAT-DEL-LB apart from a High Court and the Supreme Court.

But the Departmental officers at the adjudicating levels of Assistant Commissioner, Additional Commissioner and Commissioner have scant respect for the Tribunal, High Courts and even the Supreme Court. They work on the mantra - confirm the demand - whatever be the views of the higher courts - for they know pretty well that courts are kind and will not take action against them and the Department will be happy if they simply confirm the demands.

Recently the same issue reached the Gujarat High Court for a third time.

It was in the case of Sarla Performance Fibers Ltd. vs. Commissioner of C.Ex. Vapi reported in - (2010-TIOL-408-CESTAT-AHM) that the Tribunal held that once the measure of Custom Duty equivalent to Central Excise Duty leviable on the like goods had been worked out, the question of levying the education cess separately in respect of clearance by 100% EOU to DTA would not arise. Revenue took the matter in appeal before the Gujarat High Court which dismissed it as the appeal had to be filed in the Supreme Court. (2012-TIOL-359-HC-AMH-CX) Revenue's appeal to the Supreme Court was dismissed on the ground of delay on 15.2.2013.

Now, in the case of Claris Lifesciences, the Tribunal relied on Sarla Performance and allowed the appeal of the assessee. (2010-TIOL-1147-CESTAT-AHM). The Department did not lie low. They continued with their notices and adjudication orders. Against one such order, the assessee approached the High Court without going through the rigours of the appellate channels. The High Court disapproved the act of adjudicating authority in no uncertain terms and without hesitation struck down the adjudication order.

Even this order of the High Court did not stop the Department from issuing further notices. This time the assessee did not wait for even the adjudication orders; it challenged the Show Cause Notices. And the High Court came down rather heavily on the wise officers of the Department. The High Court observed,

"It needs to be noted with strong disapproval that the repeated acts of the adjudicating authority of ignoring the decision of this Court is impermissible xxxxxxxxx

Despite clear and specific directions and authoritative pronouncements, act of issuance of show cause notice by the Deputy Commissioner is wholly impermissible and unpalatable and deserves to be quashed and struck down with a specific note of strong disapproval. The respondents simply could not have exercised the powers contained under the statute in such arbitrary exercise and in complete disregard to the pronouncement of this Court particularly reminding the Revenue authorities of the binding effect of decision of Tribunal on the identical question of law. This not only led to multiplicity of proceedings but also speaks of disregard to the direction of this Court rendered in the earlier petition of this very petitioner. Resultantly, petition stands allowed. Both the show cause notices dated 21.8.2012 and 22.1.2013 are quashed and struck down."

Wholly impermissible and unpalatable, strong disapproval, arbitrary exercise in complete disregard to the pronouncement of this Court, multiplicity of proceedings, disregard to the direction of this Court - normally such expressions from a High Court will shame any person in authority. The High Court has been extremely kind in not initiating action against the unconcerned officers, in spite of such despicable behaviour.

And strangely enough, the Department argued before the High Court that the Revenue's actions of issuance of show cause notice, demanding the cess with interest and penalty is not illegal nor without jurisdiction as the issue has not reached its finality and that the petitioner should exhaust the alternative remedy and respond to the show cause notices instead of straightaway rushing to the High Court by way of this petition.

So Revenue wants litigation at all levels - they are not prepared to end litigation at any stage.

Revenue seems to have misled the High Court. The Revenue submitted before the High Court that it could not appeal against the Tribunal's order in Sarla Performance, as it does not conform to the monetary limits. But the fact is that Revenue did appeal to the Supreme Court in CA NO. D4856/2013 and the appeal was dismissed on the ground of delay on 15.2.2013; yet the Revenue informs the High Court that it could not appeal.

Further Revenue appears to have not informed the High Court that this very issue has been emphatically decided by the Larger Bench of the Tribunal in the Kumar Arch case - 2013-TIOL-614-CESTAT-DEL-LB.

Of course even the petitioner seems to have missed this.

We bring you the High Court order today. Please see Breaking News.

Third Time Cess - A peep into past

DDT raised this issue in DDT-48 07.02.2005.

DDT 1318 - 15.03.2010 observed, "FOR setting up an EOU in India, you need two things. One is LOP from the Development Commissioner and the other is a Master's in Mathematics from a reputed University. The former is required for carrying the operations as EOU and the latter for computing the duties payable on DTA clearances and the CENVAT Credit against such clearances"

In the Sarla Polyesters case 2008-TIOL-985-CESTAT-AHM, the CESTAT held that the third time cess is payable.

The High Court (2008-TIOL-516-HC-MUM-CX) set aside the CESTAT order and remanded the matter to the Tribunal.

On remand, as per the directions of the Bombay High Court, Tribunal served notice to the general public so that all the parties who are interested may also apply as interveners. After hearing the appellants, the interveners and the departmental representative, the CESTAT held, "What is required for the purpose of proviso to Section 3 of Central Excise Act, 1944 is to arrive at aggregate of customs duties and once we take a view that education cess is part of the customs duty and is an enhancement, the question of adding it again does not arise". (Sarla Performance Fibres Ltd v CCE, Vapi - 2010-TIOL-408-CESTAT-AHM)

Ten months after the tribunal order, Board issued a clarification that education cess had to be paid a third time. (Please see DDT 1584 - 06.04.2011).

While this confusion was in full swing, the Delhi Bench of the CESTAT did not agree with the decision in Sarla Performance and referred the issue to the Larger Bench - 2011-TIOL-1180-CESTAT-DEL

Revenue also appealed against the Sarla case in the High Court. The Gujarat High Court dismissed the Revenue appeal on the ground that the appeals were not maintainable before the High Court as it was a question of rate of tax and the appeal had to be made to the Supreme Court. 2012-TIOL-359-HC-AMH-CX

So, the Revenue took the matter to the Supreme Court but the appeal was dismissed on the ground of delay. [See DDT 2047]

The Larger Bench delivered its order on 22.02.2013 in Kumar Arch Tech Pvt Ltd Vs Commissioner of Central Excise - 2013-TIOL-614-CESTAT-DEL-LB, holding, "The intention of the legislature was never to charge education cess on education cess. In fact this is not permissible from very mode of this levy as prescribed in Section 91 of the Finance Act, 2004 and Section 136 of the Finance Act, 2007, as when a new tax is introduced as surcharge on the existing levies, the base on which the new levy as surcharge is to be calculated will include only the existing levies, not the new levy. If the Revenue's stand is accepted, and on the sum of Basic customs duty and Addl. Customs duty, first "cess on imported goods" under Section 94 of Finance Act, 2004 and Section 139 of Finance Act, 2007 is charged as duty of customs and on the aggregate of duties of customs, "cess on excisable goods," under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 is charged, it would amount to charging education cess on education cess for which there is no sanction in law."

Even after the Supreme Court dismissed its appeal and the Larger Bench emphatically ruling against it, the Revenue is not prepared to put an end to its litigation.

Just imagine the amount of time, money and paper wasted!

Also see -

Education cess payable by EoUs on DTA sale : Will this Budget clarify?

Setback for EOUs: CESTAT rules Education Cess is payable on DTA clearances in addition to duties computed under relevant Notifications

And

1. DDT - 1318 15. 03.2010

2. DDT - 1354 07.05.2010

3. DDT - 1584 06.04.2011

4. DDT - 1690 12.09.2011

5. DDT - 1855 11.05.2012

6. DDT - 2047 18.02.2013

7. DDT - 2086 16.04.2013

Customs - Concessional Rates of Duty under IMCECA

GOVERNMENT has amended Customs Notification No. 53/2011 dated 1.7.2011, so as to provide deeper tariff concessions in respect of 1630 specified goods imported from Malaysia under the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA).

Notification No. 47/2013-Cus., Dated: October 10, 2013

Customs - Duty Drawback Scheme - CBEC Instructions

IN its Report No. 15/2011-12, the CAG had found fault with the Revenue in administration of Drawback Scheme (DDT - 1683 01.09.2011). CBEC had issued certain instructions in Circular No.46/2011-Cus dated 20.10.2011 (DDT - 1718 21.10.2011) and Circular No. 35/2013-Cus dated 5.9.2013 (DDT 2185 - 09.09.2013):

The Audit Report highlighted aspects on the compliance side, which Internal Audit did not notice. CBEC observes that a better performance by Internal Audit would have enabled remedial actions to be taken earlier. Board directs that Commissioners should appropriately strengthen their Internal Audit wings to achieve desired diligence levels and a significantly improved performance in areas such as payment of re-export drawback, cases of manual processing of drawback and the determination/fixation of brand rates.

Board now directs:

Once a complete application for fixation of brand rate under/in terms of Rule 7 of the Drawback Rules, 1995 has been filed with the jurisdictional Central Excise w.r.t. exports made under claim of brand rate of drawback in the shipping bills and request made, on or alongside the said application, for grant of drawback on relevant AIR provisionally, the Central Excise officer who is to fix the brand rate should, ensuring that the exporter is eligible for the relevant AIR, authorize provisional brand rate letter within 7 days to claim the drawback. Apart from other pertinent details, the said letter should show the shipping bill No. and date/item wise relevant drawback tariff item No.(including whether ‘A' or ‘B' column) of the AIR Schedule, rate and cap of drawback being granted, and the amount of drawback (equivalent to the relevant AIR with cap) bifurcated into Customs and/ or Central Excise/Service Tax components. The bifurcation should be based on claim in the application for fixation of brand rate filed in terms of said Rule 7. This is so that the components remain aligned with claimed ‘actual' incidence. The final brand rate letter should adjust the provisionally granted amount. Even if brand rate request is denied, the rejection letter should be endorsed to the Customs formation with request to treat the provisional brand rate letter as final and update the record.

Daily monitoring by Commissioner, of the applications and of brand rate work by Divisions/Ranges and headquarter Unit, should be institutionalized and positive results achieved over next 3 months and maintained in future. Board requests Chief Commissioners to guide their Commissioners where the time attributable to the department exceeds prescribed time frame.

CBEC F.No.603/01/2011-DBK., Dated: October 11, 2013

Anti Dumping Duty on Cefadroxil Monohydrate

GOVERNMENT has imposed definitive anti dumping duty on Bulk Drug Cefadroxil Monohydrate falling under Chapter 29 of the First Schedule to the Customs Tariff Act, originating in or exported from the European Union.

Notification No. 22/2013-Cus.,(ADD), Dated: October 10, 2013

Anti Dumping Duty on Ductile Iron Pipes

THE anti dumping duty on imports of Ductile iron Pipes, originating in, or exported from, China PR was imposed by Notification No. 103/2007-Cus, dated the 14th September, 2007 and would have expired on 13 September 2012. This was extended till 12 September 2013, just in time by Notification No. 41/2012 -Customs (ADD) dated the 13th September, 2012.

So, this has expired on 13th September 2013, but this time around they could not wake up in time.

Now, definitive anti dumping duty is imposed for a period of five years with effect from 10th October 2013. Was there no dumping between 13 September and 9 October 2013?

Notification No. 23/2013-Cus.,(ADD), Dated: October 10, 2013

CBDT Issues Instructions on TDS from Salaries

THE CBDT usually issues a Circular in October explaining the salient features of deduction of income-tax from the payment of income chargeable under the head "Salaries". The Circular for this year has been issued for the Financial Year 2013-14 which also explains the related provisions of the Income Tax Act and Rules.

CBDT Circular No. 08/2013, Dated: October 10, 2013

WCO Chief in Kolkata

AT the invitation of the Chairperson CBEC, Praveen Mahajan, Secretary General of WCO, Kunio Mikuriya visited Kolkata, on 9 and 10 October 2013 to discuss transit and other matters of mutual interest.

Secretary General Mikuriya visited the Bhutan Customs Liaison Office in Kolkata, which provides Letters of Guarantee issued by the Royal Government of Bhutan for transit purposes. He observed and discussed the Customs transit arrangements in place. The Secretary General also paid a visit to the Port of Kolkata's Netaji Subhash Dock to hear about transit practices from Customs, port operators and transport operators and to gain a glimpse into one of the busiest trade hubs for container operations in South Asia.

Picture shows him with a Customs boat crew in Kolkata.

Jurisprudentiol - Tuesday's cases

Service Tax

CENVAT - It is an admitted fact that prior to 10/09/2004 appellant was not registered as an output service provider - Then question of availing or taking any credit in respect of input service received prior to 10/09/2004 would not arise ab initio: CESTAT

PRIOR to 10.09.2004 only output service providers were eligible for taking input service credit. With effect from 10/09/2004, these restrictions were removed and service tax credit was made available to manufacturers to excisable goods also.

Computerized data processing is excluded from scope of BAS: CESTAT

THE activity undertaken by the appellant in the instant case is, processing of the transactions of their client electronically. It is also a fact that the appellant is not interacting with the bank's customers for collection of any data. The data already collected by the bank in their various branches are electronically processed by the appellant. Since computerized data processing is specifically excluded from the scope of BAS as per explanation thereof, the question of confirmation of demand under BAS prima facie does not arise.

Income Tax

Whether legal fiction created u/s 50 can also curb application of Sec 54EC if assessee makes investment in tax-free bonds - NO: HC

THE issues before the Bench are - Whether the legal fiction created u/s 50 can also curb application of Sec 54EC if assessee makes investment in tax-free bonds and whether exemption benefit u/s Sec 54EC available for depreciable assets can also be availed on short-term capital gains. And the verdict goes against the Revenue.

Central Excise

When two exemption Notifications are available to an assessee, he can always opt for Notification, which is most beneficial for him: CESTAT

WHEN two exemption Notifications are available to an assessee, he can always opt for the Notification which is most beneficial for him and in this regard the Department cannot force the assessee to avail a particular exemption Notification. Looked at from this point of view, the Department's stand is incorrect.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

Mail your comments to vijaywrite@taxindiaonline.com