TIOL-DDT 2254
18.12.2013
Wednesday

THE CBEC informs that subsequent to the amendment done to Rule 7 of CCR, 2004 with effect from 01.04.2012 and 01.07.2012, it has been represented by the Trade that procedural difficulties are being faced in distribution of input service credit by input service distributor (ISD) and the "same issue"was raised in the forum for exchange of views between Industry Groups and Government chaired by the Adviser to Finance Minister.

After examining the issue, the Board has proposed to amend the Rule 7 in the following manner to address the ‘concerns' of the Trade.

The proposed changes to the existing Rule 7 of the CENVAT Credit Rules, 2004 are shown in Italic, bold with underlining or striking of the portion which is to be deleted.

"7.Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :-

a. the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;

b. credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed;

c. credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit; and

d. credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the total turnover of all its units sum total of the turnover of all the units to which the service relates during the same period.

Explanation 1.- For the purposes of this rule, "unit" includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise.

Explanation 2.- For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5."

[Existing Explanation3,is proposed to be replaced by the following explanation.]

Explanation 3.- (a)The relevant period shall be the month previous to the month during which the CENVAT credit is distributed.

(b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of Central Excise Rules, 2002 then the relevant period shall be the quarter previous to the quarter during which the CENVAT credit is distributed.

(c) In case of an assessee who does not have any total turnover in the said period, the input service distributor shall distribute any credit only after the end of such relevant period wherein the total turnover of its units is available.

"Explanation 3.- The ‘relevant period' shall be:

(i) If the assessee has turnover in the ‘financial year' preceding to the year during which credit is to be distributed for a month or quarter, as the case may be, the said financial year ; or

(ii) If the assessee does not have turnover for some or all the units in the preceding financial year then, the latest quarter, for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed."

The Board requests the Chambers, trade, industry and field formations to go through the draft rules and offer their comments, views and suggestions on or before 27th December, 2013 at the email id to jayaprahasam@gmail.com. (It is still @gmail unlike DGFT which uses nic.in.)

The CBEC communication in a very guarded manner also mentions the following -

"4.The draft ‘ CENVAT Credit Amendment Rules ' have been put up only to elicit public response. No final decision has been taken as yet by the Government / Board. Any decision in the matter will be finalized only after due examination of the response received."

Board wants comments/views/suggestions before 27th December, 2013 and they hope to finalise the issue by 31/12/2013

And why in the proposed amendment should it be "concerned unit"rather than saying "unit concerned”. That's our invaluable suggestion!

Board letter F. No. 354/246/2012-TRU dated December 17, 2013.

CE - CENVAT Credit on HSD - Finance Act 2000 disallowed CENVAT Credit on HSD and any credit taken was to be reversed within thirty days of enactment - If not reversed, interest at 24% leviable - Supreme Court

ISSUE relates to the CENVAT Credit on HSD during the period 16th March 1995 to 12th May 2000. As per Section 112 of the Finance Act 2000, interest at the rate of 24% p.a. had to be paid on the MODVAT credit wrongfully availed in respect of the duty paid on the HSD Oil used as an input. This interest liability is under challenge before the Supreme Court.

The Supreme Court yesterday confirmed that interest had to be paid by those who availed CENVAT Credit on HSD which was not reversed within thirty days from the enactment of the Finance Act 2000.

We bring you the judgement today. Please see Breaking News.

Issue of Intimation under section 143(1) of Income-tax Act, 1961 beyond time - CBDT Instructions

SEVERAL instances have come to the notice of the Board where due to certain technical or/other reasons (which inter-alia included wrong migration of PAN and delayed release of returns by the Centralized Processing Cell to the jurisdictional authorities), intimation in refund cases could not be sent to the concerned assessees within the timeframe as prescribed in second proviso to sub-section (1) of section 143 of the Income-tax Act, 1961 (‘Act'). This has caused grievances as assessees are unable to get their legitimate refunds in accordance with provisions of Act, although the delay is not attributable to them.

Central Board of Direct Taxes has now relaxed the time-frame prescribed in second proviso to sub-section(1) of section 143 of the Act in those cases where the return of-income was filed by the assessee in accordance with provisions of section 139/142(1) of the Act, but due to technical or other reasons not attributable to such assessees, the date of sending intimation under section 143(1) of the Act has lapsed before 01-04-2013. In such cases, Central Board of Direct Taxes directs that such returns shall be processed and intimation of processing of such returns shall be sent to the assessee concerned by the Assessing Officer in accordance with provisions of section 143 of the Act notwithstanding the time-limit prescribed in second proviso to sub-section (1) of that section.

CBDT Instruction No. 18/2013, Dated:December 17, 2013.

'Profits and gains of business or profession' - Section 40(a)(ia) of the I.T. Act - Conflicting Judicial Decisions - CBDT clarifies

IT has been brought to the notice of the Board that there are conflicting interpretations by judicial authorities regarding the applicability of the provisions of section 40(a)(ia) of the Income-tax Act, 1961 ('the Act') with regard to the amount not deductible in computing the income chargeable under the head 'Profits and gains of business or profession".

In the case of Merilyn Shipping & Transports v. Addl. CIT - 2012-TIOL-184-ITAT-VIZAG-SB, it was held by Special Bench of ITAT, Vishakhapatnam, that the provisions of section 40(a)(ia) of the Act would apply only to the amount which remained payable at the end of the relevant financial year and could not be invoked to disallow the amount which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court.

The Calcutta High Court and Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Exports Syndicate (2013-TIOL-404-HC-KOL-IT) and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar (2013-TIOL-389-HC-AHM-IT) respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year.

After careful examination of the issue, the Board is of the considered view that the provision of section 40(a) (ia) of the Act would cover not only the amounts which are payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a) (ia) of the Act the term "payable" would include "amounts which are paid during the previous year".

Board further clarifies that where any High Court decides an issue contrary to the 'Departmental View', the 'Departmental View' thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court.

CBDT Circular No. 10/DV/2013, Dated:December 16, 2013

Import Tariff on Items imported from Singapore lowered

IN terms of Notification 10/2008-Cus dated January 15, 2008, as amended, items mentioned in the Table annexed to the notification when imported into India from the Republic of Singapore are subject to lower rates of Customs duty varying from 1.67% to 26.67%.

The initial notification contained 539 items which over the period had come down to 533.

Now, the notification is further amended. The Table to the notification has now been substituted and the lower rates of duties now applicable are in the range of 1.11% to 17.78%.

The goods earlier figuring against Serial no. 497 viz. Tariff Item 8708 6000 and attracting 0% has now been dropped from the new Table probably because there is no such Tariff Item now existing in the Customs Tariff. And so, there are a total of 532 items in this benefactor list.

Notification 50/2013-Cus, dated: December 16, 2013

Reduction of Government litigation - providing monetary limits for filing appeals by Department before CESTAT/High Courts and Supreme Court

THE CBEC is vested with powers to regulate filing of appeals in the Tribunal and the Courts by specifying monetary limit, below which appeal need not be filed.

Section 35R of the CEA, 1944 and section 131BA of the Customs Act, 1962 empowers the Board to do so. The instructions/letter on the subject matter are dated 20/10/2010, 17/08/2011, 02/11/2011 & 03/06/2013.

Sub-Section 3 of Section 35R and Section 131BA provides that if an appeal has not been filed by the Department following Instructions issued for not filing appeal below the monetary limit, no person, being a party in appeal, shall contend that the Department has acquiesced in the decision on the disputed issue by not filing appeal. In effect, the decisions/judgments accepted for reasons of monetary limit do not have precedent value.

It has come to the notice of the Board that while arguing on the legal effect of an order accepted on account of low amount, the Department has failed to emphasize the relevant provisions of Section 35R as above before the Courts/Tribunal.

This is what the Board says -

"In a recent case, the Hon'ble High Court dismissed an order passed by the adjudicating authority and even quashed the Show Cause Notice on the ground that an earlier Tribunal order which had decided the issue was not challenged by the Department. The duty involved in the said case was below the threshold limit prescribed for filing appeal. The plea that non-filing of appeal against the said Tribunal order was on account of low amount and did not have any precedent value in the light of the provisions of Section 35R ibid and that the merits of the case are not finally settled, however, was not pleaded, resulting in two such judgments of the High Court."

Apart from the fact that the Board begins by adverting to "a case”, it ends up by saying that there are "two"such cases but nonetheless fails to disclose which this/these judgments are for the benefit of all concerned! So, also, whether the Department is contemplating filing any SLP against these orders is also not revealed.

Be that as it may, the Board further mentions that the issue involved in the said case was already before the Supreme Court in a Departmental appeal and, therefore, in view of the Board's Circular No. 162/73/95-CX dated 14.12.1995, the Show Cause Notices in question should have been transferred to Call Book awaiting the decision of the higher appellate forum. [ Not having done so, what is the point in mentioning this here !]

And so the Board advises -

"4. In view of the above, the Departmental Counsels and the DRs in the Tribunal must plead that a judgment accepted for reasons of low amount should not be relied upon by the appellate forum and that the Department is at liberty to agitate the issue in subsequent proceedings till the matter is settled on merits. The officers in the field formations are hereby directed to take note of the statutory provisions mentioned in the Para 1 & 2 above and prepare the grounds of appeal / defense in suitable cases quoting the relevant provisions."

Incidentally, the provisions of section 35R(4) mandate the following -

"(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)."

Now, how much regard should be given is another issue with multiple dimensions! And, by the way, just to keep a count, cannot these instructions be given a running serial number?

Instruction dated December 12, 2013

Forum for exchange of views between industry groups and Government on tax related issues or tax related disputes

KINDLY see our Breaking news on this topic. A point to be noted is that all the decisions concern Indirect Taxes only.

What caught our attention is this -

6.Valuation of goods sold at a price below the cost of production -

Issue : Hon'ble Supreme Court has in a recent decision in the case of CCE, Mumbai vs. Fiat India (P) Ltd (2012-TIOL-58-SC-CX).held that where products are sold at considerable losses for an unduly long period of time for the purpose of market penetration, the transaction value cannot be accepted for the purpose of levy of excise duty. Pursuant to this decision field authorities are asking assessees to furnish cost data of various products for past years.

Decision : The modality of implementation of the decision of the Hon'ble Supreme Court is under consideration of a committee of Chief Commissioners. The Circular in this regard will be issued by15/01/2014.

Incidentally, the Review petition filed by FIAT was dismissed on 27/11/2012 (2012-TIOL-110-SC-CX). Be that as it may, we are anxious about the "modalities of implementation that is under consideration of (by?) the Committee of Chief Commissioners.

Import of power generating equipment under EPCG scheme - suggestions invited

DGFT Notification No. 7 dated 18.4.2013 disallows import of captive power plants and power generator sets under Export Promotion Capital Goods (EPCG) scheme with effect from 18th April 2013.

The DGFT has received representations from trade and industry that uninterrupted supply of quality power at competitive rates is essential for production activities and maintaining export competitiveness; Import of capital goods under EPCG scheme at concessional duty reduces the overall cost of setting up of a power plant which in turn reduces the cost of power and ensures uninterrupted power supply.

Inasmuch as they have pleaded for allowing import of power generating equipment under the EPCG scheme.

The DGFT, therefore, solicits Views/suggestions/comments on the request made.

All Stakeholders are requested to give their feed-back/suggestion preferably through e-mail addressed to the Joint DGFT (akash.taneja@nic.in) as soon as possible but not later than by Monday, the 6th January, 2014.

Unlike other Revenue departments, which risk information by using private email id, this email id is that of the government's web services organization.

Trade Notice No 08/2013, Dated: December 17, 2013

CBEC Gearing up for Cadre Review - Several Committees constituted

CBEC has constituted several committees to ensure that the cadre review is implemented smoothly and quickly. There is a Core Committee headed by the DG,HRD and several other committees such as Committees for DPC, Operational Issues and reorganisation, Recruitment, Technical matters, infrastructure.

They plan to complete the entire cadre review work in six months. The Cadre Review in CBEC is yet to be notified. Cadre Review in CBDT was notified in May 2013 and is yet to be implemented.

CBEC is getting about 18000 additional posts - can they really absorb this kind of work force?

Forget cadre review - why is the Board not able to fill the existing vacancies? There are about a hundred Superintendents who are working as Superintendents for more than twenty years and who will be retiring in the next few months - eagerly hoping for that elusive promotion - Can't the Board give them an ad-hoc promotion for six months and allow them to retire happily in a higher cadre?

CBEC DGHRD Office Order, Dated: November 28, 2013

Jurisprudentiol – Thursday's cases

Central Excise

CX - SSI Exemption - Use of brand name - Sticker of another company is enough bar to exemption; Use of such sticker not informed to Department - extended period of Limitation applicable - CESTAT by majority

SINCE in this case the Respondent were availing of SSI exemption and for assessment of duty payable by a unit availing of SSI exemption, the fact as to whether or not the unit is using the brand name/logo of another person is a necessary input for the Assessing Officer to determine as to whether the duty self assessed, as reported in the ER-1 Returns, is correct or not and since in this case the Respondent, while using the logo of SEL, Baroda, had not informed the Department in this regard and since the language of SSI exemption on the point of use of another person's brand name/logo is absolutely clear and unambiguous and on the issue involved in this case, there were no conflicting judgments or circulars, the Respondent's omission to inform the Department about use of logo of M/s. SEL, Baroda on the R-Core transformers being manufactured by them cannot be said to be bona fide, as no evidence has been produced by them to prove their bona fide.

Income Tax

Whether when there is no approved layout plan and any instance of sale, resorting to development method is 'most appropriate method' for purpose of valuation of property - YES; High Court

THE issue before the High Court is - Whether when there is no approved layout plan and any instance of sale, resorting to development method is the 'most appropriate method' for purpose of valuation of property. And the verdict goes against the assessee.

Customs

Conversion of Shipping Bill from DEPB to Drawback - Exporter cannot be penalized for the inaction of the department at the time of allowing the shipment and thereafter - CESTAT

THE appellant exported a consignment of 100% cotton yarn dyed Terry Towels under the claim of DEPB scheme under three shipping bills. They claimed benefit of DEPB Credit @ 11% on FOB and obtained a DEPB Licence dated 25.02.2000 having a validity period of 12 months for the duty credit of Rs.1,83,361/-. However, the Dy. Commissioner disallowed DEPB on 22.03.2000 on the ground that the export goods were yarn dyed but not processed and the appellant could not prove the fact of processing of fabric with the help of AR4 in terms of Board's Circular No. 54/99-Cus since the appellant were Merchant exporters.

See our Columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice day.

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