News Update

 
BUDGET 2014 - Stay Syndrome - Relief

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2394
11.07.2014

Friday

TIOL thanks the Government for the huge relief given in pre-deposit in appeals before the Commissioner(Appeals) and the Tribunal. We have been relentlessly crusading for this reform for quite some time.

DDT 2286 - 04 02 2014, submitted,

It is high time that we seriously think of doing away with this anarchy called pre-deposit, which is causing irreparable damage to the Industry and Trade.

Pre-deposit is really not required now, because if the assessee loses the case ultimately, he has to pay the tax/duty with 18 percent interest and this is a wonderful investment for the Government. No Government investment brings in at least a third of that kind of returns.

Even if total waiver cannot be given, let us fix pre-deposit as a standard 10 percent of the duty/tax demanded with absolutely no discretion to any appellate authority- then appellate authorities, especially the Tribunal need not waste its time on Stay matters and final matters can be taken up and perhaps they can be decided in a couple of years.

This is the best time for the Industry and Trade bodies to influence the political parties to bring in law providing for little or no pre-deposit. Political parties are offering all kinds of sops like free electricity and colour TVs to voters - with the taxpayers' money. It is time that the real taxpayers also demand and get some relief (at least a little less harassment). After all you give a lot of money to the politicians - make them listen to your woes - at least during elections.

DDT 2390 - 07 07 2014 commented,

No civilised country would perhaps have such draconian laws. Draconian laws survive not because of the tyranny of the rulers, but because of the meek acceptance of the victim subjects. This dangerous provision has been in the Statute for more than a decade - nobody took it seriously, as Tribunal Benches were fair and just in giving stay and now if it is held that the Tribunal had no business or rather the power to give stay beyond 365 days, the Indian Business is doomed.

Mr. Arun Jaitley is a learned lawyer and he would certainly understand this issue, if explained to him properly.

He is and he did.

Now you have to pre-deposit 7.5 percent for appeals to the first appellate authority and another 10 percent for a second appeal. There is no requirement of getting a Stay and then getting it extended after 180 days and then getting doomed after 365 days. The issue whether the Tribunal can grant stay beyond 365 days is before the Larger Bench of the Tribunal, various High Courts and even the Supreme Court. All those cases will become irrelevant - at least prospectively.

Now, the Tribunal can really concentrate on the work, it was created for - deciding appeals - instead of stay and waiver applications.

The statutory amendments raise several questions though:

Many of our distinguished contributing authors have expressed a fear that, notwithstanding the amendment, Department can still proceed with recovery as the pre-deposit is only a pre condition for appeal and not a stay against recovery. Let us hope when the Bill is enacted, it would be statutorily clarified that no recovery proceedings can be initiated when the appeal is pending.

There is a doubt on payment of another 10 percent for the second appeal. Though the TRU letter states that another 10 percent, the amendment does not say so clearly. So, there is a doubt whether the pre-deposit at the second appellate stage is 10 percent or 17.5 percent. Even if it is 17.5 percent, what will happen to the 7.5%deposited with the Commissioner (A)?. Shouldn't that also be considered as pre-deposit? This also needs clarification statutorily.

Pre-deposit of penalty or duty or both: As per the amendment, pre-deposit is a percentage of the duty or penalty or both. Who will decide whether duty or penalty or both have to be paid? Does the appellant have a choice?

Can Tribunal still grant waiver? Paying 10 percent of the duty or penalty may still be difficult for some assessees. Do they lose the opportunity of appealing? There are several closed companies with no assets, who are stuck with huge demands from the department. What will they do? In case of firms and companies, Commissioners are fond of imposing huge penalties on several employees of the company. Now, each one of them will have to pay a pre-deposit of 10/7.5 percent of the penalty. You may remember the classic case of a crazy Commissioner who imposed a penalty of Rs. 50 Crores on an employee of BHEL. 2002-TIOL-281-CESTAT-DEL In the new regime, if this employee wants to appeal to the Tribunal, he has to make a pre-deposit of Rs. 3.75 Crores and if he cannot raise that kind of money, he owes the Central Excise Department a whopping Rs. 50 Crores! So, there must be some mechanism for the Tribunal to waive pre-deposit in exceptional cases and individual employees and directors should be exempted from pre-deposit if the main appeal is filed by the company/firm.

Let us hope these changes would come in the Finance Act. A good Government that has gone this far should take that extra step.

The FM's Budget Team - All smiles - It's Over!

THE Finance Minister Arun Jaitley with his deputy Nirmala Sitharaman and top officers of the Finance Ministry including Finance Secretary Arvind Mayaram, Revenue Secretary Shaktikanta Das, Chairpersons of CBEC and CBDT.

Input Service Distribution - A welcome clarification

In the midst of all those Budget Notifications and laws, both the CBEC and CBDT have come out with some important Circulars.

Input service distribution under CENVAT credit Rules 2004 has always been a confusing issue. The latest amendment to Rule 7 was made vide Notification No 5/2014 CE(NT) dated 24.02.2014 substituting clause (d) as under:

"(d) credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period.";

But still some doubts remained as to whether the credit can be distributed among all the units even if service is not used in one of the units .

Now, this issue has been clarified with clear illustration that there is no such bar and the credit can be distributed among all the units even if the service is not used in one of the units. The following illustration given in Circular No. 178/4/2014-ST dated 11.07.2014 (why the Circular should be dated 11.07.2014?) will make the things clear:

Illustration:

An ISD has a common input service credit of Rs. 12000 pertaining to more than one unit. The ISD has 4 units namely ‘A', ‘B', ‘C' and ‘D' which are operational in the current year.

Unit
Turnover in the previous year (in Rs.)
A (Manufacturing excisable goods)
25,00,000
B (Manufacturing excisable and exempted goods)
30,00,000
C (providing exclusively exempted service)
15,00,000
D (providing taxable and exempted service)
30,00,000
Total
1,00,00,000

The common input service relates to units ‘A', ‘B' and ‘C', the distribution will be as under:

(i) Distribution to ‘A' = 12000 * 2500000/10000000 = 3000
(ii) Distribution to ‘B' = 12000 * 3000000/10000000 = 3600
(iii) Distribution to ‘C' = 12000 * 1500000/10000000 = 1800
(iv) Distribution to ‘D' = 12000 * 3000000/10000000 = 3600

The distribution for the purpose of rule 7(d), will be done in this ratio in all cases, irrespective of whether such common input services were used in all the units or in some of the units.

There is another interesting development in this issue as clarified by the Circular.  The Unit "C" is mentioned as "providing exclusively exempted service" and as per the mathematical formula prescribed, the CENVAT credit that is distributed to this unit is Rs.1800/-. 

But what will the Unit "C" do with this credit? 

And is such distribution valid in the face of rule 7(b) which says –

"(b)  credit of service tax attributable to service used by one or more units exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed;"

 

Today's Circular Yesterday? This Circular is dated 11th July - How was it issued yesterday? The Board can travel back and forth in Time!

CBEC Circular No. 178/4/2014-ST, Dated: July 11, 2014

FIAT case is not applicable for Fertilizer subsidy - Board clarifies

IT seems after the FIAT case, several settled disputes are re-opened. One such dispute is whether the subsidy received from the Government by the Fertilizer manufacturers is includable in the assessable value. Trade and Industry Associations have represented that in spite of the clarification issued by the Department of Revenue to the Department of Fertilizers, the field formations have issued show cause notices to the fertilizer companies seeking to levy excise duty on the subsidy component of price-controlled fertilizers in the light of the judgment of the Supreme Court in the case of  CCE, Mumbai vs M/s Fiat India Pvt. Limited  2012-TIOL-58-SC-CX.

Board now clarifies that:

The facts at hand are clearly distinguishable from the facts and circumstances of the Fiat India case. The manufacturers of fertilizers do not gain any extra commercial advantage vis-a-vis other manufacturers because of the subsidy received from the Government. The subsidy paid by the Government to the manufacturer is in larger public interest and not for benefitting any individual manufacturer-seller and it is also not paid on behalf of any individual buyer or entity. Even though the subsidy component has money value, it cannot be considered as an additional extra-commercial consideration flowing from the buyer to the seller.

The Supreme Court, in the Fiat India case, has not ruled that the subsidy component provided by the Government would tantamount to consideration flowing from the buyer to the seller and therefore, should be included in the assessable value an excisable good in terms of the extant Valuation Rules .

It is, therefore, clarified that in respect of fertilizers for which subsidy is provided by the Government, the excise duty will be chargeable on the MRP and not on the subsidy component provided by the Government.

CBEC Circular No. 983/7/2014-CX, Dated: July 10, 2014

CBDT fixes monetary limits for appeals

CBDT has decided that Departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified.

Henceforth appeals shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: -

S.No. Appeals in Income-tax matters Monetary Limit (in Rs)
1. Before Appellate Tribunal
4,00,000/-
2. U/s 260 A before High Court
10,00,000/-
3. Before Supreme Court
25,00,000/-

Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits.

1. Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or

2. Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or

3. Where Revenue Audit objection in the case has been accepted by the Department.

This instruction will apply to appeals filed on or after 10th July 2014

CBDT Instruction No. 5/2014, Dated: July 10, 2014

Bid Adieu to LTU

ADVOCATE G. Natarajan from Chennai, a prolific budget commentator writes in:

The Large Taxpayer Units were introduced with much fanfare by the previous FM. Over the years, not many assesses have opted for LTU, as nothing much is different in a LTU from a normal Central Excise Office, other than the issue of Visitors Pass with Access cards and the corporate atmosphere in terms of furnishing, etc.

The only two incentives for any large taxpayer to opt for LTU are

- Transfer of goods between the units, without payment of duty, which otherwise involve determination of value as per CAS 4.

- Transfer of CENVAT credit from one unit (where there is accumulation of credit) to other unit (where credit is required).

Of the above, the first one is also having a fetter that if the final products are not cleared on payment of duty or for export within 180 days, duty should be paid along with interest.

So the real incentive was only the second one.

But, now this incentive has been withdrawn vide notification 21/2014 CE NT.

So, the LTU is no more attractive and we can soon see an exodus from LTU.

Place of Supply of Services Rules - And what was that?

PARA 4.1.3(ii) of the D.O Letter of the JS(TRU-II) reads as:

(ii) The definition of intermediary is being amended to include the intermediary of goods in its scope. Accordingly, with effect from 1.10.2014, an intermediary of goods, such as a commission agent or consignment agent shall be covered under rule 9(c) of the Place of Supply of Services Rules .

Where are these Rules? Where did he get them from? What he means perhaps is the Place of Provision of Services Rules as that is what the caption to the paragraph says.

Duty Free Baggage Allowance Increased

GOOD news for those going on foreign jaunts - you can return with more phoren goods - the duty free baggage allowance is increased from Rs. 35,000 to Rs. 45,000, but the quantum of duty free cigarettes is reduced.

Notification No. 50/2014-Customs (N.T.), Dated: July 11, 2014

A great Job by Revenue Officers

THE  Officers of the Indian Revenue Service in both the Boards have done a commendable job. It is not an easy task to draft all these complicated Bills and notifications, especially in the Indirect Taxes. The Himalayan task they had so silently executed is incredible. The Legislative wing of CBEC is called Tax Research Unit (TRU) and the bright boys in TRU have done tremendous research and for one tenth of this work, they would get Ph.D from the best universities. And this year they had very little time with a new Government in place.

DDT  salutes these sincere stalwarts.

Budget With TIOL

YESTERDAY , we brought to you incisive analyses on some of the issues pertaining to the budget from our in-house experts and our distinguished guests who are all noted authorities in the field. We will bring you more analyses on the budget today and in the coming days from the best brains in the country.

DDT Cartoon

Budget Notifications At a Glance

CENTRAL EXCISE - TARIFF
Sl. No.
Notification No. & Date
Subject
1. No.8/2014-CE dated 11th July, 2014 Seeks to amend notification No. 1/2011-CE, dated the 1st March, 2011. Sports gloves and Polyester staple fibre or polyester filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles attract CE duty of 2%.
2. No.9/2014-CE dated 11th July, 2014 Seeks to amend notification No. 2/2011-CE, dated the 1st March, 2011 so as to make necessary changes in the specified entries therein. Gloves designed for sports levy of 6% with CENVAT facility
3. No.10/2014-CE dated 11th July, 2014 Seeks to amend notification No. 64/95-CE, dated the 16th March, 1995 so as to provide full exemption from excise duty to goods manufactured by the Indian Offset Partner (hereinafter referred to as IOP) of the contractor to the National Technical Research Organisation, (hereinafter referred to as NTRO);
4. No.11/2014-CE dated 11th July, 2014 Seeks to amend notification No. 108/95-CE, dated the 28th August, 1995 so as to allow transfer/sale of goods procured prior to 1.3.2008 for use in projects financed by the UN or an international organization.
5. No.12/2014-CE dated 11th July, 2014 Seeks to amend notification No. 12/2012-CE, dated the 17th March, 2012 so as to make necessary changes in the specified entries therein.

- Duty increased on Pan Masala from 12% to 16%.
- Duty on branded Motor Spirit reduced from Rs. 7.50 to 2.35 /ltr
- LPG supplied to Non domestic exempted category to attract Nil rate
- Duty reduced on footwear of MRP more than Rs.500
- Machinery used in food processing/poultry/meat processing/parts used in LED lights and fixtures to attract concession duty of 6%
- Some goods used in Solar Photovoltaic cells/ wind operated electric generators to attract NIL rate

6. No.13/2014-CE dated 11th July, 2014 Seeks to exempt from excise duty goods required for the National AIDS Control Programme funded by GFATM
7. No.14/2014-CE dated 11th July, 2014 Seeks to amend notification No. 33/2005-CE, dated the 8th September, 2005 so as to provide for full exemption from excise duty on machinery required for setting up of compressed biogas plant (Bio-CNG).
8. No.15/2014-CE dated 11th July, 2014 Seeks to amend notification No. 15/2010-CE, dated the 27th February, 2010 so as to provide for exemption of excise duty on machineries required for initial setting up of solar energy production projects.
9. No.16/2014-CE dated 11th July, 2014 Seeks to amend Notification No. 42/2008-CE, dated the 1st July, 2008 so as to prescribe new rate of duty to Pan Masala and Gutkha.
10. No.17/2014-CE dated 11th July, 2014 Seeks to amend Notification No. 16/2010-CE, dated the 27th February, 2010 so as to prescribe new rate of duty to unmanufactured tobacco and chewing tobacco.
11. No.18/2014-CE dated 11th July, 2014 Seeks to amend Notification No. 23/2003-CE, dated the 31st March, 2003 so as to avoid double levy of cess on DTA clearances 100% EOUs. Entry 1A and 1B inserted in the notification to exempt Education cess and SHE cess
12. No.19/2014-CE dated 11th July, 2014 Seeks to amend Notification No. 67/1995-CE, dated the 16th March, 1995 so as to exempt intermediate goods manufactured and consumed captively for further manufacture of matches.
13. No.20/2014-CE dated 11th July, 2014 Seeks to rescind Notification No. 03/2010-CE, dated the 22nd June, 2010 so as to increase rate of Clean Energy Cess

 

CENTRAL EXCISE - NON TARIFF
Sl. No. Notification No. & Date Subject
1. No.17/2014-CE (N.T) dated 11th July, 2014 Seeks to amend Notification No. 49/2008-CE (NT), dated 24th December, 2008.ChHd 842190 included in entry Sl.No 140 of the Notification.
2. No.18/2014-CE (N.T) dated 11th July, 2014 Seeks to specify class of persons for the purposes of section 23A of the Central Excise Act, 1944. Specifies ‘resident private limited company' as class of person for the purpose of this section.. - Advance Ruling
3. No.19/2014-CE (N.T) dated 11th July, 2014

Seeks to amend Central Excise Rules, 2002.
- E payment mandatory for all assesses
- Rule 8(3A) amended to impose 1% penalty per month on the defaulted amount

4. No 20/2014-CE(NT) Dt. 11.07.2014 Seeks to amend Central Excise Valuation Rules, 2000 Proviso introduced in Rule 6 of Valuation Rules-to deem as transaction value the price less than manufacturing cost.
5. No.21/2014-CE (N.T) dated 11th July, 2014 Seeks to amend CENVAT Credit Rules, 2004
-Place of Removal defined in CCR

-service recipient- liable to pay service tax wholly or partly- is allowed to take CENVAT credit input service only after payment of service tax
6. No.22/2014-CE (N.T) dated 11th July, 2014 Seeks to amend Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008

 

CUSTOMS- TARIFF
Sl. No.
Notification No. & Date
Subject
1. No.11/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 24/2005-Customs dated 1st March 2005 so as to levy BCD @ 10% on specified telecommunication products not covered under the ITA.
2. No.12/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 12/2012-Customs, dated the 17th March, 2012 so as to make necessary changes in the specified entries therein.
3. No.13/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 81/2005-Customs, dated the 08th September, 2005 so as to reduce BCD to 5% on machinery required for setting up of compressed bio-gas (Bio-CNG) projects.
4. No.14/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 01/2011-Customs, dated the 06th January, 2011 so as to reduce BCD to 5% and CVD to Nil on machinery for initial setting up of solar energy production projects.
5. No.15/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 27/2011 Customs, dated the 01st March, 2011 so as to increase the export duty on Bauxite from 10% to 20%.
6. No.16/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 09/2012 Customs, dated the 09th March, 2012 so as to increase the variation levels in respect of re-import of cut and polished diamonds.
7. No.17/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 10/2008 Customs, dated the 15th January, 2008 so as to delete tariff item 3903 19 90 in respect of CECA.
8. No.18/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 13/2012 Customs, dated the 17th March, 2012 so as to provide for levy of education cess on CVD portion of customs duty leviable on imported IT products.
9. No.19/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 14/2012 Customs, dated the 17th March, 2012 so as to provide for levy of secondary and higher education cess on CVD portion of customs duty leviable on imported IT products.
10. No.20/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 39/96-Customs, dated the 23rd July, 1996 so as to omit the words ‘Portable X-ray machine/system' and to provide exemption for goods imported by NTRO.
11. No.21/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 21/2012 Customs, dated the 17th March, 2012 so as to make necessary changes in the specified entries therein.
12. No.22/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 84/97-Customs, dated the 11th November, 1997 so as to allow transfer/sale/re-export goods imported prior to 1.3.2008 for use in projects financed by the UN or an international organization.
13. No.23/2014-Customs dated 11th July, 2014 Seeks to exempt from customs duty goods required for the National AIDS Control Programme funded by GFATM.
14. No.24/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 51/96-Customs, dated the 23rd July, 1996 so as to provide flexibility in securing registration from DSIR to avail duty benefit for setting up of R&D units.
15 No.25/2014-Customs dated 11th July, 2014 Seeks to amend notification No. 230/86-Customs, dated the 3rd April, 1986 so as to notify concerned State Governments as sponsoring authority for Metro Rail Projects covered under the Project Import Regulations, 1986.

 

CUSTOMS-NON TARIFF
Sl. No. Notification No. & Date Subject
1. No.50/2014-Customs (N.T.) dated 11th July, 2014 Seeks to amend notification No. 30/98-Customs (NT) dated 2nd June 1998 so as to amend Baggage Rules, 1998. Duty free allowance enhanced to Rs., 45,000
2. No.51/2014-Customs (N.T.) dated 11th July, 2014 Seeks to specify class of persons for the purposes of section 28E of the Customs Act, 1962. Advance Ruling

 

SERVICE TAX NOTIFICATIONS
Sl. No.
Notification No. & Date
Subject
1. No.06/2014-ST dated 11th July, 2014 Seeks to amend notification No. 25/2012- Service Tax, dated the 20th June, 2012 - so as to amend certain existing entries granting exemption on specified services and inserting new entries for granting exemption from service tax on specified services -exempts services by an educational institution to its students, faculty and staff
- Ashrams/ Dharmsalas brought on par with hotels, inns for levy of service tax;

- exemption to services provided contract carriages is restricted to only services provided by non-air conditioned contract carriages;
2. No.07/2014-ST dated 11th July, 2014 Seeks to amend notification No.12/2013-ST dated 1st July, 2013, relating to exemption from service tax to SEZ Units or the Developer.
3. No.08/2014-ST dated 11th July, 2014 Seeks to amend notification No. 26/2012- Service Tax, dated 20th June, 2012,
- abatement of 60% to services provided by contract carriages and Radio taxis.

-conditions for availing the exemption against some entries modified
4. No.09/2014-ST dated 11th July, 2014 Seeks to amend the Service Tax Rules,1994 so as to prescribe,-
(i) the person liable to pay service tax for certain specified services - Banks to pay services tax on services provided by recovery agent
(ii) mandatory e-payment of service tax for all the assessees, with effect from 1st October,2014.
5. No.10/2014-ST dated 11th July, 2014 Seeks to amend the notification No.30/2012-ST dated 20th June,2012, so as to prescribe, the extent of service tax payable by recipient of Recovery Agent service- Banks and Financial institutions to pay 100% service tax as recipient.
6. No.11/2014-ST dated 11th July, 2014 Seeks to amend the Service Tax (Determination of Value) Rules, 2006 so as to prescribe the percentage of service portion in respect of works contracts, other than original works contract. Both finishing services and Repair services to pay service tax on 70% of value.
7. No.12/2014-ST dated 11th July, 2014 Seeks to notify the interest rate applicable in cases of delayed payment of service tax for the purposes of section 75 of the Finance Act, 1994.- Interest rates fixed - upto six months delay 18%; upto one year 24%; beyond one year 30%
8. No.13/2014-ST dated 11th July, 2014 Seeks to amend the Point of Taxation Rules, 2011, to prescribe the point of taxation for the services on which person liable to pay service tax is the recipient. Proviso amended to prescribe that where the payment is not made within a period of three months of the date of invoice, the point of taxation shall be the date immediately following the said period of three months
9. No.14/2014-ST dated 11th July, 2014 Seeks to amend the Place of Provision of Services Rule, 2012, to prescribe or modify the place of provision of services for certain specified services.
-significant change made to prescribe the place of provision of service in case of Commission agent/consignment agent (intermediaries) is the place where the service provider is located.
- in case of services hiring of aircrafts and vessels the location of recipient of such services.
10. No.15/2014-ST dated 11th July, 2014 Seeks to specify the class of persons for the purposes of section 96A- Advance Ruling- of the Finance Act,1994. Specifies Resident Limited Company.

Until Monday with more DDT

Have a nice weekend.

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