News Update

Customs - Export of Iron Ore - Valuation/Assessment - Board Instructions

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2478

IRON ore, by its nature, undergoes a change in moisture and Fe content with the passage of time including during transport. The iron ore is tested both at the load port and at the port of discharge for ascertaining its quality and price. The commercial contracts governing its sale, often, contain provisions to adjust the amount payable depending upon the test report at the port of discharge. It is reported that exporters present provisional invoices at the time of export since prices are to be finally determined after tests at discharge port.

In order to bring in uniformity, transparency and consistency in assessment of export of Iron Ore, fines and pellets, CBEC has issued the following instructions:

(a) When a consignment is entered for export of iron ore, fines or pellets, samples shall be drawn in the presence of Customs by following the procedure laid down by the Bureau of Indian Standards for drawal of samples of Iron ore, fines and Iron ore pellets and sent for testing.

(b) The declared value of the export goods shall be scrutinized in relation to the provisional invoice, contract, weight, price, etc., by the proper officer in terms of the provisions of Section 14 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 and the Shipping Bill may be provisionally assessed. In case of the transaction being declared or found to be between related parties, procedures governing related party transactions shall be followed.

(c) Upon receipt of the load port test report and discharge port test report the proper officer shall compare the two reports with the terms set out in the contract. Where variations in the two test reports are within tolerance limits provided in the contract and do not impinge upon the declared price, the proper officer may proceed to finalize the provisionally assessed shipping bill in terms of the provisions of Section 14 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

(d) In cases where the load port test report and discharge port test report show a variation, so as to impinge upon the price, the proper officer shall proceed to re-determine the value of the goods in terms of Customs Valuation (Determination of Value of Export Goods) Rules, 2007. In no case, shall a price based upon the average of the two test reports be accepted for the purposes of arriving at the assessable value.

(e) In cases where the transaction is being declared or is found to be between related Parties, while the above procedures will continue to be followed, the finalization of assessments shall be done by following instructions governing the investigation of such cases by SVBs.

(f) The Custom Houses will ensure that the shipping bills are finally assessed within 30 days of the receipt of all documents. However, this time limit shall not apply to cases under investigation for related party transactions, which shall be governed by the circular relating to investigations by SVBs.

Board wants the Customs to monitor receipt of Bank Realisation Certificates for the purposes of comparison with the final invoices submitted by the exporter to satisfy the accuracy of assessed values.

If there are any difficulties - Board wants to know.

CBEC Circular No.12/2014-Cus., Dated: November 17, 2014

Duty Drawback - Government Notifies New AIR

GOVERNMENT has notified the new rates of duty drawback. The new Rates will come into effect from 22.11.2014. The last revision was from 21.09.2013 by Notification No. 98/2013-Cus NT, which is now superseded.

Notification No. 110/2014-Cus. (N.T), Dated: November 17, 2014

Drawback - What is 'said Schedule'?

IN the above drawback notification, there is a major drawback.

The opening paragraph of the Notification states, "the Central Government hereby determines the rates of drawback as specified in the Schedule annexed hereto (hereinafter referred to as the said Schedule) subject to the following notes and conditions, namely:- "

So, throughout the notification, the said Schedule means the Drawback Schedule annexed to the Notification.

Condition (2) of the Notifications reads as, "The General Rules for the Interpretation of the First Schedule to the said Customs Tariff Act, 1975 shall mutatis mutandis apply for classifying the export goods listed in the said Schedule."

Now there are two schedules here - one is the First Schedule to the Tariff Act and the other is the Drawback Schedule.

And here the confusion starts:

Condition (3) of the notification declares, "Notwithstanding anything contained in the said Schedule... "

Here what the Government means is the 'First Schedule' and not the 'said schedule'.

DDT had pointed out this defect in DDT 2096 02.05.2013 and asked Will the Board clarify/rectify?

But obviously it was not heard.

In all fairness to the present draftsman, it must be admitted that this is not a new mistake and it first occurred in 2006 by Notification No. 114/2006 - Cus NT dated 22.11.2006 and has been religiously continued since then with regal regularity year after year.

Drawback Rules Amended

RULE 7(1) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, reads as:

(1) Where, in respect of any goods, the manufacturer or exporter finds that the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4, for the class of goods is less than four-fifth of the duties or taxes paid on the materials or components or input services used in the production or manufacture of the said goods, he may within three months from the date relevant for the applicability of the amount or rate of drawback in terms of sub-rule (3) of rule (5), make an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise having jurisdiction over the manufacturing unit, of the manufacturer or, of the supporting manufacturer, as the case may be, for determination of the amount or rate of drawback thereof stating all relevant facts including the proportion in which the materials or components or input services are used in the production or manufacture of goods and the duties or taxes paid on such materials or components or input services:

Now, the words marked in red are substituted with "he may, except where a claim for drawback under rule 3 or rule 4 has been made, within three months"

Notification No. 109/2014-Cus. (N.T), Dated: November 17, 2014

All Industry Rates of Duty Drawback - Board Issues Circular

CBEC has issued a detailed Circular explaining the salient features of the new drawback rates.

It has been made explicit that where the claim for duty drawback is filed with reference to the rate in the AIR Schedule, an application for fixation of Brand Rate under Rule 7 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 shall not be admissible. (As per the above notification.)

Board expects the Commissioners to ensure that the due diligence is exercised to prevent any misuse. Board wants them to ensure that exporters do not avail of the refund of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods through any other mechanism while claiming AIR. Board wants them to prevent any excess drawback arising from mismatch of declarations made in the Item Details and the Drawback Details in a shipping bill. Also, in case of claim of the composite (higher) rate of AIR, the processing at the time of export should specifically ensure availability of 'Non-availment of CENVAT certificate' etc at that stage itself.

CBEC Circular No.13/2014-Cus., Dated: November 18 2014

FTP - Procedure for export of certified organic products

DIRECTOR General of Foreign Trade has laid down the following procedure for export of certified organic products, in supersession of earlier Public Notice No. 72 (RE-2003)/2002-2007 dated 21.07.2004:

(i) A product will be allowed to be exported as "Organic Product" only when accompanied by a Transaction Certificate issued by a Certification Body accredited by National Accreditation Body (NAB) for Organic Products under the National Programme for Organic Production of the Department of Commerce.

(ii) "Organic Products" for export will be so certified only if Produced, Processed and Packed as per the standards laid down in the document "National Programme for Organic Production (NPOP)", available on the website of APEDA, as amended from time to time.

DGFT Public Notice No.73 (RE-2013)/2009-2014, Dated: November 18, 2014

Transfer Pricing - Shell wins huge Revenue Battle in Bombay High Court - Will Modi Government go in appeal?

THIS was a case gleefully reported all over the world. The Income Tax Department slapped a demand of nearly Rs. 18,000 crores - YES 18,000 CRORES, alleging undervaluation of shares by the Indian unit of Royal Dutch Shell Plc. The Bombay High Court yesterday struck down the demand.

Shell in its website quoted, "Royal Dutch Shell has won a significant victory in its long-running $3bn battle with India's revenue authorities, in a judgment with implications for dozens of tax disputes involving multinational companies in Asia's third-largest economy.

The Narendra Modi government may appeal the decision to the supreme court of India."

Reuters reported;

The Bombay High Court on Tuesday ruled in favor of the Indian unit of Royal Dutch Shell Plc in a multi-million dollar tax dispute, the latest verdict against the tax department that has been vigorously pursing claims against foreign firms in India.

A rash of high-value tax claims on foreign firms including IBM Corp (IBM) and Nokia in the past year has sparked criticism that overly zealous tax authorities could undermine foreign investment in India .

For a fresh injection of Rs. 867 crores, the Income Tax Department wanted a tax of Rs.15,200 crores.

Shell pleaded that issue of shares by an Indian Company to its foreign parent is not liable to transfer pricing provisions as there is no income.

The general feeling abroad seems to be that Indian Tax administration is highly adversarial that puts off foreign investors. Modi has to work hard to dispel this impression. He should be advised to do this during his foreign trips.

I heard a Revenue Secretary saying in a public meeting that foreign companies don't come to India for love, they come to make profits.

Aurobindo Pharma top executive attacked with AK-47

AUROBINDO Pharma Ltd Vice President Nityananda Reddy was attacked with an AK-47 gun this morning as he was boarding his Audi car outside a park in Hyderabad this morning. Reddy is reported to be completely safe. This park is the favourite walking spot for the City's rich and powerful.

Jurisprudentiol-Thursday's cases

Legal Corner IconCentral Excise

Ignoring judicial discipline and recording conclusions diametrically contrary to judgment of Tribunal is either illustrative of gross incompetence or clear irresponsible conduct and serious transgression of quasi-judicial norms - Revenue to pay litigative costs: CESTAT

THE Addl. Commissioner observed that since the judgment of the Tribunal in the appellant's case was appealed before the Delhi High Court & the High Court had dismissed Revenue's appeal only on the ground of limitation and not on merits, the Tribunal decision had not attained finality; thus unworthy of efficacy as a binding precedent.

The Commissioner (A) too took a similar view and rejected the appeal filed by the assessee.

It is axiomatic that judgments of this Tribunal have precedential authority and are binding on all quasi-judicial authorities (Primary or Appellate), administering the provisions of the Act. If an adjudicating authority is unaware of this basic principle, the authority must be inferred to be inadequately equipped to deliver the quasi-judicial functions entrusted to his case. If the authority is aware of the hierarchical judicial discipline (of precedents) but chooses to transgress the discipline, the conduct amounts to judicial misconduct, liable in appropriate cases for disciplinary action.

Income Tax

Whether when assessee facing Customs duty evasion charge deposits certain sums as per High Court's bail order, same cannot be construed as penal in nature till time adjudication is pending - YES: ITAT

THE assessee incurred expenditure for hiring lawyers and other support services to get the bail for him, as the assessee was in judicial custody due to his arrest by DRI in the Custom Duty Evasion case. AO made disallowance of the same. The CIT(A) held that the expenditure was incurred for defending the assessee in criminal proceedings initiated by the Department of Revenue Intelligence (DRI) and was an expenditure which was of personal in nature and not allowable under the provisions of the Act.

The assessee made payment as per direction of High Court of Delhi given in the bail order which enlarged the assessee on bail in the criminal case of Custom Duty Evasion. The Assessing Officer disallowed the amount by treating the same as penal in nature, by invoking the provisions under Explanation to section 37(1).

The issue before the Bench is - Whether when the assessee facing Customs duty evasion charge deposits certain sums as per High Court's bail order, the same cannot be construed as penal in nature till the time adjudication is pending. And YES is the answer of the Tribunal.

Service Tax

Refund - When it is held that no Service Tax is payable, whatever has been paid by the appellant, whether by way of tax or interest, has to be treated as deposit and amount is to be refunded: CESTAT

THE amounts deposited by the appellant whether by way of tax or interest, it assumed the character of deposit when it was held in its favour that no Service Tax is payable and or exigible. Thus, it is held that the adjudicating authority has erred in rejecting the refund claim of Rs.97,520/- on the ground of mismatch. The appeal is allowed, the impugned order is set aside and the adjudicating authority is directed to issue the refund of Rs.97,520/- within a period of four weeks.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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