News Update

Automobiles - concessional duty to end on 31.12.2014?

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2504

WE reported in DDT 2383 /26.06.2014

Automobiles - Reduction in duty rates to continue - Sunset clause extended

FOR the last few days, many newspapers carried advertisements by car dealers luring the buyers with the caption - buy before the excise duty rates go up again. They were referring to the Notification No 4/2014-Central Excise, Dated: February 17, 2014, which reduced duty rates of automobiles. This Notification has a sunset clause - "Provided further that nothing contained in this notification shall apply to goods specified against serial number 345 to 369 of the said Table after the 30th day of June, 2014." - Now, the Government has decided to extend the reduced duty benefit till 31 st December 2014 and accordingly issued Notification No 6/2014 CE dated 25.06.2014 amending the Mega exemption Notification No 12/2012 CE dated 17.03.2012. Similarly the reduced rate of 10% for goods falling under chapters 84 and 85 of the Tariff has also been extended till 31st December 2014.

In a press release, the FM said "We expect the industry to show positive results in the coming months. We also expect that the benefit of these duty concessions will be passed on to the consumers at large"

Notification No. 6/2014 CE, Dated: June 25, 2014

It seems that the manufacturers are at it again - that is splashing advertisements in newspapers (by dealers) and informing Indians that the prices of the cars are going to be raised by rupees 20 to 40 thousands from the 1 st of January 2015. This, they attribute to the fact that the excise duty concession granted to them would come to an end on 31 st December 2014.

DDT has been receiving mails and phone calls enquiring whether we have got any scent of any notification to be issued extending this concession.

Frankly speaking, DDT only reports and comments on notifications but does not get a whiff of the notification to be issued. We are yet to lay our hands on the Customs Non-Tariff Notification 99/2014 which presumably is lying somewhere.

Considering that the first notification granting the exemption came during the Interim Budget vide notification 4/2014-CE, dated 17.02.2014 and the one extending the concession from 30.06.2014 to 31.12.2014 was issued on 25.06.2014 (i.e 6 days before) by notification 6/2014-CE, if any further extension is contemplated by the Central Government, the same should be out…today!

Reversal of CENVAT Credit on clearance of Capital Goods as such - Revenue Neutrality - Audit Frowns

CAG's Audit observes:

Rule 3(5A) of CENVAT Credit Rules, 2004 provides that if capital goods on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking CENVAT credit. However, if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value .

Audit found that:

An assessee in Ludhiana Commissionerate, engaged in the manufacturing of auto parts/motor vehicle parts, transferred used machinery for Rs.12.79crore to its own unit in Noida during the year 2012-13, by paying excise duty of Rs.113.77 lakh instead of Rs. 158.03 lakh leviable on transaction value. This resulted in short payment of duty of Rs. 44.26 lakh.

Department did not agree and observed that had the assessee paid the higher duty, the other unit would have availed the higher credit and that the entire exercise would have been neutral. The Department also referred to certain Tribunal citations in support. - 2012-TIOL-1578-CESTAT-BANG.

But Audit is not convinced because as per provision of 3 (5A)(a)(ii) of CENVAT Credit Rules, 2004 if the amount calculated is less than the amount equal to duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

Audit also pointed out that CBEC has not issued any instructions based on the cited Tribunal decisions to guide assessees as well as adjudicating officers in similar situations.

Will the Board issue a circular now?

Source: CAG's Report No.33 of 2014

Hike in Customs Duty on Vegetable Oils

GOVERNMENT has increased the Customs duty on crude and refined vegetable oils by 5 percentage points, much to the happiness of the Indian Industry. Solvent Extractors' Association of India (SEA) and Soyabean Processors Association of India (SOPA) have welcomed the hike, though they were demanding a 10 to 15 percentage hike. Consequent to the duty hike, the Government is expected to mop up at least Rs.5,000crore annually, which the Trade wants to be used for oilseeds development purposes and improving productivity.

The Solvent Extractors' Association says, “In last two months, due to Nil export duty on palm products by Indonesia and Malaysia, lowest prices of palm products in last 5 years and reduced demand of CPO for bio diesel, pushed the export of palm products to India to reduce burgeoning stock held by the exporting countries.Also, due to high prices of soybean and lesser realization for oil and soybean meal in export market, resulted in lower crushing and availability of domestic oil coupled with anticipated increase in import duty by the Indian Government, raised the import during November, 2014 to a record level compared to Nov.'13 & Nov.'12. Import of vegetable oils during November 2014 is reported at 1,189,934 tons compared to 944,309 tons in November 2013.

The existing and amended rates are:

S. No.
Chapter or Heading or sub-heading or tariff item
Description of goods
Rate of duty
15 Crude Palm Oil - 1511
15071000 All goods (Soya)
15079010 All goods (Soya)
1508, 1509, 1510, 1512, 1513, 1514, or 1515 All goods, crude and edible grade (Ground nut)
1508,1509, 1510, 1512, 1513, 1514 or 1515 All goods, refined and edible grade
1511 90 All goods (Palm)
15121110 All goods (sunflower)
15121910 All goods(sunflower)
1514 11 or 1514 91 All goods, edible grade (rape, colza or mustard)
1514 19 or 15 14 99 All goods, edible grade (rape, colza or mustard)
1516 20 All goods, edible grade (animal or Vegetable fats)
1517 10 21, 1517 90 10, 1517 90 20, 1518 00 11, 1518 00 21 or 1518 00 31 All goods, edible grade (margarine)

Notification No. 34/2014-Cus., Dated: December 24, 2014

Declaration of Assets and Liabilities by Babus - Last Date Extended

THE Public Servants (Furnishing of Information and Annual Return of Assets and Liabilities and the Limits for Exemption of Assets in Filing Returns) Amendment Rules, 2014, extended the time limit for filing of revised returns by all public servants from "September, 2014 to 31st December 2014.

Government has now extended the last date for filing of revised returns by public servants under the rules by a period of four months, i.e., from 31st December 2014 to 30th April 2015. Formal amendments to the Public Servants (Furnishing of Information and Annual Return of Assets and Liabilities and the Limits for Exemption of Assets in Filing Returns) Rules, 2014 and to the Lokpal & Lokayuktas (Removal of Difficulties) Order, 2014 are being notified. The formats for submission of statements regarding movable properties (Form-II) and for submission of statements regarding debts and liabilities (Form- IV) under the said rules are also being revised and will be notified as part of the amendments to the rules.

All Ministries/Departments and cadre authorities are requested to issue orders towards ensuring compliance with the revised Rules by all officers and staff in the respective Ministry/Department/ Organisations/PSUs under their control, within the revised time-limit.

Obviously, the Government servants have not taken seriously the instructions to file new property returns in which they are required to give the properties of spouses also.

DoPT letter No. 407/12/2014-A VD-IV(B)., Dated: December 25 2014

Post Deputy Commissioners to SEZs - CBEC Tells Chief Commissioners

DEPARTMENT of Commerce (DoC) has informed that a large number of posts of Deputy Commissioner of Customs are lying vacant in various Special Economic Zones (SEZs). As this has been largely affecting the functioning of SEZ Customs, which has a direct bearing on imports and exports for SEZ, DoC is pressing hard for filling up of all the vacant posts of Deputy Commissioner of Customs of SEZs.

In October 2014, Board had promoted 2128 officers as Assistant Commissioners and at that time, Board had requested the Chief Commissioners to ensure that appropriate number of officers are posted to the SEZs falling under their jurisdiction.

Board once again requests the Chief Commissioners to ensure that adequate number of AC/DC level officers are posted in SEZs falling in their jurisdiction, without further delay and action taken report in this regard is furnished to the Board by 02.01.2015 positively, duly indicating the total number of encadred posts in SEZs and number of officers posted so far, as Revenue Secretary is to be apprised of the position.

Will Chief Commissioners oblige the Board?

At the same time, Board in another letter has called for applications for the post of Deputy Commissioners in the SEZs of Cochin, Madras, Visakhapatnam, Falta, Indore, Manikanchan and Kandla. (F.No.-A. 35017/71/2013-Ad.II )

CBEC Letter in F. No. A 35017/31/2013-Ad.II., Dated December 23, 2014.

U.S Exports to and Investment in India Would be Significantly Higher Without Barriers

U.S. exports to and investment in India would be significantly higher if not for Indian policy barriers, according to the U.S. International Trade Commission (USITC) in its report  Trade, Investment, and Industrial Policies in India: Effects on the U.S. Economy.

The USITC, an independent, nonpartisan, fact finding federal agency, prepared the report at the request of the House Committee on Ways and Means and the Senate Committee on Finance. The Report says:

• The share of U.S. companies substantially adversely affected by restrictive Indian policies rose from 18.8 percent to 26.1 percent between 2007 and 2013.  Shares for individual sectors in 2013 ranged from 7.7 percent to 44.1 percent. 

• Over 60 percent of the affected companies have made strategic changes in response to these barriers, most often directing fewer resources to the Indian market.

• Policies in two areas - tariffs and customs procedures, and taxes and financial regulations - have the heaviest effects on U.S. companies.  Other issues, including investment and intellectual property policies, have large negative effects on specific industries. 

• If tariff and investment restrictions were fully eliminated and standards of IP protection were made comparable to U.S. and Western European levels, Commission model results indicate that U.S. exports to India would rise by two-thirds, and U.S. investment in India would roughly double. 

Why Indians can't drink quality liquor

THE USITC report says,

The Indian market for alcoholic beverages is dominated by distilled spirits. These spirits are split between foreign-style liquors (e.g., whiskey, rum, vodka), which account for 70 percent of the alcoholic beverage market by value, and Indian-style liquors, which account for 19 percent of the alcoholic beverage market. Beer is growing in popularity (with 11 percent of the alcoholic beverage market and with sales growth of about 15 percent a year); the market for wine is also growing, but remains very small. Industry concentration in distilled spirits is substantial:

Important factors of competitiveness in the alcoholic beverage industry include the cost of distribution (which is often influenced by regulations), brand reputation and recognition, taxes and widespread price controls, and nearly prohibitive tariffs.

The Indian market is influenced by high taxes on alcohol and by a wide range of regulations at the state level. Most states impose both high taxes and price controls on alcohol. There are excise taxes on alcoholic beverages and some of the raw material inputs shipped between Indian states, which have led some producers to establish facilities in every state in which they plan to distribute their product. The price controls limit producers' ability to pass higher production costs on to the consumer.

The factors above tend to favour domestic producers, which are big enough to operate in multiple locations in India and are well informed about the varying state tax and regulatory regimes. Additionally, India bans the advertising of alcoholic beverages. This preserves an advantage for domestic producers, as consumers are more likely to rely on brands they already recognize. The market is also protected by high import tariffs, ranging from 100 to 150 percent. As a result, only 3 percent of the distilled spirits and beer consumed in India is imported. Despite the high import tariffs, U.S. companies primarily attempt to serve the market through exports rather than investment.

US Trade in India - The Modi Factor

THE USITC report says,

In May 2014, India's Bharatiya Janata Party won a majority in India's lower house, the Lok Sabha, and Narendra Modi became the prime minister of India. He previously served for 15years as the chief minister of India's Gujarat state. During that period, Gujarat experienced significant economic development that is often attributed to Modi's pro-market, pro-investment policies. U.S. industry representatives interviewed in India generally expressed optimism that this new government will adopt a position of greater openness, addressing some of those policies that significantly burden foreign business and investment. The policies of the Modi government through the end of September 2014 are described in this report, and some new policies had been implemented by this date. Most notably, these include the relaxation of limits on FDI in the defence, insurance, and rail transportation sectors in July and August 2014.

US Trade in India: U.S. engagement in India has grown substantially in the past decade. This growth, however, was from a small base, so India still accounts for a relatively minor share of total U.S. exports and foreign affiliate sales. In 2013, India accounted for about 2 percent of total U.S. exports of goods and services, less than 1 percent of sales by U.S. overseas affiliates, and less than 1 percent of the stock of U.S. overseas investment. On the other hand, in 2000 India was the 31st-largest market for U.S. exports of goods; by 2013, India had become the 18th-largest market. The value of U.S. exports of goods and services to India in 2013 was 5.5 times larger than in 2000, U.S. FDI in India was 10.2 times larger, and sales by affiliates of U.S. companies in India were 13.5 times larger.

The United States is an important source of goods, services, and capital in the Indian market. It is India's fifth-largest source of FDI, following Mauritius, Singapore, the United Kingdom, and Japan. It is the fifth-largest exporter of goods to the Indian market, following China, the United Arab Emirates, Saudi Arabia, and Switzerland. Overall, India accounted for an estimated $35.7 billion of U.S. exports of goods and services in 2013, $84.1 billion of U.S. affiliate sales in 2012, and $24.3 billion of U.S. outbound FDI in 2013.

CBI Files Charge-sheet against ADC of Income Tax - Bribery Case

CBI has filed a charge-sheet in the Court of the Special Judge for CBI Cases, Ahmedabad against an Additional Commissioner of Income Tax, and four others(all private persons) in an alleged bribery of Rs. 30,00,000/- for obtaining an illegal gratification of Rs. 30,00,000/-(approx) on 25.03.2013, from a builder of Ahmedabad for passing a favourable order in assessment/ scrutiny proceedings being conducted by him against the firm of the builder, in respect of its Income Tax Return for the Assessment Year 2010-2011.

The Additional Commissioner, a 1994 batch IRS officer then working in Gandhinagar, was arrested by the CBI in February 2013. He was released on bail in May 2013 as the CBI did not file the charge-sheet even after 90 days, though the CBI told the court that the accused has committed a serious and grave offence in a pre-planned manner and is part of a well oiled network.

Now the CBI says it has filed the charge sheet - after nearly two years.

Jurisprudentiol-Monday's cases

Legal Corner IconNDPS

Seizure of heroin and cash - Independent witnesses do not turn up in Court - Conviction cannot depend only on fact that huge quantity of heroin is shown to have been seized. Also, argument that prosecution will not needlessly implicate innocent persons does not impress Court. Voluntary Statement doubted - Leave to appeal rejected: HC

THE High Court held:

The NCB has to discharge the burden of proving beyond reasonable doubt that it is the Respondents who are guilty of the offences with which they have been charged. Since the NCB has presented a version in which independent witnesses are stated to have participated throughout the raid, the NCB has to satisfactorily explain how and why the addresses given for such witnesses has turned out to be non-existent and they have not been produced in Court. No effort appears to have been made by the NCB to ascertain the correct addresses and summon the independent witnesses. That was not the responsibility of the Court. In the circumstances, the only inference that was possible to be drawn was that the said witnesses and their addresses did not exist.

The medical report clearly shows that A-3 had a swelling and abrasion on his forehead and bruises all over his back and on his knee. The injuries noted in the said report substantiated his statement given under Section 313 Cr PC that his head was banged against the wall by the NCB officials and that he was beaten mercilessly by them at their office.

Income Tax

Whether when Revenue fails to take action on demand of tax with interest for 27 years and also fails to apply mind to interest waiver application, it is fit case to reduce interest amount u/s 220(2A) - YES: HC

THE demand, including interest, u/s 220 (2) was certified by the Tax Recovery Officer and after collecting the entire arrears, the Tax Officer raised demand of Rs.65,472/- representing the interest under Rule 5 of the Income Tax Rules, 1962. Against the said demand, assessee preferred an application before CIT u/s 220 (2) for waiver of the interest demanded. In the said petition, assessee had stated that for more than 25 years, he was an assessee on the file of ITO, Trichy, and then he was a student and his income tax affairs were looked after by his father, Mr.K.S.Rajan, who was no more and the taxes were also paid and there was no outstanding demand. It was further stated that the assessee had settled down in Madras and his old assessment records were not traceable. It was stated that after the lapse of 27 years, the Tax Recovery Officer issued summons u/s 131 and the assessee was asked to appear before him and to pay arrears of Rs.58,000/- together with interest levied under Rule 5 of the Rules.

The issue before the Bench is -   Whether when the Revenue fails to take action on demand of tax with interest for 27 years and also fails to apply mind to interest waiver application, it is a fit case to reduce or waive interest amount u/s 220(2A). YES is the answer.

Service Tax

Sofa, Almirah, chairs, ladder, drop box, doors, fire resistant file cabinets, safe deposit lockers, whether capital goods/inputs under CCR, 2004 - Matter debatable - Pre-deposit ordered: CESTAT

THE appellant is a banking company and registered with the Service Tax department in respect of Bank and Financial Services and Credit Card service etc.

A SCN dated 5.3.2013 was issued alleging that during the period 2008-09 to 2011-12 the appellant availed inadmissible CENVAT credit on goods like almirah, chairs, defender safe, display unit/vinyl display, drop box, fire resistant file cabinets, ladder, safe deposit lockers, signage/signage board, sleeper for locker, sofa, storewel, strong room door, frill, door and frill gate etc. which do not qualify as ‘capital goods'.

See our Columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend.

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