TIOL-DDT 2741
09 12 2015
Wednesday

DDT knew this.

DDT 2609 01 06 2015 mentioned: Unfortunately, there is a school of thought in the Department, which believes that this credit will lapse. Before such dangerous thoughts spread and the litigation system is further clogged with unwanted notices and appeals, CBEC/TRU should wake up to the reality and urgently issue the clarifications/amendments.

They woke up and gave the clarification - sure and wrong!

As we all know, consequent to the increase in excise duty to 12.5% from 12% with effect from 1.3.2015, the Government by Notification Nos. 14/2015-CE and 15/2015-CE dated 1.3.2015 exempted ‘education cess' and ‘Secondary and Higher Education Cess' on all excisable goods. So, from 1.3.2015, no education cess was payable on excise duty. Similar is the case of education cess on Service Tax from 1.6.2015.

CBEC has allowed the CENVAT credit on inputs and input services on goods or services received after 1.3.2015/1.6.2015, but CBEC refuses to understand that almost all the assessees must have had credit balance of education cess paid on inputs or input services as on 1.3.2015/1.6.2015. How can this credit be used? DDT extensively covered this issue on several days. (Please see DDT 2589 01 05 2015 ; DDT 2591 06 05 2015: ; DDT 2609 01 06 2015 : ; DDT 2614 08 06 2015 ; DDT 2616 10 06 2015 ; DDT 2624 22 06 2015 : ; DDT 2631 01 07 2015: ; DDT 2644 20 07 2015 : ; DDT 2647 23 07 2015 : ; DDT 2714 29 10 2015.

This issue was raised in the Tariff Conference held recently in Chandigarh by the Hyderabad, Coimbatore, Vadodara, Vishakhapatnam and Delhi Zones:

THE ISSUE: Exemption from levy of Education Cess and Secondary & Higher Education Cess has been provided w.e.f. 01.03.2015 vide notification no. 14/2015-CE & 15/2015-CE both dated 01.03.2015. Sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004, specifies that CENVAT credit of specified duties shall be utilized for payment of those specified duties only. CENVAT Credit of Education Cess and Secondary & Higher Education Cess can be utilized only for payment of Education Cess and Secondary & Higher Education Cess, respectively. Consequent upon grant of exemption there is issue of utilization of the accumulated credit of the past. It is suggested that an amendment to sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004 may be made to allow the utilization of balance CENVAT Credit of Education Cess and Secondary & Higher Education Cess towards payment of either duty of excise or Service Tax.

The Commissioners, principal and chief included made a fair, just and legal suggestion.

But DDT knew, TRU was against this and when the mighty TRU decides, poor Commissioners have to simply follow.

So this is what the Board says,

1. It was Government's conscious policy decision to withdraw the Education Cess and Secondary & Higher Education Cess.

2. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out.

3. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past.

4. The rule and notifications as they exist need to be followed and do not need any amendment.

Does the Board remember that they have allowed the credit arising after abolition of Education Cess that is from 1.3.2015 and 1.6.2015, but the credit balance would not be allowed? Is this Law or logic or sheer arrogance?

This is going to be a twenty year lega-cy. The lawyers and consultants should be extremely grateful to the CBEC for this kind gesture.

But is this how we are going to bring in GST? Maybe you will need at least a thousand more courts to deal with litigation that our babus can create in the enlarged environment of GST. I am happy that GST is a mirage - far from reality. How much money is the Government going to get by illegally denying CENVAT Credit earned by its assessees?

In the Budget speech, the Finance Minister said, "In effect, the general rate of Central Excise Duty of 12.36% including the cesses is being rounded off to 12.5% .". So it is not as if the cess is withdrawn, it is included in the excise duty with a small bonus to the Government. When the Cess I have to pay is merged with the excise duty, why can't the credit of cess I got be merged with the credit of excise duty I have?

Unjust, unfair, illogical and illegal dear Board, you just make business impossible, forget ease of doing business. Unfortunately, these things happen under the leadership of very earnest people like the present CBEC Chairman, Revenue Secretary and Finance Minister.

The Law is not what the Parliament makes, Law is not what the Supreme Court interprets, Law is what the Under-secretary in the Board understands or misunderstands!

Para B-21 of CBEC Instruction in F.No.96/85/2015-CX.I., Dated: December 07, 2015

Interest on Duty Paid on Supplementary Invoices - SKF Goes to Larger Bench

THIS is a long and interesting story that started with a non existing 2003 letter of the CBEC.

In F.No. 208/27/2003-CX-6, dated 18.12.2006, the CBEC stated,

It has been noticed that there is a practice in certain industries, especially those manufacturing motor vehicle parts, that many a time vendors raise supplementary invoices on account of revision of prices. The differential duty is paid by the vendor on the value of such supplementary invoices but interest is not paid on said differential duty. This issue was examined by the Board, and it was clarified vide letter F.No.574/CE/5/Misc.2003, dated 28.07.2003, that interest under section 11AB of the Central Excise Act, 1944 is payable on such differential duty.

The fact is  Board had never issued the letter F.No.574/CE/5/Misc.2003, dated 28.07.2003. DDT is well aware that some years ago there was an effort to trace this mysterious letter and they could not find it. Strangely, Board relied on this non-existent letter to advise the field on how to recover interest.

However, Show Cause Notice flew in all directions and five years later in 2008, a larger bench of the Tribunal referred the matter to a still larger five member bench.

In DDT 989 - 11.11.2008, DDT mentioned, "What started in 2003 has reached a VERY LARGER Bench in 2008 and may reach the Supreme Court in 2015!" Actually it reached the Supreme Court much earlier and a second round happened in the Supreme Court recently.

In the tortuous litigation journey, while the matter was pending before the five-member bench of the Tribunal, a High Court held that no interest was payable, which was set aside by the Supreme Court, but which was followed by two other High Courts. In the meanwhile, another Bench of the Tribunal followed the decision of the five-member bench - the only hitch was that the five-member bench had not delivered its judgement; the Tribunal referred to a judgement that did not exist!

And then came the famous judgement of the Supreme Court in SKF - 2009-TIOL-82-SC-CX in which the Supreme Court ruled that interest was payable on the duty paid on supplementary invoices. However, the Karnataka High Court in Bharat Heavy Electricals - 2010-TIOL-437-HC-KAR-CX, distinguished the SKF judgement.

The issue was again decided by the Supreme Court on Monday. The question again was whether interest is leviable under Section 11AB of the Act on the differential duty amount paid under supplementary invoices due to price increase by virtue of price variation clause in the sale contract. This time, the Supreme Court took the same view as the Karnataka High Court did. The Supreme Court observed, "It is undeniable that under Section 4 of the Act, the excise duty is to be paid on the 'transaction value' and such a transaction value has to be seen at the time of clearance of the goods. Indubitably, when the goods were cleared, the excise duty was paid taking into consideration the price that was actually charged and was reflected in the invoices raised for the said purpose. The Department cannot plead that as on that date, this was not the price charged. No doubt, when the differential payment is made at a later date, further amount towards excise duty becomes payable as a result of said differential in price. Further, such an event took place at a subsequent date. As on the date when the goods were cleared, there was no certainty that there would be price escalation and it was beyond comprehension to ascertain the exactitude of such an escalation. It would be impossible to expect the assessee to pay the excise duty, at the time of clearance of the goods, on the basis of price escalation that took place at a later date in future. Therefore, as on the date of clearance when excise duty was paid, it could not be treated as 'short paid' on the said date. As a consequence, when the principal amount, namely, the excise duty itself was not payable (i.e. on the differential) on the date of clearance of the goods, there cannot be any question of law to pay interest."

So, the Supreme Court has referred the matter to a Larger Bench.

The issue which was believed to have been finally settled six years ago has again come back to life. SKF is no more good law, at least until the Larger Bench decision comes. So, as of now interest need not be paid and litigation can be kept alive till the matter reaches finality - again.

We bring you this important judgement today. Please see Breaking News

FTP - Declaration of intent under Merchandise Exports from India Scheme (MEIS)

DGFT by Public Notice No. 40 dated 09th October 2015, had prescribed a procedure to be followed for claiming rewards under MEIS where exports had been made through EDI generated shipping bills between 01.04.2015 to 31.05.2015 and the exporter had inadvertently marked ‘N' in the "reward item box" and wished to seek MEIS benefit.

Subsequently representations have been received from exporters and trade & industry that such procedure should also be made applicable to exports made beyond 31.05.2015.

Now DGFT clarifies that Shipping bills, where declaration of intent ‘Y' has not been marked and ‘N' has been ticked inadvertently in the ‘reward item box' while filing shipping bills in Customs for exports made between 01.06.2015 to 30.09.2015, shall be transmitted by CBEC to DGFT.

DGFT Public Notice No. 47/2015-20., Dated December 08, 2015

Anti Dumping Duty

GOVERNMENT has imposed Anti Dumping Duty on the following:

"Methylene Chloride" also known as "Dichloromethane": Provisional anti dumping duty on "Methylene Chloride" also known as "Dichloromethane" falling under sub-heading 2903 12 of the First Schedule to the Customs Tariff Actoriginating in, or exported from the People's Republic of China and Russia.

Notification No. 58/2015-Customs (ADD), Dated: December 08, 2015

Gliclazide:  Definitive anti dumping duty imposed on Gliclazidefalling under tariff item 2942 00 90 of the First Schedule to the Customs Tariff Actoriginating in, or exported from the People's Republic of China. Gliclazide is an anti-diabetic drug to control Type 2 diabetes.

Notification No. 59/2015-Customs (ADD), Dated: December 08, 2015

Stupendous Job by CBEC - More than 50 Clarifications given

WHILE I started this DDT lambasting the Board for its insensitive clarification, I cannot close this issue without expressing my unadulterated appreciation for the Board for the stupendous job it has done in clarifying more than 50 outstanding issues. The very thought that there are fifty issues which have been crying for Board's attention all these years itself is frightening.

Board has made public the decisions taken at the recent Tariff Conference organized by the Board. CBEC believes the technical issues and decisions taken by the Conference to be beneficial to the trade as well as departmental officers.

Every cog in the Board machinery which prepared this masterpiece of a document which will be much referred to in the years ahead, deserves rich encomiums.

Some of the decisions:

1. Assessment and Valuation-Non-adoption of Section 4A-Valuationof Goods-Clearances made to Depots by Cement Manufacturers: - The conference concluded that depot is a place of removal of the manufacturer under section 4(3)(c)(iii) of the Central Excise Act, 1944 from where cement is sold to the institutional/industrial buyers who are not covered under Rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011. The conference was of the view that the valuation of goods in respect of clearances to industrial consumers even from the depot will be made under Section 4 of the Central Excise Act, 1944 and not under Section 4A of the Act ibid. The conclusion was reached in view of the fact that in case of institutional buyers purchasing goods, depot is only an extended arm of the manufacturer, being a place of removal.

2. Assessment and Valuation-Retention of Sales Tax Collected from Customers and Inclusion thereof in the Transaction Value: The conference concluded that any VAT, if retained would be added to the assessable value even if it is retained through the mechanism of adjustment against a subsidy payable under the scheme. Section 4 provides for abatement of taxes actually paid. Taxes can be considered to be paid for the purposes of granting abatement under Section 4 only if they are deposited with the exchequer.

DDT will cover the other issues in the coming days.

CBEC Instruction in F.No.96/85/2015-CX.I., Dated: December 07, 2015

Until Tomorrow with more DDT

Have a nice day.

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