TIOL-DDT 2744
14 12 2015
Monday

THE recent Central Excise Tariff Conference deliberated on the issues of refund of accumulated CENVAT Credit in relation to EOUs and International Competitive Bidding (ICB) supplies. And the verdict is against the assessees.

No refund of accumulated credit for ICB Supplies :

The Coimbatore Zone raised an issue that it would be desirable to provide completely duty free procurement of raw materials (zero rating) for use in the manufacture of goods to be supplied against ICB to mega power/ultramega power projects. While the main units/sub-contractors are entitled to exemption under notification no. 12/2012-CE dated 17.03.2012, the vendors who supply materials to such main units/sub-contractors do not get any exemption from payment duty. This leads to accumulation of credit with main units/sub-contractors. Cenvat credit so accumulated should be allowed refund under Rule 5 of the Cenvat Credit Rules, 2004.

It was decided that :the provisions of refund of accumulated credit under rule 5 of the CENVAT Credit Rules, 2004 are only meant for physical exports and not for deemed exports with one exception i.e. supplies to SEZs which is treated as exports. The meaning of the expression export goods has been inserted in the rule 5 of CCR, 2004 by notification no. 6/2015-C.E(N.T) dated 1.3.2015 to say that export goods means any goods which are to be taken out of India to a place outside India.Thus, supplies to EOU and supplies under ICB can not avail the benefit of refund of accumulated credit under rule 5. Under the present policy, it would not be possible to allow refund of accumulated credit on supplies to ICB.

No refund of accumulated credit for EOU Supplies :

The Hyderabad Zone raised a similar issue: It is pertinent to mention that conceptually SEZs and EOUs merits to be equated and supplies to EOUs may also have to be treated as Exports (Deemed exports as per FTP), but for the recent incorporations of the definition of "Export Goods". The terms exports, prior to incorporation of the definition, was interpreted in several judicial pronouncements to include deemed exports. In a similar situation in respect of SEZs, Board vide Circular 1001/8/2015-CX.8 dated 28.04.2015 has clarified that all supplies to SEZ should be treated as exports. However, the said circular did not cover the supplies to EOU. Clarification is needed regarding benefit under Rule 5 of the Cenvat Credit Rules, 2004 for supplies to EOUs.

The Decision:The issue is identical to the issue of extending benefit of refund under rule 5 of the Cenvat Credit Rules, 2004, for supplies made under International Competitive Bidding discussed in the foregoing paragraphs. The conference noted that the benefit of refund of accumulated credit under rule 5 of CCR, 2004 is not admissible for supplies to EOUs. Even prior to the amendment to the Rule, EOUs were not eligible for such benefit though it was extended in some of the cases by Hon'ble courts. The definition of export goods has now been incorporated in the rules removing confusion and ambiguity. With reference to SEZ, it was noted that SEZ Act, 2005, has an overriding application over other Acts including the Customs Act and therefore benefit of refund of accumulated credit is available for supplies of goods to SEZ. The present policy is to not allow the benefit of refund of accumulated credit for supplies to EOU.

But why? What is the logic behind this policy? Is it a simple habit with the babu that come what may, I will not give refund? Isn't the Board living in some archaic age where CENVAT credit is allergic? Are they fit to run the GST regime with the rejection of genuine small entitlements of the assessees? If they can give the refund for SEZ, why not for the EOU?Babucracy is the only logic.

Para B-22 and B-24 of CBEC Instruction in F.No.96/85/2015-CX.I., Dated: December 07, 2015

CBDT Enhances Monetary Limits for Appeals - Retrospectively

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.

Now appeals shall not be filed in cases where the tax effect does not exceed the monetary limits as: -

Adverse judgments relating to the following issues would 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, or

4. Where the addition relates to undisclosed foreign assets/ bank accounts.

This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits are directed to be withdrawn/ not pressed.

Will CBEC follow suit?

CBDT Circular No. 21/2015., Dated: December 10, 2015

Anti Dumping Duty on Cold Rolled Flat Products of Stainless Steel

GOVERNMENT has imposed anti dumping duty on Cold Rolled Flat Products of Stainless Steel falling under heading 7219 of the First Schedule to the Customs Tariff Act and originating in, or exported from the People's Republic of China, Korea, European Union, South Africa, Taiwan (Chinese Taipei), Thailand and United States of America (USA).

This anti dumping duty was earlier imposed in 2009 and it expired on 21st April, 2015. Thankfully, the Government has not opted for retrospective imposition of anti dumping duty this time, but the duty was lost for about eight months.

Notification No.61/2015-Cus.,(ADD)., Dated: December 11, 2015

FTP -Onions - Minimum Export Price Reduced

"THE price of onion in local market is likely to cool down as the Indian government on Friday slashed the minimum export price of onions at USD 400 per tonne from USD 700.”, reported the Dhaka Tribune yesterday.

Government has reduced the Minimum Export Price (MEP) for export of all varieties of onions from USD 700 F.O.B. per MT to USD 400 F.O.B. per MT. This was increased from 425 to 700 dollars in August 2015.

DGFT Notification No.26/2015-2020, Dated: December 11, 2015

ATVP - Exemption to Imports - Extended indefinitely

AS per Sl No. 13 of the table in Notification No. 39/1996 - Cus dated 23.07.1996, Machinery, equipment, instruments, fittings, devices, scientific apparatus, components, spares, tools, accessories, computer hardware, computer software, technical know-how (in the form of documents and drawings in the printed media), castings, forgings, pipings, tubings, raw materials and consumables required for the purpose of Advance Technology Vessels Programme (ATVP) of the Ministry of Defence, are exempted.

This exemption was to lapse on 1.1.2016. Now this is extended indefinitely.

Notification No. 56/2015-Cus., Dated: December 11, 2015

Customs - Differential duty paid on account of increase in rate of duty after assessment of Bill of Entry - Matter goes to Third Member in CESTAT

HERE is an interesting case:

The importer filed a Bill of Entry on 20.11.2000 for clearance of the declared quantity of RBDPalmolein on 20.11.2000. As the rate of duty on the goods on that date was 35% ad valorem , the Bill of Entry was assessed by the Customs officers with the duty liability of Rs.1,62,40,718/-. The appellant paid the said assessed duty on 20.11.2000 and the requisite order in terms of the provisions of Section 47(1) of the Customs Act for clearance of the goods for home consumption was made on 23.11.2000.

However, vide a subsequent Notification No. 142/2000-Cus dated 21.11.2000, the effective rate of Basic Customs Duty on RBDPalmolein was enhanced from 35% to 65%. Inasmuch as the Entry Inwards of the vessels loaded with the imported goods was granted on 21.11.2000, the said enhanced rate of duty was applicable to the goods in question, in terms of the provisions of Section 15 of the Customs Act, 1962. The said facts of enhancement of rate of duty did not come to the notice of the Customs officers, who passed the ‘out of charge' order on 23.11.2000 and the goods were accordingly cleared by the respondents.

Subsequently, a letter was issued to the importer on 24.11.2000 and they were directed to pay the differential duty amounting to Rs. 1,02,84,944/-. As the respondent did not deposit the said amount during the intervening period, the duplicate copy of the Bill of Entry was endorsed referring to increase of Customs duty from 35% to 65% and quantifying the duty on the said account as also on the excess discharged cargo amounting to Rs. 1,02,84,944/-, on 12.3.2001. The respondents, in fact, admitted their excess duty liability and accordingly, wrote to the department that they would be depositing the same. In fact, they made part payment of Rs. 25 lakhs during the first week of December 2000 itself which was rejected by the Revenue on the ground that they should pay the entire duty in one go as there is no provision for part payment of duty under the Customs Act. Ultimately, the total differential duty of Rs. 1,02,84,944/- was paid by the respondents on 10.3.2001.

However, a show-cause notice dated 3.4.2001 was issued alleging contravention of provisions of Section 47(2) of the Customs Act, 1962 and proposing interest of Rs. 6,96,558/- under Section 28(1) of the Customs Act as also proposing imposition of penalty under Section 117 of the Customs Act. The show-cause notice culminated into an order passed by the Deputy Commissioner confirming the interest and imposing penalty of Rs. 10,000/-. On appeal against the said order, the Commissioner (Appeals) reversed the same.

Revenue is in appeal before CESTAT.

The Member (Technical) observed,

This is a case where the respondents have deliberately delayed the payment of differential duty of customs though it was payable to the national exchequer immediately i.e. as soon as the goods were released for home consumption. When the respondents knowingly and deliberately delayed the payment of differential duty of the customs they cannot claim any defence that they are not liable to pay any interest in this situation.

The provisions of Customs Act both under 47 of the Customs Act as well as Section 28(1) of the Customs Act 1962 make it clear that the interest for delayed payment of duty is liable to be payable by the respondents. When the respondents have deliberately violated the provisions of law and have not paid the interest which was duly payable by them, the penalty imposed under Section 117 by the original adjudicating authority is also sustainable in law .

The Member (J) however did not agree.

She observed,

There was admittedly a short levy of duty, but instead of issue a show-cause notice for such levy in terms of Section 28 of the Act, the Revenue adopted a route of addressing letters to the respondents who deposited the differential duty. The said communication was accepted by the assessee and they deposited the duty accordingly. The interest stands confirmed against the assessee under Section 28 of the Act. When there is no show-cause notice issued by the Revenue in terms of Section 28 of the Customs Act, the confirmation of interest on delayed payment of duty in terms of Section 28AA cannot be invoked. The said interest provisions require an assessee to pay the assessed duty within a period of 3 months from the date of determination of duty. If there is no such determination by the Revenue, the question of payment of interest does not arise. As such, I find no infirmity in the views adopted by the Commissioner (Appeals). Similarly, I agree with the Commissioner (Appeals) that when there is no interest liability alleging contravention of provisions of Section 47(2) of the Act, imposition of penalty upon the assessee was not justified. The Revenue's appeal is, accordingly, rejected.

We bring you this order today. Please see Breaking News

Date of Effect of Notifications

THE Notifications are supposed to come into effect on the date of its issue/publication. The CBEC normally issues notifications in the evening and they are available late in the evening or the next day, but they have come into effect from 0000 hours of the date shown in the notification irrespective of when the public or for that matter the Government officers responsible for implementing them come to know about it.

In the case above, the Customs officers were not aware of the increase in duty when they allowed clearance. They could subsequently recover the enhanced duty, because the assessee was an established Industry. What would happen if the assessee cannot be traced easily? For example, the increase/decrease in tariff value of gold. The notification comes sometime in the evening and the Customs officer in the airport is not aware of it. What do they do when they assess the duty at a lower tariff value and realise that the value has been increased? They don't face this problem, because gold is generally not assessed in the airports!

It would be convenient to everybody if the notification itself specifies an effective date two or three days after issue of the notification. Heavens are not going to fall and coffers are not going to be emptied if the effect of the notification is postponed for a couple of days. Another archaic relic we are not able to get rid of!

CESTAT Bench Inaugurated at Hyderabad

ADDRESSING a meeting of the FAPCCI at Hyderabad on 08.06.2013, Justice Goda Raghuram, the CESTAT President said that the proposal to start a CESTAT Bench at Hyderabad is seven months pregnant but he was not sure of a safe delivery in nine months.

It took 30 long months! Finally, the Bench is inaugurated today at Hyderabad by the President.

Until Tomorrow with more DDT

Have a nice day.

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