TIOL-DDT 2879
30 06 2016
Thursday

THE Delhi High Court in the case of Mangali Impex Ltd - 2016-TIOL-877-HC-DEL-CUS, held that sub-section (11)of Section 28of the Customs Act,1962 cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short levy or erroneous refund for the period prior to 8th April 2011, if such SCNs have been issued or proceedings conducted by officers of the Customs,DGDRI or DGCEI or by the SIIB, who are not 'proper officers' within the meaning of subsection(34) of Section 2 of the Act.

Covering the case, DDT 2838 04 05 2016, observed, "This is not positively the end of litigation in this matter. The Government is sure to take the matter to the Supreme Court and/or try another hand at retrospective litigation. Undoing a Supreme Court order requires deft drafting skills, which bureaucrats are not fortunately endowed with."

Now, the Board clarifies,

In this regard it may be mentioned that the amendment in Section 28 (11) of the Customs Act, 1962 was brought out by the Government, after the decision of Supreme Court in Commissioner of Customs vs Sayed Ali 2011-TIOL-20-SC-CUS, wherein it was held that Customs Preventive Officers are not proper officers to issue Show Cause Notice u/s 28 of Customs Act, 1962. Vide Notification No.44/2011 dated 06.07.2011, Board assigned the functions of proper Officers to the officers of DGDRI, DGCEI and Preventive. Further, in the Statement of Facts and Reasons to the Customs (Amendment and Validation), Bill, 2011, while introducing sub-section 11 of Section 28 of the customs Act, 1962, the then FM had expressly mentioned that it has purposed to amend the Customs Act, 1962 retrospectively. Thus, the intention of Legislature was clearly spelt out. Therefore, the officers of DGDRI, DGCEI and Preventive are Proper Officers even for the Show Cause Notices issued prior to issuance of Notification dated 06.07.2011. Since the order dated 03.05.2016 of High Court of Delhi challenges the constitutional validity of sub-section (11) of Section 28 of the Customs Act, 1962, the Board has decided to file an SLP in the case before the Hon'ble Supreme Court.

The Board wants field formations to transfer all the SCNs issued by DRI, DGCEI, SIIB, Preventive prior to 06.07.2011 which are pending adjudication, to the Call Book till disposal of the matter in the Supreme Court.

CBEC Instruction in F.No..276/104/2016-CX.8A(Pt), Dated: June 29, 2016

Litigation Management in CBEC - Govt Appoints 251 Standing Counsels - Rescinds 111 - Wants to appoint some more

BY an order dated 9th June 2016, the President of India was pleased to appoint 251 Senior/Junior Standing Counsels to handle litigation of Indirect Taxes before various High Courts and other fora. Some of them were appointed in 2011 or earlier and their term had ended on 14.10.2014. They were reappointed on 9th June 2016.

Within ten days on 18th June 2016, the CBEC by an Order rescinded the appointment of 111 of those counsels. These are counsels who were already on the panel as on 14.10.2014.

Now the CBEC wants to fill these vacancies! Board wants the Chief Commissioners to complete the selection process latest by 20.08.2016.

The Pay Commission should have given a huge hike to the Revenue Officers for their efficiency.

CBEC Instruction in F.No..278A/33/2016-Legal, Dated: June 24, 2016

FTP - Import from Iran or Export to Iran

THE prohibition on direct or indirect export to Iran or import from Iran of specified items is lifted. Direct or indirect export to Iran or import from Iran is now permitted subject to UN Security Council Resolution 2231(2015) and IAEA specified documents.

DGFT Notification No.13/2015-2020., Dated: June 29, 2016

FTP -Export to Iran - Procedure

DIRECTOR General of Foreign Trade has incorporated sub-para VIII in paragraph 2.74 of the Handbook of Procedures 2015-2020 which reads as:-

"VIII. Authorization for export of items in Categories 0, 3 (other than 3D), 4, 5 and 7 of the SCOMET list to Iran would be subject to the relevant provisions contained in Annex B to the UN Security Council resolution 2231 (2015). The licensing authority, i.e. DGFT or Department of Atomic Energy, as the case may be, on completion of the IMWG process or the applicable internal process, shall seek the concurrence of Disarmament and International Security Affairs (D&ISA) Division in the Ministry of External Affairs, as required."

DGFT Public Notice No. 19/2015-2020., Dated: June 29, 2016

Central Excise Duty on Waste and Scrap

DDT 2877 28 06 2016 carried a capsule Central Excise Duty on Waste and Scrap. In this regard, we received this mail from a distinguished advocate:

This is with regard to the DDT today (28th) under the caption: Central Excise Duty on Waste and Scrap:

IN a recent meeting of the Regional Advisory Committee of Hyderabad Central Excise Zone, a point was raised,

CBEC Instruction in F.No.96/85/2015-CX.I., Dated: December 07, 2015 has communicated minutes of the meeting of Chief Commissioners held on 28/29th October, 2015. One of the issues discussed at the said meeting was on the duty on waste and scrap. The conference decided that henceforth waste & scrap are to be treated as "non excisable goods". In view of this decision, Industry wants confirmation on

(a) Since waste and scrap sold are "non excisable goods", no excise duty will be payable and

(b) that for the purpose of Rule 6 (3) the value of clearances of waste and scrap will be treated as 'exempted goods".

After the issue of the clarification in the above matter, there was a CBEC circular which was referred to in the following order of the Hyderabad CESTAT M/s Gemini Edibles & Fats India Pvt. Ltd. Versus The Commissioner C.C.E & ST, Guntur - 2016-TIOL-1579-CESTAT-HYD

Extract:-

Excisability of the byproduct ‘Spent Earth' arising as a residue in the process of refining of crude palm oil -adjudicating authority confirmed demand of duty on the byproduct and interest and imposed equal penalty - On appeal, Commissioner (Appeals) rejected the appeal holding that definition of excisable goods in 2(d) of the CE Act, 1944 was amended adding an explanation that for the purposes of this clause, ‘goods' includes any article, material or substance which is capable of being bought or sold for consideration and that such goods shall be deemed to be marketable.

Held: Issue having been settled by case laws referred to in the Board circular and also the withdrawal of earlier circulars and further the clarification of Board that the revised instructions will be applicable to cases kept in call book, the present appeal is allowed, setting aside the impugned order.

Please also see Excisability of Bagasse - CBEC Clarifies - Beware there is Rule 6(3) in DDT 2832 26 04 2016

Yesterday in Supreme Court

THE Supreme Court yesterday decided two important NDPS cases:

NDPS - Procedure not followed - Conviction Set aside: The secret information recorded by the Station House Officer and the report sent by him to the Circle Officer were different; A personal jeep was considered as a public transport vehicle; The sealing of the material sample was not proper nor the sample of seal was deposited in the stock house; The independent witnesses have not supported the case of prosecution at all. --- Result: the conviction is set aside. The NDPS Act was enacted to consolidate and amend the law relating to narcotic drugs, to make stringent provisions for the control and regulation of operations relating to narcotic drugs and psychotropic substances. At the same time, to avoid harm to the innocent persons and to avoid abuse of the provisions by the officers, certain safeguards are provided which in the context have to be observed strictly.

NDPS - Conviction Confirmed - Bail granted cancelled - Appellant directed to surrender before the Trial Court to undergo the remaining period of sentence: the accused was arrested in 1998; he was given bail by Supreme Court in 2004. Now his conviction is confirmed and he is directed to surrender to undergo the remaining period of sentence.

Please see Breaking News + Breaking News for more details of these cases.

Service Tax on ocean freight - Hard days for importers? - TIOL Article in RAC Meeting

A point raised in the Regional Advisory Committee meeting of the Hyderabad Central Excise Zone on 25 04 2016:

In this Finance Bill, Service tax is proposed to be levied on the transportation of goods by a vessel from outside India up to the customs station of clearance in India. The proposal perhaps has far reaching consequences to the importers who basically bear the freight charges either collected by shipping lines, forwarders etc. or pay to exporter situated out side India (prepaid charge). In both the situations, importer has to include the freight (ocean freight) in the CIF value of imported goods and pay the customs duty thereon. The effective date of levy of this service tax is01.06.2016.

At present, service tax on such ocean freight is placed under negative list and, therefore, no service tax was payable on such freight element. Consequent upon the omission from the negative list the person liable for payment of service tax would be the recipient of service in India; under Reverse Charge Mechanism.

Para 4.1(C ) of the D.O letter F.No. 334/8/2016 -TRU dated 29-02-2016,clarifies the new levy as under:-

"The entry in the Negative List that covers services by nay of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance [section 66D (p)(ii)] is proposed to be omitted with effect from 1.06.2016. Clause 146 of Finance Bill 2016 may please be seen in this regard. However, such services by an aircraft will continue to be exempted byway of exemption notification [Not. No. 25/2012-ST, as amended by notification No. 09/2016-ST dated 1st March, 2016 refers]. The domestic shipping lines registered in India will pay service tax under forward charge while the services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity. The service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfillment of the other existing conditions). It is clarified that service tax levied on such services shall not be part of value for custom duty purposes.

In addition, Cenvat credit of eligible inputs, capital goods and input services is being allowed for providing the service by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India. Consequential amendments are being made in Cenvat Credit Rules, 2004 [Not. No. 23/2004-CE (N.T.) as amended by Sl Nos. 2(b) and 5(h)of notification No. 13/2016-C.E. (N.T.) dated refers.] (Clause 146 of the Bill refers)"

Thus, it is amply clear that the service tax has to be paid by a business entity located in India who receives services of transportation of goods in vessel from outside India. Although it is clarified that customs duty is not payable on the service tax amount, yet basic issue remains un-resolved as to how the value of taxable service will be determined in case where the transportation charges are pre-paid. In such cases, there may be situation when neither the agent nor the importer will be aware of the freight amount so as to determine the value of taxable services since the freight charges are paid by the exporter abroad. The same situation arises in case of outward freight paid by the entities in domestic "Door-step Delivery". In case of domestic home delivery unlike prepaid imports, the freight charges paid to transporters are available and, therefore, taxed at the hands of hiring entities. Contrary to this in case of "GHAR-POCH" (in Marathi meaning - Home Delivery of goods) by the exporters such freight actually paid or payable will not be ascertainable.

In this situation it is likely that the business entities who receive services of transportation of goods in vessels coming from outside India will face harrowing times unless specific modalities for determining value of taxable services are laid down.

This is an exact reproduction of an article we carried on 15.4.2016 - Service Tax on ocean freight - Hard days for importers?

And this is what the Department replied:

The Chief Commissioner explained that actual Ocean freight is always available and hence there will not be any problem in payment of service tax. In the case of ocean freight charges prepaid by the exporter abroad it was opined that the actual ocean freight paid can be ascertained directly from the exporter abroad or can also be ascertained from the shipping liners. Further it was mentioned that since the service tax is required to be paid by 6th of the following month and by 31st March for the month of March there would be sufficient time to ascertain the same and pay service tax .

Low Attendance In RAC Meetings

IN the above mentioned RAC Meeting, the Chief Commissioner expressed disappointment at the poor attendance by the members as the Regional Advisory Committee is constituted and conducted to resolve local issues.The members present were requested to convey to all the other members to attend and utilize this platform to resolve their issues.

That meeting was attended by 5 members from the Trade and 9 Officers from the Department.

The RAC Meeting of the Ahmedabad Zone held on 29.1.2016 had 11 Departmental Officers and 4 representatives from Trade.

In the largely attended RAC meeting in Mysore on 20.04.2016, there were 14 officers and 10 assessees.

Cochin RAC on 30.03.2016, had 9 officers and 4 assessees.

In DDT 120 24 05 2005, I wrote: "In its earlier days the RAC meetings used to be attended by the top executives of the companies but slowly they lost interest as they had come to realise that these meetings do not offer any solutions and at best they are an exercise in PR. So now you find RAC meetings attended by three assessees and thirty officers. The minutes of RAC meetings are full of wry humour."

Until Tomorrow with more DDT

Have a nice Day.

Mail your comments to vijaywrite@tiol.in