There has been a doubt whether export duty should be charged simply as a percentage of FOB price or whether the FOB price should be taken as the ‘cum-duty price’ for determination of assessable value and duty due thereon.

In TIOL-DDT 913 - 22.07.2008, we raised this question:-

Export of taxes – the SEZ confusion continues

Now that SEZ units and developers are reconciled to payment of export duty on steel products cleared to SEZs, some new issues crop up. What is the valuation for calculating the export duty? Does the value include excise duty and VAT? Excise duty is either not payable or rebated and so should it be excluded?

While the Revenue Department, especially the Super Intelligent DRI, is sure that export duty is payable, nobody seems to be sure, on what value the duty is to be calculated.

It is high time the Revenue Department clarifies such hot issues – but who is bothered?

Now the Board has clarified the position:-

The practice was that the export duty and cesses were calculated by taking the FOB price declared by the exporter as the cum-duty price and working backwards from the FOB price. This methodology is based on instructions issued by the Board (contained in Appraising Manual) in 1966. This view was reconfirmed by the Board in 2000 while developing the software for Indian Customs EDI System (ICES-Exports) for the purpose of levy of cess under various enactments of different Ministries.

The Board asked ORACLE – the Law Ministry and the wise Ministry opined

1. Section 14 of the Customs Act or the rules framed thereunder, do not specify any procedure for calculation of assessable value for the purpose of charging export duty in a situation where the exporter has not collected any amount in excess of what has been declared in the shipping bill/invoice.

2. As per practice in vogue for the last more than four decades, transaction value of export goods has invariably been taken as ‘cum-duty price’.

3. This practice is not in conflict with any of the statutory provisions.

4. Amendments made in Section 14 of the Customs Act by the Finance Act, 2007 have also not brought any change in the procedure for calculation of assessable value for the purpose of charging export duty.

5. However, any decision on this issue is essentially a matter of policy on which decision is to be taken by the administrative department.

So, it is POLICY not LAW and the issue is back with the Board.

So, Board has taken a Policy Decision – and you guessed it; it is against the trade!

Board has decided that till 31.12.2008, the existing practice of computation of export duty and cesses by taking the FOB price as the cum-duty price may be continued. All pending cases may be finalized accordingly.

But Board has a new year gift – Come January 2009 and this is going to change:

With effect from 1st January, 2009, the practice of computation of export duty shall be changed. It is proposed that for the purposes of calculation of export duty, the transaction value, that is to say the price actually paid or payable for the goods for delivery at the time and place of exportation under section 14 of Customs Act 1962, shall be the FOB price of such goods at the time and place of exportation. For example if the transaction is at Rs 100 FOB, and the duty is 15%, the export duty will be 15% of FOB price, that is Rs 15. In case the transaction is on CIF basis, the FOB price may be deduced from the CIF value, and then the export duty be calculated as 15% of such FOB price.

Any difficulties which are anticipated in the implementation of the change in computation of export duty from 1st January, 2009 should be brought to the notice of the Board by 20th November, 2008 positively.

But doesn’t the law need to be amended or can the Board just say that the value changes on the midnight of 31st December 2008 with nothing else changing?

All exporters should re bargain their prices – you have about 50 days time!

Did somebody in the Board and Law Ministry forget “Customs Valuation (Determination of Value of Export Goods) Rules, 2007 which were enacted with effect from October 10, 2007? How come these Export Valuation Rules become irrelevant for the purpose of determining the value of export goods for the purpose of levy of export duty whether it is before or after January 2009?

If the Export Valuation Rules does not take care of the situation, shouldn’t that be amended instead of giving such clarifications?

CBEC Circular NO. 18/2008 in F. No. 467/45/2008-Cus-V- Dated: November 10, 2008

Notification for appointment of Chief Commissioners – yet another Departmental Appeal dismissed in Kolkata CESTAT

The Hon’ble CESTAT observed,

We find that there is no Notification in the Official Gazette appointing either Shri Amar Singh or Shri P.N.Vittal Dass as Chief Commissioner of Central Excise for Ranchi and Bhubaneswar Zones. Such a requirement flows from the statutory provisions contained in Section 2(b) of the Central Excise Act, 1944 and Rule 3 of the Central Excise Rules, 2002. This issue has been gone into in detail by us the case of Commissioner of Central Excise, Kolkata-III and others vs. M/s. Nafar Chandra Jute Mills Ltd. and Others - Order No.M-242/A-915-917/Kol/2008 dated 04.09.08 = 2008-TIOL-1805-CESTAT-KOL, in which, for the detailed reasons stated therein, we have held that unless a person is appointed by a Notification in the official Gazette he cannot be deemed to have been vested with the statutory powers to act as a Chief Commissioner of Central Excise under the Central Excise Law. Consequently, such a person cannot also exercise the powers under the Finance Act, 1994 dealing in Service Tax matters, as such powers are exercisable only by a person appointed as Chief Commissioner of Central Excise in the manner known to the law. In the present case, we have been shown only office Order No.186/2007 dated 26.07.07 in respect of Shri Amar Singh and Office Order No.85/08 dated 29.04.2008 in respect of Shri P.N.Vittal Dass; but the Department has not produced any Notification published in the official Gazette appointing either of them as Chief Commissioner Central Excise. The arguments advanced by learned Jt. C.D.R., Dr. Gautam Ray are nothing new and these have been duly considered by us in the case of M/s. Nafar Chandra Jute Mills (cited supra). Learned Jt. C.D.R. states that the matter is under examination of the Central Board of Excise and Customs, but he has no information as to when such examination would be concluded and remedial action would be taken. In the meantime, in the absence of any Gazette Notification appointing the two signatories to the impugned Review Order as Chief Commissioner of Central Excise, following our earlier order in the case of M/s.Nafar Chandra Jute Mills (cited supra), we have no option but to hold that the direction to file the present Appeal has been issued without having the necessary statutory power and jurisdiction and the same is, therefore, non-est in the eyes of law. Consequently, the appeal filed pursuant to such direction is not maintainable and the same is rejected at the threshold without going into the merits of the case.

As we had mentioned earlier, if the Government does not wake up fast all the appeals in all the Benches of the Tribunal will be dismissed. It will be very difficult to restore the dismissed appeals. Will the Board act soon?

2008-TIOL-1837-CESTAT-KOL

Supplementary Invoices - Interest on Duty?

The Government is often worried more about the interest than duty.

In TIOL-DDT 556 21.02.2007, it was reported,

Issue of Show Cause Notice for demanding interest and power of adjudication of such cases - CBEC relies on a nonexistent letter

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 is the issue and Board says it had examined the issue and by letter F.No.574/CE/5/Misc.2003, dated 28.07.2003 clarified that interest under section 11AB of the Central Excise Act, 1944 is payable on such differential duty.

The fact is Board had never issued such a letter. DDT is well aware that a couple of years ago there was an effort to trace this mysterious letter and they could not find it. Strangely, Board now relies on this non existent letter to advise the field on how to recover interest.

There is no equity in taxation. If for any reason, the assessee has to refund some money to his customer, he will not get a refund from the department, but if his customer pays him some money after some time, he has to pay duty as well as interest.

Now the Tribunal has referred the matter to a Five Member Bench. What started from a nonexistent circular has travelled through all possible Judicial Corridors and is now before a Five Member Bench – which certainly is not the end – you still have the High Court and Supreme Court.

What started in 2003 has reached a VERY LARGER Bench in 2008 and may reach the Supreme Court in 2015!

Why can’t the Board amend the Law as it deems fit and avoid future litigation?

We bring you this landmark judgement today.

See Breaking News .

Jurisprudentiol–Tomorrow's cases

Writ Jurisdiction

Just because Article 227 was mentioned in the writ appeal instead of Article 226, writ should not have been dismissed: Supreme Court

The High Court seems to have gone by the nomenclature i.e. the description given in the writ petition to be one under Article 227 of the Constitution. The High Court did not consider the nature of the controversy and the prayer involved in the Writ petition. The prayer was to quash the order of assessment passed by the Assistant Commissioner, Commercial Tax levying purchase as well as Entry Tax - there is no manner of doubt that the orders and proceedings of a judicial court subordinate to the High Court are amenable to writ jurisdiction of the High Court under Article 226 of the Constitution.

Central Excise

Exemption for captive consumption - emergence of by products, no reason to deny credit - methane and ethane automatically emerging during cracking of naphtha: Apex Court

The Tribunal's finding that the ethylene and propylene used as refrigerant has been used in or in relation to the manufacture of the same goods. The inevitable and automatic emergence of ethane and methane, therefore, by itself is no ground for denying the exemption contained in the notification. The Tribunal came to the categorical finding that the respondent could not have manufactured ethylene and propylene without manufacturing its by-products ethane and methane. The Tribunal held that in any technology the emergence of ethane and methane was inevitable and hence while it is no doubt correct to say that the ethylene and propylene have been used in or in relation to the manufacture of ethane and methane, the identical quantity of the same goods has simultaneously been used in the manufacture of ethylene and propylene. The emergence of ethane and methane, therefore, cannot be a ground to deny the benefit of exemption to the respondent

Income Tax

When AO completes assessment proceedings verifying all material facts he cannot retrace his steps to allege that appellant failed to disclose fully and truly all relevant facts – Notice issued under Sec 148 quashed - Delhi High Court

Mere reason to believe that the income had escaped assessment is not a sufficient ground to reopen assessment beyond the four year period under s.147. It should also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly, in the absence of which no action under s.147 could be taken against them.

Customs

Import of cars – Import Policy required a certificate from a Japanese Ministry which refused to give certificate; law cannot ask a person to do the impossible – Revenue Appeal dismissed: Delhi High Court

As per the Import Policy the importers were required to obtain the Type Approval Certificate/ COP from the international accredited agency of the country of origin of the goods. In this case the cars have been imported from Japan and, therefore, it was only the Ministry of Land, Infrastructure and Transport which could have issued the Type Approval Certificate/ COP. The respondents had applied to the said Ministry for the Type Approval Certificates/ COPs but the Ministry had flatly refused in so many words. In such a situation the respondents could not be expected to submit the Type Approval Certificate/ COP from the said agency

See our columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice Day.

Mail your comments to vijaywrite@taxindiaonline.com