BOARD had received several references to put in place a verification mechanism in respect of the duty credit scrips issued under Chapter 3 schemes of the Foreign Trade Policy (FTP) and in respect of the Export Promotion Schemes viz., Advance Authorization / Duty Free Import Authorization (DFIA) / Export Promotion Capital Goods (EPCG) schemes.

After examining the matter and after considering the reports received from the field formations, which indicated discrepancies having revenue implications, Board has decided to put in place the following procedures:-

a) In case of EPCG scheme, the Jurisdictional Customs Authorities at the Port of Import shall ensure that the installation certificates are submitted within 6 months of completion of imports as stipulated in the corresponding customs notifications. The correctness of the installation certificates, which are issued by the Chartered Engineers, shall be verified on a random basis through Central Excise divisions. Further, the EPCG notifications stipulate fulfilment of at least 50% of export obligation within the first block. This shall be verified in detail. In case the same is found satisfactory, the Export Obligation Discharge Certificate issued by the Director General of Foreign Trade (DGFT) at the end of 2nd block may be accepted without further verification unless there is a specific intelligence suggesting need for detailed verification.

b) In case of Advance Authorization scheme, the Export Obligation Discharge Certificate should normally be accepted unless there is an intelligence suggesting misuse.

c) The Jurisdictional Commissioner of Customs may cause random verification for some of the authorizations issued under EPCG / DFIA / Advance Authorization schemes registered at their port to check the correctness of the address shown on the Authorization. This is important, as the EPCG notification requires installation of the capital goods and the Advance Authorisation scheme (and DFIA scheme in some cases) contemplates actual usage of the imported goods. Such verification may be carried out during the validity of the Authorisation and preferably through the Central Excise divisions.

d) Action to safeguard customs revenue should be initiated in case the authorization holder does not submit the Export Obligation Discharge Certificate within the time period stipulated in the relevant Customs notifications.

e) As regards the duty credit scrips issued under Chapter 3 of FTP, the verification of genuineness of scrips in terms of Para 3.11.3 of the HBP v.1 shall be done before allowing registration of such scrips. Further, the Commissioner may cause random verification of the shipping bills based on which the said duty credit scrip has been issued to ascertain the genuineness of such shipping bills. A quarterly report on the outcome of the said verification may be forwarded to the Board, which should include inter alia the details of the discrepancies noticed during the verification and the measures taken to redress such discrepancies. This procedure will be reviewed once online transmission of the duty credit scrips issued under Chapter 3 of FTP is operationalized.

f) Wherever the Export Obligation Discharge Certificates issued by DGFT bear the requirement that the Customs department should carry out verification, then such verification should be done. In all cases – EPCG, Advance Authorization, DFIA and Reward Schemes, the Department would retain the right to carry out a complete verification wherever there is specific intelligence available suggesting misuse.

The notifications issued under EPCG / Advance Authorization / DFIA schemes provide that the exporter should discharge the export obligation within the specified time period or within such extended period as may be permitted. Further, the notifications issued under EPCG scheme stipulates that in case of non-fulfilment of block-wise export obligation, the importer should pay the proportional duty of unfulfilled portion of export obligation along with specified interest from the date of clearance of the goods and such payment should be made within 3 months from the expiry of said block. Monitoring of export obligation is an integral part of verification mechanism. This would facilitate faster redemption of Bonds / Bank Guarantee executed under the above schemes. In view of above, the Jurisdictional Commissioners of Customs are directed to put suitable systems in place to initiate timely action in all cases of default.

The guidelines issued in the past on the subject shall be modified to the above extent.

The most important aspect that needs to be stressed is with regard to coordination between the DGFT and the Customs authorities on monitoring of export promotion schemes. Strangely this aspect does not find any mention in the above guidelines.

For e.g. when the notifications prescribe payment of proportionate duty for unfulfilled portion of export obligation along with interest, before the Customs authorities issue a show cause notice for recovery of such proportionate duty, they should get a confirmation from the office of the DGFT if any modification / extension of the time period for fulfilling the export obligation is allowed to an exporter.

For meeting this objective, it is the Customs authorities who have to be more pro-active. Instead of launching a typical bureaucratic correspondence, which will take its own time to conclude, a personal call or a visit to the DGFT office and vice versa, would otherwise speed up flow / sharing of information between the two authorities.

Unfortunately, this jugalbandi between Customs and DGFT rarely happens in the field and it appears as though they are working at cross purposes resulting in tonnes of paper work and unwarranted litigation.

There were many instances where CESTAT, while hearing cases related to demand of duty for non-fulfilment of export obligations, had to deal with representations from the assessees stating that the DGFT was obliged to provide an extension of time period to fulfil the export obligations, resulting in remand of cases for further verification or dismissal of appeals in favour of assessees.

Circular No. 5/2010-Cus., Dated: March 16, 2010

Committee of Chief Commissioners reconstituted

CBEC has made a modification in the Committee of Chief Commissioners constituted for review of cases originating from the jurisdiction of Belgaum , Mangalore and Mysore Central Excise Commissionerates. The modified Committee comprises of Chief Commissioners of Central Excise, Mysore and Bangalore Zones.

Notification No. 12/2010-CX.(N.T.), Dated: March 16, 2010

DGS & DM exhorts field formations for 100% usage of ACES

THE Director General of Systems and Data Management wrote a letter to all the Chief Commissioners of Central Excise / Service Tax Zones exhorting them to ensure 100% usage of ACES by the end of this year since automation in Central Excise and Service Tax is an important pre-requisite for successful transition to GST regime.

Since the number of assessees using ACES will increase manifold with effect from 1st April, 2010 due to reduction in threshold limit of duty for e-payment and e-filing of return, particularly in Service Tax (being the month for filing half-yearly ST 3 returns), the DGS & DM has requested that all Commissioners shall take necessary steps to ensure smooth working of ACES.

With the mandatory e-filing, many existing assessees, whose e-mail IDs are not in the database, may now approach the departmental officers to incorporate their email IDs to get TPIN mails and register with ACES. The Commissioners should, therefore, ensure that the Range Superintendents, who are given the power in ACES to incorporate email IDs of assessees and resend TPIN e-mails are fully conversant with the process. In case of any problem or clarification, they can approach the ACES service desk by phone or e-mail.

Further, to make it easy for the Dealers to file returns in ACES, an XML scheme has been hosted on the ACES website. All Commissioners are advised to bring it to the notice of the staff and the dealers. By using this scheme the assessees can generate an up-loadable form of return directly form their own database without the need to make fresh data entry. It is informed that the DGS & DM is in the process of publishing similar scheme for ER 2 and ER 1 returns by the end of March, 2010.

It appears that only LTUs at Bengaluru and Chennai consistently maintained a 100% e-filing record and some other Commissionerates are actively pursuing this path of automation with renewed vigour.

Laxity on part of assessees

DGS & DM laments that a large number of assessees have still not intimated their e-mail IDs to the department. As a result, the activities in ACES have not been to the desired level. In this connection, template of a letter was sent to the Commissioners to collect the e-mail IDs from the assessees, particularly when they come to the office to submit their manual returns. They were advised to either get the e-mail data updated in ACES through the Range officers or forward the information in excel sheet to DG, Systems so that it can be updated. The Commissioners were also advised to send copies of this template to various Chambers of Commerce and Industry with a request to advise their members to submit email IDs to the department as soon as possible and start using ACES.

Discrepancy with reference to number of assessees in ACES database

BEFORE rolling-out ACES, DGS & DM had repeatedly advised the Commissioners to review the status, clean up the database so that the records of registration in SACER and SAPS could be migrated to ACES. Based on the data, with the flags as it existed, data were migrated to ACES. DG Systems has not made any changes in the flags of the assessees. In the ACES application, field officers have not been given any rights to put flags. In spite of a letter from DGS, Chennai to review the status of the assessees and forward the list with the correct flags so that DGS & DM can upload the data till date no such list has been received from any Commissionerate. The Commissioners are instructed to complete the review process and send the lists by 25th March positively so that database could be corrected by 1 st April, 2010.

Time lag in issuance of registration certificates

IT is seen that there is a considerable time gap between filing of registration application and issuance of registration certificate by the Departmental Officers. Efforts should be taken to issue registration certificate as per norms of CBEC at the earliest, preferably on the same day, so that the assessees can feel the utility of ACES.

How often do they stick to the norms and does it matter to the assessee?

Hitherto, it did not matter if the registration was granted within a stipulated time or not and to a certain extent reduced their interaction with the authorities thereby reducing the culture of speed money to a certain extent. But with the introduction of ACES and mandatory requirement of online payment and e-filing of returns at reduced threshold limits of duties from April 1, 2010, obtaining a registration certificate with appropriate registration number becomes necessary for smooth operation of ACES from the assessee's side.

Unfortunately, there is a danger of this mandatory requirement making assessees vulnerable to the machinations of the officers who are used to speed money.

Certified Facilitation Centres for ACES

THE Finance Minister has approved the proposal to set up Certified Facilitation Centres (CFCs) for ACES throughout India , with effect from April, 2010, by the Members of the Institute of Chartered Accountants of India (ICAI). CBEC is in the process of entering into an MOU with ICAI shortly. This will help the assessees, particularly those who do not have the requisite IT infrastructure or resources, to use the facilities of CFCs to digitize and upload their documents to ACES on payment of service charges, at rates approved by CBEC, to the Chartered Accountants, running the CFCs. The free-of-cost services under ACES will, however, continue to be available to those assessees who directly use ACES on their own.

Why only CFCs set up by CAs? Why not provide an opportunity to institutes of CWAs or CSs?

DG (Systems) Letter F. No. IV (24) 19/2010-Systems, Dated: March 10, 2010

CAs Institute sees it as a Professional Opportunity for Members

THE ICAI President Uttam Prakash Agarwal sees the ACES as a new opportunity for his members.

He says,

“This new service is a new centralised web based software application of CBEC which provides us an online electronic interface with the department. ACES aims to reduce paperwork, visits to the department and transaction costs while increasing accountability, responsiveness, efficiency and transparency in indirect tax administration. The online facilities offered are many and include services such as registrations, filing of service tax returns, refund claims, filing of intimations, tracking, dispute resolutions and online viewing of our records. The Institute highly appreciates this service as it will make our work more efficient and linear.

Very few of our members have entered the excise and customs field of practice. However, now with ACES, I am sure it would attract more and more of our members to enter this field of practice, and would go a long way in widening the scope of professional opportunity. I hope that this service also enables our members to become more IT savvy while doing their work.”

Jurisprudentiol – Thursday's cases

Customs

Import restrictions on marble slabs/blocks – challenge to condition of having gang saw by importers - it is not possible to hold that transition from dual policy to a unified policy was either arbitrary or irrational - decision-making process itself appears to be a well deliberated one where matters were considered at different levels. Respondents were faced with an unenviable task of accommodating several competing interests. Court cannot be expected to sit in appeal over decision of the government to introduce a requirement for eligibility for grant of an import licence and opine that one criterion is more appropriate than other - Mere inconvenience to a trader cannot by itself render the policy arbitrary or unreasonable.

IF anyone wants to make a detailed study on the history of the policy provisions on marble imports, they can't find a better case law than this. The High Court has done a detailed analysis of the policy provisions relating to import of marble slabs from 2001 to till date. After the import restrictions on marble were removed in 2001, when India became part of GATT, rough marble slabs/blocks continued to be in the restricted list. In consultation with Department of Industrial Policy & Promotion and the Ministry of Mines, a policy circular was issued on 14th March 2002 permitting import of marble against licence, to those firms who had set up manufacturing/processing unit in the country and had also imported marble in the preceding year when it was under the SIL List.

Central Excise

Duty on 'Cinder' paid under protest but collected from customers – Changing the manner of issuing invoice but retaining the ultimate price charged to customers indicates unjust enrichment - Amount correctly credited to Consumer Welfare fund: CESTAT

THE appellant is manufacturing of Viscose Filament Yarn and have coal fired boilers for generation of steam.  During the course of manufacture of steam, “Cinders” (Coal ash), a by-product emerges from the coal fired boilers.  The Department took the stand that the said “Cinders” is classifiable under Chapter sub-heading no. 2621.00 of the Central Excise Tariff Act, 1985 and duty was payable on the same. 

Many may be aware that this unfortunate dispute came into prominence after the Union Budget of 1996. Notification 76/86-CE dated 10.02.1986 (it is still alive) exempts articles of erstwhile Tariff Item 68 as mentioned in the Schedule appended to the notification. “Cinder” figured at Entry no. 18 of the Schedule and was actually not noticed except when the same came to be omitted by amending notification 11/96-CE, dated 23.07.1996.  Although the fact remains that the Apex Court had on 18.01.95 in the case of H.M.M Ltd. dismissed the Civil Appeal No. 1629 of 1988 filed by Collector of Central Excise, Chandigarh and upheld the Tribunal order holding “Cinder” as not excisable, the Revenue authorities chose to look the other way.

Income Tax

Indo-German DTAA - purchase of software from parent company - Revenue for TDS on royalty - Because of non-discriminatory clause in DTAA , non-resident cannot be subjected to provisions of Sec 40(a)(i) - depreciation on capitalised software cannot be restricted: ITAT

THE Assessee is a subsidiary of a German company. It is engaged in the business of supply of assemblies of metallurgical equipment and technical service in design and engineering. It makes payments to parent company for software installation - whether TDS u/s 195 is deductible on such payment of royalty. Whether it is fee for technical services or outright sale of software. Whether the assessee cannot be discriminated against as per Article 24(1) of the DTAA .

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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