TIOL-DDT 1935
05.09.2012
Wednesday

A fire at one end, a fool at the other, and a bit of tobacco in between

1. Take a look at the comparative chart of the Rate of duty on cigarettes under the First Schedule from 01.01.2012:

#- new category introduced by Finance Bill, 2012

2. A careful reading of the above Tabulation will reveal that the Central government has done the unthinkable.

2.1 The Central Excise duty on Cigarettes under the First Schedule as proposed by the Finance Bill, 2012 and which was brought into force with immediate effect by way of a declaration under the Provisional Collection of Taxes Act, 1931 has been drastically altered [except for the cigarettes filter/non-filter of length less than 65 mm] inasmuch as by the Finance Act, 2012 [w.e.f 28.05.2012] it has been re-converted from ad valorem plus specific to purely SPECIFIC rate of duty as was existing prior to 16.03.2012.

2.2 It would be interesting to note that consequent upon introduction of the Finance Bill, 2012 read with the PCT Act, 1931, cigarettes were notified under section 4A of the Central Excise Act. Accordingly, the value for the purpose of charging the ad valorem component of duty was to be done on the Retail Sale Price (RSP) printed on the pack less abatement of 50% [Notification Nos. 7/2012-CE(NT) dated 17th March, 2012 refers]. The Third Schedule of the Central Excise Act was also amended to include cigarettes through clause 140 of the Finance Bill, 2012. However, consequent upon enactment of the Finance Bill, 2012, nothing changed much on this front viz. The Third Schedule carried the same change as proposed by clause 140 of the Finance Bill, 2012 inasmuch as it reads -

"In the Third Schedule to the Central Excise Act, after S.No. 26 and the entries relating thereto, the following S. No. and entries shall be inserted, namely:-

2.3 Similarly, the notification 7/2012-CE(NT) dated 17.03.2012 also continues to extend MRP assessment to Cigarettes [Tariff Item 2402] and grants an abatement of 50%.

2.4 Existence of these amendments would suggest that Cigarettes are supposed to be assessed on ad valorem component of duty too.

2.5 But then, as mentioned, what the Finance Bill, 2012 proposed has been overturned by the Finance Act, 2012 i.e Cigarettes are to be assessed w.e.f 28.05.2012 at Specific rates of duty ONLY.

3. One cannot understand what is happening in reality.

3.1 The shocking part of this story is the following directive given by the TRU in its letter F.No. 334/1/2012-TRU dated 01.06.2012; Paragraph I (1.4) under the head 'Excise duty applicable to cigarettes '.

"As part of proposals for Budget 2012-13, an ad valorem component of 10% chargeable on 50% of Retail Sale Price was added to other slabs beyond 65mm. The ad valorem component of 10% has now been converted to a specific rate and consequently, basic excise duty rates on cigarettes continue to be fully at specific rate albeit at revised rates as under:

...This clause was declared under Provisional Collection of Taxes Act, 1931 and hence the rates proposed in the Finance Bill came into effect from 17th March, 2012. Consequently, the revised rates as per section 141 read with Seventh Schedule of the Finance Act, 2012 are applicable with effect from 17th March, 2012."

4. Wherefrom the TRU gathers the powers to make this "specific rate of duty" applicable from 17 th March 2012 defies logic .

5. Probably, the Anti-evasion authorities will be sharpening their knives before all goes up in SMOKE!

Will TRU clarify?

CBEC Promotions - Contempt Petition against Revenue Secretary - Supreme Court Issues Notice

In SPDudeja v Union of India - 2011-TIOL-74-SC-MISC, the Supreme Court directed the Union of India to finalise the process of amending the Recruitment Rules for appointment as Assistant Commissioners of Central Excise and Customs from the three feeder cadres of Central Excise Superintendents, Customs Superintendents and Customs Appraisers including altering the existing ratio among the feeder cadres. The Government was supposed toEcomplete the job by 31 December 2011.

The Union of India filed a modification/clarification petition, which was dismissed. However, the Government was given time until June end to implement the order.

It seems to be beyond the Board to implement the order and even the recent promotions to the cadre were given based on the previous rules and ratio.

The All India Association of Central Excise Executive Officers have filed a contempt petition against the then Revenue Secretary RS Gujral and others.

The Supreme Court on 3rd September issued notice to the Revenue Secretary. For the present, the personal appearance of the Revenue Secretary is dispensed with.

The Supreme Court Order reads as:

CONTEMPT PETITION (CIVIL) NO.295/2012 IN WRIT PETITION (CIVIL) NO.385 OF 2010

LET, in the first instance, notice returnable on 24th September, 2012, issue to the Revenue Secretary, Ministry of Finance, to show cause as to why appropriate proceedings for non-compliance with order dated 3rd August, 2011 in Civil Appeal No. 1198 of 2005 [2011-TIOL-74-SC-MISC ] and Writ Petition (Civil) No.385 of 2010, extended vide order dated 30th March, 2012 in I.A. No.8 of 2012 in Civil Appeal No.1198 of 2005, be not initiated against him. Mr. Rajiv Nanda, Advocate for Mr.A.K. Sharma, Advocate-on-record accepts notice on behalf of the Secretary and prays for some time to seek instructions. For the present, the personal appearance of the Revenue Secretary is dispensed with.

In simple terms, what it all boils down to is that there can be no further promotions inCBEC until they recast their seniority lists and it seems even the UPSC is not willing to continue with these ad hoc promotions.

Please also see DDT 1669 - 09 08 2011.

PC in Hospital - To be discharged in a day   

FINANCE Minister, P. Chidambaram was admitted in Apollo Hospital, Chennai yesterday evening for a minor elective laparoscopic procedure . Hospital sources said he would be discharged in a day. We wish PC a speedy recovery - we really cannot afford to have him in a hospital.

What is a Car?

A car is any motor vehicle of a kind normally used on public roads. It must have three or more wheels and meet one of the following conditions:

• It must be constructed - or adapted - mainly for carrying passengers.
• It must have roofed accommodation behind the driver's seat. This must either be fitted with side windows already or be constructed - or adapted - so that side windows can be fitted.

In addition, the following are not cars:

• Vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
• Caravans, ambulances and prison vans
• Vehicles of three tonnes or more unladen weight
• Special purpose vehicles, such as ice cream vans, mobile shops, hearses, bullion vans, and breakdown and recovery vehicles
• Vehicles with a payload of one tonne or more

This is as per the VAT Laws of UK.

Jurisprudentiol - Thursday's cases

Customs

Conversion work done through a job-worker would not, prima facie, constitute transfer of the imported raw materials - CESTAT order directing applicant to make a pre-deposit of Rs.1 Crore quashed: High Court

THE  assessee is engaged in the manufacture of angles, flat bars of Iron and Steel etc. On the basis of the prior exports effected the assessee was granted advance licences under which the assessee was entitled to import raw materials viz. prime steel billets without payment of duty under Notifications 51/2000-Cus and 43/2002-Cus.The assessee had purchased billets from Maharashtra Steel Rolling Mills Private Limited (MSRM) another manufacturer-exporter on High sea sale basis and on arrival cleared the same without payment of duty by availing the benefit under the impugned notifications.These duty free billets were sent to MSRM for conversion into angles on job work basis as per the Memorandum of Understanding entered into by and between the assessee and MSRM.

Income Tax

Whether when assessee receives interest from subsidiary, and latter also receives interest from former, under two independent contracts, provisions of Sec 10(23G) require any netting of such payments - NO: High Court

The  Assessee had received interest from DHIL, a wholly own subsidiary of the Assessee and had credited the same to its profits and loss account. The Assessee was also paying interest to DHIL in respect of an entirely different contract/ transaction from the one in respect whereof DHIL paid interest to the respondent. The AO held that exemption u/s 10 (23G) can be allowed only on the net interest received. The CIT (A) held that subject to necessary approval from the Central Government, the deduction u/s 10(23G) ought to be allowed without adjusting interest paid by the respondent. The Tribunal upheld the order.

Service Tax

Contention that since appellants were paying VAT on charges of repair and maintenance they were not required to pay Service Tax is without any merit: CESTAT

THE appellants entered into a contact with M/s Hindustan Zinc Ltd. for maintaining and repairing their heavy dumpers for a period of five years. As per the contract, they were charging consideration under two heads-one charging for manpower and logistics and other charging for maintenance and repair. The appellants were paying service tax on consideration received under the former head but were not paying service tax on the latter head.

The reason given for not paying service tax on maintenance and repair charges is that they were paying VAT on such charges. It is also their contention that consideration received under the contract for maintenance and repair is towards cost of spare parts and which charges they recovered irrespective of the fact whether spare parts were actually supplied or not, because according to them maintenance and repair charges were fixed on average basis taking into consideration the life of the dumper and life of spare parts.

Central Excise

When there is a specific exclusion on availment of input credit, the submission that there was no suppression of this fact just because there was no column in ER-1 or no specific requirement of intimating the department or submitting invoice is not acceptable: CESTAT

THE  appellant during the period September 2004 to May 2005 had availed cenvat credit on ineligible inputs namely, Light Diesel Oil amounting to Rs. 4,40,046/-. Proceedings were initiated which culminated in confirmation of demand with interest and penalty under Rule 15 of CCR, 2004 r/w s. 1AC of CEA, 1944.

Before the CESTAT, the appellant submitted that the Show Cause Notice dated 01.12.2008 while seeking to invoke the extended period of limitation alleges that they had suppressed the fact of availment of CENVAT credit on LDO, since it was never declared to the department either in ER-1 returns or by any other way and also the documents on which the CENVAT credit was availed were never submitted to the department. It is further submitted that there is no statutory requirement for submission of invoices on the basis of which CENVAT credit has been taken nor there is any requirement to indicate the details of CENVAT credit taken as well as the details of inputs in the return filed and in this scenario suppression of facts could not have been alleged.

See our columnsTomorrowfor the judgements

Until Tomorrow with more  DDT

Have a Nice Day.

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