TIOL-DDT 105
02 05 2005
Monday

Duty free goods for manufacture of export goods – Bhutan and Nepal included

As per Rule 19 (2) of the Central Excise Rules, 2002 excisable goods can be procured without duty for manufacture of export goods. Subject to the conditions, safeguards and procedures prescribed by the Board by notification. And Board had issued Notification No. 43/2001-CE (N.T.) dated 26-6-2001 to prescribe the procedure and conditions. But this notification deals with only exports to countries other than Bhutan and Nepal. Notification No. 45/2001-CE (N.T.) dated 26-6-2001 prescribes the procedure for export to Nepal and Bhutan. But so far, there is no notification for getting the raw-materials for manufacture of goods exported to Nepal or Bhutan. That means if you are manufacturing goods for export to Nepal and Bhutan, you are not allowed to get the raw-materials without payment of duty. And if you are exporting to other countries and Nepal and if you have got raw-materials without payment of duty, for that part of the goods exported to Nepal your receipt of raw-materials without payment of duty was illegal.

The Board has now corrected the anomaly by amending Notification No. 43/2001. The words ‘except Nepal and Bhutan’ are omitted. Further two conditions are added that for exports to Nepal and Bhutan, the payment has to be received in freely convertible currency and the procedure as per Notification No. 45/2001 is followed. The Board deserves all praise for this suo-motto amendment.

Notification No. 19/2005-CE (N.T.) Dated 29-04-2005

It’s no more Indian Reporting Service

The Finance Minister Mr. Chidambaram announced that from May 1 2005 the number of reports in Customs, Central Excise & Service Tax are reduced from 133 to just 7. The forms are also being revised to make them amenable to electronic filing and processing. Today is May 2nd and the departmental offices across the country have no clue as to what the FM is talking about. Nobody seems to know as to what forms have been done away and what new forms have been prescribed.

Money laundering - ED to get some work

Sometime back, I visited a regional office of the Enforcement Directorate. I ask the officers what they were doing after the demise of FERA. They told me that they were all eagerly waiting for the Money Laundering Act, under which they would be the enforcement officers. The amendment moved by the Finance Minister Mr. P. Chidambaram in the Lok Sabha on Friday indeed gives the enforcement powers to the Directorate of Enforcement.

VAT on DEPB

Exporters selling DEPB scrips may be in for a shock. They may have to pay either a 4% or a 12.5% VAT on the DEPB licenses. Sale of intangible goods like copyright, patent and REP licenses attract a 4% VAT where as items not mentioned in any schedule will attract 12.5% VAT. So it is possible that on sale of DEPB licenses 12.5% VAT may be demanded. The Haryana Tax Tribunal had in 2003 held that DEPB is a sort of money which can be used by the dealer himself or anybody else to discharge the Customs duty liability. As money is not goods, DEPB is not covered by the definition of goods. But the Supreme Court had in the case of Vikas Sales Corporation held that “when there is no restriction on the purchase and the sale of DEPB freely and it has a value unrelated to the goods, there is no scope of their being treated as actionable claim. DEPB for all practical purposes represent merchandise and is treated and dealt with as such in the commercial world.” The Delhi High Court had held that DEPB is goods and upheld the right of the state of Delhi to tax this.

Service tax GTA – DGST’s clarification – Truly withdrawn

Since DDT carried the information on 13-04-2005 that the DGST has withdrawn its controversial clarification on service tax on GTA, we were flooded with request for copies of the clarification. While the Chief Commissioners were very prompt in sending to the field the DGFT’s original, clarification it appears that withdrawal of the letter has not been communicated to the field. One hapless assessee wrote to us that his Range Officer is asking him to produce a copy of the DGST’s letter or pay higher tax.

We confirm that the DGST has indeed withdrawn the clarification in a letter address to all the Chief Commissioners. The letter states :

“The letter F NO V/DGST/43-GTO/02/2005 dated 30.3.2005 issued by this Directorate in respect of applicability of Notification No 32/2004 dated 03.12.2004 is hereby withdrawn.”

And it is signed by the DG himself. It would be very nice if the DG gives an official clarification that his original clarification is withdrawn to avoid further damage.

Until Tomorrow with more DDT

Have a Nice Day.

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