Light at end of the...canal - CESTAT LB Rules in Favour of Assessees
29 04 2015
Wednesday
I can't resist the temptation to give here an extract from DDT 2450 07.10.2014
THE infrastructure industry in the State of AP/Telangana was having a tough time for quite some time on service tax front. During the Chief Ministership of Y. S. Rajasekhara Reddy, several massive irrigation projects were undertaken by the State Government, involving digging of canals, lift irrigation, strengthening the embankment of canals, laying of pipelines and other electro mechanical work, etc., running into crores and crores of rupees. Rightly or wrongly, these contracts were described as Turnkey /EPC projects, which is enough for the Service Tax department to demand service tax under Works contract service. With the sudden demise of Y.S. Rajasekhara Reddy and subsequent political developments, it was a nightmare for these infrastructure majors in claiming their contract amounts, cost escalation; leave alone the service tax demand.
While such demands were stayed by the CESTAT in several cases on a prima facie view, the calamity struck in the form of the decision of the Tribunal in the case of Ramky Infrastructure Limited - 2012-TIOL-613-CESTAT-BANG , which has upheld the demand. What followed was a spate of orders directing various amounts of pre deposits; inability of the appellants to pay the same, dismissal of appeals for non-compliance, battered assesses approaching High Court and Supreme Court.
Though there was a hope that a section 11C exemption would be issued in this regard (DDT 2255 - 19.12.2013), nothing happened. In fact the documents obtained under RTI by some of the contractors reveal that the Government was positively considering the issue of 11C exemption.
When all non-commercial construction activities were kept out of the levy of service tax upto 01.06.2007, and when canals were specifically exempted vide notification 41/2009 ST Dt. 23.10.2009 and all irrigation related works were exempted from 01.07.2012 under Notification 25/2012 ST dated 20.06.2012, it defies logic as to why they should be taxed only for the intervening period.
Few of the Joint Venture Companies, who have been asked to deposit 50 percent of the service tax dues by the Tribunal, have knocked at the doors of the AP High Court, albeit unsuccessfully. They then made a beeline to the Supreme Court, which passed a landmark order on the subject. Please see 2014-TIOL-83-SC-ST
While directing the petitioners to deposit about 10 percent of the tax dues, the Supreme Court has directed that a full bench, headed by the President of the Tribunal should hear all such cases together and pass orders, before 15.03.2015. Full bench, in the language of the Supreme Court means a bench of three Judges and obviously, the issue has to be decided by the Larger bench of the Tribunal, which is not bound by the decision of the Division bench in Ramky case.
Will the CBEC magnanimously concede before the Tribunal about its intention to exempt such activities, instead of defending the demands tooth and nail?
No, the CBEC didn't concede; it actually fought the case vigorously.
As per the directions of the Supreme Court, the Larger Bench headed by the President was constituted and it heard arguments from 15th December 2014 to 19th December 2014 at Bangalore from a battery of eminent lawyers and specially flown in Departmental Representatives.
The Larger Bench gave its decision yesterday, in favour of the assessees. A lawyer who argued the case says that the decision brings cheers to the infra industry. Will it? Government and God willing.
We will bring you the judgement as soon as it is made available.
Please also see DDT 1204 25.09.2009, DDT 1212 09.10.2009, DDT 1224 - 27.10.2009, DDT 2001 - 12.12.2012 and DDT 2540 17 02 2015
Export - Rebate of duty and refund of Cenvat Credit - Clearances to SEZ covered - CBEC
BUDGET 2015 had mischievously included a definition of ‘export' in the Central Excise Rules and the Cenvat Credit Rules.
An explanation was added to Rule 18 of the Central Excise Rules (Rebate of duty);
"Explanation.- For the purposes of this rule, "export", with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India and includes shipment of goods as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft.".
Similarly in Rule 5 of the Cenvat Credit Rules (Refund of Cenvat Credit) an explanation was added:
"export goods" means any goods which are to be taken out of India to a place outside India.".
What is the effect of these explanations? The immediate reaction in the field was that no rebate will be given and no refund will be given for clearances to SEZs. Several Assistant Commissioners told me so.
After two months of confusion, the CBEC has now issued a clarification. The Board says apprehensions have been expressed by the trade (the apprehension was with the department and not the trade) as to whether the following benefits would be available after these amendments:
i. Benefit of rebate of duty on goods cleared from DTA to SEZ.
ii. Refund of accumulated CENVAT credit when goods are cleared from DTA to SEZ.
Board clarifies:
According to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outside the customs territory of India. It is in line of these provisions that rule 30 (1) of the SEZ rules, 2006 provides that the DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under claim of rebate on the cover of ARE-1.
It was in view of these provisions that the DGEP vide circulars No. 29/2006-customs dated 27/12/2006 and No. 6/2010 dated 19/03/2010 clarified that rebate under rule 18 of the Central Excise Rules, 2002 is admissible for supply of goods made from DTA to SEZ. The position as explained in there (what Board means is 'these' and not 'there') circulars does not change after amendments made vide Notification No. 6/2015-CE (NT) and 8/2015-CE (NT) both dated 01.03.2015, since the definition of export, already given in rule 18 of Central Excise Rules, 2002 has only been made more explicit by incorporating the definition of export as given in the Customs Act, 1962. Since SEZ is deemed to be outside the Customs territory of India, any licit clearances of goods to an SEZ from the DTA will continue to be export and therefore be entitled to the benefit of rebate under rule 18 of CER, 2002 and of refund of accumulated CENVAT credit under rule 5 of CCR, 2004, as the case may be.
Board deserves unlimited appreciation for this sound clarification. We should only hope that the field officers show some respect to the Law and the Board and implement this clarification.
Please also see Supplies from DTA to SEZ - Rebate should continue and Unnecessary explanations adding to avoidable litigation
CBEC Circular No. 1001/8/2015-CX, Dated: April 28, 2015
FTP - Import of Urea made Free
GOVERNMENT has amended the Import Policy of Urea under ITC (HS) code 3102 1000 of Chapter 31 of ITC (HS), 2012 - Schedule - 1 (Import Policy).Import of Industrial Urea / Technical Grade Urea (TGU) shall be free, subject to Actual User condition.
DGFT Notification No. 04/2015-2020, Dated: April 28, 2015
Income Tax exemption for rendering help to victims of Nepal Earthquake
THE Prime Minister of India has promised that India would make all efforts to render assistance to the people of Nepal who have suffered due to the recent earthquake. A number of Voluntary organisations/trusts have expressed their desire to render assistance to the quake victims in Nepal.
The Central Board of Direct Taxes has decided to fast track all applications made u/s11(1)(c) of the Income Tax Act, 1961 seeking approval for rendering help to the victims of earthquake in Nepal. It will be the endeavor of the Department to process these applications within two working days of receiving the completed applications.
Until Tomorrow with more DDT
Have a nice day.
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