TIOL-DDT 2797
01 03 2016
Tuesday

THE CBEC has done it - almost the impossible. The humongous work they have done is unbelievable. They have issued more than 60 notifications in Customs, Central Excise and Service Tax. They have amended 23 Sections in the Customs Act, 1 Section in the Customs Tariff Act, some 70 entries in the Customs Tariff, 4 Sections in the Central Excise Act, about 40 entries in the Central Excise Tariff apart from changes in the Service Tax Statutes and bringing in three new rules.

And all this with musical precision and symmetry, with hardly any mistakes and promoting the cause of Ease of Doing Business and Make in India.

Kudos to every officer in CBEC who made this possible and revived hopes that Government is not all about harassment and making life miserable.

Today's DDT will cover some of these measures that have not received much attention, publicity or recognition. The good proposals of CBEC would have earned brownie points for the Finance Minister, but his speechmakers for some reason shied away from disclosing those good measures in the speech. That is actually another problem with CBEC; their good work often goes unheard, while the bad deeds get more than due publicity.

The stakeholders in Indirect Taxes are certainly better off from today than they were yesterday.

The CENVAT Credit Rules Overhauled - Creditably

THE CENVAT Credit Rules, beneficial as they are, have been swords hanging by hairs on the heads of assessees and several simplifications attempted earlier have resulted in more complications. The scheme is thirty years old and in these thirty years, we have filled up the court dockets with unending litigation. For the first time perhaps, some changes are made assuming that every assessee is not a thug out to cheat the system and the Board is not meant to add to the agony of the assessee.

Here are some of the good measures:

1. CENVAT Credit on equipment and appliance used in an office located within the factory are being included in the definition of capital goods so as to allow CENVAT credit.

2. CENVAT credit on inputs and capital goods used for pumping of water, for captive use in the factory, is allowed even where such capital goods are installed outside the factory.

3. Capital goods having value up to Rs. ten thousand per piece are included in the definition of inputs. This would allow an assessee to take full credit on such capital goods in the same year in which they are received . Further they are liberated from all the rigours of capital goods.

4. CENVAT credit on tools of Chapter 82: Manufacturer of final products is allowed CENVAT credit on tools of Chapter 82 of the Central Excise Tariff in addition to credit on jigs, fixtures, moulds & dies, when intended to be used in the premises of job-worker or another manufacturer who manufactures the goods as per specification of manufacturer of final products. A manufacturer can send these goods directly to the other manufacturer or job-worker without bringing the same to his premises.

5. Permission valid for three years: the permission given by an Assistant Commissioner or Deputy Commissioner to a manufacturer of the final products for sending inputs or partially processed inputs outside his factory to a job-worker and clearance therefrom on payment of duty is valid for a financial year. Now it would be valid for three financial years.

CENVAT Credit Rules - Formulated Rule 6

THE reversal of CENVAT Credit when both dutiable and exempted goods are manufactured and/or taxable and exempted services are provided, had resulted in mind boggling litigation. A Supreme Court Judge, who as a High Court Judge stated in the Court after hearing Rule 6, "why do they make such complicated laws that even lawyers and judges don't understand. How do they expect assessees or even their officers to understand?" Almost the entire rule is amended to make it simpler clearer without actually changing the substance of the statute.

The ridiculous situation of the amount of credit to be reversed, was best highlighted by the Tribunal in THYSSENKRUPP INDUSTRIES Vs COMMISSIONER OF CENTRAL EXCISE, PUNE - 2014-TIOL-1825-CESTAT-MUM; the Tribunal noted the case as:

In the present case, it is a fact that the total Cenvat Credit taken on common input services only Rs. 2.07 crore (approximately) whereas if we apply the formula, the amount of credit required to be reversed works out to Rs. 8.62 crore. But if we consider the first option of payment of an amount @ 5% of the value of the exempted services, the liability of the appellant would work out to about Rs. 13 crore which is much higher than that arrived at by applying the formula.

For taking a credit of Rs. 2 Crores, they had to pay either about 9 crores by one calculation and 13 crores by another.

In this situation, the Tribunal expressed its helplessness by stating, "If the formula leads to an anomalous situation, the remedy lies in amending the provisions of the statute and the judiciary is helpless."

Writing in our columns, Ankit Shah observed, "It seems that the Tribunal has opened the gates of litigation & only a clarification from the Central Board of Excise & Customs  in favour of the assessee should provide some relief as a soothing balm. But, the CBEC rarely is known for such generosity!"

Thankfully, the Board has found the balm and applied it.

The highlights of the new Rules:

1. a manufacturer who exclusively manufactures exempted goods for their clearance up to the place of removal or a service provider who exclusively provides exempted services shall pay (i.e. reverse) the entire credit and effectively not be eligible for credit of any inputs and input services used.

2. When exempted and dutiable goods are manufactured or exempted and taxable services are provided, the assessee has two options - (1) pay an amount equal to six per cent of value of the exempted goods and seven per cent of value of the exempted services, subject to a maximum of the total credit taken or (2) pay an amount as determined under sub-rule (3A).

3. The amount to be paid will not exceed the total credit taken.

4. Sub-rule (3A) prescribes the procedure and conditions for calculation of credit allowed and credit not allowed and directs that such credit not allowed shall be paid, provisionally for each month. There is a simple formula and if you are not scared by simple algebra, you will have no problem.

The most important point is that at last it is by law stipulated that for the sin of taking a small credit, you will not be asked to sell your factory.

The Board has really solved a longstanding irritating litigation - fairly and in favour of the assessee and the Government. This is a welcome change from the adversarial era to the facilitation age.

Lost in Budget Baggage

WHEN the Board gives, it is very generous. Lost in the mountain of budget papers were some assessee friendly circulars of the Board.

Registration of two or more premises as one registrant in Central Excise: Notification No. 36/2001-Central Excise (NT), dated 26.06.2001 has been amended vide Notification No. 19/2016-Central Excise(NT), dated 01.03.2016 to provide that if two or more premises of the same factory are located in a close area, these premises are within the jurisdiction of a Central Excise Range and the process undertaken there are interlinked and the units are not operating under any of the area based exemption notifications, the Commissioner of Central Excise, may, subject to proper accountal of the movement of goods from one premise to other and such other conditions and limitations, as may be prescribed, allow single registration. Earlier instruction on this issue are treated as amended. - CBEC Circular No. 1016/4/2016-CX., Dated: February 29, 2016

Certificate evidencing payment of Central Excise duty: By Circular 620/11/2002-CX, dated 20.02.2002 the facility of issuing of Certificate as proof of payment of Central Excise duty was extended to Small Scale Industry. References have been received from Trade for extending this facility of issuing Certificate as proof of payment of Central Excise duty to all categories of industries.

Board has decided that the benefit of Circular No.620/11/2002-CX dated 20.02.2002 shall be extended to the entire industry as a matter of trade facilitation. - CBEC Circular No. 1017/4/2016-CX., Dated: February 29, 2016

Withdrawal from prosecution in Central Excise cases older than15 years involving duty less than rupees five lakhs: Board has decided to withdraw from prosecution of the cases where evasion of Central Excise duty is less than Rupees five lakhs and prosecution is pending for more than fifteen years.

Application will also be moved for withdrawal from prosecution against the conoticees in a case, where the prosecution, against the main noticee is proposed to be withdrawn, as the grounds for withdrawal of prosecution would apply equally to the conoticees. - CBEC Circular No. 1018/4/2016-CX., Dated: February 29, 2016

Change in rate of interest on goods warehoused for export, when cleared to DTA-: Board Circular No. 581/18/2001-CX, dated 29.06.2001, specifying conditions, procedures, class of exporters and places under sub-rule (2) of rule 20 of Central Excise (No. 2), Rules, 2001 for Central Excise who can avail facility of export warehousing, provides for a liability of interest @ 24% on goods, warehoused for export, when diverted for home-consumption. Keeping in tune with the general gesture of reducing interest to 15%, the interest payable in this case is also reduced to 15%. It is really laudable that the Board could locate this circular and reduce the interest rate. - CBEC Circular No. 1019/4/2016-CX., Dated: February 29, 2016

The Budget Notifications

FOR your ready reference here are the Budget Notifications:

Increase in Tariff Values of oils

IN the midst of all the mega budget hungama, they hiked the tariff values of oils, reduced that of gold, silver and brass scrap.

Notification No. 34/2016-Customs (NT), Dated: February 29, 2016

Until Tomorrow with more DDT

Have a nice day.

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