TIOL-DDT 1024
02.01.2009
Friday

Just two weeks ago, we had carried an article in our Special Column - Clearances to SEZ developers: Clash between DRI and DGCEI - what is good for goose must be good for gander- highlighting the  controversy in interpretation of Rule 6(6) of Cenvat Credit Rules and  likelihood of it being  snowballing into a conflict  between two wings of CBEC on the issue of iron and steel products cleared to SEZ developers. Normally the government would wait and watch  till the courts decide on such controversial issues; however, in this case, surprisingly CBEC has seized the matter quickly and resolved the issue by amending the Rule 6(6) of Cenvat credit Rules, 2004 vide Notification No. 50/2008 CE(NT) dt. 31/12/2008. The notification seeks to substitute the existing clause (i) of Rule 6(6) with the following:

"(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or".

With this amendment, the clearances made to both 'SEZ units' and 'SEZ developers' have been put on the same plane so far as Rule 6 of CCR is concerned and as a result, the manufacturers making clearances even to SEZ developers henceforth would not be required to maintain separate accounts or to pay 10% amount or reverse the credit as required under Rule 6 of CCR.

This amendment assumes importance because most of the recently notified SEZs are still in the construction phase requiring supplies of huge quantities of cement and steel.  If this amendment is not made, all such clearances to SEZ developers by DTA units would attract 10% amount under Rule 6 of CCR which would ultimately jack up the construction costs. Apart from this, the present amendment would also set at rest the controversy that has arisen because of the distinction made by the department (basing on  the letter of Addl. Director General (EP) letter F.No.DGEP/SEZ/473/2006 dt. 3/04/2008) between the clearances made to SEZ units from that of SEZ developers while interpreting Rule 6 of CCR. [see TIOL- DDT:858 - 5.05.2008]

Will the controversy end?

Yes, it should in probability end for the clearances made prospectively from 1/1/2009. Then what about past clearances? This is again an issue for raising big audit objections by C& AG.

Apart from the clearances made to SEZ units/SEZ developers directly, the DTA units also make clearances to contractors appointed by SEZ units. How to treat these clearances? Should they be treated as clearances made to SEZ units?

The government by amending clause i) of Rule 6 of CCR appears to be of the view that the clearances to SEZ developers/SEZ units as not constituting 'exports under bond' so as to be covered under clause (v) of Rule 6(6) of CCR. Will this in  any way weaken the DRI view point of holding  such clearances as constituting 'export' under bond?

Commenting on our above story, a distinguished Netizen had commented in our 'Message Board',

It is not if Central Excise department doesnot treat supplies to SEZ developers as not being exports. In fact, rebate route as well as export under bond route has always been made available to SEZ developers since the inception of SEZ Rules. It is only that CENVAT credit to developers was not being permitted. In relation to the same also EGOM has taken a positive decision which is awaiting implementation. Just to give an update.

Maybe the Board should come out with a detailed clarification on these issues and be a good sport and make this amendment retrospectively valid - we may have to wait till the next Budget for that to happen.

Anyway CBEC deserves all praise for putting an end to an unwanted controversy. DDT profusely thanks the Chairman and all the concerned officers in the Board for this lovely New Year Gift to the Nation. Thousands of Show Cause Notices waiting in the wings are nipped in the bud - though this may not be really good news for the consultants, but then we all work for consistency and clarity and not confusion and litigation.

Notification NO. 50/2008-Central Excise ( N.T. ) Dated: 31st   December, 2008

Anti Dumping Duty on Flexible Slabstock Polyol - Extended

Provisional Anti Dumping Duty was imposed on import of Flexible Slabstock Polyol originating in, or exported from, the People's Republic of China, Republic of Korea, Chinese Taipei and Brazil, was imposed by Notification No. 21/2004- Cus., dated 20-1-2004 and was to expire on 20.07.2004.

Definitive Anti Dumping was imposed by Notification No. 4/2005-CUSTOMS, dated the 24th January, 2005 and this was to be effective from the date of imposing the provisional anti dumping duty that is 20.01.2004 and so would have expired on 20.01.2009.

This time around, the government did not wait for the expiry and extended this till 23.07.2009. The extension is made a full three weeks before the last date.

Notification NO. No. 138/ 2008-Customs Dated: 31st December, 2008

Customs Superintendent and wife convicted by CBI Court - Property worth over One Crore confiscated

A CBI Court in Chennai convicted a Customs Superintendent to undergo Rigorous Imprisonment for five years and his wife to three years RI. They were also fined Rs. 1 lakh and Rs. 10,000/- respectively.

The punishment did not end there - The Judge also directed that the disproportionate assets to the tune of Rs. 1,05,60,148/- standing in the name of both the accused be confiscated to the Government.

The properties confiscated include;

1. Total cash of Rs. 38,73,000/- seized from the residential premises and from bank locker.

2. Fixed Deposits and investments worth about Rs. 10 Lakhs.

3. Several landed properties including a shop at Anna Nagar Plaza.

Toilet Paper to cost more in Australia -India to Blame?

Ablution is going to be more expensive in Australia thanks to an anti dumping duty proposed on toilet papers imported from China and India which are coming in at prices almost 40 per cent below "normal" and hurting local manufacturers. Government is everywhere including your toilets.

Jurisprudentiol- Monday's cases

Central Excise

Assessable Value - Refund cannot be rejected merely because adjustments made through Credit or Debit Notes : Rajasthan HC

THIS is a landmark judgement. There is a strange logic reigning in the field that refund cannot be granted if the assessee had returned money to the customer by Credit Notes. God knows what difference it makes if the payment is made by cash, cheque or Credit note.

Now the Rajasthan High Court has clearly explained the position.

Income Tax

Sales tax and excise duty excluded from total turnover for purpose of computation of deduction under section 80HHC : ITAT

BOTH the parties agreed that the issue is covered in favour of the assessee by the decision of the Supreme Court in the case of CIT Vs. Lakshmi Machine Works, (2007-TIOL-72-SC-IT) Since the decision of the CIT(A) is in accord with the decision of the Supreme Court referred to above, no merit in this ground of appeal raised by the Revenue.

Customs

SEZ - Imported goods - short receipt in SEZ - shortage within tolerable limits and goods not easily removable: demand of duty not sustainable: CESTAT

THE variation in the present consignment is within the same tolerance limit. The entire operation was monitored by the surveyor and no discrepancy was found by him. As such, there is no reason to hold that the goods were less received by the appellant holding it liable to pay the duty especially when there is no dispute about the number of bundles received by the appellant and keeping in view the nature of the goods being solid bars, making it impractical for the assessee to remove a part of the same.

See our columns Monday for the judgements

Until Monday with more DDT

Have a nice Weekend.

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