JANUARY 29, 2010

Let assessee choose Notification beneficial to him when two Notifications are applicable

By Sanjay Malhotra

CBEC has clarified vide Clause VI of Service Tax Circular No. 112/12.03.2009 that certified copy of the document is accepted in respect of refunds to be processed under Notification No. 41/2007-ST dated 6.10.2007, hence similar clarification should be issued for Service Tax Notification No. 17/2209 & 18/2009, which mentions of submission of Original documents.

Further volumes of documents are large in case of GTA and Export Commission, which increase the transaction cost. CBEC should accept the Annexure or Service Tax Refund Return duly certified by the Statutory/Income Tax Auditors and do away with the submission of Original documents as required under Notification No. 18/2009-ST dated 7.07.2009. The same can be called for verification wherever required.

Single Invoice is received from CHA for multiple services i.e. GTA, CHA services, etc. Notification No. 17/2009 ST & 18/2009-ST both requires submission of Original, which becomes difficult. Certified copies should be required to for submission to ease the procedural issues.

Service Tax Exemption on Transport of Goods in container by Rail as per Notification No. ST-33/2009 dated 1.09.2009

Central Govt. has issued Service Tax Notification No. 33/2009 dated 1.09.2009 exempting the Transport of goods as specified in sub-clause (zzzp) of clause (105) of Section 65 of Finance Act from levy of Service Tax. The said exemption is not admissible to person other than Government Railway.

CONCOR (Container Corporation of India) a Public Sector undertaking under Ministry of Railways moves the container from Inland Container Depot to Gateway ports. CONCOR is charging Service Tax as on date for movement of export containers by Rail. They have been apprised of above Notification, but says that the same is not applicable to them. Request CBEC to issue necessary clarification.

Service Tax on 'Terminal Handling Charges'

The "THC" by its name is the Terminal Handling Charge, which no doubt is paid at the Port after the goods are handed over for loading into the ship for sailing. Further "the definition of "œPort Services" has been clarified in the clarificatory Circular No. B-11/1/2001-TRU dated 09.7.2001. "Terminal handling charges" is towards handling of container at port, Railway haulage charges that are covered under Port services and are eligible for refund of Service Tax.

Further, reference is drawn to Sr. No. 16 of Table annexed to Notification No. 17/2009 dated 7.7.2009, which provides for THC classification under any sub-clause of (105) of Section 65. It highlights that the said service is eligible for Service tax refund under 65(105)(zn) i.e. port services earlier also. CBEC to issue necessary clarification in this regard as the recent coverage of THC under Service Tax refund has created confusion among the assesses and departmental officers.

Service Tax on Export Commission

Notification No. 41/2007 ST provides for refund of Service Tax within 6 months from the date of export of goods. Export Commission is paid upon receipt of Invoice from the overseas Agent. The overseas Agent raises invoice after the goods are delivered at overseas Customer premises and payment realization is done. Service tax payment is made as per the Service Tax Act when the amount is paid to the overseas agent on a/c of export commission.

There is a time gap between Export of Goods, Payment of Export Commission & payment of service tax. For e.g. Goods are exported in Qtr ending Jan-Mar'09 and Export Commission Invoice is received from overseas Agent in June'09 and accordingly the Export Commission payment is made in September'09.

Service Tax is deposited in the month of October'09 as per provisions of Service Tax Act.

Issue is how can the refund claim for Service Tax be submitted within 6 months when the payment realization period is 6 months and export commission has not been paid.

CBEC to issue amendments in the Notification No.41/2007- ST 06.10.2007 thus prescribing the time limitation as 1 year instead of 6 months or else alternative is to prescribe time limit of 6 months from the payment of service tax against Export Commission. CBEC has prescribed the period of 1 year in the amended Notification No. 17/2009-ST on Service Tax .

Service Tax Refund under Notification No. 17/2009-ST dated 07.07.2009

Refund provisions under Service Tax captioned cited Notification provides for Chartered Accountant Certificate if the refund claim is more than 0.25% of FOB Value of export.

Concern over here is that against a particular Export Invoice, multiple services such as CHA services, Technical Testing service, Insurance of export goods, storage & warehouse etc. are received. Service providers raise invoices for multi shipments and it becomes difficult to correlate the FOB Value. Further, partial containers movements also add to problems in FOB calculation.

CBEC to issue necessary amendments in the Notification thus provide an absolute amount of Rs. 5 lacs beyond which certification from Chartered Accountant is required to ease the procedural difficulties.

Availment of Beneficial Notification when different Notification exists for same product

Notification No. 58/2008-CE dated 7.12.2008 & Notification No. 59/2008-CE dated 7.12.2008 were issued on same day. Notification No. 58/2008-CE dated 7.12.2008 amending Notification No. 29/2004-CE dated 29.07.2004 have reduced the CENVAT rate by 4% for textile related products which has exempted some products chargeable to 4%duty rate earlier, whereas on the same product, Notification No. CE- 59/2008 provides for levy of 4% duty.

Assessee is free to opt for beneficial Notification to him as already clarified in Para 2.2. of TRU letter No. D.O.F No. 334/1/2008-TRU dated 29.02.2008. Departmental officer concern is that once the goods are absolutely exempted from payment of duty then as per Section 5A (1A), the assessee can't opt for another Notification and pay duty of excise.

CBEC to issue necessary clarification that whether Notification No. 59/2008-CE dated 7.12.2008 issued after Notification No. 58/2008-CE dated 07.12.2008, shall be availed by assessee by clearing the goods on payment of duty.

EDI processing of Rebate Claims

We appreciate the efforts of Government in implementing "ACES" system. To take a step further, our submission is to process the Excise rebate claims electronically through EDI system as is being followed by Custom officers for processing of drawback claims. Customs EDI system should be replicated in Central Excise for EDI processing of rebate claims. The same would reduce the transaction cost for exporters.

REFUND CLAIM UNDER RULE 5 of CCR 2004

"Refund of CENVAT Credit in respect of inputs used in the export of Exempted Goods under Rule 5 of CENVAT Credit Rules 2004"

Exporters are being deprived of input duty refunds of accumulated credit under Rule 5 of CCR 2004, on account of Exports goods, which are exempted from payment of duty. Input stage duty rebate is admissible as per provisions of Rule 19 of Central Excise Rules in respect of Export Goods which covers dutiable (excisable or exempted) and non-excisable goods and the same provisions should be applicable for refund under Rule 5 of CCR, 2004.

We submit that it is the policy of the Government that the exports should be relieved of the duties and taxes paid on the inputs or the exported goods. It is in this context that the laws and procedures relating to incentives for the exporters are to be interpreted liberally and an interpretation obsessed by technicality must be avoided .

It is to be appreciated that export incentive is quite different from imposing a tax. In the matter of levy and collection of duty or tax a strict approach is called for but not so much in the case of export incentive. This contention is substantiated by the following illustrations:

Rule 19 of the Central Excise Rules permits export of goods under bond without payment of excise duty. The term excise duty refers to basic excise duty. Certain goods are chargeable to NCCD, which is different from basic excise duty. When an issue arose whether goods bearing NCCD can also be exported without insisting upon payment of NCCD,in Circular No. 209/44/2002-CX6 dated 26/6/2002, the Board clarified, Board has examined the matter. Though NCCD is levied under Finance Act, 2001, it is a duty of excise. Notification No. 42/2001-C.E. (N.T.), dated 26-6-2001 issued under Rule 19 of Central Excise Rules, 2001 read with Central Excise Rules, 2002 allows goods to be exported without payment of duty. Further, it is the policy to grant relief form element of domestic taxes on goods, which are exported. Accordingly, it is clarified that no NCCD leviable under Section 129 of Finance Act, 2001 to be paid on the goods exported under bond. No doubt if export does not eventually take place the goods would be subject to all duties of excise including NCCD as applicable.

When a question was raised whether the credit of duty paid on inputs used in export clearances is permissible or not, the Board advised the field formations as to the policy objective and did not take a strict narrow view. In Circular No. 283/117/96-CX dated 31/12/1996, The Board said: It is also observed that in case such inputs are cleared on payment of duty by debit in RG 23A Part-II account by virtue of Rule 57F(4)(iii), the manufacturer will be entitled for rebate under Rule 12(1)(a) of the Central Excise Rules. He is, however, put to disadvantage if he opts for export under bond procedure. The exports under claim of rebate' and export under bond' should be at parity, since, intention of both the procedures are to make duty incidence nil'. It is also an established principle that rules should be interpreted in a manner which do not render them redundant.

The basic principle governing exports is to make duty incidence Nil, hence CBEC should issue necessary clarification that the provisions of Rule 6(6) of CCR 2004, applicable to excisable goods covers exempted goods and exports refunds to exporters should be processed without delay to ensure the exporters competitiveness in international market.

Finance Minister & Commerce Minister in their various Budget & Foreign Trade Policy speeches have made it clear that Taxes and duties are not to be exported. The basic principle in excise taxation is that the excise duty/service tax should be only in respect of goods/services consumed within the country. If the goods/services are exported, they should not suffer any excise duty/service tax. In all matters relating to export of goods and services, this fundamental principle has to be kept in mind.

SUGGESTIONS

In view of the above references drawn, it is requested to issue necessary clarifications by amending the Rule 6(6) of CENVAT credit Rules 2004 so as to substitute the phrase ''EXEMPTED GOODS'' in place of ''EXCISABLE GOODS'' i.e. to restore the provisions as existed in erstwhile Central Excise Rules 1944 & CENVAT Credit Rules 2001 till 10.09.2004.

Explanation clause should be inserted in Rule 6(6)(i)&(ii) as follows:

Provisions of CENVAT payment as per Rule 6(6)(i) or Rule 6(6)(ii) of CENVAT Credit Rules 2004 is not applicable in case of EXPORT OF GOODS both dutiable or exempted.

Further, clarification should be issued for clearance of Export Goods under Bond irrespective of whether the same is Excisable or Exempted. (Rule 6(6)(v)).

Issuance of clarification retrospectively from 10.09.2004 at the earliest would restore the confidence of exporters and make their products competitive in the international market and would boost up the country exports share.

CENVAT payment in respect of Excisable & Exempted Goods “ Rule 6 of CCR 2004

Rule 6(3) of CENVAT Credit Rules 2004 as amended by Notification No. 23/2008 CE dated 1.03.2008 provides for either of following options by manufacturer of Excisable & Exempted Goods.

(i) the manufacturer shall pay an amount equal to 5% of value of the exempted goods and the provider of output service shall pay an amount equal to 6% of the value of the exempted services or

(ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT Credit attributable to input and input services used in or in relation to the manufacture of final product.

Some of the assesses are benefited by the duty reduction in Finance Budget 2009-10 as the CENVAT payment as specified in sub-clause (i) is lower than the CENVAT payment option prescribed in sub-clause (ii) as stated above, whereas the same is vice-versa for others. CBEC should make amendments thus providing for option as specified in sub-clause (ii) of Rule 6(3) only as the same would not have any impact on Govt. revenue and also reduce the litigation cost.