1. law, govt and politics

MANOJ BATRA
www.camanojbatra.com
TAX- UPCOMING BATCHES
Start DATE
FACE 2 FACE (IN DELHI)
BATCH- 1
28TH Nov 2014(MON TO SAT - DAILY)
~1~
INDIRECT
Timing
6-30 to 10-30* a.m
BATCH END DATE- 3RD WEEK OF FEB 2015
SATELLITE BATCH
BATCH- 2
Batch-3
last week of Nov 2014(M,W,F)
5-15 to 9-00* p.m
st
1 week of Dec 2014 (T,T,S)
6-30 to 10-30* a.m
CONTACT - Bright Commerce Academy
1/53, Lalita Park, laxmi Nagar Delhi-92
Ph.-08800381758, 011- 47665555 , www.camanojbatra.com
Index
Case lawsAMENDMENTS FOR NOV 2014
AMENDMENTS FOR May 2014
Amendmets for Nov 2013
AMENDMENTS FOR MAY 2013
Miscellaneous que
Summary AMENDMENTS FOR NOV 2012 & case laws
Page No
2-59
60-
MANOJ BATRA
www.camanojbatra.com
~2~
Latest Cases
(1) SAIL extracts iron ore from mines in the form of blasted mass/rocks which are then crushed and screened into
small sizes and washed with a view to remove foreign materials. Iron ore extracted from SAIL mines has iron
content of 60% or more. By reason of the said washing/sizing activities the iron contents of iron ore do not
increase in any way.
The Revenue wants to levy duty on the iron ore excavated by the SAIL on the ground that the mined iron ore
on being subjected to crushing, grinding, screening and washing becomes iron ore concentrate which is
covered by Heading 26.01 of the Tariff. Heading 26.01 of the Central Excise Tariff applies to “Iron Ore and
concentrates, including roasted iron by rites.” The Revenue has relied on the Explanatory Notes of HSN
according to which the term “concentrates” applies to ores which have had part or all of the foreign matter
removed by special treatment.
On the other hand the assessee contends that the processes undertaken by them do not convert iron ore into
iron ore concentrates as no special treatments are undertaken by them nor the iron content increases after
the processes undertaken by them. It is the contention of the assessee that the activities of crushing, grinding,
screening and washing do not amount to manufacture of any goods attracting levy of Central Excise duty.
Explain, with the help of a decided case law, whether Department’s stand is justified in law.
OR
DOES THE PROCESS OF REMOVAL OF FOREIGN MATERIALS FROM IRON ORE FOR CONCENTRATION OF SUCH ORE
AMOUNT TO MANUFACTURE
STEEL AUTHORITY OF INDIA LTD. 2012 (S.C.)
Ans- No, the Department’s stand is not justified in law.
The issue for consideration is whether the processes ( i.e of crushing, grinding, screening and washing) undertaken by SAIL
convert iron ore into iron ore concentrates (i.e manufacture )
The facts of the question are similar to STEEL AUTHORITY OF INDIA LTD. 2012 (S.C.)
Assesse was mining iron ore from mines and subjecting the same to crushing, grinding, screening and washing with
an aim to concentrate the ores; department was of the opinion that in case of SAIL, mining activity is done by fully
mechanized system; that they are mining iron ores from mines and then ores are subjected to process of crushing,
grinding and screening and washing with a view to remove foreign materials and to concentrate such ores; that the
Respondents resorts to washing with an aim to concentrate the ores; that the purpose of washing is to increase the
flowability/fluidity of iron ore after it has been mined as mined ore has very little flowability; that at each stage of
washing water is added to improve the flowability of material by removing the sticky particles; that the processes
undertaken by them definitely involve removal of parts of foreign material from the ores and increase the “Fe”
content (i.e. iron content); that goods obtained by such process would qualify as concentrate
SAIL(assesse) contended that the washing of iron ore by itself could never convert it into concentrates and hence
washing will not amount to manufacture. He further contended that the concentrates are manufactured by
increasing the concentration of Fe content of the mineral by removing and separating different impurities; ; that in
the present matters neither they undertake any such process nor there is any variation in the Fe content of Iron Ore
extracted from its mines and the Fe content of seized iron ore. Even as per HSN the term “concentrates” applied to
ores which have had part or all of the foreign matters removed either because such foreign matter might hamper
subsequent metallurgical operations or for economical transport.
in order to amount to “manufacture” a new commercial product must emerge, different from the ore on which
different processes applied.
It was held by SC that process of removal of foreign materials from iron ore for concentration of such ore doesn’t
amount to manufacture because final product are not different from that of the blasted ore. The use of iron ore as
mined or iron ore after the process undertaken by the assessee remain the same.
MANOJ BATRA
www.camanojbatra.com
~3~
AUTHOR NOTE- Presently this process is covered as deemed manufacture.
(2) WHETHER THE ADDITION AND MIXING OF POLYMERS AND ADDITIVES TO BASE BITUMEN RESULTS IN THE
MANUFACTURE OF A NEW MARKETABLE COMMODITY AND AS SUCH EXIGIBLE TO EXCISE DUTY?
OSNAR CHEMICAL PVT. LTD. 2012 (276) E.L.T. 162 (S.C.)
The assesse is engaged in the supply of Polymer Modified Bitumen (for short “PMB”). The assessee entered into a
contract with one M/s. Afcons Infrastructure Ltd. (for short “Afcons”) for supply of PMB at their work site IN
Bangalore. As per the agreement, the base bitumen and certain additives were to be supplied by Afcons to the
assessee directly at the site, where the assessee, in its mobile polymer modification plant, was required to heat the
bitumen at a temperature of 160°C with the help of burners. To this hot bitumen, 1% Polymer and 0.2% additives
were added under constant agitation, for improving its quality by increasing its softening point and penetration. The
process of agitation was to be continued for a period of 12 to 18 hours till the mixture becomes homogenous and
the required properties were met. The said bitumen in its hot agitated condition was mixed with stone aggregates
which was then used for road construction. The Osnar paid duty on PMB processed at their factory in
Mumbai but had not paid the same for the conversion done at their work site. The resultant product was considered
to be a superior quality binder with enhanced softening point, penetration, ductility, viscosity and elastic recovery.
DEPARTMENT contended that the above process carried out by the assessee (i.e Osnar chemicals ) amounted to
manufacture of PMB. It was submitted that the end products, viz. PMB and CRMB are different from bitumen,
inasmuch as polymers and additives are the raw materials consumed in the process of manufacture of the said final
products and are therefore, covered by the definition of the term “manufacture” in Section 2(f) of the Act. To
buttress his submission that PMB and CRMB are exigible to Excise duty, both falling under a specific entry, learned
counsel referred to the Tariff Act, whereunder, while bitumen is classifiable under Chapter Sub heading 271320.00,
and polymer is classifiable under Chapter Sub Heading 390190.00, the finished products, PMB and CRMB are
classifiable under Chapter Sub Heading 271500.90. In support of his submission that PMB and CRMB are
commercially known in the market for being bought and sold and therefore, satisfy the test of marketability which is
one of the essential conditions for the purpose of levy of Excise duty
ASSESSEE argued that the mechanical process of adding polymer and additives to heated bitumen to bring into
existence the so-called new substance, known as PMB, DID NOT AMOUNT TO ‘MANUFACTURE’ in terms of Section
2(f) of the Act. It was explained that BY THE SAID PROCESS, ONLY THE GRADE OR QUALITY OF BITUMEN IS
IMPROVED by raising its softening point and penetration, for improving the quality of the road; but even with the
improved quality, bitumen remained bitumen with the same end use. It was the say of the learned counsel that a
mere improvement in the quality did not amount to manufacture
IT WAS HELD that the process of mixing polymers and additives with bitumen does not amount to manufacture.
There was no change in the characteristics or identity of bitumen and only its grade or quality was improved. The
said process did not result in transformation of bitumen into a new product having a different identity, characteristic
and use. No such process has been specified in the Section notes or Chapter notes in respect of Petroleum Bitumen
falling under Tariff Item 27132000 or even in respect of bituminous mixtures falling under Tariff Item 27150090.
Hence it can’t be treated as deemed manufacture.
(3) Grasim Industries was the manufacturer of the white cement. He repaired his worn out machineries/parts of the
cement manufacturing plant at its workshop such as damaged roller, shafts and coupling with the help of
welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams, etc. In this process of
repair, M.S. scrap and Iron scrap were generated. Grasim cleared this metal scrap and waste without paying any
excise duty. The Department issued a show cause notice demanding duty on the said waste contending that the
process of generation of scrap and waste amounted to the manufacture in terms of section 2(f) of the Central
Excise Act. Briefly discuss, with reference to case law, whether the show cause notice is sustainable in law.
Ans- No, the show cause notice is not sustainable in law.
The issue for consideration is whether the process of generation of scrap and waste during repair of his worn out
machineries/part amounted to the manufacture
The facts of the given case are similar to case of GRASIM INDUSTRIES LTD 2011 (S.C.).
1) It was held that manufacture in terms of section 2(f) includes any process incidental or ancillary to the
MANOJ BATRA
www.camanojbatra.com
~4~
completion of the manufactured product. This ‘any process’ can be a process in manufacture or process in
relation to manufacture of the end product, which involves bringing some kind of change to the raw material at
various stages by different operations.
The process in relation to manufacture means a process which is so integrally connected to the
manufacturing of the end product without which, the manufacture of the end product would be impossible or
commercially inexpedient.
2) Further welding welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams, etc which
are used in process of repair and maintenance are not raw material used in the manufacturing of end product i.e
cement, HENCE THE PROCESS OF REPAIR AND MAINTENANCE of the machinery of the cement manufacturing
plant, in which M.S. scrap and Iron scrap arise, HAS NO CONTRIBUTION OR EFFECT ON THE PROCESS OF
MANUFACTURING OF THE CEMENT, (WHICH IS THE END PRODUCT). The repairing activity in any possible
manner cannot be called as a part of manufacturing activity in relation to production of end product. Therefore,
the M.S. scrap and Iron scrap cannot be said to be a by-product of the final product. At the best, it is the byproduct of the repairing process.
Hence, it was held that the generation of metal scrap or waste during the repair of the worn out
machineries/parts of cement manufacturing plant does not amount to manufacture.
(4) Whether it is necessary that the circular must be issued under section 37B in order to be binding on the
Department?
Darshan Boardlam Ltd. v. UOI 2013 (287) E.L.T. 401 (Guj.)
It was held that ANY CLARIFICATION ISSUED BY THE BOARD is binding to the Central Excise Officers Whether section
37B is referred to in such circular or not, is not relevant. When other Central Excise authorities of equal and higher rank have
followed and acted as per the clarifications, jurisdictional Commissioner could not have taken a contrary view on the assumption
that the clarifications are only letters and not orders under section 37B.
Marketability –
(5) [Nicholas Piramal India Ltd 2010 (SC)]
The assessee produced “Crude Vitamin–A”, which is consumed for producing animal feed supplements.
The assessee did not market “Crude Vitamin–A”. The product has a life of 2 to 3 days.
Decision:
Where the product is commercial known and is capable of being marketed, then such goods shall be liable for
excise duty, subject to other conditions. It is not necessary that the goods should be actually marketed by the
manufacturer.
Further, only where a product has NO shelf life or the shelf life is insufficient to market the product, then only it
is considered as “Not Marketable”. In the given case, since the product has a life of 2 to 3 days, the same shall be
considered as marketable.
(6) THE THEORETICAL POSSIBILITY OF PRODUCT BEING SOLD IS SUFFICIENT TO ESTABLISH THE MARKETABILITY OF
A PRODUCT. CRITICALLY EXAMINE THE SAID STATEMENT.
Bata India Ltd (SC)(2010)- IMP
1) The Assessee is a well known manufacturer of foot wear. For the manufacture of foot wear, various raw
materials are purchased by the assessee from the market and / or from their respective manufacturers such
as fabrics, rubbers, chemicals, solvents etc. During the process of manufacturing of foot wear various
chemicals / rubbers / solvents etc., are mixed together and a thin layer of such mixed materials is
sandwiched in between two sheets of textile fabric, in running length, through a three bowl calendering
machine. The resultant product “ Double Textured Rubberized Fabric” (DTRF) is later cut and stitched
according to the assessee's requirements and in-process materials are used as shoe- uppers in the foot wear.
MANOJ BATRA
2)
3)
4)
5)
6)
www.camanojbatra.com
~5~
Such fabrics are also at times sent to job workers for stitching purposes only and the fabric sandwiched with
the mixed materials are inputs of the intermediate stage during the course of manufacture of footwear.
Vulcanisation of the foot wear takes place only after completing the entire process and then it would be a
finished product as a footwear, made available in the market and acquires commercial identity and turns out
to be a commercially known product.
The department, came to the conclusion that this double textured fabrics are marketable
Without proof of marketability the intermediate product would not be goods . Such a product is excisable
only if it is a complete product having commercial identity capable of being sold to a consumer which has to
be established by the Revenue.
The test report of the Chemical Examiner, SPB hand book of rubber products and the statement of the
Superintendent (Supply and Transportation) of the assessee's company do not show that the product in
question is capable of being marketed. The mere theoretical possibility of the product being sold is not
sufficient but there should be commercial capability of being sold. Theory and practice will not go together
when we examine the marketability of a product.
Hence it was not marketable.
(7) USHA RECTIFIER CORPN. (I) LTD.(2011)(SC)- M IMP & EXPECTED
The assessee is a manufacturer of electronic transformers, semi-conductor devices and other electrical and
electronics equipments. During the course of such manufacture the appellant also manufactured machinery in the
nature of testing equipments to test the final products of the assessee company. The assessee contending that
assembly of testing equipments from various parts and components bought from outside is not manufacture.
Further he contended that even if it is treated as manufacture, as it ie not engaged in manufacture and it will be
disassembled after completion of research. it is not marketable since testing equipments were not removed outside
the factory
It was held that testing equipments having different name and use, hence it is manufacture. Further the profuct
will be treated as marketable because assessee have clearly taken a stand in their reply to show cause notice that
they bought various parts and components to develop the testing equipments for use within the factory and that
such steps were undertaken to avoid importing of such equipments from the developed countries with a view to
save foreign exchange. Hence it is marketable. As pe Explanation to Rule 5 of CER 2002, Rate of duty for captiley
consumed goods will be date of issue for such use.
(8) GTC Manufacturers was a manufacturer of cigarettes. It used duty paid paperback aluminum foil in the roll
form for the purpose of packing cigarettes. In the process, the roll of aluminum foil was cut horizontally to
make separate pieces of the foil and word ‘PULL’ was embossed on it. Thereafter, fixed number cigarettes
were wrapped in it. An aluminium foil being resistant to moisture was used as a protector for the cigarettes
and to keep them dry. Revenue issued a show cause notice to GTC Manufacturers alleging that the process of
cutting and embossing aluminum foil amounted to manufacture. Since the aluminum foil was used as a shell
for cigarettes to protect from them moisture; the nature, form and purpose of foil were changed. Briefly
discuss, with reference to case law, whether the show cause notice is sustainable in law.
or
Does the process of cutting and embossing aluminum foil for the purpose of packing of the cigarettes amount to
manufacture? –IMP
GTC Industries Ltd. 2011 (Bom.)
A roll of aluminum foil was cut horizontally to make separate pieces of the foil and word ‘PULL’ was embossed
on it. Thereafter fixed number cigarettes were wrapped in it. An aluminium foil being a resistant to moisture was
used as a protector for the cigarettes and to keep them dry.
Revenue’s submitted that the process of cutting and embossing aluminum foil amounted to manufacture. Since
the aluminum foil was used as a shell for cigarettes to protect from them moisture; the nature, form and purpose of
foil were changed.
It was held that cutting and embossing did not transform aluminum foil into distinct and identifiable commodity.
There were no records to suggest that cut to shape/embossed aluminum foils used for packing cigarettes were
distinct marketable commodity. Since, foil was cut to size in a continuous process, process did not amount to
MANOJ BATRA
www.camanojbatra.com
~6~
manufacture as per section 2(f) of Central Excise Act, 1944. because the process which produces distinct and
identifiable commodity will amount to manufacture.
Author Note- By F. Act 2012 cutting & embossing treated as Deemed Manufacture.
(9) Rotomac Corporations Ltd. was engaged in the assembling and installing the parts and components of asphalt
batch mix, drum mix/hot mix plant. The Department alleged that the assembling and installation of asphalt
batch mix, drum mix/hot mix plant amounted to manufacture. It contended that the said plant was not per se
immovable. Attachment of plant with nuts and bolts was only intended to provide stability and prevent
vibration. The attachment was easily detachable from foundation and was not permanent. Therefore, the
assessee was liable to pay duty on the said plant.
Explain, with the help of a decided case law, if any, whether Department’s allegation is justified in
law.
Ans
The Department’s allegation is justified in law. The facts of the given case are similar to the case of Solid &
Correct Engineering Works and Ors 2010 (SC) It was held
that assembling, installation and commissioning of Asphalt Drum/Hot Mix Plants amounted to manufacture
inasmuch as the plant that eventually came into existence was a new product with a distinct name, character
and use different from what went into its manufacture.
The fixing of plants to a foundation was meant only to give stability to the plant and keep its operation
vibration/wobble free. Futher, the setting up of the plant itself was not intended to be permanent at a given
place; the plant could be moved and was actually moved after the road construction/ repair project was over.
Therefore, mere fixation of a plant to the earth by nuts and bolts for ensuring wobble free operation of the plant
would not render it immovable property. The machine could not be regarded as part and parcel of the earth
permanently.
Hence, the Asphalt Drum/ hot-mix plants manufactured at site by Solidmec were manufactured and movable
property hence excisable goods liable to duty.
(10)
Parsvnath Music Systems Ltd. imported recorded audio and video discs in boxes each containing 50 discs.
Each individual disc was then packed in transparent plastic cases known as jewel boxes. An inlay card
containing the details of the content of the compact disc was also placed in the jewel box. The whole thing
was then shrink wrapped and sold in wholesale. The Department contended that the said process amounted
to manufacture.
Explain, with the help of a decided case law, if any, whether Department’s contention is justified in law.
Ans- The Department’s contention is not justified in law. The facts of the given case are similar to the case of CCE v.
Sony Music Entertainment (I) Pvt. Ltd. 2010 (Bom) “Note 6 to Section XVI of the tariff provides that in respect of
goods covered by that section, conversion of an article which is incomplete or unfinished but having the essential
character of a finished article into a complete finished article shall amount to manufacture.
It was held that
1) that the activities carried out by the respondent does not amount to manufacture since the compact disc
were complete and finished when imported by the assessee. They were imported in finished and
completed form.
2) Note 6 clearly does not apply to the facts before us. None of the activity that the appellant undertook
involved any process on the compact discs that were imported. Those compact discs were complete and
finished. They could be played by any person in order to listen to the sound and view the images that
they contained. They were imported in finished and completed form. The mere packing of these discs
has no bearing on the fact that they were imported complete and finished.”
Hence, the said process does not amount to manufacture.
(11)
VIRGO INDUSTRIES (ENGINEERS) PVT. LTD.
MANOJ BATRA
www.camanojbatra.com
~7~
1) It was observed that Virgo had been manufacturing and supplying signages under a contract with M/s. Indian Oil
Corporation Ltd. (IOC) and had erected them at the retail outlets of IOC located at various places in the south.
2) It was contended by assessee that Signage came into existence only at site and the same was immovable on
erection as it was fixed to earth on concrete foundation. .
3) It was held that Signages erected at various petrol bunks of IOC - Excisability of - Complete signage is movable
and is installed by fixing it on a concrete foundation - These can be detached and shifted to another location
without damaging them - Signage is fixed to earth and is complete before fixing on the concrete platform Signages do not emerge as an immovable property on assembly or erection - Signages are excisable goods Sections 2(d) and 3 of Central Excise Act, 1944.
4) Excisability - Item which is fixed in the earth can continue to be movable and excisable if the same is capable of
being shifted from one place to another without having to dismantle the same into the constituent components
- Sections 2(d) and 3 of Central Excise Act, 1944.
(12)
MEHTA & CO. (2011)(SC)
whether the items like chairs, beds, tables, desks, etc., affixed to the ground could be said to be immoveable
assets and not liable to excise duty. It was held that in case of Craft Interiors (supra) has clearly laid down that
ordinarily furniture refers to moveable items such as desk, tables, chairs required for use or ornamentation in a
house or office. So, therefore, the furniture could not have been held to be immoveable property
Miscellaneous que
(1) Discuss briefly whether excise duty is attracted on the excisable goods manufactured :
a)
b)
c)
d)
In jammu & kashmir
In special economic Zone
In 100% EOU
Beyond Indian territorial waters (within 150 NM from the shore line)
Ans(a) As Per Section 1(2) of Central Excise Act, 1944, Excise duty is attracted on the excisable goods manufactured in
Jammu & Kashmir, Since Central Excise Act, 1944 extends to the whole of India
(b) Goods manufactured in special economic zone are not exigible to excise duty as they are excluded from the
scope of charging provisions of section 3 of Central Excise Act, 1944.
(c) As per Proviso to Sec 3 of CEA 1944, Excise duty on the goods manufactured in 100% export oriented
undertaking will be attracted only when they are brought to any other place in India.
(d) Excise duty is attracted since Central Excise Act, 1944 has been extended to the designated areas in the
Continental Shelf and Exclusive Economic Zone of India which extends up to 200 nautical miles Inside the sea
from the base line.
(2) May 2008
Explain briefly with reference to rule 21 of CER 2002 relating to remission of duty the following
(i)
can remission of duty be granted on goods cleared from the factory after payment of duty, but which were
destroyed by fire in transit.
(ii)
upon grant of remission of duty the cenvat credit on inputs used in final product has to be reversed.
Ans
(i) remission of duty cannot be granted as goods have already been cleared from the factory after payment of
duty.
(ii) As per sub-rule (5C) of rule 3 of CENVAT Credit Rules, 2004, where on any goods manufactured or produced
by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the
CENVAT credit taken on the inputs used in the manufacture or production of said goods shall be reversed.
(3) May 2003/nov 2002/nov2003
Discuss whether remission of duty shall be granted or not, in the following cases, under the central excise rules
2002;
MANOJ BATRA
www.camanojbatra.com
~8~
(i) excisable goods manufactured in the factory are claimed by the manufacturer as unfit for consumption or
marketing
(ii) duty paid goods were damaged due to breakage in handling.
(iii) Finished goods entered in Daily stock Account (DSA) were stolen from the factory.
Ans- provisions regarding remission of duty are contained in Rule 21 of CER 2002.
(I) Remission of duty can be granted, because as per rule 21 of CER 2002, if goods are unfit for consumption of
marketing then remission of duty can be granted
(II) If the breakage took place before removal then remission shall be granted. Since the goods were duty paid
goods, it implies that they have been removed from the factory. Hence remission shall not be granted.
(III) Remission shall not be allowed, since it is not covered by Rule 21 of CER 2002. Further it was held in Gupta Metal
Sheets (2008) (TRI-LB) Loss by theft or dacoity cannot be termed as loss due to natural cause or due to
unavoidable accident. Theft or dacoeity is a mere incident not an accident. Further the word loss implies that the
goods are unavailable for consumption. Whereas in case of theft or dacoity, the stolen goods enter the market
for consumption. Thus loss by theft or dacoity is not eligible for remission of duty.
Hence remission of duty shall not be allowed.
Q Discuss whether remission of central excise duty will be granted in the following cases under the central excise
rules 2002;
I. Goods were not fully manufactured and lost by natural causes before entry in “ Daily Stock Account”
II. Goods (fully manufactured were lost during transportation of the same to the customer’s business premises
due to unavoidable accident.
III. goods ( fully manufactured) were lost by fire before removal from the factory and the assessee has received a
claim from the insurance company.
Ans- provisions regarding remission of duty are contained in Rule 21 of CER 2002.
(I) there is no question of claiming remission on such goods, because no duty can be levied, i) duty is levied only if
a new product emerges.
(II) Remission can not be granted. As per Rule 21 of CER 2002, remission can be claimed only if the loss arises at any
time before removal. And in present case the loss has taken place after removal, during transit.
(III) Remission can be claimed as the loss has taken place in factory before removal.
Honwever if insurance claim is also made of duty, then remission can’t be claimed.
(4) Nov 08 old
Discuss whether remission of duty will be granted under the Central Excise Rules, 2002, in the following cases:
(i) Loss of molasses due to auto combustion in sugar factory.
(ii) Normal evaporation, storage and handling losses of petroleum products.
(iii) There was natural calamity in the factory, but the department was not intimated in time.
Ans
(i) Yes. Loss of molasses due to auto combustion in sugar factory is an unavoidable accident and hence, remission is
admissible
(ii) Yes. Remission can be granted in case of normal evaporation, storage and handling losses of petroleum products.
(iii) Yes. Remission cannot be denied simply because there was delay in giving intimation to the Department. If there
is a natural calamity in the factory, procedural lapse cannot come in the way of benefit.
MANOJ BATRA
www.camanojbatra.com
~9~
VALUATION
(1) Can the pre-delivery inspection (PDI) and free after sales services charges be included in the transaction value
when they are not charged by the assessee to the buyer?
Tata Motors Ltd. v. UOI 2012 (286) E.L.T. 161 (Bom.)
Assessee (Tata Motors Ltd.- Petitioners) were the manufacturers of cars. They sold their cars to their subsidiary companiesM/s TMLD which in turn sold cars to the dealers
Between the petitioners and each dealer, an agreement is executed thereby appointing such a person as a dealer on terms
and conditions mentioned in the said agreement. According to the petitioners, the petitioners decide the maximum price at which
the dealer has to sell the car. On account of this, the dealer cannot sell the car for an amount more than the one which is specified
by the petitioners. The dealer pays to the petitioners a particular price quoted by the petitioners and according to the petitioners it is
that price on which excise duty is paid. According to the petitioners that is the price which will have to be termed as assessable
value. According to the petitioners on account of the dealership agreement, the dealer is required to carry out Pre Delivery
Inspection (For short PDI) before the car is actually delivered to the customer. These services are referred to as free after sales
services. Department issued SCN to the petitioners alleging that costs incurred by the dealer towards PDI and said services was
also includible in the assessable value because of Circular No. 643/34/2002
However, Assessee contended that Circular No. 643/34/2002-CX, contrary to the provisions of section 4(1)(a)
and section 4(3)(d) of the Central Excise Act, 1944. Further the dealer had to incur the expenses to conduct PDI and
said services without reference to them. Tata Motors (Assessee) did not reimburse such expenses incurred by the
dealer. Hence PDI & After sale service will not be included in Assessable value.
It was held that
(1) Pre-delivery inspection as well as free after sales services during the warranty period are rendered by dealers as part of
their dealer’s responsibility cast on them as per the dealership agreement. The manufacturers do not charge the dealers
for expenses incurred by the dealers towards such pre-delivery inspection and after sale services.
(2) It further stated that when a car was sold by the manufacturer ( Tata Motors) to dealer, price was the sole consideration
and the petitioners and dealer were not related to each other. Hence, since the requirements of section 4(1)(a) were being
complied with, the assessable value would be the transaction value [determined as per section 4(3)(d)]. Accordingly, the
expenses incurred for PDI and said services should not be included in the transaction value of the car.
(3) CBEC Circular is contrary to sec 4(1)(a). valuation will be as per Sec 4(1)(a) and not covered in sec 4(1)(b) Further,
Court was of the opinion that the linkage of the expenses incurred for PDI and said services with expenses for
advertisement or publicity in the said circular was not correct.
(4) The Court held that the said circular wrongly held that in case where the assessee (manufacturer) sold the motor vehicles
to a dealer (buyer) at a given price and the dealer in turn sold the said motor vehicles to a customer at a price with dealers
margin which included the PDI charges and after sales service charges, then, the assessable value would include the PDI
and after sales service charges even if they were not been charged by the assessee (manufacturer) to the dealer. It was
contrary to the provisions of section 4(1)(a) read with section 4(3)(d).
(2) Is the amount of sales tax/VAT collected by the asssessee and retained with him in accordance with any State
Sales Tax Incentive Scheme, includible in the assessable value for payment of excise duty?
CCEx v. Super Synotex (India) Ltd. 2014 (301) E.L.T. 273 (S.C.)
Assessee was a manufacturer of manmade fibre yarns which were chargeable to excise duty. Under the Sales Tax New Incentive
Scheme for Industries, 1989, the Assessee was ENTITLED TO RETAIN 75% OF THE SALES TAX COLLECTED and PAY ONLY
25% to the Government.
MANOJ BATRA
www.camanojbatra.com
~ 10 ~
While computing the ‘transaction value’ for the purpose of payment of excise duty, assessee claimed 100% deduction of sales tax
collected from buyer. Department objected to this as effectively, the assessee did not pay excise duty on the additional
consideration received towards sales tax collected but not deposited with the State exchequer.
It was held
that amount paid or payable to the State Government towards sales tax, VAT, etc. is excluded as it is not an amount paid to the
manufacturer towards the price, but an amount paid or payable to the State Government for the sale transaction. Hence the
amount paid to the State Government is only excludible from the transaction value.
That As per Sec 4 (3)(d) of CEA 1944, the Sales Tax actually paid or Payable to the Government can be reduced from the price
to determine transaction value. Hence, if the Sales Tax is not actually paid, no benefit of reduction under the concept of
“Transaction Value”.
(i) 25% of the Sales Tax collected has been paid to the State Exchequer by way of deposit. Hence this amount is
deductible. The rest of the amount has been retained by the Assessee. That has to be treated as the Price of the goods
under the basic fundamental concept of “Transaction Value”.
(ii) Therefore, the Assessee is bound to pay the Excise Duty on 75% Sales Tax also, as it forms part of the Price collected.
(3) Maruti Suzuki Ltd. was manufacturer of various types of motor vehicles chargeable to duty on ad valorem
basis. Department observed that while selling the vehicles to the customers, the dealers added their own
margin known as the dealer’s margin to the price at which the vehicles were made available to them by
Maruti Suzuki Ltd. This dealer’s margin contained provision for rendering pre-delivery inspection and three
after sale services. Hence, the Department contended that the cost of pre-delivery inspection and after sale
services would form part of the assessable value of the automobile while discharging the duty liability.
Decide whether contention of department is valid
Maruti Suzuki India Ltd.(2010)(Tri-LB)
(1) The assessee, a manufacturer of motor cars sells the motor car to dealers who in turn sells them to ultimate
customer. The assessee pays duty on price charged from dealers and dealer margin = [price charged from
customer—price paid to Maruti ]
(2) Under Dealership agreement, the dealer was required to carry out pre-delivery inspection and three after sale
services. Dealer margin consist of [ PDI & after sale sevice and margin of dealer]
(3) MSL was not paying duty on PDI & after sale service whereas department contending that these charges form
part of assessable value.
It was held that
The definition of the expression “transaction value” undoubtedly uses the expression “any amount that the
buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable
at the time of the sale or at any other time, including. .....servicing, warranty, commission or any other matter,......”
The definition clause defines the transaction value to be the price paid or payable for the goods when sold. It
then explains that the inclusion of identified items does not mean that they are restricted or limited to those which
are specifically identified. In this ‘inclusion’ part of definition, the legislature has used the word ‘any amount’ at two
places, thereby clearly disclosing the extensive nature of the definition. Thereafter, the definition clause specifically
identifies the items which stand excluded from the transaction value, which is absolutely restrictive in nature.
The pre-delivery inspection and after sale services are carried by dealer under the terms of dealership
agreement between assessee and dealer. These charges are paid by buyer to dealer on behalf of assessee and the
same is payable by reason of or in connection with sale of car by assessee to dealers. Hence these charges will be
included in assessable value of motor cars and therefore liable to excise duty.
MANOJ BATRA
www.camanojbatra.com
~ 11 ~
Classification
Connaught Plaza Restaurant (Pvt) Ltd. 2012 (286) E.L.T. 321 (S.C.)
(1) Can the ‘soft serve’ served at McDonalds India be classified as “ice cream” for the purpose of levying excise
duty?
McDonalds India [M/s Connaught Plaza Restaurant (Pvt) Ltd.] manufactured and served ‘soft serves’ dispensed
through vending machines at its restaurants. The Department contended that 'soft serve' was classifiable under
2105.00-“ice cream and other edible ice, whether or not containing cocoa” and thus, would attract excise duty @
16%. However, assesse conteded that the ‘soft serve’ was classifiable under Heading 04.04 as “other dairy produce”
chargeable to nil rate of duty.
ASSESSEE CONTENTION- as per the definition of “ice cream” under Prevention of Food Adulteration Act, 1955 , the milk
fat content of “ice-cream” and “softy ice-cream” shall not be less than 10%.
Hence soft serve cannot be classified as ice cream under heading 2105 as it contains only 5% milk fat content.
SC HELD- definition of one statute (Prevention of Food Adulteration Act, 1955) having a different object, purpose and
scheme could not be applied mechanically to another statute (Central Excise Act).
ASSESSEE CONTENTION- “soft serve” could not be considered as “ice-cream” as it was marketed by the assessee the
world over as ‘soft serve
SC HELD- the manner in which a product might be marketed by a manufacturer, did not necessarily play a decisive
role in affecting the commercial understanding of such a product. What matters was the way in which the consumer
perceived the product notwithstanding marketing strategies. Hence a person entering the “McDonalds” outlet with the
intention of enjoying an “ice-cream”, ‘softy’ or ‘soft serve, unaware of its milk fats contents.
ASSESSEE CONTENTION- The assessee pleaded that in the matters pertaining to classification of a commodity, technical
and scientific meaning of the product was to prevail over the commercial parlance meaning
SC HELD- none of the terms in Heading 04.04, Heading 21.05 and Heading 2108.91 had been defined and no technical or
scientific meanings had been given in the chapter notes. in the absence of a statutory definition or technical description,
meaning of the product will be taken as per common parlance principle
ASSESSEE CONTENTION- “Rule 3(a) of the General Rules of Interpretation which stated that a specific entry should
prevail over a general entry, ‘soft serve’ would fall under Heading 04.04 since it was a specific entry.
SC - rejecting this contention it was held that Heading 21.05 (ice cream & other edible rice), while Heading 04.04 covers –
other dairy products. Heading 21.05 is a specific entry and soft serve classified under heading 2105 applying the rule 3(a)
of General Rules of interpretain which specifies “Specific heading prevail over General Heading”.
(2) How will a cream which is available across the counters as also on prescription of dermatologists for treating
dry skin conditions, be classified if it has subsidiary pharmaceutical contents - as medicament or as cosmetics?
MANOJ BATRA
www.camanojbatra.com
~ 12 ~
CCEx. v. Ciens Laboratories 2013 (295) ELT 3 (SC)
The assessee manufactured a cream called as ‘Moisturex’ which was prescribed by dermatologists for treating dry skin conditions.
However, the same was also available in chemist or pharmaceutical shops without prescription of a medical practitioner. The
pharmaceutical content of the cream included urea (10%), lactic acid (10%) and propylene glycol (10%). The assessee contended
that the cream classified as medicament under Heading 30.03 of the Central Excise Tariff.
Department contended that the product ‘Moisturex’ is mainly used for care of the skin and thus, they are to be classified as
cosmetic or toilet preparations under Heading 33.04. It is further contended that even if such cosmetic products contain certain
subsidiary pharmaceutical contents or even if they have certain subsidiary curative or prophylactic value, still, they are to be treated
as cosmetics only. It is also contended that the product is sold across or under the counter and the same can be purchased without
prescription of a medical practitioner and hence it is not medicament.
Whereas Assessee contended that the very presence of pharmaceutical substances will change the identity of the product
since such constituents are used NOT FOR CARE of the skin BUT FOR CURE of certain diseases relating to skin. The container
of the product has given the following indications for use
It was held that
Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, the
proportion of such ingredients is not invariably decisive. WHAT IS OF IMPORTANCE IS THE CURATIVE ATTRIBUTES of such
ingredients that render the product a medicament and not a cosmetic.
Secondly, though a product is sold without a prescription of a medical practitioner, it does not lead to the immediate
conclusion that all products that are sold over/across the counter are cosmetics. There are SEVERAL PRODUCTS THAT ARE
SOLD OVER-THE-COUNTER AND ARE YET, MEDICAMENTS.
Thirdly, prior to adjudicating upon whether a product is a medicament or not, Courts have to see what the people who actually
use the product understand the product to be. If a product’s primary function is “care” and not “cure”, it is not a medicament.
Cosmetic products are used in enhancing or improving a person’s appearance or beauty, whereas medicinal products are used to
treat or cure some medical condition.
A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small
quantities, is to be branded as a medicament.
Having regard to the PHARMACEUTICAL CONSTITUENTS PRESENT IN THE CREAM ‘Moisturex’ and its use for the cure
of certain skin diseases, the same is a medicament liable to be classified under the Heading 30.03.
(3) In case of specific classification viz-à-viz classification based on material used/composition of goods, which one
should be adopted?
MINWOOL ROCK FIBRE LTD.2012 (S.C.)
A SCN was issued to the assesse (Minwool Rock Fibres Ltd.) directing them to show cause as to why ROCKWOOL AND
SLAGWOOD using more than 25% of blast furnace should not be classified under Chapter sub-heading No. 6807.10
and duty of 18% should not be charged and recovered from them
ASSESSEE (Minwool Rock Fibres Ltd) Contended that they started manufacturing rockwool and slagwool using more
than 25% of blast furnace slag by weight right from 1993 onwards. And were classifying them under Tarriff heading
6803.00 (i.e. Slagwool, Rockwool and similar mineral wools) and had been filing classification declarations
mentioning this fact. Such declarations so filed prior to 1997-98 were accepted by the Department. However,
another specific sub-heading 6807.10 of Central Excise Tariff was introduced vide Budget 1997 for ‘Goods having
more than 25% by weight blast furnace slag’. Accordingly, they claimed that the goods manufactured by them,
namely, slagwool and rockwool should henceforth be classified under Chapter sub-heading 6807.10 of the Tariff
That they are manufacturing ‘Min wool’ using more than 25% of blast furnace slag by weight, right from 1993
onwards and they have been filing classification declarations mentioning this fact and such declarations so filed prior
to 1997-98 are accepted by the department and, therefore, the goods in question requires to be classified under
Chapter sub-heading No. 6807.10 of the Act.
(4) In case of a specific entry viz-a-viz a residuary entry, which one should be preferred for classification purpose?
Wockhardt Life Sciences Ltd. 2012 (S.C.)
Assessee manufactured Povidone Iodine Cleansing Solution USP and Wokadine Surgical Scrub. The only difference
MANOJ BATRA
www.camanojbatra.com
~ 13 ~
between these two products was that Wokadine was a branded product whereas Povidone Iodine Cleansing Solution
was a generic name. and classified under Chapter Heading 3003 of Tariff Act.
The Revenue contended that the said products were not medicament in terms of Chapter Note 2(i) of the Tariff Act
as it neither had “Prophylactic” nor “Therapeutic” usage and hence it is classified as ‘DETERGENTS’ under heading
3402.90. Department contendend that in order to qualify as a medicament, the goods must be capable of curing or
preventing some disease or aliment
The assessee stated that the Revenue, in their show cause notices, had admitted that the products in issue were
antiseptic and used by surgeons for cleaning or de-germing their hands and scrubbing surface of skin of patient
before operation. Therefore, it would fall under chapter sub-heading 3003 and not under chapter 34.
Decision of the Case:
The Court said that the combined factor that requires to be taken note of for the purpose of the classification of the
goods are the composition, the product literature, the label, the character of the product and the use to which the
product is put. In the instant case, it is not is dispute that this is used by the surgeons for the purpose of cleaning or
degerming their hands and scrubbing the surface of the skin of the patient that portion is operated upon. The
purpose is to prevent the infection or disease. Therefore, the product in question can be safely classified as a
“medicament” which would fall under chapter sub-heading 3003 which is a specific entry and not under chapter subheading 3402.90 which is a residuary entry.
Thus, on the basis of the above observation by the Court the Revenue’s appeal was rejected.
(5) In case no statutory definition is provided under law, can the opinion of expert in trade who deals in those
goods be considered?
Konkan Synthetic Fibres 2012 (S.C.)
The assessee an importer imported one unit of the equipment which was declared as “Kari Mayer High Speed Draw
Warping Machine with 1536 ends along with essential spares”. The importer claimed that these goods are covered
under an exemption notification.
Under said notification, exemption was available in respect of the High Speed Warping Machine with yarn
tensioning, pneumatic suction devices and accessories.
But the assessee imported High Speed Warping Machine, which has drawing unit and not the pneumatic suction
device. The textile commissioner, who was well conversant with these machines, had stated that the goods imported
by the assessee were covered under the exemption notification. He further stated that drawing unit was just an
essential accessory to the machines imported by assessee and, therefore, was covered under said notification.
Customs department refused to give exemption had directed the assessee to pay the duty under the provisions of
the Customs Act, 1962.
It was held that it is a settled proposition in a fiscal or taxation law that while ascertaining the scope or expressions
used in a particular entry, the opinion of the expert in the field of trade, who deals in those goods, should not be
ignored, rather it should be given due importance. The Supreme Court on referring to the case of Collector of
Customs v. Swastic Woollens (P) Ltd. 1988 (37) E.L.T. 474 (S.C.), held that when
no statutory definition was provided in respect of an item in the Customs Act or the Central Excise Act, the trade
understanding, i.e. the understanding in the opinion of those who deal with the goods in question was the safest
guide.
Hence Imported goods were covered under the exemption notification.
(6) Where a classification (under a Customs Tariff head) is recognized by the Government in a notification any
point of time, can the same be made applicable in a previous classification in the absence of any conscious
modification in the Tariff?
Keihin Penalfa Ltd. 2012 (S.C.)
Department contended that ‘Electronic Automatic Regulators’ were classifiable under Chapter sub-heading 8543.89
whereas assesse contended that the goods were classifiable under Chapter sub-heading 9032.89. An exemption
notification dated 1-3-2002 exempted the disputed goods classifying them under chapter sub-heading 9032.89. The
MANOJ BATRA
www.camanojbatra.com
~ 14 ~
period of dispute, however, was prior to 1-3-2002.
It was held by SC that the Central Government has issued a exemption notification dated 1-3-2002 and in the said
notification it has classified the Electronic Automatic Regulators under Chapter sub-heading 9032.89. Since the
Revenue itself has classified the goods in dispute under Chapter sub-heading 9032.89 from 1-3-2002, the said
classification need to be accepted.
(7) M/s CPS Textiles P Ltd. 2010 (Mad.)
company is engaged in manufacture and export of Knitted Garments. After completion of the exports, petitionercompany claimed drawback on the export of the goods. Department issued notice/letter stating that excess
drawback was claimed and paid due to wrong classification and called upon the petitioner to repay the excess
amount
the following 2 issues for consideration are
1. Whether the description of the goods as per the documents submitted along with the Shipping Bill be
a relevant criterion for the purpose of classification, if not otherwise disputed on the basis of any
technical opinion or test?
2. Whether a separate notice is required to be issued for payment of interest which is mandatory and
automatically applies for recovery of excess drawback?
It was held that
1. Description of goods as per the documents submitted along with shipping bill will be a relevant criteria
for the purpose of classification, if not otherwise disputed on the basis of any technical opinion or test Petitioner cannot plead that exported goods should be classified under different headings contrary to
description given in the invoice and the shipping bill which have been assessed and cleared for export
2. insofar as the interest is concerned Section 75A(2) of the Customs Act, 1962 reads as follows :Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable under this Act
or the rules made thereunder, the claimant shall, within a period of two months from the date of demand, pay in
addition to the said amount of drawback, interest at the rate fixed under section 28-AB and the amount of interest
shall be calculated for the period beginning from the date of payment of such drawback to the claimant till the date
of recovery of such drawback.”
On reading of Section 75A(2) of the Customs Act, it is clear that when the claimant is liable to pay the excess
amount of drawback he is liable to pay interest as well. The section provides for payment of interest automatically
along with excess drawback. No notice need be issued separately as the payment of interest become automatic,
once it is held that excess drawback has to be repaid
Cenvat credit
(1) Can CENVAT credit be availed on machineries purchased for being used in setting up a sugar plant in
foreign country when (i) the same are not used in the factory premises and (ii) no duty is paid on final
product viz., the sugar plant?
KCP Ltd. v. CCEx. 2013 (295) ELT 353 (SC)
MANOJ BATRA
www.camanojbatra.com
~ 15 ~
The appellant-assessee is a manufacturer of machinery for sugar and cement plants and parts thereof falling under Chapter 84 of
the Central Excise Act, 1944. The appellant-assessee entered into a contract with M/s Vina Sugars, Vietnam for supply and
installation of a sugar plant at Vietnam. FOR THE SAID PURPOSE, the appellant had manufactured certain machines in its
own factory AND certain machinery, including electric cables etc., were Purchased by the appellant from other dealersmanufacturers and then both the machineries along with cable had been put in a container and the containers were transported to
Vietnam so that plant can be set up at Vietnam.
The assessee availed CENVAT credit on bought-out machinery describing them as eligible capital goods. The Department,
contended that CCR not available since the bought-out machinery was not eligible capital goods as not been used by the assessee
in its factory premises
The department was of the view that none of such purchased items had been used by the appellant in its factory
premises in relation to manufacture of the final product manufactured by the appellant. And hence no CCR will be
available.
It was held that
the most important object OF CCR Scheme is to remove cascading effect of the duty imposed on the final
product cleared at the time of sale is removed
There are 2 conditions for getting the CENVAT credit benefit :
1. must have paid duty and such raw material must have been used in the process of manufacturing the final product in his
factory or premises.
2. Excise duty must have been levied on the final product.
If there is no duty levied on the final product, there would not be any question of grant of any relief because in that case there
would not be any cascading effect on the duty imposed.
Looking at the above stated clear legal position, one may see here that no duty was paid by the appellant on the final product
i.e. on the sugar plant which had been set up in Vietnam. For time being, let us forget the fact whether the plant is movable or
immovable - the fact remains that no duty was paid on the said plant and therefore, there would not be any question with regard to
getting credit on the duty paid on the inputs, especially when the appellant had not used the machinery purchased from other
manufacturers in its factory premises while manufacturing machinery.
As the same ( machinery purchased) was not even unpacked or tested, and transported in exact condition along with
machinery manufactured by the assessee. The assessee, therefore, merely acted as a trader or as an exporter in relation to the
machinery purchased by it, which had been exported and used for setting up a sugar plant in a foreign country.
Therefore it can be concluded that CENVAT credit could not be allowed to the assessee as no duty was paid on sugar plant
set up in a foreign country. Further, since the bought-out machinery was not used in the assessee’s factory premises, the
necessary condition for availing CENVAT credit on capital goods could not be fulfilled.
(2) Whether (i) technical testing and analysis services availed by the assessee for testing of clinical
samples prior to commencement of commercial production and (ii) services of commission agent are
eligible input services for claiming CENVAT?
CADILA HEALTHCARE LTD. 2013 (30) S.T.R. 3 (Guj.)
Assessee is engaged in the manufacture of P. & P. medicines. Department denied CCR taken in respect of the following input
services : (1) Technical Testing and Analysis (2) Commission paid to the foreign agents
TECHNICAL TESTING AND ANALYSIS SERVICES - The assessee had availed of CENVAT credit on Technical Testing and
Analysis services in respect of clinical samples tested by various Testing Agency. Medicines can be manufactured only upon
approval of the regulatory authority which is based on technical testing and analysis Report further it was observed that the
assessee had not started commercial production of products of which clinical samples were got tested by various agencies.
Samples were manufactured in small trial batches and removed after payment of excise duty. The department contended that
unless goods reached the commercial production stage, CENVAT credit was not admissible
COMMISSION PAID TO FOREIGN AGENTS FOR THE SALE -Further, the assessee also availed CENVAT credit of service
tax paid by it on commission paid to foreign agents for the sale of such medicaments. Credit was taken as per the inclusive part of
the definition of input service, which included services in relation to sales promotion. However, the department contended that
there was a clear distinction between sales promotion and sale and a commission agent is directly concerned with sales rather
than sales promotion. Therefore, service provided by commission agent would not fall within the purview of the main or inclusive
part of the definition of input service.
MANOJ BATRA
www.camanojbatra.com
~ 16 ~
It was held that the final product can be manufactured only upon approval of the regulatory authority after the product
undergoes technical testing and analysis. Unless such testing and analysis is carried out, it would not be possible to produce the
final product. Besides trail batches were removed on payment of excise duty. Hence the services availed in respect of
technical testing and analysis services are directly related to the manufacture of the final product. The contention of the department
that unless the goods have reached the commercial production stage, CENVAT credit is not admissible in respect of the technical
testing and analysis services availed in respect of the product at trial production stage, does not merit acceptance. Therefore CCR
allowed on Technical Testing service.
Further, there is nothing to indicate that such commission agents were actually involved in any sales promotion activities or
advertising. This service is not directly or indirectly, in or in relation to the manufacture of final products and clearance of final
products upto the place of removal. Hence CCR not allowed on Service tax paid on commission service of commission agent.
(3) Whether wrongful availment of 100% CENVAT credit on capital goods in the year of purchase be
upheld if wrongly availed credit of 50% is not utilized in the said year?
Satish Industries 2013 (Bom.)
In the instant case, the assessee availed 100% CENVAT credit on capital goods in the year of purchase, i.e. in first year itself.
However, he utilized only 50% of the CENVAT credit so availed in the first year. Department contended that assessee, was
entitled to avail 50% of the credit of duty paid on capital goods in the first financial year and avail the balance 50% credit in
subsequent financial year.
It was held that if 50% CENVAT credit on capital goods pertaining to subsequent financial year which had been wrongly
availed in the first year had not been not utilized till the commencement of the subsequent financial year, no prejudice was caused
to the Revenue and thus, the same could be upheld.
(4) Will two units of a manufacturer surrounded by a common boundary wall be considered as one
factory for the purpose of CENVAT credit if they have separate central excise registration?
Sintex Industries Ltd. vs. CCEx 2013 (287) ELT 261 (Guj.)
The appellant is a company incorporated under the Companies Act, 1956. The appellant has, inter alia, 2 divisions, The Textile
Division and Plastic Division. The present appeals relate to the Textile Division of the appellant. Both these units having separate
Registration number and are owned by Syntex Industries Ltd., having a common PAN under the Income Tax Act. Both the above
units are located on the common ground surrounded by a common boundary wall and adjoining to each other.
The appellant, in order to receive continuous and uninterrupted supply of electricity, installed DG sets/electricity
generation plant to be used in the factory of the appellant and it has been using furnace oil as fuel in the generation of
electricity.
The appellant has been availing Cenvat credit on the inputs, viz. furnace oil, used as fuel for the generation of
electricity, which is used for captive consumption in their own factory. Whenever there is lower utilization of electricity
and/or when the appellant’s other unit, i.e. the Plastic Division, requires electricity, the appellant supplies part of the
electricity so generated to its own Plastic Division.
Department requiring the appellant to reverse the credit taken on furnace oil used in the generation of electricity and supplied
to the Plastic Division
Assesse submitted that both the units of the appellant are located in the same premises surrounded by a common boundary
wall adjoining to each other, the electricity supplied to the other unit COULD NOT BE TREATED AS BEING supplied to a
different entity BUT WITHIN ITS OWN FACTORY. He further contended that separate central excise registration does not make
it two separate factories as would appear from the definition of the “factory” as contained in Section 2(e) of the Act.
It was held that, the Appellant itself having described the factory of its Plastic Division as a separate place of business
BY APPLYING FOR SEPARATE REGISTRATION and having obtained such separate registration, Hence Credit On Inputs
Utilized To Produce Electricity which was supplied to a factory registered as a different unit (plastic division) would not be
allowed.
(5) Can CENVAT credit of duties, other than National Calamity Contingent Duty (NCCD), be used to pay
NCCD?
MANOJ BATRA
www.camanojbatra.com
~ 17 ~
CCEx. v. Prag Bosimi Synthetics Ltd. 2013 (295) ELT 682 (Gau.)
The assessee contended that though CENVAT credit in respect of NCCD can be utilized only for payment of NCCD duty, NCCD
can be paid by using CENVAT credit of basic excise duty also. The Revenue, however, rejected the assessee’s contention.
Rule 3(1) provides that a manufacturer or producer of a final product shall be allowed to take CENVAT credit of the NCCD leviable
under Section 136 of the Finance Act, 2001
Rule 3(4) provides the CENVAT credit may be utilized for payment of any duty of excise on any final product;
Rule 3(7)(b) provides that CENVAT credit in respect of NCCD and other duties shall be utilized towards payment of duty of excise
leviable under various statutes respectively.
MEANING THEREBY Rule 3(7)(b) provides that CENVAT credit in respect of NCCD can be utilized only for payment of NCCD
HENCE it can be concluded that, Cenvat Credit of NCCD and BED can be utilized for payment of NCCD.
Author note- in case of NCCD on mobile phones, credit of only NCCD can be utilised for payment of the NCCD on mobile phones.
It means if the credit of NCCD is not available, than NCCD payable on mobile phones will have to be paid in cash (even if credit of
other duties/tax is available) as no other credit can be utilized to pay such duty.
(6) Whether bagasse which is a marketable product but not a manufactured product can be subjected to
excise duty?
Balrampur Chini Mills Ltd. v. Union of India 2014 (300) ELT 372 (All.)
Bagasse is a residue/waste of the sugarcane which is left behind when sugarcane stalks are crushed to extract their juice during
the manufacture of sugar. It is currently used as a biofuel and in manufacture of pulp and paper products and building materials
and is classified under sub-heading 2303 20 00 of Central Excise Tariff Act, 1985 as ‘Beet-Pulp’, ‘bagasse’ and ‘other waste of
sugar manufacture’ with NIL rate of duty.
However, consequent upon the amendment in Section 2(d) of the CEA 1944, vide the Finance Bill, 2008, CBEC
Circular dated 28-10-2009 clarified that ‘bagasse’ treated as marketable and would be chargeable to payment of
Central Excise Duty.
Department contended that As per rule 6 of CCR 2004, if inputs which are used for manufacture of dutiable and
exempted goods and no separate accounts have been maintained in this regard, then proportionate credit would be
reversed or 6% amount would be paid. Therefore, the bagasse is now (w.e.f. 10-5-2008) an ‘exempted excisable
goods’ and hence the provisions of Rule 6 of the Rules would apply.
However, Supreme Court in the case of Balrampur Chini Mills Ltd. in Civil Appeal No. 2791 of 2005, decided on 21-7-2010
held that bagasse is a waste and not a manufactured product.
Assesse contended that rule 6(3) will not apply . Because it applies when a manufacturer manufacturers both dutiable as well
as exempted final products, and as per Supreme Court’s judgment holding bagasse as a non-manufactured final product.
Therefore, he is not liable to reverse 6% of the amount of bagasse sold.
The High Court concluded that though bagasse is an agricultural waste of sugarcane, it is a marketable product. However,
duty cannot be imposed thereon simply by virtue of the explanation added under section 2(d) of the Central Excise Act, 1944 as it
does not involve any manufacturing activity. The High Court quashed the CBEC’s Circular dated 28-10-2009.
On the basis of following observation
(i) Supreme Court in its judgement given vide order dated 21.7.2010 in Civil Appeal No.2791 of 2005 has held that reversal
of 6% is not applicable in case of bagasse as the same is not a final product, but a waste. Bagasse is never
manufactured, but it only emerges as a waste from the crushing of sugarcane for the manufacture of final product,
namely, sugar and thus, rule 6(2) and rule 6(3) would not be applicable.
(ii) Explanation added to section 2(d) deems the goods, which are capable of being bought and sold, to be marketable.
Earlier also, bagasse was being bought and sold for a consideration and even after the amendment in 2008 it is being
bought and sold for a consideration. Hence, it was marketable earlier also and no difference has been made about the
marketability of bagasse on account of addition of explanation to section 2(d) of CEA, 1944 inasmuch as it does not cease
to be waste and it does not become a manufactured final product for the purposes of rule 6 of CENVAT Credit Rules.
(7) MADRAS CEMENTS LTD. (2010)(SC)
MANOJ BATRA
www.camanojbatra.com
~ 18 ~
Capital goods used in mines - Mines if captive mines so as to constitute one integrated unit with concerned
cement factory, Cenvat/Modvat credit available - Mines if not captive mines but supply to various other cement
companies of different assessees and goods used in mines outside factory of assessee, credit not available under
appropriate Rules
Cenvat/Modvat - Input used in mines - Explosives, lubricating oil, etc. used in mines - Issue squarely covered by
decision of Apex Court in case of Vikram Cement [2006 (194) E.L.T. 3 (S.C.)] – cenvat credit on input allowed even if
they are not used in the factory of production but are used in mines.
(8) The assessee claimed the CENVAT credit on the duty paid on capital goods which were later
destroyed by fire. The Insurance Company reimbursed the amount inclusive of excise duty. Is the
CENVAT credit availed by the assessee required to be reversed?
(1) TATA ADVANCE MATERIALS(2009)(Tri)
1) The appellants purchased Capital Machinery in 1998 and availed Cenvat credit on the said Capital Goods.
They were put to use in manufacturing the final products. However, in 2003, a fire accident occurred and the
goods were destroyed. They were cleared as scrap without payment of duty. Insurance was also claimed.
The Insurance Company reimbursed the amount to the assessee, which included the excise duty, which the
assessee had paid on the capital goods.
2)
Revenue proceeded against the appellants for the reversal of the Cenvat credit taken on the Capital
Goods. The Original Authority confirmed the demand. He further imposed penalty under Section 11AC along
with demand of interest.
3) On a very careful consideration of the issue, I find that the goods have been put to use from 1998 upto 2003.
The appellants had legally availed the Cenvat credit and further used the same for payment of duty on the
final products. The goods were destroyed in 2003 due to a fire accident. There is no legal provision for
demanding the Cenvat credit taken on the said goods during the relevant period. The fact that the appellants
claimed insurance, which is inclusive of Excise Duty, is not at all relevant.
No reversal of CCR
Author note- but presently if cleared as waste and scrap then as per rule 3(5A) – AMT PAYABLE = duty leviable on
transaction value.)
(9) In case of combo-pack of bought out tooth brush sold alongwith tooth paste manufactured by
assessee; is tooth brush eligible as input under the CENVAT Credit Rules, 2004?
Prime Health Care Products 2011(Guj)
The assessee was engaged in the manufacture of tooth paste. It was sold as a combo pack of tooth paste and a
bought out tooth brush. - No extra amount recovered from consumer on toothbrush - The assessee availed CENVAT
credit of central excise duty paid on the tooth brush
IT WAS HELD: Combo-pack reached its final stage of marketability only after packet containing tooth brush was
placed with tooth paste - Also, re-packing, labelling etc. amounted to manufacture - In that view, tooth brush was an
input on which assessee was entitled to credit of duty paid.
(10)
Whether CENVAT credit can be denied on the ground that the weight of the inputs recorded on
receipt in the premises of the manufacturer of the final products shows a shortage as compared to
the weight recorded in the relevant invoice?
(1) Bhuwalka Steel Industries (2010)(Tri)
MANOJ BATRA
www.camanojbatra.com
~ 19 ~
(2) Rule 3(1) of the Cenvat Credit Rules allow credit in respect of input or capital goods actually received in the
factory of manufacturer of the final product. In a case where either the entire quantity of goods not
received in the factory of manufacturer of the final product, there cannot be any question of allowing any
credit in respect of such goods not received.
(3) However, it cannot be denied that some goods are susceptible to transit loss on account of such goods
being of hygroscopic nature or of volatile nature. There can also be cases of difference in weight on account
of difference in the weighing scales at both ends, i.e., at the point of despatch and at the point of receipt.
Whether CCR allowed in that case?
(4) There may be difference in quantity received and invoiced. Such difference is termed as ‘transit loss’ and if
such loss falls within the tolerance/normal limits or industry norms, CCR will be allowed on whole of the
quantity of input as stated in the invoice and no disallowance of CCR.
(11)
Can CENVAT credit be taken on the basis of private challans?
Stelko Strips Ltd. 2010 (P & H)
The issue under consideration before the High Court in the instant case was that whether private challans other than
the prescribed documents are valid for taking MODVAT credit
Document for taking credit - Private challans - Credit can be taken on the strength of private challans, as the same
was not found to be taken and there was a proper certification that duty had been paid - Rule 9 of Cenvat Credit
Rules, 2004.
(12)
BANSAL ALLOYS & METALS LTD.(2010) (Tri)
The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of Iron and Steel
Ingots classifiable under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. They were availing Cenvat
credit benefit on final product. They also paid service tax on the transportation of goods by road. The appellants
removed the inputs as such after reversal of Cenvat credit on input availed by them under Rule 3(5) of Cenvat Credit
Rules, 2004 during the period January, 2005 to October, 2005. It has been alleged that the appellants had not
reversed the Cenvat credit of service tax availed in respect of transportation of goods by road.
From the plain reading of Rule 3(5) it is clear that the manufacturer shall be required to pay an amount equal to
the credit in respect of such input or capital goods. On the other hand, Rule 3(1) allowed the manufacturer to take
credit on any input or capital goods and any input service. Rule 3(5) does not indicate for payment of equal amount
in respect of credit of input service. It is well settled that while interpreting the statute no addition or subtraction
can be made and the words used therein must be given their plain meaning. So, the appellants are required to
reverse equal amount of input credit on removal of the inputs as such under Rule 3(5) of the Rules. There is no
provision for payment of credit on input service. So, reversal of Credit on input service in respect of Goods
Transportation Agency service is not justified.
(13)
whether penalty can be imposed on the directors of the company for the wrong CENVAT credit
availed by the company?
Ashok Kumar H. Fulwadhya v. UOI 2010 (Bom.)
It was held that words “any person” rule 15(1) of the CENVAT Credit Rules, 2004] clearly indicate that the person
who has availed CENVAT credit shall only be the person liable to the penalty.
It was held that, CENVAT credit had been availed by the company and the penalty under rule 15(1)] was imposable
only on the person who had availed CENVAT credit [in present case company], who was a manufacturer. The
petitioners-directors of the company could not be said to be manufacturer availing CENVAT credit.
MANOJ BATRA
www.camanojbatra.com
~ 20 ~
Small Scale Industry
(1) Whether an assessee can claim the benefit of SSI exemption on the brand name of another firm if its
proprietor is also a partner in such other firm?
Elex Knitting Machinery Co. 2012 (S.C.)
The Assessee was engaged in the manufacture of flat knitting machines. They had been availing the SSI exemption
under 8/2003.
Department contended that they are using the brand name ”ELEX” on those machines which belonged to M/s. Elex
Engineering Works and hence they were not entitled to avail exemption.
Assessee contended that he is co-owner of brand name “ELEX” as he [being properitor of Elex knitting machinery] is
also a partner in Elex engineering works.
It was held by SC that the assessee was eligible to claim benefit of the SSI exemption as the proprietor of Elex
Knitting Machinery Co. was one of the partners in Elex Engineering Works. And hence being the co-owner of the
brand name of Elex, he could not be said to have used the brand name of another person, in the manufacture and
clearance of the goods in his individual capacity.
(2) Whether the clearances of two firms having common brand name, goods being manufactured in the
same factory premises, having common management and accounts etc. can be clubbed for the purposes
of SSI exemption?
CCE v. Deora Engineering Works 2010 (255) ELT 184 (P & H)
The respondent-assessee was using the brand name of "Dominant" while clearing the goods manufactured by
it. One more manufacturing unit was also engaged in the manufacture and clearance of the same goods under
the same brand name of "Dominant" in the same premises. Both the firms had common partners, the brand
name was also common and the machines were cleared from both the units under common serial number
having common accounts. Department clubbed the clearance of the goods from the both the units for the
purposes of SSI exemption because both the units belong to same persons and they had common machinery,
staff and office premises etc.
MANOJ BATRA
www.camanojbatra.com
~ 21 ~
The High Court held that indisputably, in the instant case, that the partners of both the firms were common and
belonged to same family. They were manufacturing and clearing the goods by the common brand name,
manufactured in the same factory premises, having common management and accounts etc. Therefore, High
Court was of the considered view that the clearance of the common goods under the same brand name
manufactured by both the firms had been rightly clubbed.
CENTRAL EXCISE RULES – Export Procedure
(1) Can export rebate claim be denied merely for non-production of original and duplicate copies of ARE-1
when evidence for export of goods is available?
UM Cables Limited v. Union of India 2013 (293) ELT 641 (Bom.)
The assesse engages in the manufacture of Polyethylene Insulated Jelly filled Copper Cables and Optical Fiber Cables
used in telecommunication. Assessee has exported the goods under Rule 18 and filed claims for rebate under Rule
18 of the Central Excise Rules, 2002. The rebate claims have been rejected by the AC on the ground that the
original copy of the ARE-1 form is not presented. However assesse is of the view that ARE-1 form is lost but we have
presented other evidences for claim of Rebate, such as a) the bill of lading; (b) the mate’s receipt; (c) bank receipt of
the State Bank of India showing the realization of the export proceeds; and (d) an endorsement of the customs
authorities on the triplicate copy of the ARE-1 form which would establish that the goods were exported and had a
duty paid character;
The High Court observed that the objective of the procedure laid down in Notification No. 19/2004 CE (NT) dated
06.09.2004 and CBEC’s Manual of Supplementary Instructions 2005 is to facilitate the processing of a rebate claim and to
enable the authority to be duly satisfied if these 2 conditions are fulfilled (i) having been exported and (ii) being duty paid is fulfilled.
The High Court referred to the decision of Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. v.
Deputy Commissioner 1991 (55) E.L.T. 437 (SC) wherein the Supreme Court held that non-compliance of a condition
which is substantive and fundamental to the policy underlying the grant of an exemption would result in an invalidation of the claim.
On the other hand, other requirements may merely belong to the area of procedure and it would be erroneous to attach equal
importance to the non-observance of all conditions irrespective of the purposes which they were intended to serve
The procedure cannot be raised to the level of a mandatory requirement. Rule 18 itself makes a distinction BETWEEN
conditions and limitations on the one hand subject to which a rebate can be granted AND the Procedure governing the grant of
a rebate on the other hand. While the conditions and limitations for the grant of rebate are mandatory, matters of procedure
are directory.. The High Court ruled that non-production of ARE-1 forms ipso facto cannot invalidate rebate claim. In such a
case, exporter can demonstrate by cogent evidence that goods were exported and duty paid and satisfy the requirements of rule
18 of Central Excise Rules, 2002 read with Notification No. 19/2004 CE (NT).
However, the rebate sanctioning authority shall not reject the claim on the ground of the non-production of the original and the
duplicate copies of the ARE-1 forms, if it is otherwise satisfied that the conditions for the grant of rebate have been fulfilled.
(2) In case of export of goods under rule 18 of the Central Excise Rules, 2002, is it possible to claim rebate of
duty paid on excisable goods as well rebate of duty paid on materials used in the manufacture or
processing of such goods?
Rajasthan Textile Mills v. UOI 2013 (298) E.L.T. 183 (Raj.)
(i) Assessee manufactured M.M. Yarn by using duty paid inputs and cleared the same for export under Rule 18 on
payment of duty. It claimed rebate of duty paid by it on inputs AS WELL AS of duty paid ON FINISHED GOODS under
rule 18 of the Central Excise Rules, 2002.
(ii) The Department rejected the rebate claims on the ground that rule 18 grants EITHER rebate of duty paid On Exported
Finished Goods OR rebate of duty paid ON INPUTS.
(iii) However Assessee contended that rebate should be allowed of the duty paid on both the manufactured goods as well
as on materials used in the manufacture of such goods. He submitted that WORD “OR” USED IN RULE 18 SHOULD BE
READ AS “AND” as there is a combined form-Form ARE-2 for claiming the rebate on the manufactured goods as well
as rebate on materials used in the manufacture or processing of such goods. Further, since whole of the duty paid on
MANOJ BATRA
www.camanojbatra.com
~ 22 ~
manufactured goods is exempted under rule 19 of the Central Excise Rules, 2002, the petitioner opting for rule 18 cannot
be put at a disadvantageous situation in the matter of claiming such rebate.
It was held that
Under rule 18 of the Central Excise Rules, 2002, grant of rebate of duty paid is available EITHER on excisable goods OR on
materials used in the manufacture or processing of such goods i.e. on raw material, but not on both.
It is because of following reasons:(i) On plain reading of rule 18, it is apparent that if the word “or” is taken to be disjunctive, the intention manifested in rule 18
can be given full effect to, i.e. to give the benefit admissible on one of the item, EITHER on finished goods OR inputs used
in the manufacture or processing of such goods.
(ii) Rule 19 also does not provide for rebate on inputs, it provides for rebate on goods manufactured. Merely with the aid of
different provision of rule 19, interpreting the word “or” used in rule 18 as “and” to provide benefit for both, would not be
permissible.
(iii) It is important to note that Notification No. 19/2004- provides rebate of the whole of the duty paid on all “excisable
goods” while Notification No. 21/2004 provides the rebate of whole of the duty paid on ‘materials’ i.e. inputs used in
the manufacture or processing of export goods. Issuance of 2 different notifications further makes it clear that both the
benefits cannot be claimed simultaneously.
(iv) Merely by the fact that Form ARE-2 is providing either to claim the rebate on finished goods or on inputs used in
manufacture of such goods, it cannot be culled out that the same is available on both i.e. finished goods as well as on the
inputs. Merely by preparation of any combined form for both the benefits, the word “or” cannot be construed as “and” to be
used conjunctively.
CENTRAL EXCISE RULES – OFFENCES AND PENALTIES
(1) In a case where the manufacturer clandestinely removes the goods and stores them with a firm for further
sales, can penalty under rule 25 of the Central Excise Rules, 2002 be imposed on such firm?
CCEx. v. Balaji Trading Co. 2013 (290) E.L.T. 200 (Del.)
The allegation against Balaji Trading Co. was that they were storing and selling zarda which had the brand name of “Ratna”
and which had been manufactured by Prabhat Zarda Factory. It is alleged that the said Prabhat Zarda Factory had clandestinely
cleared the said quantities of ‘Ratna’ Zarda and that the same were being stored with the Balaji Trading Co. for further sales. It is
also contended that the said respondents, were related concerns of Prabhat Zarda Factory.
It was held that Rule 25 does not apply to Balaji Trading Co. BECAUSE Rule 25(1) specifically mentions 4 categories
of persons :- (a) producer; (b) manufacturer; (c) registered person of a warehouse; or (d) a registered dealer. These four
categories of persons are also mentioned at the end of Rule 25, where the liability of penalty has been spelt out i.e duty or
2000 whichever is greater. It is, therefore, clear that the penalty can be imposed on such persons only. The respondents
are neither producers nor manufacturers of the said Prabhat Zarda nor are they the registered persons of a warehouse in
which the said zarda had been stored. The respondents are also not the registered dealers. That being the case, no
penalty can be imposed under Rule 25 on Balaji Trading Co.
MANOJ BATRA
www.camanojbatra.com
~ 23 ~
Demand & Refund(1) In a case where the assessee has been issued a show cause notice regarding confiscation, is it necessary that
another SCN regarding recovery of dues and penalty on the same allegations can be issued only when first SCN
is adjudicated?
Jay Kumar Lohani v. CCEx 2012 (28) S.T.R. 350 (M.P.)
A SCN was issued as to why excise duty and penalty as mentioned in the said notice should not be jointly and
severally demanded and recovered from them by invoking extended period of 5 years.
According to assesse A SCN was earlier issued for confiscation of goods and penalty. The assessee contended that
since no decision was taken in respect of Earlier SCN, the Commissioner could not pre-judge the issue involved in the matter and
issue another SCN for recovery of duty and penalty. Therefore Second notice is invalid.
It was held that having regard to the fact that it is not a case of prejudging of the issue and that it is not a case of the show
cause notice being without jurisdiction. and there was no legal provision requiring authorities to first adjudicate the notice issued
regarding confiscation and, only thereafter, issue show cause notice for recovery of dues and penalty.
(2) Is assessee required to pay interest in case of voluntary payment of time-barred duty before issuance of the
show cause notice?
C.C.E. & C. v. Gujarat Narmada Fertilizers Co. Ltd. 2012 (285) E.L.T. 336 (Guj.)
Assesse is engaged in the manufacture of excisable goods. He has paid the duty voluntarily before issuance of SCN. BUT
THE DEMAND HAS BECOME TIME-BARRED. The question is whether he can be called upon to pay interest on duty so paid.
It was held that The recovery of the unpaid or short paid duty would become time-barred. If the manufacturer does not pay it
voluntarily, it would not be possible for the Department to recover the same. But if he does it voluntarily despite completion of
period of limitation, he would, further be saddled with the liability to pay statutory interest. While introducing section 11A(1)(b),
intention of the Legislature was not to impose interest on the voluntary payment of time-barred duty.
Hence he is not liable to pay interest on voluntary payment of time-barred duty.
(3) Whether Additional Director General, Directorate General of Central Excise Intelligence can be considered a
central excise officer for the purpose of issuing SCN?
Raghunath International Ltd. v. Union of India, 2012 (280) E.L.T. 321 (All.)
MANOJ BATRA
www.camanojbatra.com
~ 24 ~
The assessee was engaged in the manufacture and clearance of Gutkha and Pan Masala. Search and seizure was
conducted at the appellant’s premises by the officers of the Directorate General of Central Excise. A SCN was issued
by Additional Director General, Directorate General of Central Excise Intelligence, asking as to why the duty, penalty
and interest were not to be imposed.
ASSESSEE contended that Additional Director General, Directorate General of Central Excise Intelligence had no
jurisdiction to issue the Show Cause Notice, Since he is not a “Central Excise Officer” within the meaning of section
2(b) of the Central Excise Act, 1944. Further assesse contended that the authority who had issued the show
cause notice ought to have obtained prior permission from the adjudicating authority before issuing the SCN.
SEC 2(B) OF CEA 1944- CEO- defined as Chief CCE, CCE, CCE(A), Additional commissioner, Joint commissioner, AC.dc
or any other officer of Central Excise Department or any person ( including an office of the State Government)
invested by CBEC with any of the powers of a CEO under this Act.
It was held that the Additional Director General, Directorate General of Central Excise Intelligence having been
specified as a Commissioner of Central Excise was fully entitled to issue the show cause notice under section 11A,
being a Central Excise Officer.
The Board(CBEC) issued notification dated 26-6-2001 in exercise of power under section 2(b) of the Central Excise
Act, 1944 read with sub-rule (1) of rule 3 of the Central Excise Rules, 2002, appointing the Director General of central
Excise officers as ( COMMISSIONER OF CENTRAL EXCISE) Central Excise Officer and investing them with all the
powers, to be exercised by them Hence,SCN issued in valid.
(4) Where a circular issued under section 37B of the Central Excise Act, 1944 clarifies a classification issue, can a
demand alleging misclassification be raised under section 11A of the Act for a period prior to the date of the
said circular?
S & S Power Switch Gear Ltd. v. CCEx. Chennai-II 2013 (294) ELT 18 (Mad.)
HC referred the case of Supreme Court H.M. Bags Manufacturer(1997), it is seen that a demand under Section
11A of the Act cannot be raised for any date prior to the date of the Board Circular and the time-limit as provided
under Section 11A of the Act is not available to the Department.it was held that once reclassification Notification/
circular is issued, the Revenue cannot invoke Section 11A of the Act to make demand for a period prior to the date of
said classification notification also.
(5) Can customs duty be demanded under section 28 and/or section 125(2) of the Customs Act, 1962 from a
person dealing in smuggled goods when no such goods are seized from him?
CCus. v Dinesh Chhajer 2014 (300) E.L.T. 498 (Kar.)
The investigation revealed that the assessee received the goods, which have been smuggled from Nepal
through courier from some persons in Calcutta. The investigation has actually not unearthed who the real
importers were. The assessee was dealing in computer parts like EDO RAM, SD RAM and processors of makes like
Celeron and AMD, which were actually smuggled. The investigation revealed that the ASSESSEE WAS DEALING IN
smuggled goods. He was actually receiving the various computer parts by courier from some parties in Calcutta and
was supplying the same to various persons
Duty was demanded from the assessee under section 28 and 125(2) of the Customs Act, 1962.
When the Appeal was made to CESTAT, it held that
(i) DUTY CAN BE DEMANDED UNDER SECTION 28 ONLY FROM THE PERSON CHARGEABLE WITH DUTY, WHO IS
THE IMPORTER as defined under section 2(26) of the Act.
(ii) Further, it held that if the smuggled goods are seized, confiscated and then an option to pay fine is given to the person
from whose possession the goods were seized or to the owner of the goods, DUTY COULD BE DEMANDED FROM
SUCH PERSON UNDER SECTION 125(2) OF THE ACT, APART FROM FINE AND PENALTY.
However, in present case, the assessee was not the importer and goods were also not confiscated, the demand of duty on the
assessee was unsustainable in law.
The Appeal was further made to High Court. Against the order of Tribunal
It was held by HC that
MANOJ BATRA
www.camanojbatra.com
~ 25 ~
no duty is leviable against the assessee as he is neither the importer nor the owner of the goods or was in possession of any
goods.
On the basis of following observations
(i) Section 28 applies to a case where the goods are imported by an importer and the duty is not paid in accordance with
law, for which a notice of demand is issued on the person.
(ii) In case of notice demanding duty under section 125(2), firstly the goods should have been confiscated and the duty
demandable is in addition to the fine payable under section 125(1) in respect of confiscated goods. Thus, notices issued
under sections 28 and 125(2) are not identical and fall into completely different areas.
(iii) The material on record disclosed that the assessee did not import the goods. He was not the owner of the goods but only
a dealer of the smuggled goods and therefore, there was no obligation cast on him under the Act to pay duty. Thus, the
notice issued under section 28 of the Act to the assessee is unsustainable as he is not the person who is chargeable to
duty under the Act.
(iv) Since no goods were seized, there could not be any confiscation and in the absence of a confiscation, question of
payment of duty by the person who is the owner of the goods or from whose possession the goods are seized, does not
arise.
(6) Whether extended period of limitation for demand of customs duty can be invoked in a case where the
assessee had sought a clarification about exemption from a wrong authority?
Uniworth Textiles Ltd. vs. CCEx. 2013 (288) ELT 161 (SC)
Uniworth textiles an 100% EOU claimed an exemption wrongly. However before claiming the exemption it intimated
its doubt for availing exemption to Development Commissioner. The development commissioner allowed to claim
exemption by quoting letter of ministry of commerce in support of its opinion
Department issued a SCN demanding duty for the period during which exemption wrongly claimed by invoking
extended period of limitation of 5 years. Whether the department action is valid.
Assessee, an EOU, purchased electricity generated by the captive power plant of its sister unit.
Sister unit procured furnace oil required for running the captive power plant. This purchase of furnace oil was
exempted from payment of Customs duty. later sister unit informed the appellant that it would require the
arrangement for running the captive power plant for its own use, and hence, would be compelled to stop the supply
of electricity to the appellant. Consequently, as a temporary measure, for overcoming this difficulty, the assessee
imported furnace oil and supplied the same to sister unit for generation of electricity, which it continued to receive
as before. The assessee also claimed exemption on import of furnace oil under the same notification as was claimed
by its sister unit.
As the assessee was procuring furnace oil for captive power plant of another unit, it sought a clarification from the
Development Commissioner seeking as to whether import of furnace oil and receipt of electricity would be liable to duty. The
Development Commissioner replied in favour of the assessee quoting letter by Ministry of Commerce and THEREAFTER, THE
ASSESSEE CLAIMED THE EXEMPTION.
Department issued SCN by invoking extended period of limitation (i.e 5 Years period) demanding duty on imported furnace oil
on behalf of it sister unit. The contention of the Revenue was that the entitlement of duty free import of fuel for its captive power
plant lies with the owner of the captive power plant, and not the consumer of electricity generated from that power plant
The Apex Court held that section 28 of the Customs Act clearly contemplates two situations, viz. inadvertent non-payment and
deliberate default. For inadvertent non-payment of duty section 28 prescribes limitation period of 1 year (earlier it was 6 months),
whereas for deliberate default section provides limitation period of 5 years. For this the intention to deliberately default is a
mandatory prerequisite.
In the present case, from the evidence adduced by the appellant, one will draw an inference of bonafide conduct in favour of
the appellant. The appellant was under doubt decided to address it to the concerned authority, the Development Commissioner,
thus, in a sense offering its activities to assessment. The Development Commissioner answered in favour of the appellant and in its
reply, even quoted a letter by the Ministry of Commerce in favour of an exemption the appellant was seeking, which anybody would
have found satisfactory. Only on receiving this satisfactory reply did the appellant decide to claim exemption. EVEN IF one were to
accept the argument that the Development Commissioner was perhaps not the most suitable repository of the answers to
the queries that the appellant laboured under, it does not take away from the bona fide conduct of the appellant. It still reflects the
fact that the appellant made efforts in pursuit of adherence to the law rather than its breach.
The Supreme Court held that mere non-payment of duties could not be equated with collusion or willful misstatement or
suppression of facts as then there would be no form of non-payment which would amount to ordinary default. The Apex Court
opined that something more must be shown to construe the acts of the assessee as fit for the applicability of extended period of
limitation (I.e 5 years)
MANOJ BATRA
www.camanojbatra.com
~ 26 ~
(7) Can extended period of limitation be invoked for mere contravention of statutory provisions without the
intent to evade service tax being proved?
Infinity Infotech Parks Ltd. v. UOI 2013 (31) STR 653 (Cal.)
A show cause notice dated 18th April, 2012 served for Service Tax amounting to Rs. 9,53,69,284/- including cess for
the service of renting of immovable property during the period 2007-2008, 2008-2009, 2009-2010 and 2010-2011.
The impugned notice has been challenged by the assesse on the ground of the same being barred by limitation, and
therefore, without jurisdiction.
However Department contended that SCN can be served by invoking Extended period of limitiation for 5 years because of
fraud, collusion, wilful mis-statement, suppression of facts etc. because during audit evasion of service tax was detected, and
if the Audit Team had not visited the premises of the said assessee and unearthed material facts, the assessee would
have been continuing the evasion
Following are the observation of court.
Assessee was duly registered with effect from the year 2007. The dispute is only with regard to Service Tax allegedly payable
on the premium received during the period in question.
Assessee submission that in view of the Delhi High Court judgment in Home Solution Retail (supra) holding that Service Tax
was not payable on rent of immovable property per se, the petitioner was not liable for rent on premium. In any case, prima facie
there was some confusion as to whether renting per se was taxable for which the law had to be amended.
Renting of immovable property was made liable to Service Tax by Finance Act, 2011 with retrospective effect
from June, 2007, whereas earlier rent per se was not a taxable service in view of Court judgment. Allegations against
assessee about suppression were vague.
It was held that Mere contravention of provision law is not sufficient to invoke extended period of limitation Contravention necessarily has to be with intent to evade payment of Service Tax to invoke extended period of
limitation
(8) In a case where the assessee has acted bona fide, can penalty be imposed for the delay in payment of service
tax arising on account of confusion regarding tax liability and divergent views due to conflicting court
decisions?
Ankleshwar Taluka ONGC Land Loosers Travellers Co. OP. v. C.C.E., Surat-II 2013 (29) STR 352 (Guj.)
Ankleshwar Taluka, a Co-operative Society, rendered rent-a-cab service to M/s. GPCL. The members of the
society were essentially agriculturists who formed the society after they lost their land when GPCL plant was
being set up.
At the time, when Ankleshwar Taluka started rendering the service to GPCL, there was no service tax levy on
rent-a-cab service. However, service tax was imposed on rent-a-cab service subsequently. There had been a
confusion regarding the liability of Ankleshwar Taluka as GPCL denied to pay the service tax for the want of
any clause to this effect in the service contract. However, with due negotiation and arbitration, it was decided
that the disputed amount would first be paid by Ankleshwar Taluka and the same would then be reimbursed
by GPCL.
A show cause notice was issued on Ankleshwar Taluka proposing to recover service tax with applicable
penalty and interest. Ankleshwar Taluka paid the entire disputed amount but refused to pay the penalty.
Ankleshwar Taluka contended that they did not pay service tax at the relevant point of time as it being a new
levy; they were unaware of legal provisions. Also, there were divergent views of different Benches of Tribunal,
which had added to the confusion, and the issue was debatable. Further, there had also been confusion
regarding their liability as initially GPCL denied to pay service tax.
Discuss, with the help of a decided case law, whether penalty can be imposed for the delay in payment of
service tax arising on account of confusion regarding tax liability and divergent views due to conflicting court
decisions.
ANS- No, penalty cannot be imposed for the delay in payment of service tax arising on account of confusion
regarding tax liability and divergent views due to conflicting court decisions.
The facts of the given case are similar to the case of Ankleshwar Taluka ONGC Land Loosers Travellers Co.
OP.(Guj.). In the instant case, the High Court made the following three important observations:
MANOJ BATRA
www.camanojbatra.com
~ 27 ~
(i) The levy was comparatively new and therefore, both unawareness and confusion were quite possible particularly when the
members of the appellant society were essentially agriculturists.
(ii) There were divergent views of different benches of Tribunal, which may have added to such confusion.
(iii) The fact that the appellant had persuaded their right of reimbursement of payment of service tax with the service recipient
by way of conciliation and arbitration Cannot Deprive Them Of The Defence Of Bona Fide Belief of applicability of service tax.
It was held that There Could Be No Justification In Levying The Penalty In Absence Of Any Fraud, Misrepresentation,
Collusion Or Wilful Mis-Statement Or Suppression even if the appellants were aware of the levy of service tax and were not paying
the amount on the ground of dispute with the service recipient,. Further in the present case the entire issue for levying of the tax
was debatable
Hence Penalty could not be imposed.
(9) Can penalty under section 11AC of the Central Excise Act, 1944 be imposed in a case where there are divergent
judicial pronouncements on an issue and the assessee chooses to follow one of those pronouncements?
CCEx. v. Delphi Automotive Systems Ltd. 2013 (292) E.L.T. 189 (All.)
Assesse was manufacturers of air-conditioning machines to be fitted in the cars AND parts thereof. Assesse was not
paying duty DUE TO DIVERGENT VIEWS With Regard To Exemption of parts of AC machine.
The Commissioner Central Excise who passed the order confirmed the demand and also levied penalty of the same amount
by invoking Section 11AC.
It may be noted that there were divergent views with regard to exemption of parts of air-conditioning machine. The CBEC
issued the Circular, dated 25-9-2002 by referring the case of Universal Commercial Corporation 1994. So Tribunal Remanded back
the Case of Assessee in light of above circular.
The High Court elucidated that mens rea (guilty mind) is an essential part for levy of penalty under section 11AC of the
Central Excise Act, 1944. Where a provision of statute is not clear and there are divergent judicial pronouncements, IT
CANNOT BE SAID that there is mens rea on the part of the assessee if he chooses to follow his course of action in the light of
one of the judicial pronouncements.
(10)
Whether non-filing of additional documents despite several opportunities to the assessee to produce the
same, could be a sufficient ground for passing a non-speaking order?
DBOI Global Service Pvt. Ltd. v. UOI 2013 (29) S.T.R. 117 (Bom.)
The adjudicating authority had disallowed the refund claim filed by the assessee and called for certain additional documents,
ALTHOUGH SIMILAR REFUND CLAIMS FILED BY THE ASSESSEE FOR THE EARLIER PERIODS HAD BEEN ALLOWED by
the adjudicating authority Without These Additional Documents. The assessee failed to furnish the additional documents despite
being given several opportunities to produce the same. The adjudicating authority passed an order rejecting the refund claim but
failed to record any reason as to why it differed with the earlier decisions
The assessee contended that no reason given by the adjudicating authority for differing with the earlier decisions, its order
must be quashed.
Department contended that the adjudicating authority was justified in passing the non-speaking order since assesse failed to
produce additional documents inspite of several opportunities given to produce additional documents.
The High Court held that if the assessee had failed to furnish additional information, it had been obligatory on the part of the
adjudicating authority to record a finding as to why the documents furnished by the assessee were not sufficient to allow his claim
and why additional documents were necessary and accordingly set aside the order of Adjudicating Authority.
(11)
Is the adjudicating authority required to supply to the assessee copies of the documents on which it
proposes to place reliance for the purpose of requantification of short-levy of customs duty?
Kemtech International Pvt. Ltd. v. CCus. 2013 (292) E.L.T. 321 (S.C.)
Department contended that assessee undervalued certain goods imported by them. . On the basis of evidence
gathered, a SCN alleging undervaluation of the goods and proposing recovery of duties short paid and imposition of
penalties was issued. Further Demand order passed
The assesse asked for the copies of documents relied upon by the department which was not supplied by the
Department.
Bearing in mind the principles of natural justice, we feel, the prayer made is reasonable
MANOJ BATRA
www.camanojbatra.com
~ 28 ~
Hence for the purpose of re-quantification of short-levy of customs duty, the adjudicating authority should supply to the
assessee all the documents on which it proposed to place reliance.
Thereafter the assessee might furnish their explanation thereon and might provide additional evidence, in support of their
claim.
(12)
Can the directors of the company be held liable for the recovery of customs dues on the company?
Anita Grover v. CCEx. 2013 (288) E.L.T. 63 (Del.)
The petitioner was a director in the company “Shri Ram Casting P. Ltd” (hereafter “the company”), and she resigned from the
Board of the company on 2-4-1993. She received the demand notice dated 3-8-2012 in respect of the custom duty payable by the
company- Shri Ram Casting P. Ltd. The Customs Department sought to attach the properties belonging to the petitioner for
recovery of the dues to the company. The petitioner contended that the action of the Department was not justified as the said
properties belonged to her and not the company.
Department contended that as director, the petitioner could not distance herself from the company’s acts and omissions; she
had to shoulder its liabilities. It was in furtherance of such obligation that the authorities acted within their jurisdiction in issuing the
impugned notice.
It was held that Considering the provisions of section 142 of the Customs Act, 1962 and the relevant rules make it clear
beyond doubt that it is only the defaulter against whom steps may be taken under Rules. The defaulter is the person from whom
dues are recoverable under the Act, which in the present case undoubtedly is the company. There is no averment that the
company has been or is being wound up. In that case, there cannot be any question about the separate juristic personality of an
existing company and its former director; the dues recoverable from the COMPANY cannot, in the absence of a statutory
provision, be recovered from the DIRECTOR. There is no provision in the Customs Act, 1962 corresponding to Section 179 of
the Income Tax Act, 1961 or Section 18 of the Central Sales Tax, 1956 which enable the revenue authorities to proceed against
directors of companies who are not defaulters.
(13)
Can a former director of a company be held liable for the recovery of the excise dues of such company?
Vandana Bidyut Chatterjee v. UOI 2013 (292) E.L.T. 6 (Bom.).
It was held in a similar case of Anita Grover 2013(Del.) that a former director of a company cannot be held liable for the
recovery of the customs dues of such company.
The facts of the case are that A notice of attachment issued to the petitioner (Attachment of Property of Defaulters for Recovery of
Government Dues) Rules, 1995 attaching the immovable property for recovery of central excise dues.
The father of the petitioner, late Mr. Mukherjee, was during his life time a Director of Verma Mukherjee Private
Limited (“the company) died on 4 September, 2011. And had gifted the property during lifetime to his daughter.
In this case, Department alleged that the petitioner was liable to pay the arrears of the excise duty and penalty of a company
of which her late father was a director and sought to attach the property belonging to the petitioner for
recovery of such dues. The company was jointly controlled by Mukherjee Brothers (the petitioner) and Kapoor family. They
entered into agreement wherein the latter transferred their shares to Mukherjee Brothers and placed the responsibility to discharge
the excise duty liability of the company on them.
The High Court observed that duty and penalty were the arrears of the company because company was the person engaged
in the manufacture of goods and registered as manufacturer. As per section 142 of the Customs Act, 1962 read along with the
Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995*, Central Government could
recover dues belonging only to a defaulter. Thus, the recovery proceedings could be taken only against the company, as it alone
was the defaulter. There was no provision to recover the arrears of the company from its directors and or shareholders under the
Customs Act.
Further, there was no provision in the Customs Act as was found under section 179 of the Income Tax Act, 1961 or under
section 18 of the Central Sales Tax Act, 1956 where the dues of a private limited company could be recovered from its directors
when the private limited company was under liquidation, in specific circumstances. Since a company was a separate person having
a distinct identity, independent from its shareholders and directors, company’s dues could not be recovered from the directors
and/or individual shareholder of the company.
Furthermore, the Department’s reliance upon the agreement entered into between Mukherjee Brothers and Kapoor family to
fasten the liability of excise duty and penalty arrears of the said company upon the petitioners’ father was not sustainable.
Hence, the Court held that in the instant case, the attachment notices issued on the former late director and his daughter was
without jurisdiction.
MANOJ BATRA
www.camanojbatra.com
~ 29 ~
(14)
Is the copy of the order mandatory to be served via “registered post” or a speed post would also suffice?
Amidev Agro Care Pvt. Ltd.2012 (Bom.)
Department contended that a copy of the order of the CCE (A) dated 31st March 2008 was in fact dispatched on 1st
April 2008 by speed post and, therefore, the assessee must have received the order
And appeal was not filed within the stipulated time of 3 months from 31st March 2008 while the assessee
contended that the appeal filed was within 3 months of serving of the order on 26 February 2010.
Assesee contended that A copy of the order passed by the CCE (Appeals) dated 31st March, 2008 was not served
upon him. It is only when the recovery proceedings were initiated, the assessee sought a copy of the order dated
31st March 2008 and the same was made available to the assessee on 26th February 2010. Immediately thereupon
the assessee filed an appeal before the CESTAT on 17th May 2010. Hence, it is contended that the appeal filed is in
time.
It was held that under section 37C of the Central Excise Act, 1944, a copy of the decision to the assesse sent by
‘registered post with due acknowledgment’ to the assessee or its authorized agent.
Accordingly, the contention of the assessee that a copy of the order of Commissioner of Central Excise (Appeals)
was received for the first time on 26th February 2010 would have to be accepted.
Note- now this case has been overruled
(15)
Can a decision pronounced in the open court in the presence of the advocate of the assessee, be deemed
to be the service of the order to the assessee?
Nanumal Glass Works v. CCEx. Kanpur, 2012 (284) E.L.T. 15 (All.)
The Assistant Commissioner of Central Excise passed an order confirming central excise duty amounting to Rs. 2,04,816/and imposing penalty of the same amount. An appeal was filed by the appellant before the Commissioner (Appeals). An appeal
filed with CCE (A) and penalty set asided. Then department filed appeal with CESTAT against order of CCE (A). The Tribunal vide
its order dated 22nd July, 2010 given an option to pay 25% of the penalty imposed amount to Rs. 51204/- within 30 days from the
date of its order (viz. 22nd July, 2010). The appellant deposited on 30th August, 2010 and stated that the counsel who appeared
and argued the case before the Tribunal informed the local counsel of the appellant but the local counsel could not inform the
appellant about the direction of the Tribunal giving an option of paying 25% of the penalty within 30 days due to which 9 days’
delay had occasioned.
The ASSESSEE contended that the order could not be said to be tendered to him on 22nd July, 2010 as it was not received
by the assessee in person and that he had deposited the amount of 25% of penalty within 30 days from the date of
communication of the order to him and there had been no delay.
Whereas Department contended that as the advocate of the assessee was present at the time of passing of the order, the
order would be deemed to have been communicated to him on the same date (22nd July, 2010) and 30 days time will be counted
from that date.
A perusal of Section 37C(a) indicates that in case the decision is tendered to the person OR HIS AUTHORISED AGENT, the
same shall be deemed to be served in accordance with the Act. In the present case, the Advocate of the appellant who is
authorised agent within the meaning of Section 37C, being present on the date of the order, the service of the order shall be
deemed to be made to the authorised agent on the same date. Thus, when the order was passed by the Tribunal on 22nd July,
2010 in presence of advocate of the assessee, the order would be deemed to be communicated to the authorized agent of the
assessee (i.e. his advocate) on the same date and 30 days period would start from 22nd July, 2010.
(16)
Where clearances of a dubious company are clubbed with clearances of the original company, whether
penalty can be imposed on such dubious company if all the clearances have been made by the original
company?
CCEx v Xenon 2013 (296) ELT 26 (Jhar.)
M/s. Xenon, Jamshedpur is a partnership firm and are engaged in the manufacturing of Motor Vehicles Parts. The assessee is
availing the SSI exemption. The factory of the assessee is adjacent to the M/s. Samarth Engg. Co. Pvt. Ltd., Jamshedpur ( M/s.
MANOJ BATRA
www.camanojbatra.com
~ 30 ~
SECO) who is also availing SSI exemption which assessee formed by dubiously i.e dubious company and with a view to misutilize
the benefits of aforesaid SSI exemption notification.
It was established that the dubious company did not manufacture and clear any goods and that all the transactions shown by it
were, in fact, the transactions undertaken by the original company. Thus, the manufacture and clearances shown by the two units
separately were clubbed together as manufacture and clearances of a single unit viz. original company in terms of the applicable
SSI exemption notification and the differential duty and penalty was imposed on such original company. At the same time, penalty
was also imposed on the dubious company.
A question arise in this Tax Case is whether in a case one company is declared to be dubious company of
another (i.e non-existent company) and all the transactions made by the dubious company are treated to be a
transaction made by the original company and the duties imposed upon that original company, the penalty
can be imposed against the alleged declared dubious company?
The Department contended that that Both companies had their different registration and they obtained separate
SSI Exemptions. Therefore, in that situation, the other company, which is dubious company of the original company,
cannot be said to be non-existent company, therefore, that company is also liable to the penalty for claiming wrongly
SSI Exemption.
It was held that Merely because dubious company was in existence, it cannot be said that it undertook the
transactions. Its existence cannot create liability, the liability would arise only when transaction were actually
undertaken by the dubious company. Transactions done in name of dubious company by original company have to
be clubbed with own. As transactions had been done by original company and not by dubious company, no penalty
can be imposed on the latter. The High Court emphasized that penalty could not be imposed upon the company who did not
undertake any transaction.
(17)
Can Appellate Authorities or Courts permit assessee to pay reduced penalty of 25% beyond the time
prescribed under section 11AC?
CCEx. v. Castrol India Ltd. 2012 (286) E.L.T. 194 (Bom.)
The assessee paid the duty sought to be evaded and interest payable thereon before the passing of the Demand order. The
penalty under section 11AC was imposed on the assessee. But assessee did not pay penalty within 30 days from the date of the
communication of the order of Central Excise Officer. If he has paid the penalty within 30 days then penalty payable would be 25%
of the duty, But the assessee chose to file an appeal against imposition of penalty under section 11AC to Tribunal. And Tribunal
allowed reduced penalty of 25% of duty. Department filed appeal against the order of Tribunal to High Court.
It was held that for benefit of reduced 25% penalty under section 11AC (1)(c) it was required to be paid within 30 days from
the date of communication of the order of the Central Excise Officer, The Appellate authorities/ court cannot permit the assesse to
pay 25% penalty beyong time period prescribed u/s 11AC. The incentive in this section is intended to encourage payment of tax
due to Revenue at the earliest without resorting to unwarranted litigation and is not an incentive for violating the provisions of law.
Thus if appellate authority is allowed to permit assesse to pay 25% of penalty within 30 days of communication of appeal order, it
would defeat the object of which incentive under this section is given.
However where Duty was increased by the appellate authority in the appellate proceedings, Then Reduced Penalty i.e 25% of
the increased Duty allowed if paid within 30 days of the communication of the order for the appellate authority.
(18)
Can Appellate Authorities or Courts permit the assessee to pay reduced penalty of 25% beyond 30 days of
the communication of the order of the adjudicating authority as prescribed under section 11AC?
CCEx. V. Ratnamani Metals and Tubes Ltd. 2013 (296) ELT 327 (Guj.)
Assesse is required to be given an option by adjudicating authority where he is asked to pay a duty demand with interest and
25% of penalty within 30 days from date of adjudication of order. Where such option is not given earlier and matter is remanded, 30
days period can be considered fro date of availing such option. It was held that an option can also be granted to the assessee to
deposit the entire dues along with 25% interest and penalty within a period of 30 days of communication of the order of Tribunal. (
Appellate authority)
MANOJ BATRA
www.camanojbatra.com
~ 31 ~
(19)
Whether filing of refund claim under section 11B of Central Excise Act, 1944 is required in case of suo
motu availment of CENVAT credit which was reversed earlier (i.e., the debit in the CENVAT Account is not
made towards any duty payment)?
ICMC Corporation Ltd.v CESTAT, CHENNAI 2014 (302) E.L.T. 45 (Mad.)
Assessee has taken credit of Rs. 3,21,308/- which was earlier reversed by the assessee
Department contended that the assessee should have filed refund application as required under Section 11B of the
Central Excise Act instead of taking suo motu credit.
The High Court held that this process involves only an account entry reversal and factually there is no outflow of funds from
the assessee by way of payment of duty.
Thus, filing of refund claim under section 11B of the Central Excise Act, 1944 is not required. Further, it held that on a technical
adjustment made, the question of unjust enrichment as a concept does not arise.
(20)
Does the principle of unjust enrichment apply to State Undertakings?
CCEx v. Superintending Engineer TNEB 2014 (300) E.L.T. 45 (Mad.)
The assessee is Basin Bridge Gas Turbine Power Station of the Tamil Nadu Electricity Board. It filed 3 refund
claims for Rs. 14,28,10,401/-, Rs. 3,12,79,642/- and Rs. 16,62,928/- ON THE GROUND THAT THEY WERE ELIGIBLE
FOR EXEMPTION OF DUTY ON NAPHTHA used in the production of electricity at their power plant
Department rejected refund claim on the ground that the respondent had not proved that they had not passed
on the duty liability to the consumers and electricity rate remained same before and after claiming exemption
notification. It would indicate that the assessee had passed on the duty liability to the ultimate consumer
The High Court relied on the decision of the Constitution Bench of the Apex Court rendered in the case of Mafatlal
Industries Ltd. v. Union of India 1997 (89) E.L.T. 247 SC.
The Supreme Court in the said case held as under:
“The doctrine of unjust enrichment is a just and salutory doctrine. No person can seek to collect the duty from both ends. In
other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground
that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a
person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one
can speak of the people being unjustly enriched.”
It was held that the concept of unjust enrichment is not applicable as far as State Undertakings are concerned and to the
State.
(21)
Whether the interest on delayed refund under section 11BB would be payable from the date of deposit of
tax or from the date of receipt of application for refund?
Kanyaka Parameshwari Engineering Ltd. v. Comm of Cus & Cx 2012 (26) STR 380 (A.P)
Kanyaka Parameshwari Engineering Ltd. was engaged in business of manufacture and sale of LPG cylinders. The
appellant had paid excise duty under protest for the financial year 1999-2000 Since the price was not finalized by the
oil companies, Superintendent, Central Excise directed to pay differential duty under protest with a view to claim
refund of excess duty paid after final assessment
The appellant undertook to pay the differential duty, if any, on fixation of exact price. Pursuant to the reduction in
the prices of LPG cylinders, the appellant filed applications for finalization of assessments and for refund of excess
duty so paid by them. The Department refunded the excess duty paid by the appellant with interest from 3 months
after the application for refund filed till the date of payment.
Assessee contended that interest on refund on the excess duty so paid by him as per section 11BB of Central Excise
Act from the date of payment as duty was paid under protest.
It was held that as per sec 11BB of the Central Excise Act, 1944, if any duty is not refunded within 3 months from the
date of receipt of application, interest shall be paid on such duty from the date immediately after expiry of three
months from the date of receipt of such application till the date of refund of such duty.
MANOJ BATRA
(22)
www.camanojbatra.com
~ 32 ~
Whether interest is liable to be paid on delayed refund of special CVD arising in pursuance of the
exemption granted vide Notification No. 102/2007 Cus dated 14.09.2007?
KSJ Metal Impex (P) Ltd. v. Under Secretary (Cus.) M.F. (D.R.) 2013 (294) ELT 211 (Mad.)
Assesse has claimed refund of special CVD under sec 27 of CA 1962
1. Notification No. 102/2007, issued under section 25(1) of the Customs Act, 1962, grants exemption in respect of such
special CVD subject to certain conditions. The exemption under the said notification is being granted by way of refund of
the special CVD. In other words, exemption is not given ab initio but duty has to be paid first and thereafter, refund for the
same needs to be claimed.
2. The assessee paid the special CVD and applied for the refund under section 27 of the Customs Act, 1962 along with
interest in pursuance of the above-mentioned notification.
3. The Department, however, rejected the assessee’s claim for the interest in view of paragraph 4.3 of CBEC Circular No.
6/2008 Cus. dated 28.04.2008 which stipulated that interest could not be granted as Notification No. 102/2007-Cus. did
not have any specific provision for payment of the same on refund of duty. The Department was of the view that since
such refund of special CVD was an automatic refund by virtue of Notification No. 102/2007 Cus, it could not be considered
as a refund under section 27 of the Customs Act, 1962 so as to claim interest under section 27A of the Customs Act,
1962.
It was held that
the grant of exemption under Section 25(1) of the Customs Act, 1962 is an independent exercise of power by the Central
Government and certain conditions have been imposed in notification – 102/2007 for seeking refund, but the procedure for
refund, will fall under Section 27 of the Customs Act, 1962 as made applicable under Section 3(8) of the Customs Tariff
Act, 1975. A conjoint reading of these two provisions makes it clear that the refund application should be filed and entertained only
under Section 27 of the Customs Act, 1962 and there is no method or manner prescribed under Section 25 of the Customs Act,
1962 to file an application for refund of duty or interest. To state that no interest on delayed payment is contemplated in the
notification issued under Section 25 of the Customs Act, 1962 is a misconception of the provisions of the Customs Act, 1962.
When Section 27 of the Customs Act, 1962 provides for refund of duty and Section 27A of the Customs Act, 1962 provides for
interest on delayed refunds, the authority cannot override the said provisions by a circular and deny the right which is granted by
the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975. Therefore, paragraph 4.3 of the Circular No. 6/2008Customs, dated 28-4-2008 is contrary to the statute and becomes totally inappropriate. When the circular is contrary to
the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975, it has to be struck down as bad.
Hence interest has to paid on delayed refund of special CVD.
(23)
What is the date of commencement of the period for the purpose of computing interest on delayed
refunds under section 11BB-
 the date of receipt of application for refund or
 date on which the order of refund is made
or
Que- Ranbaxy ltd. filed claim for rebate of duty, amounting to Rs. 6,00,00,000/- on 21st May 2003. to AC u/s
11B. However, the Assistant Commissioner vide order dated 23rd June 2004, rejected the claim. Ranbaxy filed an
appeal before the CCE(A), who by his order dated 30th Dec 2004 allowed the appeal and sanctioned the rebate
claim. Being aggrieved by the said order, the revenue filed an appeal before the Joint Secretary, Government of
India, Ministry of Finance, but without any success. Ultimately rebate was sanctioned on 21th FEBURARY, 2005.
RANBAXY filed a claim for interest under Section 11BB of the Act on account of delay in payment of rebate.
While Department contends that no interest will be payable because rebate had been sanctioned to them within 3
months of the receipt of order of the CCE(A) dated 30th Dec, 2004 by applying EXPLANATION TO Sec 11B. Discuss
whether the contention of department is correct or not
Ans- The contention of Department is not correct.
The issue for consideration is
MANOJ BATRA
www.camanojbatra.com
~ 33 ~
What is date of commencement of the period for the purpose of computing interest on delayed refunds under
section 11BB the date of receipt of application for refund or
 date on which the order of refund is made
The facts of the question are identical to
RANBAXY LABORATORIES LTD. V. UOI 2011 (273) E.L.T. 3 (SC)
It was held that interest under the section 11BB
becomes payable on the expiry of a period of 3 months from the date of receipt of the application under section
11B(1).
Section 11BB READS as under:
If any duty ordered to be refunded under sub-section (2) of section 11B to any applicant is not refunded within 3
months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that
applicant interest at such rate, not below 5% and not exceeding 36% P.A as is for the time being fixed by the CG, on
such duty from the date immediately AFTER THE EXPIRY OF 3 MONTHS FROM THE DATE OF RECEIPT OF SUCH
APPLICATION TILL THE DATE OF REFUND OF SUCH DUTY
Explanation - Where any order of refund is made by the
 Commissioner (Appeals),
 Appellate Tribunal or
 any court
against an order of the AC/DC, under sub-section (2) of section 11B, the order passed by the Commissioner
(Appeals), Appellate Tribunal or, as the case may be, by the court shall be deemed to be an order passed under the
said sub-section (2) for the purposes of this section.
IT WAS HELD that Explanation to section 11BB introduces a deeming fiction that
 where the order for refund of duty is NOT MADE BY THE AC/DC
 BUT BY AN APPELLATE AUTHORITY or the Court, then for the purpose of this section
THE ORDER MADE by such higher Appellate Authority or by the Court SHALL BE DEEMED TO BE AN ORDER
MADE UNDER SECTION 11B(2). It is apparent that the explanation does not bearing or connection with the date
from which interest under section 11BB becomes payable and does not postpone the said date.
HENCE APEX COURT HELD THAT section 11BB of the Central Excise Act, 1944 comes into play only after an order
for refund has been made under section 11B. However, the liability of the revenue to pay interest under section
11BB commences from the date of expiry of three months from the date of receipt of application for refund under
section 11B(1) and not on the expiry of the said period from the date on which order of refund is made.
INTEREST WILL BE PAYABLE – 1 ½ year
FROM 21st Aug 2003 (i.e after 3 m from application date 21 may 2003)
Till 21st Feb 2005 (i.e till date of Refund)
6 crore * 6% * 1 ½ =54,00,000
(24)
the assessee is engaged in manufacture of various toilet preparations such as after-shave lotion, deo-spray,
mouthwash, skin creams, shampoos, etc. One of the main ingredients used in the manufacture of various items
is Extra Natural Alcohol (ENA). The assessee procures ENA from the local market on payment of duty, to which
Di-ethyl Phthalate (DEP) is added so as to denature it and render the same unfit for human consumption. The
officers of DGCEI visited the factory of the respondent on 29-8-2001 and found that the addition of DEP to ENA
results in the manufacture of an intermediate product i.e. Denatured-ethyl Alcohol, which is a specified product
liable to central excise duty
DEPARTMENT CONTENDED THAT non-disclosure as regards manufacture of Denatured Ethlyl Alcohol
amounts to suppression of material facts and hence it attracts the larger period of limitation under section
11A. whether contention of department is valid?
The contention of department is not valid
The issue for consideration is that non-disclosure as regards manufacture of Denatured Ethlyl Alcohol amounts to
suppression of material facts and hence it attracts the larger period of limitation under section 11A.
MANOJ BATRA
www.camanojbatra.com
~ 34 ~
The facts of the question are identical to ACCRAPAC (INDIA) PVT. LTD. 2010 (GUJ.) wherein,
it was held that, As regards invocation of the extended period of limitation, the Tribunal noted that
 denaturing process in the Cosmetic Industry is a STATUTORY REQUIREMENT under the Medicinal & Toilet
Preparations (M&TP) Act.
 Thus addition of DEP to ENA to make the same unfit for human consumption was a STATUTORY
REQUIREMENT.
The fact that the respondent was manufacturing cosmetics, was admittedly KNOWN TO THE DEPARTMENT. Hence,
failure on the part of the ASSESSEE to declare that it was adding DEP to ENA cannot be held to be suppression, since
this was a well known fact, which the excise authorities are required to be in knowledge of. That such facts known
to the both sides would not render omission, if any, on the part of the assessee into suppression or mis-statement
with an intention to evade payment of duty. The Tribunal also noted that as similarly situated assesses were not
paying duty on denatured ethyl alcohol, the respondent entertained a reasonable belief that it was not liable to pay
excise duty on such product. The Tribunal was accordingly of the view that the department was not justified in
invoking the larger period of limitation
(25)
Whether time-limit under section 11A of the Central Excise Act, 1944 is applicable to recovery of dues
under compounded levy scheme?
Hans Steel Rolling Mill v. CCEx., Chandigarh 2011 (S.C.)
It was held that compounded levy scheme is a separate scheme from the normal scheme for collection of excise
duty on goods manufactured. Since the compounded levy scheme is comprehensive scheme in itself, general
provisions of the Central Excise Act and rules are excluded. Hence, it held that the time-limit under section 11A of
the Central Excise Act, 1944 is not applicable to recovery of dues under compounded levy scheme.
Author Note- but presently the above case has no relevance i.e time limit u/s 11A applicable in case of duty
based on production capacity
Earlier sec 3A was introduced by F. Act 1997, subsequently it was deleted. W.e.f F.ACT 2008 sec 3A was reintroduced and for products notified under this sec, assesee is liable to pay duty compulsory on that basis and pan
masala & Tobacco packing machine rules made for the purpose of sec 3A provide that
Provisions to apply mutatis mutandis. - Except as herein provided, all provisions of the Central Excise Act 1944 and
the Central Excise Rules, 2002, including those relating to maintenance of daily stock account, removal of goods on
invoice, filing of returns and recovery of dues shall apply mutatis mutandis.
(26)
MERELY BECAUSE ASSESSEE HAS SUSTAINED LOSS MORE THAN THE REFUND CLAIM, IS IT JUSTIFIABLE TO
HOLD THAT IT IS NOT A CASE OF UNJUST ENRICHMENT EVEN THOUGH THE ASSESSEE FAILED TO ESTABLISH
NON-INCLUSION OF DUTY IN THE COST OF PRODUCTION?
Or
The assessee is engaged in the manufacture of HDPE sacks, falling under Chapter 6307 of Central Excise Tariff
Act, 1985. The assessee had paid duty amounting to Rs. 7,11,039/- on HDPE tapes which is an intermediary product
in the manufacture of HDPE sacks. The assessee contended that the assessee was not liable to pay the duty and
therefore an application came to be filed claiming refund of Rs. 7,11,039/-. Assessee was of the view that he has
sustained loss more than the refund claim, hence unjust enrichment not applicable even though the assessee
failed to prove that duty in the cost of production is not included.
The claim of the assessee was rejected by the department that he was not entitled to claim refund as it would
amount to unjust enrichment
Discuss, whether refund can be granted considering assessee plea.
Ans- the claim of assesse is rightly rejected by the Department and hence assessee can’t be granted refund.
The issue for consideration is that Merely because assessee has sustained loss more than the refund claim,
whether proves that it is not a case of unjust enrichment even though the assessee failed to prove that duty in the
cost of production is not included?
The facts of the question are identical to
Gem Properties (P) Ltd. 2010 (Kar)
MANOJ BATRA
www.camanojbatra.com
~ 35 ~
Wherein, It was held that
The Chartered Accountant certificate clearly shows that the
 cost of the duty is also included while computing the cost of production of the material
Further, It is no doubt that the assessee has sustained loss during relevant assessment year.
Merely because the assessee has sustained the loss, cannot be a ground to hold it is not a case of any unjust
enrichment as long as the assessee proves before the authorities that assessee has sustained loss on account of noninclusive of the duty. Hence assessee will not be entitled to refund.
(27)
Can a refund claim be filed under section 27 of the Customs Act, 1962 if the payment of duty has not been
made pursuant to an assessment order?
The above issue has been decided in case of Aman Medical products 2010 (Del.)
Facts of the case are that, The assessee filed a Bill of Entry and paid the higher duty without considering
exemption notification. There was no assessment order for being challenged in the appeal which was passed under
section 27(1)(i) of the Act. Department is of the view that a refund in appeal can be asked for under section 27 of
the Customs Act, 1962 only if the payment of duty had been made pursuant to an assessment order.
Section 27 of the Customs Act, 1962, inter alia, provides as follows:Any person claiming refund of any duty and interest, if any, paid on such duty (i) paid by him in pursuance of an order of assessment; or
(ii) borne by him,
may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant
Commissioner of Customs or Deputy Commissioner of Customs.
The High Court, held that refund u/s 27 can be granted in 2 cases, firstly refund arising due to order of
assessment and secondly duty is borne by the person claiming refund.hence refund can be granted where the duty is
paid by a person without an order of assessment.
The High Court held that the refund claim of the appellant was maintainable under section 27 and even if appeal
is not filed against the assessed bill of entry,appellant can make claim for refund under section 27 of the Customs
Act, 1962. In present case refund claim can be made u/s 27(1)(ii).
(28)
Can the assessee be denied the refund claim only on the basis of contention that he had produced the
attested copy of TR-6 challan and not the original of the TR-6 challan?
Narayan Nambiar Meloths v. CCus. 2010 (251) E.L.T. 57 (Ker.)
Facts of the case are that assessee made application for refund alongwith attested copy of TR-6 Challan
Department denied to grant refund on the reasoning that production of original of the TR-6 challan was a
mandatory requirement for processing the refund application.
The Kerela High Court held that assessee will be entitled to refund claim because of following reasons1. attested copy of TR 6 Challan was purely a technical contention and could not be accepted.
2. as per clarification issued vide F.No. 275/37/2K , dated 2-1-2002, a simple letter from the person who made
the deposit, requesting for return of the amount, along with the appellate order and attested Xerox copy of
the Challan in Form TR-6 would suffice for processing the refund application.
Hence it can be concluded that assesee can’t be denied for claim of refund.
Author Note- Now TR-6 challan replaced by GAR-7 challan.
(29)
. AP SPINTEX LTD- 2009- RAJSTHAN HC
ED recovered from buyer – credit notes issued subsequently – Applicability of Doctrine of Unjust Enrichment – not
applicable
Sec 11-B of CEA, 1944 provides that any refund of excise duty shall be credited to the Consumer Welfare
Fund. However, it shall be given to the applicant if duty of excise has been paid and borne by the
manufacturer. In a case where assessee manufacturer initially recovered excise duty from the buyer and
then subsequently issued credit note to the buyer, then whether this can be treated as equivalent as “excise
duty paid and borne by the manufacturer.
it was held that “When debit note is issued by the buyer and corresponding credit note is issued by the
seller, price of goods stand reduced to the extent of debit note and credit note. When debit note and credit
note are issued and effected, it cannot be assumed that incidence of duty has been passed on the purchaser.
MANOJ BATRA
www.camanojbatra.com
~ 36 ~
In other words, „doctrine of unjust enrichment‟ shall not be applicable in such situation and the appellant
shall be entitled to the refund‟.
(30)
Raja Ltd. imported certain parts of a machine and filed a Bill of Entry. Raja Ltd. paid the higher duty in
ignorance of a notification which allowed him the payment of duty at a concessional rate. Later Raja Ltd filed
a refund claim under Section 27 of the Customs Act,1962 by producing the certificate issued by the Chartered
Accountant (CA) to establish that the amount of duty in relation to which such refund is claimed, has not been
passed on by him to any other person. The refund claim was rejected by the department as there was no
other evidence other than the certificate issued by CA.
Discuss with reference to decided case law if any whether the stand taken by the Department is correct in law.
or
Whether Chartered Accountant’s certificate alone is sufficient evidence to rule out the unjust enrichment under
customs?
Ans- The stand taken by the Department is correct in law
The issue for consideration is
Whether Chartered Accountant’s certificate alone is sufficient evidence to rule out the unjust enrichment
under customs?
The facts of the question are identical to BPL Ltd. 2010 (Mad.)
Assessee had not produced any document other than the certificate issued by the Chartered Accountant to
substantiate its refund claim. The certificate issued by the Chartered Accountant was merely a piece of evidence
acknowledging certain facts. It would not automatically entitle a person to refund in the absence of any other
evidence. Hence, the respondent could not be granted refund merely on the basis of the said certificate.
(31)
Can the excess duty paid by the seller be refunded on the basis of the debit note issued by the buyer?
Techno Rubber Industries Pvt Ltd. 2011(Kar.)
The assessee cleared the goods paying higher rate of excise duty in the month of March, although the rate of duty
on the said goods had been reduced in the budget of the same financial year. However, the buyer refused to pay
the higher duty which the assessee had paid by mistake. The customer raised a debit note in his name in the
month of June of the same year. The assessee applied for the refund of excess excise duty paid. Revenue rejected
his claim on the ground that incidence of the duty had been passed by him to the buyer.
Department contended that since the debit note was issued in the month of June and not March, it could not be
the basis for refund.
It was held that, when the buyer had refused to pay excess duty claimed and had raised a debit note, it means
that the assessee had not received that excess duty which he had paid to the Department. Hence Department
was bound to refund to the assessee the excess duty paid.
Appeals
(1) Can Tribunal condone the delay in filing application consequent to review by the Committee of Chief
Commissioners if it is satisfied that there was sufficient cause for not presenting it within the prescribed
period?
Thakker Shipping P. Ltd. v. Commissioner of Customs (General) 2012 (285) E.L.T. 321 (S.C.)
The proceedings were initiated against the assessee under the Customs Act, 1962. However, Commissioner of Customs
(General), in his order-in-original, dropped the said proceedings.
The Committee of Chief Commissioners of Customs reviewed the order of Commissioner and directed him to apply
to the Tribunal
MANOJ BATRA
www.camanojbatra.com
~ 37 ~
The Commissioner, accordingly, made an application under Section 129D(4) of the Act before the Tribunal. As the
said application could not be made within the prescribed period and was delayed by 10 days, an application for
condonation of delay was filed with a prayer for condonation
But Tribunal rejected the application for condonation of delay on the ground that Tribunal had no power to condone the delay
caused in filing application under section 129D(4) by the Department beyond the period of 3 months
This appeal raises the question, whether it is competent for the Tribunal to invoke Section 129A(5) of the Act where an
application under Section 129D(4) has not been made by the Commissioner within the prescribed time and condone the delay in
making such application if it is satisfied that there was sufficient cause for not presenting it within that period.
It was held that
Parliament intended entire Section 129A, as far as applicable, to be supplemental to Section 129D(4) and that is why it
provided that the provisions relating to the appeals to the Tribunal shall be applicable to the applications made under Section
129D(4). The expression, “including the provisions of sub-section (4) of Section 129A” is by way of clarification and has been so
said expressly to remove any doubt about the applicability of the provision relating to cross objections to the applications made
under Section 129D(4) or else it may be said that provisions relating to appeals to the Tribunal have been made applicable and not
the cross objections. The use of expression “so far as may be” is to bring general provisions relating to the appeals to Tribunal into
Section 129D(4). Once the provisions relating to the appeals to the Tribunal have been made applicable, Section 129A(5) stands
incorporated in Section 129D(4) by way of legal fiction and must be given effect to. Seen thus, it becomes clear that the Act has
given express power to the Tribunal to condone delay in making the application under Section 129D(4) if it is satisfied that there
was sufficient cause for not presenting it within that period
Hence it can be concluded that it is competent for the Tribunal to invoke Section 129A(5) where an application under Section
129D(4) has not been made within the prescribed time and condone the delay in making such application if it is satisfied that there
was sufficient cause for not presenting it within that period.
Note- Section129A(5): The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-
objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied
that there was sufficient cause for not presenting it within that period.
Section 129D(4): Where in pursuance of an order under sub-section (1) or sub-section (2), the adjudicating authority or any
officer of customs authorised in this behalf by the Commissioner of Customs, makes an application to the Appellate Tribunal or the
Commissioner (Appeals) within a period of 1 month from the date of communication of the order under sub-section (1) or subsection (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the Commissioner (Appeals),
as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the
provisions of this Act regarding appeals, including the provisions of section 129A(4) shall, so far as may be, apply to such
application.
(2) Which remedy is available against a pre-deposit order passed by CESTAT under section 35F of Central Excise
Act, 1944/section 129E of Customs Act, 1962; is it an appeal to High Court under section 35G of Central Excise
Act, 1944/section 130 of Customs Act, 1962 or a writ petition before High Court?
Metal Weld Electrodes v. CESTAT 2014 (299) ELT 3 (Mad.)
The assessee contended that only a writ petition, and not an appeal, can be filed against the pre-deposit orders of CESTAT on
account of following reasons:
(i) Predeposit order is an interim order not passed in appeal but in appeal proceedings. Hence Only an order
determining the final issues arising between the parties in the appeal before the Appellate Tribunal is appellable before the
High Court.
(ii) The term "every order" in sec 35 G does not include interim order under section 35F
(iii) A substantial question of law cannot arise out of an interlocutory order that deals only with prima facie nature of the case; A
substantial question of law would arise only from the order which finally decides the rights of the parties in controversy.
(iv) A period of 180 days have been granted in the statute for filing an appeal. However, very short time is granted to comply with
the pre-deposit orders and therefore, such order cannot be construed as an order to be appealed against.
Hence the assessee contended that when a remedy is not available under the Act, remedy under Article 226 of the
Constitution of India through writ petition has to be permitted
As per Sec 35G(1) An Appeal Shall Lie To The High Court FROM EVERY ORDER PASSED IN APPEAL by the Appellate
Tribunal (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty
MANOJ BATRA
www.camanojbatra.com
~ 38 ~
of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial
question of law.
As per sec 35G(2) Commissioner of Central Excise or the other party aggrieved by ANY ORDER PASSED BY THE
APPELLATE TRIBUNAL may file an appeal to the High Court.
.
Observations of the Court:
It was held that
Order passed by the CESTAT in terms of section 35F of the Central Excise Act, 1944 is appealable in terms of section 35G
of the Excise Act, 1944 on the basis of following observations
(i) There is a vital difference between sub-sections (1) and (2) of section 35G. Under sub-section (1) an appeal shall lie to the
High Court from "every order passed in appeal by the Appellate Tribunal", AND UNDER sub-section (2) the
Commissioner of Central Excise or the other party aggrieved may file an appeal to the High Court against "any order
passed by the Appellate Tribunal". The words "in appeal" is conspicuously absent under sub-section (2).
(ii) The words “in appeal” cannot be confined to mean only final orders passed in appeal. INTERIM ORDERS ARE ALSO
ORDERS PASSED IN APPEAL; they are not passed outside the scope of appeal or as independent or parallel orders.
(iii) Thus, it is clear that unless there is a specific bar in the statute itself against filing appeal against interlocutory
orders or there is an express provision saying only a final order of the Tribunal is appealable, the scope of filing
appeal contemplated under Sections 35G cannot be narrowed down or restricted.
(iv) Whether a substantial question of law would arise in case of interim orders would depend upon facts/circumstances of each
case and there cannot be any uniform presumption that no substantial question of law would arise in all pre-deposit orders.
(v) The contention of the assesse that granting of short time to comply with the predeposit orders would prevent them from filing
an appeal before the High Court is not correct.
NoteRecently it was held in M/s Patel Engineering Ltd (AP)(2013) that an order passed under section 35F is
appealable under section 35G and that a writ petition against the same is not maintainable.
(3) Can the Committee of Commissioners review its decision taken earlier under section 86(2A) of the Finance Act,
1994, at the instance of Chief Commissioner?
Dell Intl. Services India P. Ltd. 2014 (Kar.)
It was held that as sec 86(2A) that if Committee of Commissioners may, if it objects to any order passed by
the CCE (Appeals) under section 85, direct any CEO to appeal on its behalf to the Appellate Tribunal
against the order. AND IF Committee of Commissioners DIFFERS IN ITS OPINION against the order of the
CCE(A), it shall state the point or points on which it differs and make a reference to the
jurisdictional Chief Commissioner who shall, after considering the facts of the order, if is of the opinion
that the order passed by the Commissioner of Central Excise (Appeals) is not legal or proper, direct any
CEO to appeal to the Appellate Tribunal against the order.
HENCE, once the Committee of Commissioners, on a careful examination of the order of the Commissioner (Appeals), did not
differ in their opinion against the said order of the Commissioner (Appeals) and decide to accept the said order, the matter ends
there. The said decision is final and binding on the Chief Commissioner also. The Chief Commissioner is not vested with any
power to call upon the Committee of Commissioners to review its order so that he could take decision to prefer an appeal. Such a
procedure is not contemplated under law and is without jurisdiction.
MANOJ BATRA
www.camanojbatra.com
~ 39 ~
(4) Whether the question of chargeability or levy of service tax on a particular activity would be covered within
the term “determination of any question having relation to rate of service tax or value of a service for the
purpose of assessment” as contemplated under sections 35G and 35L of the Central Excise Act, 1944?
Commissioner of Service Tax v. Ernst & Young Pvt. Ltd. 2014 (34) S.T.R. 3 (Del.)
The precise and significant issue which arose for consideration of the High Court was whether chargeability or levy of service tax
on a particular activity would be covered within the term ‘determination of any question having relation to rate of
duty of excise (or service tax) or value of goods (or service) for the purpose of assessment’ as
contained in sections 35G and 35L of the Central Excise Act, 1944, so as to decide whether the order of Tribunal relating to such
issue is appealable to High Court or Supreme Court.
The contention of the Department is that the expression “rate of duty” or “value” of service should be construed in
a narrow manner, to mean the rate of service tax payable on the service chargeable to tax or the valuation of the
services which is chargeable to tax. The words are not broad or wide enough to encompass the question, whether
or not the activity is a taxable service under the charging section.
It was held by the High Court held that question of chargeability or levy of service tax on a particular activity would be covered
within the term “determination of any question relating to rate of service tax or value of a service for the purpose of assessment.
It was held that determination of any question relating to rate of tax would necessarily directly and proximately involve the
question, whether activity falls within the charging section and service tax is leviable on the said activity. The reason for the same is
that in case service tax is not to be leviable under the charging section, rate of tax will be nil.
Further, all assessments necessarily have to determine and decide the rate of tax after determining and deciding whether or
not activity is chargeable to tax or tax can be levied.
Assessment of the assessee would decide the rate of tax applicable once it is held that the activity is chargeable to service
tax. The words ‘rate of tax’ would include the question whether or not the activity is exigible to tax under a particular or
specific provision.
(5) Whether doctrine of merger is applicable when appeal dismissed on the grounds of limitation and not on
merits?
Raja Mechanical Co. (P) Ltd. 2012 (SC)
ASSESSEE wrongly filed an appeal before adjudicating authority. Nearly afer a year’s time realizing his mistake, the
assesse filed appeal with CCE (A) BUT it was rejected on the ground of limitation.
Assesse filed appeal with CESTAT against the above order and tribunal also confirmed the order of CCE(A). Aggrieved
by order of Tribunal it filed an reference application with HC, WHICH was also rejected. Finally assesse filed an
appeal with SC and contended that the orders passed by the original authority would merge with the orders passed
by the first appellate authority and, therefore, the Tribunal should consider the appeal filed by the assessee.
And further Tribunal ought to have considered the assessee’s appeal not only on the ground of limitation but also on
merits of the case. Assesse was of the view that the “doctrine of merger” theory would apply in the sense that
though the first appellate authority had rejected the appeal filed by the assessee on the ground of limitation, the
orders passed by the original authority would merge with the orders passed by the first appellate authority and,
therefore, the Tribunal ought to have considered the appeal
Department contended that the doctrine of merger would not apply to a case where an appeal was dismissed only
on the ground of the limitation.
The SC observed that if for any reason an appeal is dismissed on the ground of limitation and not on merits that
order would not merge with the orders passed by the first appellate authority. Hence doctrine of merger is not
applicable when appeal is dismissed on the frounds of limitation and not on merits.
(6) In a case where an appeal against order-in-original of the adjudicating authority has been dismissed by the
appellate authorities as time-barred, can a writ petition be filed to High Court against the order-in-original?
Khanapur Taluka Co-op. Shipping Mills Ltd. v. CCEx. 2013 (292) E.L.T. 16 (Bom.)
Assessee filed the appeal to the Commissioner (Appeals) and then further appeal to CESTAT against the order-in-original
passed by the adjudicating authority. However, the appeals were dismissed as time-barred.
MANOJ BATRA
www.camanojbatra.com
~ 40 ~
The assessee filed a writ petition to the High Court challenging thecorrectness of the order-in-original. It further contended that
although the appeal filed by it had been dismissed by the appellate authorities on the ground that same had been time-barred, it
was entitled to challenge the correctness of the order-in-original in a writ petition.
High court rejected the writ by referring the case of
Raj Chemicals v. Union of India [2013 (Bom.)] has held that where the appeal filed against the order-in-original is dismissed as
time-barred, this court in exercise of writ jurisdiction can neither direct the Appellate Authority to condone the delay nor interfere
with the order passed by the Adjudicating Authority. Consequently, it refused to entertain the writ petition in present case.
(7) Can the High Court condone the delay - beyond the statutory period of 3 months prescribed under section 35
of the Central Excise Act, 1944 - in filing an appeal before the Commissioner (Appeals)?
Texcellence Overseas v. Union of India 2013 (293) ELT 496 (Guj.)
The petitioner was granted a refund by way of order-in-original and the same was also upheld by the CESTAT. However, a
fresh show cause notice was issued on the ground that refund was erroneously granted. The show cause notice, this time was
adjudicated in favour of the Department. The petitioner challenged this order before Commissioner (Appeals) five months after the
said order was passed. As per section 35 of the Central Excise Act, 1944, an appeal needs to be filed with the Commissioner
(Appeals) within 60 days from the date of the communication of the order sought to be appealed against. However, the
Commissioner (Appeals) is empowered to condone the delay for a period of 30 days if he is satisfied with the sufficiency of the
cause of the delay. Therefore, the Commissioner (Appeals) and Tribunal (when the matter was brought before it) rejected the
appeal on the grounds of limitation as the same was filed beyond three months from the date of the impugned order.
The High Court observed that none of the appellate authorities decided the question on merit after the second round of
litigation began and therefore, the question of merger* would not arise until the matter is decided on merits. Treating these
circumstances as extraordinary, the High Court sought to uphold the petitioner’s challenge to the impugned order. The High Court
noted that Department did not dispute the fact that the petitioner had extremely good case on merit. Further, the petitioner, while
challenging the impugned order before the Commissioner (Appeals), had also preferred an application for condonation of delay
and substantiated the same with sufficient and acceptable grounds. The High Court, thus, concluded that the petitioner had
sufficiently explained the delay from the very beginning, though the appellate forums were bound by the law on the issue.
The High Court opined that since the total length of delay was very small and the case had extremely good ground on merits
to sustain, its non interference at that stage would cause gross injustice to the petitioner. Thus, the High Court, by invoking its
extraordinary jurisdiction, quashed the order which held that refund was erroneously granted. The High Court held that such
powers are required to be exercised very sparingly and in extraordinary circumstances in appropriate cases, where otherwise the
Court would fail in its duty if such powers are not invoked.
(8) Can the deposit of 50% of tax amount be made a condition for condoning the delay in filing of an appeal?
Mihani Network v. CCus. & CEx. 2012 (285) ELT 182 (MP)
In the instant case, the assessee had filed an appeal along with an application for stay before the CESTAT. However, since
there had been a delay in filing the appeal of 259 days, the assessee also filed an application for condonation of delay. In the
application for condonation of delay, the petitioner stated that matter was handed over to Shri Arup K. Das, Advocate, for the
purposes of filing the appeal who, due to problems in his matrimonial life, did not pay attention as a result of which the appeal could
not be filed within the prescribed period of limitation. The petitioner also stated that Arup K. Das ultimately returned the papers to
the petitioner and the appeal was filed through another counsel. The CESTAT ordered that the delay would be treated as
condoned, if the assessee deposits 50% of the amount of tax.
It was held that there is no legal provision which provides for condoning the delay in filing the appeal on a condition
of depositing 50% of the tax amount. The delay in filing the appeal is condoned or refused depending upon the sufficiency of
cause for delay. If the party is found to be prevented by a sufficient cause to the satisfaction of the Appellate Authority/Tribunal, the
delay is condoned and if not found to be prevented by a sufficient cause, the delay is not condoned. The condition of depositing
50% of the tax amount for condoning the delay is apparently illegal.
(9) Can delay in filing appeal to CESTAT for the reason that the person dealing with the case went on a foreign trip
and on his return his mother expired, be condoned?
MANOJ BATRA
www.camanojbatra.com
~ 41 ~
Habib Agro Industries v. CCEx. 2013 (291) E.L.T. 321 (Kar.)
Applications were filed before the Tribunal with delay of 45 days. The Tribunal dismissed the said applications holding that
there is no sufficient cause shown for condonation of delay.
The reason for delay in appeal was that authorised Representative who deals with the case had gone abroad for about a
month. On his return, his mother had expired. After attending obsequies, the appeals were filed. The reason shown cannot be
considered as unreasonable. There does not appear to be any deliberate latches or neglect on the part of the authorised
representative to file the appeals. In that view, the order of the Tribunal is set aside the matter is remanded back to the Tribunal.
(10)
Can delay in filing appeal to CESTAT due to the mistake of the counsel of the appellant, be condoned?
Margara Industries Ltd. 2013 (All.)
The appeal was filed late with CESTAT after 3 months with application of condonation of Delay in filing the appeal which was
rejected by the CESTAT.
It was held that appellant’s counsel had admitted his mistake by filing personal affidavit and the Tribunal ought to have taken
a lenient view in the matter, more so, when the appellant can not be said to have acted malafidely and would not have gained
anything from not filing the appeal within limitation.
In this view of the matter, we are of the considered opinion that the order of the Tribunal dated 20-12-2010 cannot be
sustained and is hereby set-aside. The Tribunal ought to have condoned the delay, which is hereby condoned. The Tribunal is
directed to decide the appeal in accordance with law.
(11)
VOLVO INDIA LTD. (2011)(kar)
Appeal to High Court in Service tax matter –
Royalty charges for transfer of know-how - Whether Service tax is leviable on it as Consulting Engineer service.
the question that arises for our consideration in this appeal is whether the assessee is liable to pay service tax under
the aforesaid agreements. In other words, the question relates to payment of rate of duty/tax. Whether Against
CESTAT order appeal can be made to High court.
IT WAS HELD : Question relates to rate of tax, for which appeal from CESTAT order lies to Supreme Court, and High
Court has no jurisdiction over it –
Because, the said question falls squarely within the exception carved cut in Section 35G, ‘an order relating,
among other things, to the determination of any question having a relation to the rate of duty of excise or to the
value of goods for purposes of assessment’,
(12)
Is
the CESTAT order disposing appeal on a totally new ground sustainable?
CCE v. Gujchem Distillers 2011 (270) E.L.T. 338 (Bom.)
The High Court elucidated that in the instant case, the CESTAT had disposed of the appeal on a ground which was
not urged by the respondents before the adjudicating authority. Thereby the CESTAT had disposed of the appeal on
a totally new ground which was not laid before the adjudicating authority and which would entail a finding on facts.
The High Court explained that had the CESTAT not been satisfied with the approach of the adjudicating authority, it
should have remanded the matter back to the adjudicating authority. However, it could not have assumed to itself
the jurisdiction to decide the appeal on a ground which had not been urged before the lower authorities.
(13)
Whether Revenue can prefer an appeal in case of a consent order?
CCus v. Trilux Electronics 2010 (KAR)
MANOJ BATRA
www.camanojbatra.com
~ 42 ~
The assessee contended that the appeal aginst tribunal order can’t be filed since the order had been passed by
the Tribunal on the submission of the representative of the Revenue. Further, since it is a consent order, no appeal
would lie.
Revenue can NOT prefer an appeal in case of an order passed by CESTAT remanding back the matter to revenue
for recomputation of duty based on consent and the matter was remanded at the instance of Revenue, then
The High Court held that an appeal against the consent order cannot be filed by the Revenue.
Note: A consent order is a judicial decree expressing a voluntary agreement between parties to a suit,
especially an agreement by a defendant to cease activities alleged by the Government to be illegal in return for an
end to the charges.
Advance Ruling
Can a writ petition be invoked against advance rulings?- IMP
Ans
It was held by high court in in case of UAE Exchange Centre Ltd. v. UOI 2009 , that the ruling by Advance Rulings
Authority is binding on the applicant, the departmental officers concerned and transaction on which the ruling is
sought.
The decision of the Authority is not final.
The High Court is of the opinion that the Courts would have jurisdiction to entertain actions under Article 226 of
the Constitution for writ petition. Therefore, a writ petition can be invoked against advance rulings.
SETTLEMENT COMMISSION
(1) Where a settlement application filed under section 32E(1) of the Central Excise Act, 1944 (herein after referred
to as ‘Act’) is not accompanied with the additional amount of excise duty along with interest due, can Settlement
Commission pass a final order under section 32F(1) rejecting the application and abating the proceedings before
it ?
(ii) In the above case, whether a second application filed under section 32E(1), after payment of additional excise
duty along with interest, would be maintainable?
Vadilal Gases Limited v Union of India 2014 (301) E.L.T. 321 (Guj.)
(i) SCN was received by assesse for duty, interest and Penalty. Assessee made an application
to settlement commission but duty and interest was not paid before making the application
which is the pre- condition for making application to settlement commission as per clause
MANOJ BATRA
www.camanojbatra.com
~ 43 ~
(d) of first proviso of sub-sec (1) of Sec 32E. Hence The Settlement Commission passed an ex parte
order and rejected the applications filed under Section 32E(1) of the Act on the ground that the petitioners
have not deposited the additional excise duty liability and interest.
(ii) After the rejection of the assessee applications on 2-3-2012 by the Settlement Commission, the Vadilal Gases
Ltd on 15-3-2012 deposited the additional amount of excise duty, and interest due under Section 11AA of
the Act and filed fresh separate applications before the Settlement Commission on 17-4-2012. These fresh
applications filed by assessee have been returned by the Settlement Commission by order dated 18-5-2012
on the ground that since earlier the Settlement Commission had passed a final order on 2-3-2012 rejecting
the applications filed by the assessee, and ordered abatement of proceedings before it.
It was held that since the earlier application was dismissed on technical defect for non-compliance of the provisions of clause
(d) of the proviso to section 32E(1) of the Act and the same was not considered and decided on merits, the second application filed
after depositing the additional excise duty and interest would be maintainable.
On the basis of following observations of the court
(i) As per sec section 32E of the Act no application to settlement commission shall be made unless the applicant has
paid the additional amount of excise duty accepted by him along with interest. Hence, if an application is made without
complying with the first proviso, it would be defective and not maintainable.
(ii) Settlement Commission in its discretion may allow time to the applicants to remove the defects or may direct that the
applications be returned. Such discretionary power must be deemed to have been conferred on Settlement Commission.
(iii) Under section 32F(1) only valid applications which do not suffer from any bar created by the first proviso to section 32E(1)
can be considered and decided according to the procedure provided in the section. Therefore, the applications which are
defective and non-maintainable in terms of the first proviso to section 32E(1) cannot be decided or rejected or declared to
have abated under section 32F(1).
(iv) Rejection of application cannot be taken as amounting to a final order, as that would render the mandatory bar created by
clause (d) of proviso to section 32E(1) nugatory, redundant and otiose.
(v) Order rejecting the application for non-compliance with clause (d) of proviso to section 32E(1) would amount to
administrative/technical order and it would not bar the second application filed by the assesee. In other words, principle of
res judicata would not apply as matter was not determined on merits.
Hence it can be concluded that second application filed after depositing the additional excise duty and interest would be
maintainable.
(2) Can the Settlement Commission decline to grant immunity from prosecution after confirming the demand and
imposing the penalty?
Maruthi Tex Print & Pr ocessors P. Ltd.2012 (Mad.)
During search AT factory, registered office premises, their godown and dealers’ premises, recovery of certain
records relating to delivery of processed fabrics, and seizure of certain quantities of grey and processed fabrics. The
Department issued SCN confirming demand at the higher rate of duty and interest and penalty thereon and seized
goods also. However, there was no clear evidence to hold that the fabrics mentioned in all delivery challans were
attracting higher rate of duty. The assessee approached the Settlement Commission. The Settlement Commission
confirmed the entire demand, penalty, seizure and denied the immunity from the prosecution. The assessee
approached the High court.
IT WAS HELD
The Settlement Commission, by looking at the onus upon the Department to prove about the nature of goods
cleared without payment of duty, should decide the matter.
However, in the present case, without placing the burden on the department to prove their case, the Settlement
Commission confirmed the demand on the assessee. Settlement Commission should not have refused the benefit of
immunity from prosecution.
(3) Does Settlement Commission have jurisdiction over baggage cases?
CCus.v. Ashok Kumar Jain 2013 (292) ELT 32 (Del.)
The applicant claims to be Chairman and Managing Director of M/s. Meera Exim Limited with its office in Delhi.
Upon his arrival at IGI Airport during the intervening night of 27/28-1-2008 with his son, the Customs Authorities
MANOJ BATRA
www.camanojbatra.com
~ 44 ~
seized three watches and other miscellaneous goods from his possession. The Customs department issued a show
cause notice in July 2008 proposing demand of duty, confiscation and imposition of penalty to the applicant
Upon receiving the show cause notice in respect of three wrist watches for which different customs duty,
penalty and confiscation as proposed, the applicant moved the Settlement Commission under Section 127(1) of the
Customs Act
In this case the Department contended that the Settlement Commission lacks the jurisdiction to entertain the baggage cases
because he did not file any bill of entry or shipping bill under Section 127(C). AND It was also not a case of short levy
on account of mis-declaration or undervaluation or inapplicability of exemption notification
IT WAS HELD THAT
He was required to fill in disembarkation card which he did and in it he declared value of the goods imported as
“baggage”. On account of Section 77 and Chapter under which it fell, he was not expected to file bill of entry.
The High Court opined that the provisions that conferred jurisdiction on the Settlement Commission (Section 127B) cannot be
construed as narrowly as it sought to be urged by the Revenue. A plain reading of the provisions of sections 127A and 127B
reveals that there is no bar/express or implied on the Settlement Commission - in respect of entertaining applications by the
passengers which brought in goods through their baggage.
It further noted that section 127B enumerates the kinds of cases which could not be entertained by the Settlement
Commission. Had the intention of the Parliament been to exclude adjudication by Customs Authorities in respect of baggage claim
from the
purview of the Commission’s jurisdiction, such intention would have been more clearly manifested as it had been mentioned in
provisos to section 127B(1).
(4) Is judicial review of the order of the Settlement Commission by the High Court or Supreme Court under writ
petition/special leave petition, permissible?
Saurashtra Cement Ltd. v. CCus. 2013 (292) E.L.T. 486 (Guj.)
While examining the scope of judicial review in relation to a decision of Settlement Commission, the High Court noted that
although the decision of Settlement Commission is final, finality clause would not exclude the jurisdiction of the High Court under
Article 226 of the Constitution (writ petition to a High Court) or that of the Supreme Court under Articles 32 or 136 of the
Constitution (writ petition or special leave petition to Supreme Court).
Despite such narrow confines of judicial review of the decision of the Settlement Commission, it is undeniable that the
jurisdiction under Article 226 of the Constitution is not totally ousted. In a given situation if the Settlement Commission has taken
into consideration irrelevant facts and such consideration has gone into its decision-making process resulting into grave injustice
and prejudice to the party then within the narrow confines of the judicial review, interference would still be open.
The Court would ordinarily interfere if the Settlement Commission has acted without jurisdiction vested in it or its decision is
wholly arbitrary or mala fide or is against the principles of natural justice or when such decision is ultra vires the Act or the same is
based on irrelevant considerations.
The Court, however, pronounced that the scope of court’s inquiry against the decision of the Settlement Commission is very
narrow, i.e. judicial review is concerned with the decision-making process and not with the decision of the Settlement Commission.
M. IMP & EXPECTED
(5) Whether a consolidated return filed by the assessee after obtaining registration, but for the period prior to
obtaining registration, could be treated as a return under clause (a) of first proviso to section 32E(1)?
OR
Excise department conducted search on the factory of ICON INDUSTRIES. after few days of the search
conducted in its units ASSESSEE got its units registered. Thereafter, it filed consolidated return with the
Department for the period prior to search. After that, it filed a settlement application in respect of the
proceedings issued by the Commissioner.
MANOJ BATRA
www.camanojbatra.com
~ 45 ~
SETT. COMM. rejected the application on the ground that return submitted could not be
considered as valid return which is the pre- condition for filing application with sett. comm. since
prior to search there was no registration and no returns. Whether application to settl comm. is
maintainable or not.
ans- the application made to settl. comm. is not maintainable
the facts of the question are identical to
Icon Industries v. UOI 2011 (273) E.L.T. 487 (Del.)
The High Court held that as per Clause (a) of first proviso
 unless the applicant has filed returns, showing production, clearance and Central Excise duty paid in the
prescribed manner,
no such application shall be entertained.
The Court referred the case of M/s. Emerson Electric Company India Pvt. Ltd. wherein it was held that although
section 32E(1) does not refer to rule 12 of the Central Excise Rules, 2002 under which ER-1/ER-3 returns are
prescribed, since the said returns contain details of excisable goods manufactured, cleared and duty paid in the
prescribed manner, the said return can be deemed to be the ‘return’ referred to in section 32E(1).
Hence, the concept of return has to be understood in context of rule 12 of the Central Excise Rules, 2002.
However, in case of consolidated returns filed in the instant case, the applicant would not be able to indicate ‘duty
paid’ in the prescribed manner (or even in any manner) and question would continue to agitate about the details of
production and clearance to be filled in such belated returns.
Consolidated return filed either just before filing of application/along with it, by covering all the past periods will not
be valid return filed under rule 12 of CER 2002. Hence, it held that the order passed by the Settlement
Commission was valid.
(6) Is the Settlement Commission empowered to grant the benefit under the proviso to section 11AC in cases of
settlement? - IMP
The Court, in case of Ashwani Tobacco Co. Pvt. Ltd. v. UOI 2010 (251) E.L.T. 162 (Del.), held that benefit under
the proviso to section 11AC could not be granted by the Settlement Commission in the cases of settlement.
Settlement is in distinct from adjudication before Central Excise Officer - Scheme of provisions in Chapter V of
Central Excise Act, 1944 is settlement and not adjudication - Powers of Central Excise Officer vested in Settlement
Commission to give finality to its orders - Order of settlement different from adjudication order as adjudicating
Central Excise Officer not empowered to grant immunity from prosecution while determining duty liability Therefore, the benefit under the proviso to section 11AC, which could have been availed when the matter of
determination of duty was before a Central Excise Officer would not be attracted to the cases of a settlement,
undertaken under the provisions of Chapter-V of the said Act.
Section 127M of the Customs Act, 1962
(7) Can the order of the Settlement Commission be considered to be a judicial proceeding?
The High Court observed that as per section 127M of the Customs Act, 1962, the order passed by the Settlement
Commissioner is in judicial proceedings and it is a judicial order.
The above is sue has been decided in case of East and West Shipping Agency 2010-HC-MUM
Facts of the case are that The Custom House Agent License of the respondents was suspended on the ground
that authorized agent of the respondents had committed misconduct by taking active part in the act of smuggling
and has thus violated the Custom House Agent Licensing Regulations, 2004. During pendency of the misconduct
MANOJ BATRA
www.camanojbatra.com
~ 46 ~
proceedings, respondents approached Settlement Commission. The Settlement Commission after hearing all the
parties held that Revenue had failed to prove that the authorized agent of the respondent Custom House Agent
(CHA) had a conscious knowledge of mis-declaration of goods. On the basis of said order of the Settlement
Commission, Tribunal decided the case in favour of the respondents and dropped the misconduct proceedings
against them. The appellants challenged the Tribunal’s order alleging that the order passed by the Settlement
Commission was ab-initio, null and void being without jurisdiction.
The High Court observed that as per section 127M of the Customs Act, 1962, the order passed by the Settlement
Commissioner is in judicial proceedings and it is a judicial order. Further, the appellants had not challenged the said
order. Hence, the order passed by the Settlement Commissioner could not be brushed aside considering the scheme
of Chapter XVIA. It must be held good in law so long as it is not set aside.
(8) In case of a Settlement Commission's order, can the assessee be permitted to accept what is favourable to
them and reject what is not?
Sanghvi Reconditioners Pvt. Ltd. V. UOI 2010 (251) ELT 3 (SC)
The Apex Court held that the application under section 127B of the Customs Act, 1962 is maintainable only if the
duty liability is disclosed. The disclosure contemplated is in the nature of voluntary disclosure of concealed
additional customs duty. The Court further opined that having opted to get their customs duty liability settled by the
Settlement Commission, the appellant could not be permitted to dissect the Settlement Commission's order with a
view to accept what is favourable to them and reject what is not.
CUSTOM
Can a writ petition be filed against an order passed by the CESTAT under section 9C of the Customs Tariff Act, 1975?
Rishiroop Polymers Pvt. Ltd. v. Designated Authority 2013 (294) E.L.T. 547 (Bom.)
In this case, the CESTAT upheld a notification issued by the Central Government imposing definitive anti-dumping duty on certain
products originating from specified countries pursuant to the findings recorded by the Designated Authority in a review of antidumping duty. The assessee filed a writ petition under Article 226 of the Constitution to challenge the said order passed by the
CESTAT under section 9C of the Customs Tariff Act, 1975.
The Department contended that an appeal, and not a writ petition, would lie against the order passed by the CESTAT
The plain effect of Section 9A(8) of the Customs Tariff Act, 1975 is that the provisions of the Customs Act, 1962
relating to appeal have been made applicable, as far as may be, in their application to the anti-dumping duty
chargeable under sec 9A. The order of the Tribunal passed in appeal would, therefore, clearly be subject to appeal,
either to this Court under Section 130 or to the Supreme Court under Section 130E where the appeal relates to the
rate of duty or to a valuation of the goods for the purposes of assessment
The assessee submitted that under section 130(2), an appeal can be filed by the Commissioner of Customs or the other party.
However, in case of anti-dumping duty, Commissioner of Customs would have no occasion to file an appeal since proceedings are
against the designated authority.
Sec 9A(8) specifically incorporates all the provisions of the Customs Act, 1962 relating to appeal as far as may be, in their
application to the duty chargeable under Section 9A. Under Section 130, an appeal has been provided to the High Court against a
determination that has been made by the Tribunal and similarly under Section 130E an appeal has been provided to the Supreme
Court against an order of the Tribunal on a question involving rate of duty or of valuation of the goods for the purposes of
assessment. In relation to the Customs Act, an appeal under sub-section (2) of Section 130 can be filed by the Commissioner of
Customs or the other party aggrieved. , therefore, necessarily apply in a manner that would make the appellate provision intelligible
and workable. .
For these reasons, we are of the view that it would not be appropriate for this Court to exercise the jurisdiction under Article
226 of the Constitution, since an alternate remedy by way of an appeal which is available in accordance with law. We accordingly
dismiss the petition leaving it open to the assesse to take recourse to the appellate remedy.
(1) Can the time-limit prescribed under section 48 of the Customs Act, 1962 for clearance of the goods within
MANOJ BATRA
www.camanojbatra.com
~ 47 ~
30 days be read as time-limit for filing of bill of entry under section 46 of the Act?
CCus v. Shreeji Overseas (India) Pvt. Ltd. 2013 (289) E.L.T. 401 (Guj.)
Upon combined reading of the above-mentioned statutory provisions, it can be seen that Section 46 nowhere provides for any
time-limit for filing a bill of entry by an importer upon arrival of goods. It is, of course, true that Section 48 permits the authorities to
sell the goods after following the procedure if within 30 days of unloading the same at the customs station, the same are not
cleared for home consumption or warehoused or transshipped. It was held that the time-limit prescribed under section 48 for
clearance of the goods within 30 days cannot be read into section 46 and it cannot be inferred that section 46 prescribes any timelimit prescribed for filing of bill of entry.
(2) Essar Steel Ltd (2010)(Guj) –
Export duty - Special Economic Zones - Export duty whether leviable under Customs Act, 1962 on goods supplied
from DTA to SEZ Developers/Units - Customs Act defining export as taking out of India to a place outside India Definition of ‘export’ or charging Section 12 ibid not amended and charging provision not inserted contemplating
movement of goods from Domestic Tariff Area to Special Economic Zone as taxable event entailing export duty as in
the case of export - Levy of export duty cannot be justified under Customs Act - Export duty not payable on
movement of goods from DTA to SEZ units or developers -
(3) Relevant Date for removal of warehoused goods after permitted period
Normally the relevant date for CD rate shall be date of filing Bill of Entry (BoE) for Home Consumption if the
warehoused goods are removed u/s 68 within the permitted period.
If warehoused goods are removed from Warehouse after the permitted period, then such goods shall be
deemed to be improperly removed u/s 72. Hence such goods are not removed u/s 68. In such case, the relevant date
shall be the date of the expiry of the permitted warehousing period and the date of filing BoE for Home
Consumption.
[SBEC Sugars Limited 2011 (SC)]
1) Ferodo India Pvt. Ltd. (2008)(SC)
Royalty and license fees for use of know-how/secret formula supplied by foreign supplier, which was based on
net sales value of licensed products manufactured out of components imported from such supplier, is not
includible in the value of imported components, if the same is not related to imported components and is not paid
as a condition of import.
(4) Paras Fab International v. CCE 2010 (256) E.L.T. 556 (Tri. – LB)
1) Whether the entire premises of 100% EOU should be treated as a warehouse?
2) Whether the imported goods warehoused in the premises of 100% EOU is to be held to have been removed
from the warehouse before the same is issued for manufacture/production/processing by the 100% EOU?
3) Whether issue for use by 100% EOU would amount to clearance for home consumption?
4) Whether non-filing of ex-bond bill of entry before using the goods by the 100% EOU makes the goods as not
cleared for home consumption?
The facts of the case are that the Assessee is a 100% EOU in Alwar. They imported the impugned goods namely
HSD oil through Kandla Port and filed ‘into Bond Bill of Entry’ for warehousing the imported goods. The impugned
goods were warehoused in their 100% EOU in Alwar and subsequently used in the factory within the premises of the
100% EOU for manufacture of the finished goods. The Departmental Authorities at Kandla as well at Alwar have
separately demanded Additional Customs duty imposed under Section 128 of the Finance Act, 2003
the contention of the Assessee that since (i) the entire premises of the 100% EOU has been licensed as a
warehouse under the Customs Act; (ii) the impugned goods have been warehoused therein and subsequently
MANOJ BATRA
www.camanojbatra.com
~ 48 ~
utilized for manufacture of finished goods in bond; and (iii) the impugned goods have not been removed from the
warehouse, there cannot be any question of demanding duty on the same.
The manufacturing is also required to be done within the bonded premises. Hence, we find support for the
contention of the appellants that the entire premises of 100% EOU is a bonded warehouse. Neither the Manual nor
the Customs Act speaks of any requirement to pay any duty on the warehoused goods which are used for
manufacture in bond nor it requires filing of any ex-bond bills of entry at that stage. Section 65 of the Act which
deals with manufacturing in bond on the other hand, does not require any filing of ex-bond bills of entry or payment
duty before taking warehoused goods for manufacture inside the bonded premises. it is thus clear that neither the
scheme of the Act nor the provisions contained in the Manual require filing of ex-bond bills of entry or payment of
duty before taking the imported goods for manufacturing in bond nor there is any provision to treat such goods as
deemed to have been removed for the purpose of Customs Act, 1962.
It was held that, The entire premises of a 100% EOU has to be treated as a (a) warehouse if the licence granted
under Section 58 to the unit is in respect of the entire premises.
(b), (c ) and (d) Imported goods warehoused in the premises of a 100% EOU (which is licensed as a Customs
bonded warehouse) and used for the purpose of manufacturing in bond as authorized under Section 65 of the
Customs Act, 1962, cannot be treated to have been removed for home consumption.
Miscellaneous
(1) Whether any interest is payable on delayed refund of sale proceeds of auction of seized goods after
adjustment of expenses and charges in terms of section 150 of the Customs Act, 1962?
Vishnu M Harlalka v. Union of India 2013 (294) ELT 5 (Bom)
The Settlement Commission by an order dated 9 November, 2009 passed under Section 127C(5) of the Customs Act, 1962,
directed as follows :
(i) The customs duty was settled at Rs. 5,48,381/- which was already paid;
(ii) Interest of Rs. 32,660/- was paid by the Petitioner;
(iii) Immunity was granted from payment of a penalty in excess of Rs. 50,000/-; and
(iv) Immunity was granted from fine in lieu of confiscation in excess of Rs. 1.00 lakh.
3. The Settlement Commission also granted an immunity from prosecution under the Customs Act, 1962 (‘the Act’). The
Settlement Commission further issued the following direction :
“Release of Goods/Sale Proceeds : The Bench holds that the applicant is entitled to release of the seized goods on payment
of fine and penalty adjudged as above. Since the seized goods are reported to have already been auctioned, the Bench directs the
Revenue to refund to the applicant the amount remaining in balance after adjustment of expenses and charges as payable in terms
of Section 150 of the Customs Act, 1962 and further adjustment of fine and penalty adjudged as above.”
The refund was however, not granted despite several
representations. The response to the RTI query showed that refund was sanctioned but
it was not paid till filing of this writ petition.
During the pendency of this writ petition, the principal amount of the sale proceeds was paid to the assessee but the interest
on the same was not paid. It was the contention of the Department that the amount paid to the assessee represented the balance
of sale
proceeds of the goods auctioned or disposed of after adjustments under section 150 of the Act. Since the amount paid did not
represent the amount of duty or interest, the provisions of sections 27 and 27A of the Customs Act relating to claim for refund of
duty and interest on delayed refunds respectively would not be applicable.
IT WAS HELD BY HIGH COURT THAT Though no period was stipulated in the order of the Settlement Commission for the
grant of refund, the entire exercise ought to have been carried out within a reasonable period of time. A refund in the present case
was not granted to the Petitioner despite several representations. All statutory powers have to be exercised within a reasonable
MANOJ BATRA
www.camanojbatra.com
~ 49 ~
period even when no specific period is prescribed by a provision of law. It can be no defence to urge that the Customs Act, 1962
provides for the payment of interest only in respect of a refund of duty and interest and hence the Petitioner would not be entitled to
interest on the balance of the sale proceeds which were directed to be paid by the Settlement Commission. Acceptance of the
submission would mean that despite an order of the competent authority having jurisdiction, directing the Department to grant a
refund, the Department can wait for an inordinately long period; perhaps for years together without granting a refund in compliance
with the directions of the Settlement Commission. There is absolutely no reason or justification for the unexplained delay. Hence,
in exercise of the jurisdiction of this Court under Article 226 of the Constitution, DEPARTMENT IS DIRECTED TO PAY INTEREST
FROM DATE OF APPROVAL OF PROPOSAL FOR SANCTIONING THE REFUND.
(2) Where goods have been ordered to be released provisionally under section 110A of the Customs Act, 1962,
can release of goods be claimed under section 110(2) of the Customs Act, 1962?
Akanksha Syntex (P) Ltd. 2014 (P & H)
The petitioner is a private limited company. It is engaged in the business of import of fabrics. The petitioner
imported a number of consignments during the years 2008 to 2011 and paid duty as assessed by the Assessing
Officer. On 3-2-2011, officers of the Directorate of Revenue Intelligence (DRI) searched the premises of the
petitioner and found imported fabrics lying in its godowns at Ludhiana and Delhi. The DRI sealed the said godowns.
Under the threat of arrest, the petitioner deposited a sum of ` 2 crores with the respondents. The petitioner
requested for provisional release of the goods. Period of 6 months of seizure was going to expire on 2-8-2011 but no
notice of confiscation was served upon the petitioner. On 29-7-2011, the Commissioner of Customs- passed an
order whereby period of seizure in terms of proviso to Section 110(2) of the Customs Act, was extended for 6
months. Aggrieved thereby, petitioner had filed an application before the Hon’ble Delhi High Court for provisional
release of goods in pursuance to which an order under Section 110A of the Act was passed for provisional release of the
seized goods had been made under section 110A of the Act pursuant to an application filed by the petitioner in this regard.
However, the petitioner claimed unconditional release of its seized goods in terms of sections 110(2) and 124 of the Act as no
show cause notice had been issued within the extended period of 6 months (which was extended by another 6 months by the
Commissioner of Customs in this case). As per section 110(2) of the Customs Act, 1962 where any goods are seized under
subsection (1) and no notice in respect thereof is given under clause (a) of section 124 within 6 months of the seizure of the goods,
the goods shall be returned to the person from whose possession they were seized. However, the aforesaid period of 6 months
may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding 6 months.
Department contended that once an order for provisional release of goods has been made under section 110A of the Act, in
view of judgment of the Bombay High Court in Jayant Hansraj 2008 (Bom.), goods cannot be released under sections
110(2) and 124 of the Act. The only recourse available to the petitioner was either to comply with the order of provisional release
and in case, the petitioner was unable to abide by the terms of the
provisional release then in view of the judgment of the Bombay High Court in Jayant Hansraj Shah’s case, the prayer for
return of goods unconditionally could not be made.
It was held that the object of enacting section 110(2) of the Act is that the Customs Officer may not deprive the right to
property for indefinite period to the person from whose possession the goods are seized under subsection (1) thereof. Sub-section
(2) of section 110 strikes a balance between the Revenue’s power of seizure and an individual’s right to get the seized goods
released by prescribing a limitation period of six months from the date of seizure if no show cause notice within that period has
been issued under section 124(a) for confiscation of the goods.
The High Court opined that a plain and combined reading of sections 110(2), 124 and 110A spells out that any order for
provisional release shall not take away the right of the assessee under section 110(2) read with section 124 of the Act. Where no
action is initiated by way of issuance of show cause notice under section 124(a) of the Act within six months or extended
period stipulated under section 110(2) of the Act, the person from whose possession the goods were seized becomes
entitled to their return. The High Court did not accept the contrary interpretation of the Bombay High Court in Jayant Hansraj
Shah’s case. The High Court was of the view that the said interpretation was not borne out from the plain reading of the aforesaid
provisions.
Notes: the effect of the statute, by virtue of section 110(2), is that on expiration of the total period of one
year (in the absence of a show cause notice) the seizure ceases, and the goods which are the subject
MANOJ BATRA
www.camanojbatra.com
~ 50 ~
matter of seizure, are to be released unconditionally. There is nothing in section 110A to detract from this
consequence.
(3) Whether discharge of liability on indicated value would still make the assesse liable for confiscation of goods if
he has initially made a mis-declaration of the value thereof?
Wringley India Pvt.Ltd. v. Commr.of Cus.(Imports), Chennai 2011 (274) E.L.T. 172 (Mad.)
Facts of the Case: Wringley India Pvt. Ltd. had imported second-hand machinery along with spare parts from its
sister concern located at Spain as per Bill of Entry dated 28-4-2006. There was indication in the invoice that the
machinery was certified by M/s. S.G.S. Spain, the load port Chartered Engineer at Euro 35876.49. However, the
certificate issued by M/s. S.G.S. Spain, the load port Chartered Engineer was not enclosed along with the Bill of Entry
and only the invoice was submitted. Since the appellant didn’t submit the valuation report, the Custom authorities
referred the matter for valuation to local valuer. It entrusted the valuation to the local Chartered Engineer-M/s
S.G.S. India Pvt. Ltd. During the process of valuation, M/s. S.G.S. India Private Limited found that the report originally
issued by M/s. S.G.S. Spain was showing a higher value of goods than the value declared by the appellant to the
customs authorities. Wringley India then paid duty on that high value indicated as per the original report of M/s.
S.G.S. Spain.
Department contended that since the appellant had mis-declared the value of the goods imported, therefore the
imported goods should be confiscated under section 111(m) of the Customs Act, 1962.
The High Court held that since the appellant made an attempt to mis-declare the value of the imported goods and to
misguide the Customs Department, which was also evident from the fact that when the Customs Department
directed the appellant to obtain the certificate from the local Chartered Engineer, even at that time they did not
disclose the true value assessed by the load port Chartered Engineer M/s. S.G.S. Spain. Even after obtaining the
valuation certificate from M/s. S.G.S. India Private Limited, the appellant had no grievance. In fact the valuation so
done by the local Chartered Engineer was readily accepted by the appellant as evident from the letter issued by
them to the Customs Department and the subsequent payment made by them. The High Court was thus convinced
that there was clear mis-declaration of value by the appellant and as per section 111(m) of the Customs Act, the
revenue was asked to confiscate the goods so imported.
(4) Can penalty for short-landing of goods be imposed on the steamer agent of a vessel if he files the Import
General Manifest, deals with the goods at different stages of shipment and conducts all affairs in compliance
with the provisions of the Customs Act, 1962?
Caravel Logistics Pvt. Ltd. v. Joint Secretary (RA) 2013 (293) ELT 342 (Mad.)
In the instant case, the steamer agent submitted Import General Manifest and acted on behalf of the master of the vessel (the
person-in-charge) before Customs Authorities to conduct all affairs in compliance with the Customs Act,
1962. The assessee filed Import General Manifest, affixed the seal on the containers and took charge of the sealed containers.
It also dealt with the customs department for appropriate orders that had to be passed in terms of section 42 of the Customs Act.
Penalty under section 116 of the Customs Act was imposed by the Department on the
steamer agent for short landing of goods.
The High Court noted that
(i) section 116 of the Act imposes a penalty on the person- in-charge of the conveyance inter alia for shortlanding of the goods at the place of destination and if the deficiency is not accounted for to the satisfaction of the
Customs Authorities.
(ii) Section 2(31) defines “person-in-charge” in relation to a vessel means master of the vessel.
(iii) Section 148 of the Act imposed liability on the agent appointed by the person-in-charge of the conveyance and any
other person who represents himself to any customs officer as an agent of any such person-in-charge is held to be
liable for fulfillment in respect of the matter in question of all obligations including penalties and confiscation
That can be imposed on person-in-charge.
(iv) The High Court observed that if assessee affixed seal on containers after stuffing and took their charge, he stepped
into shoes of/acted on behalf of master of vessel, the person-in-charge.
MANOJ BATRA
www.camanojbatra.com
~ 51 ~
A conjoint reading of Sections 116, 2(31) and 148 of the Act makes it clear that in a case of short landing of
goods, if penalty is to be imposed on the person-in-charge of the conveyance, it can also be imposed on the agent so
appointed by the person-in-charge of the vessel. There is no dispute that the steamer agent in this case is an agent
duly appointed.
Also sec 42 of the Act says that no conveyance can leave without the written order, thus penalty becomes
authomatic for not accounting of goods which have been shown as loaded ob the vessel.
There is no requirement of proving mens rea on the part of the person in charge of the conveyance to fall within
the mischief of sec 116 of the Act. However, assesse if innocent, has right to work out his remedy against the shipper
for any claim made on him.
(5) Whether the smuggled goods can be re-exported from the customs area without formally getting them
release from confiscation?
Hemal K. Shah 2011
Hemal K. Shah, a passenger, who arrived at AHMEDABAD Airport,on 20-6-2009, had declared the total value of
goods as ` 13,500 in the disembarkation slip. On detailed examination of his baggage, it was found to contain
Saffron, Unicore Rhodium Black, Titan Wrist watches, Mobile Phones, assorted perfumes, Imitation stones and bags.
Since, the said goods were in commercial quantity and did not appear to be a bona fide baggage, the said goods
were placed under seizure. The passenger in his statement admitted the offence and showed his readiness to pay
duty on seized goods or re-shipment of the said goods. The adjudicating authority determined total value of seized
goods as ` 8,39,760/- (CIF) and ` 10,91,691/- (LMV); ordered confiscation of seized goods u/s 111(d) and (m) of the
Customs Act, 1962; imposed penalty of ` 2,50,000/- on Hemal K. Shah; confirmed and ordered for recovery of
customs duty on the goods with interest and gave an option to redeem the goods on payment of fine of ` 2,00,000/which should be exercised within a period of 3 months from date of receipt of the order. On appeal by Hemal K.
Shah, the Commisisoner(Appeals) allowed re-export of the confiscated goods. Now aggrieved with the order of the
Commissioner of Customs (Appeals), department filed Revision Application before the Revisionary Authority under
Section 129DD of the Customs Act,
Whether Re-export of goods can be allowed
It was held that the passenger had grossly misdeclared the goods with intention to evade duty and smuggle the
goods into India. As per the provision of Section 80 of Customs Act, 1962 when the baggage of the passenger
contains article which is dutiable or prohibited and in respect of which the declaration is made under Section 77, the
proper officer on request of passenger detain such article for the purpose of being returned to him on his leaving
India. Since passenger neither made true declaration nor requested for detention of goods for re-export, before
customs at the time of his arrival at Airport. So the re-export of said goods cannot be allowed under Section 80 of
Customs Act.
(6) Can separate penalty under section 112 of the Customs Act be imposed on the partners when the same has
already been imposed on partnership firm?
Textoplast Industries 2011 (Bom.)
As per Explanation to section 140 of the Customs Act, 1962 brings within purview of “Company”, a firm or an
association of individuals, and “Director” in relation to firm, includes its partner. IN CASE OF Standard Chartered
Bank v. Directorate of Enforcement, there emerged the principle that the deeming fiction is not confined to a
criminal prosecution but will also extend to an adjudication proceeding as well. Hence, the High Court, in the instant
case, held that the deeming fiction in section 140(2) making Director, Manager, Secretary or other officer of
company liable to penalty, would not be confined to criminal prosecution but extends to adjudication proceeding as
well.
The High Court explained that had it been otherwise, it would have led to strange situation where, for criminal
prosecution, partner as well as person in charge responsible for conduct of business of partnership firm would be
liable whereas for adjudication purposes, a narrower construction had to be adopted. There was no reason to
exclude penalty on partnership firm, particularly when it was consistent with overall scheme and object of the Act.
MANOJ BATRA
www.camanojbatra.com
~ 52 ~
In view of the above discussion, the High Court held that for the purpose of imposing penalty, the adjudicating
authority under Customs Act, 1962 might, in an appropriate case, impose a penalty both upon a partnership firm
as well as on its partners.
(7) Can the goods be detained indefinitely without any formal order under section 110 of the Customs Act, 1962?
S.J. Fabrics Pvt. Ltd. v. UOI 2011 (268) E.L.T. 475 (Cal.)
Decision of the case: The High Court held that there is no time limit for issuance of an order under section 110
and/or the proviso thereof. However, such notice should ordinarily be issued immediately upon interception and
detention of the goods. The goods cannot indefinitely be detained without any order under section 110.
The High Court observed that section 110(2) provides that when any goods are seized under sub-section (1) and
no notice in respect thereof is given under clause (a) of section 124 within 6 months of the seizure of the goods, the
goods shall be returned to the person from whose possession, the goods were seized. The proviso to Section 110(2),
however, empowers the Commissioner of Customs to extend the aforesaid period of six months by a further period
of not exceeding 6 months on sufficient cause being shown.
(8) Under what circumstances can the penalty be imposed in terms of section 112(a)(ii) of the Customs Act, 1962?
Mr. Henry was the managing director of a company, which had set up a unit in the Cochin Export Processing Zone
for manufacture of certain equipments for cent percent export. On the basis of the relevant notifications, the
company was entitled to import capital goods and claim benefit of duty exemption on proof of total export. With
the passage of time, the business of the company fell and it went into liquidation. In the
mean while, the customs authorities issued a notice to show cause against confiscation, in terms of Section 111(o)
of the Customs Act, 1962, and in terms of the bond executed by them and also against imposition of penalty, on
the company and its directors under Section 112 of the Act. This was on the premise that the Assistant
Commissioner of Customs had reported that neither the capital goods nor the raw materials and other goods were
used in the production of goods for export in terms of Notification No. 340/86, dated 13-6-1986 and in terms of
the bond executed by the company.
Briefly discuss, with reference to case law, whether the show cause notice imposing penalty under section 112 is
sustainable in law.
No, the show cause notice imposing penalty under section 112 of the Customs Act, 1962 is not sustainable in law.
The facts of the given case are similar to case of O.T. Enasu v. UOI 2011 (272) E.L.T. 51 (Ker.)
It was held that under section 112, the liability to penalty is determined on the basis of duty sought to be
evaded. Hence the deciding factor to impose penalty under sec 112(a)(ii) is “duty was sought to be evaded”. The
concept of evading involves a conscious exercise by the person who evades. Therefore, the process of “seeking to
evade” essentially involves a mental element and the concept of the status “sought to be evaded” is arrived at
only by a conscious attempt to evade. The non-observance of the conditions of import of the goods in question
gives the jurisdiction to impose an order of confiscation in terms of Section 111(o) of the Act. However, while
considering the question as to whether penalty has to be imposed on any person for any commission or omission,
which has rendered the goods liable for confiscation under Section 111(o), it has to be decided as to whether the
goods became liable for confiscation on account of any act of omission or commission attributable to the person
in question. Merely because a person is the Managing Director of a company, he would not be fastened with
penalty, unless it is shown that he had, by his commissions or omissions, led the goods to be liable for
confiscation. In view of the above discussion, the High Court inferred that unless it is established that a person
has, by his omissions or commissions, led to a situation where duty is sought to be evaded, there cannot be an
imposition of penalty in terms of section 112(a)(ii) of the Act. Hence Mr. Henry, the managing director could not
be made liable to penalty under section 112 of customs Act, 1962.
(9) Is the want of evidence from foreign supplier enough to cancel the confiscation order of goods undervalued?
CCus. v. Jaya Singh Vijaya Jhaveri 2010 (251) E.L.T. 38 (Ker.)
MANOJ BATRA
www.camanojbatra.com
~ 53 ~
in order to sustain confiscation order for misdeclaration, the Tribunal wanted evidence from the Singapore
supplier and for failure of the department to prove the excess payment of invoice value by the respondent to the
Singapore supplier, the Tribunal cancelled the confiscation order. In our view, it is illogical that a person who is a
party to undervaluation and sale of car at lower than the actual price will give evidence to the department to prove
the case that the invoice raised by him on the respondent is a bogus one and that they received underhand payment
of the differential price. It is also to be noted that the respondent has not produced evidence for payment of even
the invoice value. The only reasonable inference possible is that it is an arranged transaction between the Singapore
supplier and the respondent for import of the car by misdeclaring it’s actual value in the invoice. We, therefore,
reverse the order of the Tribunal and uphold the order of confiscation and release on redemption fine.
(10)
Ambalal & Co. had smuggled rough diamonds ( like uncut gems like rubies, emeralads) into the country
clandestinely without payment of duty. T During search conducted by customs officer, in the office premises of
Ambalal, a large quantity of uncut rubies were recovered. The Department issued a notice to Ambalal & Co. proposing
confiscation of the diamonds under clause (d) of section 111 of the Customs Act, 1962 and imposing penalties
on various persons concerned.
However, the said goods were unconditionally exempted from the payment of the import duty vide an exemption
notification. So, Ambalal & Co. contended the benefit of the said exemption notification. However, the
Department denied to give the benefit of exemption meant for imported goods to be given to the smuggled
goods.
Do you think that Department’s action is valid in law?
Ans- the action of Department is valid in law.
The issue for consideration is whether benefit of exemption meant for imported goods to be given to the
smuggled goods.
The facts of the question are identical to the case of
[ M.Ambalal & Co. 2010 (SC)]
Fact: The assessee imported rough diamonds into India, which were not disclosed at the time of imports. Hence,
the Department treated them as Smuggled Goods and levied duties and penalties on them. However, such rough
diamonds are exempt from payment of import duty as per a specific notification. The question is whether the
assessee can claim such exemption in respect of such smuggled goods.
It was held that The Customs Act treats imported goods and smuggled goods as two different set of goods.
Hence, only those goods which are imported into India based on a valid declaration and as per the provisions of the
Act shall alone be considered as Imported Goods and eligible for exemption. Smuggled Goods not eligible for
exemption.
(11)
Que- The Customs Department seized some documents from the office premises of the assessee, M/S
Manmohan under panchnama. The assessee sought copies of the documents seized from his office premises
and print outs drawn from the Laptop during his attendance in DRI. However, Revenue officers replied that
the documents would be provided to him on completion of the investigation. Discuss with reference to
decided case law if any whether the stand taken by the Department is correct in law.
Ans- Refer Manish Lalit Kumar Bavishi
Is it mandatory for the Revenue officers to make available the copies of the seized documents to the person
from whose custody such documents were seized?
Manish Lalit Kumar Bavishi v. Addl. DIR. General, DRI 2011 (272) E.L.T. 42 (Bom.)
MANOJ BATRA
www.camanojbatra.com
~ 54 ~
Facts of the case: The assessee sought copies of the documents seized from his office premises under
panchanama and print outs drawn from the Laptop during his attendance in DRI. However, Revenue officers replied
that the documents would be provided to him on completion of the investigation.
Decision of the case: The High Court held that from the language of section 110(4), it was apparent that the
Customs officers were mandatorily required to make available the copies asked for. It was the party concerned who
had the choice of either asking for the document/seeking extract and not the officer.
If any document was seized during the course of any action by an officer and relatable to the provisions of the
Customs Act, that officer was bound to make available copies of those documents. The denial by the Revenue to
make the documents available was clearly an act without jurisdiction.
The High Court directed the Revenue to make available the copies of the documents asked for by the assessee
which was seized during the course of the seizure action.
Service tax
(1) Is rule 5A(2) of the Service Tax Rules, 1994 ultra vires the Finance Act, 1994?
A.C.L. Education Centre (P) Ltd. v. UOI 2014 (33) S.T.R. 609 (All.)
the Central Excise Department on various dates has issued intimation under Rule 5A(2), to assessees for making
a reference to conduct an Audit under EA-2000. For the said purpose, the necessary documents were demanded
from the petitioners-assessees. The petitioners-assessees objected and also challenged the vires of Rule 5A(2) of the
Service Tax Rules, 1994 inter alia on the ground that the provision of Rule 5(A)(2) are contrary to the provision of
Section 72 of the Service Tax Act.
The petitioner further submitted that as per rule 5A(2), assessee is required to provide record for audit to the audit party
deputed by Commissioner or by CAG for carrying out audit of the records of assessee. However, there is no provision in the
Finance Act, 1994 which empowers Central Government to frame rules in respect of the audit of the accounts of private person or
companies or firms who are paying service tax by self
assessment. Thus, rule 5A(2) empowering the departmental officers as auditor is arbitrary, illegal and ultra vires to the
provisions of the Finance Act, 1994.
the High Court held that section 5A(2) is not ultra vires. It is in consonance with section 72A of the Finance Act,
1994 on the basis of following observations :(i) Rule 5A, sub-rule (2) states that every assessee shall, on demand, make available to the officer authorised or the audit
party, records, trial balance and income-tax audit report, if any. So here, the officer will demand the documents just to
facilitate the correctness of books of accounts and ultimately, the audit will be conducted by the Audit Party headed by the
Chartered Accountant/Cost Accountant, as the case may be, deputed by the Commissioner.
(ii) It is Commissioner on whose behalf, the officer will collect the material and the Auditor will perform the audit. In any case,
the final report duly signed by the Chartered Accountant will be submitted to the Commissioner. In case of Government
Autonomous Body, the function of the audit has been assigned to the Comptroller of Auditor General of India.
(iii) From the above, it is crystal clear that in case of private assessee, the Commissioner will refer the matter to an officer to
collect the material or Chartered Accountant for the purpose of audit.
(iv) Thus, for the purpose of audit, the material can be collected either by
a.
the officer authorized by the Commissioner or
MANOJ BATRA
www.camanojbatra.com
~ 55 ~
b. by the Auditor himself.
But, audit will be performed only by the Chartered Accountant.
(v) It is pious duty of the assessee to make available the record as mentioned in Rule 5A i.e. trial balance; and the Incometax audit report, if any, under Section 142(2A) of the Income Tax Act, 1961, for the scrutiny of the officer or the Audit
Party, as the case may be.
(vi) Thus, we find that there is no inconsistency in Rule 5A and Section 72A of the Finance Act, 1994. The said provision is
not arbitrary. The manner for conducting the audit is as per the accounting standard provided by the Institute of Chartered
Accountant of India. The audit report will be made available to the assessee, as per law.
(2) Whether best judgment assessment under section 72 of the Finance Act, 1994 is an ex-parte*
assessment procedure?
N.B.C. Corporation Ltd. v. Commissioner of Service Tax 2014 (33) S.T.R. 113 (Del.)
The High Court held that section 72 could per se not be considered as an ex parte assessment procedure as ordinarily
understood under the Income-tax Act, 1961. Section 72 mandates that the assessee must appear and must furnish books of
account, documents and material to the Central Excise Officer before he passes the best
judgment assessment order. Thus, said order is not akin to an ex parte order.
Such an order will be akin to an ex parte order, when the assessee fails to produce records and the Central Excise Officer has
to proceed on other information or data which may be available.
Note: The term ex-parte means proceeding by one party in the absence of, and without notice to, the
other.
(3) Would service tax collected but not deposited prior to 10.05.2013 be taken into
consideration while calculating the amount of `50 lakh as contemplated by clause (ii) of
section 89(1) of the Finance Act, 1994?
Kandra Rameshbabu Naidu v. Superintendent (A.E.), S.T., Mumbai-II 2014 (34)
S.T.R. 16 (Bom.)
the assesse Director of company was arrested on 22nd January, 2014 at 9:00 p.m. under Section 89 read with
Section 90 of the Finance Act, 1994 for non-payment of Service Tax for the period from 2010 to December, 2013.
he had collected service tax of ` 2.59 crores during the period between financial years 2010-11 and 2013-14, but had
deposited only ` 15 lakh with the Government.
The liability to pay the collected Service Tax to the Government is not disputed by the applicant. However, according to him
there is no authority with the Department to arrest the applicant in view of the amended provisions of Section 89(1)(d) of the
Finance Act, 1994. The said amended provision came into effect from 10-5-2013 and said Section became cognizable for service
tax collected and not deposited for more than 6 months and service tax exceeds 50 lakh. According to the applicant in view of the
amended provision of Section 89(1)(d), the offence was made cognizable as mentioned above from finance ACT dated 10-5-2013,
Section 90 and Section 91 were introduced in the Finance Act.
By pointing out the above provisions, it is submitted on behalf of the applicant that there cannot be any
retrospective effect to the penal provisions and as such considering the arrest of the applicant on 22-1-2014 and
considering that the amount of tax collected and required to be deposited with the Government must exceed Rs. 50
Lakhs and there must be failure to pay the amount so collected to the credit of the Central Government beyond a
period of 6 months from the date on which such payment becomes due, the applicant was not liable for the arrest
inasmuch as the amount collected between 10-5-2013 to 21-7-2013 is only Rs. 5,00,887/. In other words, it is
submitted on behalf of the applicant that the maximum amount evaded, if any, under Section 89(1)(d) is less than
Rs. 50 lakhs for the relevant period and as such the provisions of Section 89(1)(d)(ii) are not applicable.
He submitted that since penal provisions could not be made effective retrospectively, amended section 89(1) and newly
introduced sections 90 and 91 of the Finance Act, 1994 (as introduced by the Finance Act, 2013) could not be made effective for a
period prior to 10.05.2013 [i.e. the date on which Finance Act, 2013 came into effect].
Assessee further submitted that since the amount collected between 10.05.2013 and 21.07.2013 was much less than ` 50
lakh, provisions of amended clause (ii) of section 89(1) were not applicable in his case.
MANOJ BATRA
www.camanojbatra.com
~ 56 ~
Department contended that since failure to deposit service tax with Central Government after collecting it from the customers
was a continuing offence, entire amount of arrears of service tax was required to be construed as liable to be deposited with the
Central Government when it became due and it being a continuing offence, the assessee was liable to deposit the entire arrears
which was more than ` 50 lakh.
It was held that it is a continuing offence and as on 10-5-2013 there were huge outstandings definitely beyond
the amount of Rs. 50 Lakhs and more so said amount was outstanding even at the time of arrest of the applicant
since the said offence is a continuing offence, entire amount of service tax outstanding [which is required to be deposited with
the Central Government] as on 10.05.2013, would be taken into consideration while calculating the amount of ` 50 lakh as
contemplated by section 89(1)(ii) of the Finance Act, 1994.
(4) Whether filing of declaration of description, value etc. of input services used in providing IT
enabled services (call centre/BPO services) exported outside India, after the date of export of
services will disentitle an exporter from rebate of service tax paid on such input services?
Wipro Ltd. v. Union of India 2013 (29) S.T.R. 545 (Del.)
This is an appeal by Wipro Ltd., which was formerly known as Wipro BPO Solutions. It was at the material time engaged in the
rendering of IT-enabled services such as technical support services, back-office services, customer-care services etc. to its various
clients all of whom were situated outside India, i.e., in UK, USA and Australia. It involved attending to cross-border telephone calls
relating to a variety of queries from existing or prospective customers in respect of the products or services of multinational
corporations Every call centre requires an employee-strength to attend to the calls. First they have to be recruited and then they
have to be trained in following and speaking in different accents peculiar to different countries. This involves COSTS OF
RECRUITMENT AND TRAINING. Once recruited, the staff has to be brought to the call centres. This involves costs on
transportation and since most of the work, as stated earlier, is performed from late evening to the early hours in the next morning,
the transportation of the staff is at night and that is the reason why the APPELLANT CALLS IT “NIGHT TRANSPORTATION
SERVICES”. When remittances are received from the client-corporations abroad through banks, THERE ARE BANK CHARGES.
For rendering such services, the appellant used input services such as night transportation services, recruitment services, bank
charges etc.
The appellant claimed rebate of the service tax paid by it on such input services, used in providing the output services which
were exported during a particular time period, under the said notification. However, the declaration required under para 3.1 of the
notification was filed only after the export of the services
The appellant filed two claims under the said notification claiming rebate in respect of service tax paid on such input services.
The rebate claims were rejected by the Department on the ground that the prescribed procedure, as laid down in Notification
No.12/2005, for obtaining the rebate was not followed by the appellant
Notification No. 12/2005-S.T. rebate is granted of the whole of the duty paid on excisable inputs or the whole of the service
tax and cess paid on all taxable input services used in providing taxable service exported out of India.
Condition 3.1 of the Notification stipulated that The provider of taxable service to be exported shall, PRIOR TO DATE OF
EXPORT OF TAXABLE SERVICE, FILE A DECLARATION with the jurisdictional Assistant or Deputy Commissioner of
Central Excise, describing the taxable service intended to be exported with,(b) description, value and the amount of service tax and cess payable on input services ACTUALLY REQUIRED to be
used in providing taxable service to be exported. Before the date of export of such taxable service.
It was held that
The nature of the services is such that they are rendered on a continuous basis without any commencement or terminal points;
it is a seamless service. It involves attending to cross-border telephone calls relating to a variety of queries from existing or
prospective customers in respect of the products or services of multinational corporations, it was impossible for the appellant to not
only determine the date of export but also anticipate the call so that the declaration could be filed “prior” to the date of export.
The High Court noted that the appellant was also required to describe, value and specify the amount of service tax
payable on input services actually required to be used in providing taxable service to be exported. The High Court
opined that except the description of the input services, the appellant could not provide the value and amount of
service tax payable as any estimation was ruled out by the use of the word “actually required” and the bill/invoice
for the input services were received by the appellant only after the calls were attended to.
Further, the High Court also observed that one-to-one matching of input services with exported services was impossible since
every phone call was export of taxable service but the invoices in respect of the input-services were received only at regular
intervals, viz. monthly or fortnightly etc. Thus, the High Court was of the view that in the very nature of things, and considering the
peculiar features of the appellant's business, it was difficult to comply with the requirement “prior” to the date of the export.
MANOJ BATRA
www.camanojbatra.com
~ 57 ~
Furthermore, the High Court elaborated that if particulars in declaration were furnished to service tax authorities within a
reasonable time after export, along with necessary documentary evidence, and were found to be correct and authenticated,
object/purpose of filing of declaration would be satisfied.
(5) Can service tax be levied on the services rendered in connection with a chit fund business?
Delhi Chit Fund Association v. UOI 2013 (30) S.T.R. 347 (Del.)
Appellant is an association of chit fund companies based in Delhi. According to them, services rendered in connection with chit
fund business are not taxable. The contention is that As per the definition of service under section 65B(44) the definition
excludes an activity which constitutes “merely a transaction in money or actionable claim”; a chit business is a
transaction in money and it is obvious that a transaction in money by itself cannot be a service in the sense of being
an activity carried out by any person for consideration. Therefore, there can be no question of excluding what is not
a service from the definition and that being so, what stands excluded is a service rendered in relation to a
transaction in money and chit business being a transaction in money, the services rendered in connection with the
said business is excluded from the definition.
This argument is sought to be supported by reference to Explanation 2 to Section 65B(44)
EXPLANATION 2 OF SEC 65B(44)
only service in relation to a transaction in money which is taxable,
is the activity relating to
 the use of money or
 its conversion from one form, currency or denomination to another
for which a separate consideration is charged.
Resultantly,
All other services rendered in connection with a transaction in money or actionable claim,
including the services rendered by the foreman of a chit business, stand excluded from the definition.
It further submitted that since chit fund business is not a service, Notification No. 26/2012 dated 30.06.2012 granting
an abatement of 30% to services provided in relation to chit should be quashed as question of exempting a part of the
consideration received for the services in chit fund business could not arise when the law provided that such services were not
taxable at all.
The High Court HELD THAT A ‘mere transaction in money’ cannot be considered as ‘service’
The High Court elucidated that even though ‘mere transaction in money’ is not service in the first place, the intention of the
legislature in excluding it from the definition might be that the legislature deemed it fit, ex abundanti cautela, to exclude it.
A clue to proper interpretation of the exclusionary part of the definition is embedded in Explanation 2 which provides that
except an activity for which a separate consideration is charged and which relates to the use of money or its conversion by cash or
by any other mode, from one form, currency or denomination to another form, currency or
denomination, all other cases of transaction in money shall stand excluded from the charge of service tax, including the
consideration charged for the services of a foreman in a chit business.
The High Court inferred that since in a chit fund business, the subscription is tendered in any one forms of money as defined
under section 65B(33), it would be a transaction in money and would fall in the exclusionary part of the definition. Otherwise also,
in view of Explanation 2 read along with the exclusionary part, the services rendered by the foreman of the chit business for which
a separate consideration is charged would be out of the clutches of the definition. Thus, either way, the services of a foreman of a
chit business do not constitute a taxable service.
Consequently, the High Court quashed Notification No. 26/2012-S.T. dated 20.06.2012 to the extent of the entry in
serial No. 8 thereof.
Example of chit fund to understand the concept
It is necessary to give a brief account of the operations of a chit fund business. Supposing 50 persons come
together to organise a chit. Let us further suppose that each of them undertake to contribute ` 1,000/-. The total chit
amount would be ` 50,000/-. Let us further suppose that the fund would operate for a period of 50 months. Thus the
member subscribers and the number of months for which the chit would operate would be the same. In this example
MANOJ BATRA
www.camanojbatra.com
~ 58 ~
at the end of each month, an amount of ` 50,000/- (` 1,000/- × 50) would be available in the kitty of the chit fund.
The said amount would be put to auction and those subscribers who are interested in drawing the money early
because of their needs may participate in the auction. The successful bidder who is normally the person who offers
the highest discount is given the chit amount. For example if there are three bidders offering to take the chit of
50,000/- for 40,000/-, 37,500/- and 35,000/- respectively, the chit would be given to that subscriber who is willing to
take it for 35,000/- since he has offered a discount of 15,000/-. This leaves a balance of ` 15,000/- (` 15,000 ` 50,000) in the kitty. The amount of 15,000/- which represents the discount which the successful bidder has foregone
becomes the dividend which is to be distributed to all the subscribers after deducting a fixed amount representing the
commission payable to the foreman. A foreman is normally a person who organises the auction and conducts the
proceedings. If in the example given above, the commission payable to the foreman is fixed at 5%, then after
deducting 2,500/- (5% of 50,000/-, the chit amount) the balance of 12,500/- would be distributed among all the 50
subscribers so that each would get 250/-. This amount of ` 250/- can be set off by the subscribers against the second
month‘s installment of ` 1,000/- payable by him and he can give only ` 750/-. The auction would be repeated in the
subsequent months and the same procedure is followed. Any subscriber who delays the bidding or does not bid at all
stands to gain the maximum discount
(6) Whether expenditure like travel, hotel stay, transportation and the like incurred by service
provider in course of providing taxable service should be treated as consideration for taxable
service and included in value for charging service tax?
Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India 2013 (29) S.T.R. 9 (Del.)
The petitioner is a company providing consulting engineering services. The petitioner receives payments not only for its
service but is also reimbursed expenses incurred by it such as air travel, hotel stay, etc. It was paying service on value of services
rendered to its clients. But not paying any service tax on reimbursable expenses under rule 5 of Service tax Determination of value
Rules 2006.
Department contended that reimbursable expenses will be included in the value for paying service tax.
the petitioner challenges the constitutional validity of Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to the
extent it includes re-imbursement of expenses in the value of taxable services for the purposes of levy of service tax.
As per sec 66B service tax is levied at 12% on Value of taxable service. And as per Section 67, value of the taxable service
for the purpose of charging service tax under Section 66B as the gross amount charged by the service provider for such service
provided or to be provided by him. HENCE such expenditure/ costs reimbursed cannot be considered as charged by service
provider for such service provided by him.
The High Court elaborated that power to make rules could not exceed or go beyond the section which provides for charge or
collection of service tax. The High Court clarified that even though section 94 prescribes to lay every rule framed by Central
Government before each House of Parliament, which have power to modify them; the same cannot add any greater force to the
Rules than what they ordinarily have as species of subordinate legislation.
It was held that rule 5(1) may also result in double taxation, if expenses like air travel tickets, had already been subjected to
service tax. Further double taxation can be imposed only when it is clearly provided for and intended. It can never be enforced by
implication.
(7) Whether tax is to be deducted at source under section 194J of the Income-tax Act, 1961 on
the amount of service tax if it is paid separately and is not included in the fees for
professional services/technical services?
CIT v. Rajasthan Urban Infrastructure 2013 (31) STR 642 (Raj.)
The assessee, Rajasthan Urban Infrastructure Development Project accounts are maintained on cash basis of
accounting and also audited by the Chartered Accountant. CA has raised the Bill and charged Service tax on fees. The
tax is deducted on fees and other payments of expenses as being part of contract, however, no TDS has been
deduced on service tax in view of the term of contract.
The dispute relates to a point as to whether TDS is to be deducted on the amount payable on account of service
tax or not?
It was held that if as per terms of the agreement between the payer and the payee, service tax is to be paid
separately - service tax would not be subject to TDS
MANOJ BATRA
www.camanojbatra.com
~ 59 ~
(8) Is it justified to recover service tax during search without passing appropriate assessment
order?
Chitra Builders Private Ltd. v. Addl. Commr. of CCEx. & ST 2013 (31) STR 515 (Mad.)
A search was conducted at a branch office of the petitioner company and at the residence of director wherein a sum of ` 2
crores was collected by the Department from the petitioner. The petitioner filed a writ petition requesting the Court to direct the
Department to return the money so collected
It has been stated that the assessee is registered with Service Tax Department, Kolkata and Rayagada and paying
the Service Tax due from it, regularly, without any default.
.
None of the works had been carried out by the petitioner, within the jurisdiction of the Coimbatore Commissionerate.
However, a search had been conducted at the residence of the Director of the petitioner-company. These were the
submissions of assesse 1. When the search had been conducted, a deposition had been recorded, from Rakhi Shah, one of the directors of
the petitioner-company. The said deposition had been recorded, under coercion. It is recorded as though a sum
of Rs. 2 crores was being paid to the respondent-Department, voluntarily, as part of the arrears of Service Tax,
due from the company. It is a well settled position in law that no tax can be collected from the assessee without a
proper assessment order being passed, in accordance with the procedures established by law.
2. It has been further stated that the Department has no jurisdiction to search the premises of the company, or of its
Directors, as the company is not carrying on its business of the Commissionerate who had issued the search
warrant.. Further, the petitioner has not been registered under the respondent-Department, at Coimbatore.
3. It has also been stated that there is no liability on the part of the petitioner to pay Service Tax. While so, the
collection of a sum of Rs. 2 crores, by the Department, from the petitioner, is arbitrary and illegal.
The Department counterargued that since the petitioner was actually liable to pay a larger amount of service tax, it could not
claim for return of the said amount which was paid by him during the search as the said amount was paid by it voluntarily and not
under coercion to mitigate the offence committed by it, under section 73(3) of the Finance Act,1994.
It was held that it is a well settled position in law that no tax can be collected from the assessee, without an appropriate
assessment order being passed by the authority concerned and by following the procedures established by law. However, in the
present case, no such procedures had been followed.
Further, although Department had stated that the said amount had been paid voluntarily by the petitioner in respect of its
service tax liability; it had failed to show that the petitioner was actually liable to pay service tax.
Further the High Court elucidated that the amount collected by Department, from the petitioner, during the search
conducted, could not be held to be valid in the eye of law, and directed the Department to return to the petitioner the sum of ` 2
crores, collected from it, during the search conducted.
(9)
Will service tax paid mistakenly arouse service tax liability?
KVR Construction 2012 (Kar.)
M/s. KVR Construction is a construction company rendering services under category of “Construction of
Residential Complex Service” and are paying the Service Tax in accordance with Finance Act, 1994. They have
undertaken the construction of following works on behalf of Shri Adichunchanagiri Shikshana Seva Trust by virtue of
an agreement dated 7-12-2004 :
(a) Medical college (b)
AIMS Hospital (c) SJBIT Engineering college (d) SJBIT Engineering Boys Hostel
and paid service tax accordingly. However, later they filed refund claim for the service tax so paid contending
that they were not actually liable to pay service tax as it was exempt.
MANOJ BATRA
www.camanojbatra.com
~ 60 ~
Department rejected the refund claim on the ground that the refund application filed by the respondentassessee was beyond the limitation period as stated in section 11B of Central Excise Act. Department did not dispute
the
It was held that service tax paid mistakenly under construction service although actually exempt, is payment
made without authority of law. When once there was no compulsion to pay this service tax, the amount of Rs.
1,23,96,948/- paid by petitioner under mistaken notion, would not be a duty or “service tax” payable in law.
Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any
stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview
of Section 11B of the Act.
Hence it was held that refund of an amount mistakenly paid as service tax could not be rejected on ground of
limitation under Section 11B of the Central Excise Act, 1944.
(10)
Can refund of an amount mistakenly paid as excise duty be rejected on the ground of limitation
under section 11B of the Central Excise Act, 1944?
Swastik Sanitarywares Ltd. v. UOI 2013 (296) E.L.T. 321 (Guj.).
The company is engaged in the business of manufacture of sanitarywares which are excisable goods. . the
assessee had due to a pure clerical error, deposited the excise duty twice on the clearance of same goods. However, the
burden of the duty paid the second time was not passed on to the consumer. Application for refund was made after 1 year from the
relevant date, hence the refund claim was rejected on the ground of limitation under section 11B of the Central Excise Act, 1944.
The High Court held that payment made by the assessee the second time could not be considered as duty deposited or paid.
Hence, repayment of such amount could not be seen as a refund claim made under section 11B. Consequently, such amount is
refundable to the assessee by the Department.
(11)
Whether the provisions of deemed registration under rule 4(5) of the Service Tax Rules, 1994 are
attracted in case of centralized registration?
Karamchand Thapar & Bros. (Coal Sales) Ltd. v. UOI 2010 (20) STR 3 (Cal.)
Decision of the case:
The Court observed that every person liable to pay service tax is required under rule 4(1) of the Service Tax
Rules, 1994, to apply to the Superintendent of Central Excise for registration in Form ST-1. The deeming provision
in rule 4(5) is applicable to registration granted by the Superintendent of Central Excise.
The Hon’ble High Court held as under:
a) The deeming provision under Rule 4(5) of Service Tax Rules, 1994 providing that registration certificate deemed
to have been granted if not granted within seven days from the date of receipt of application is applicable only
to registration granted by Superintendent of Central Excise and not to centralized registration granted under
Rule 4(2).
b) Though no time limit is specified for grant of centralized registration, however the same cannot be indefinitely
delayed and be granted within reasonable time and seven days can be considered as reasonable time.
c) The Commissioner or Superintendent is not empowered to grant registration in category other than the category
in which registration can be sought by the service provider. Further, they are not empowered to refuse
application for registration if the same is properly filled up.
d) The circulars prescribe appropriate action against officers who delay registration
(12)
Mr. Shyam alongwith his family entered into agreement with a Municipality and had taken rooms
on rent from it. The Municipality wanted to pass on the burden of Service Tax leviable on room rent
to Mr. Shyam. However, Mr. Shyam challenged the validity of the demand for service tax. The
primary contentions of Mr. Shyam were as follows:(a) Under the agreement, there was no provision for payment of service tax. Therefore, the demand
for payment of service tax was illegal. Further, service tax was payable by the Municipality and there
was no authority with which the Municipality could pass it on to the Mr. Shyam.
(b) Since they were small tenants, the Municipality must be treated as units of the State within the
MANOJ BATRA
www.camanojbatra.com
~ 61 ~
meaning of Article 289 of the Constitution of India and, therefore, levy of service tax on the property
or on the income of the Municipality was unsustainable.
The Revenue contended that service tax was an indirect tax. Though primarily the person liable to
pay the tax was Municipality, there was nothing in the law which prevented passing of the liability to
Mr. Shyam.
You are required to examine whether liability to pay service tax can be passed on to Mr. Shyam in
the instant case, with the help of a decided case law.
ANS
Yes, the liability to pay service tax can be passed on to Mr. Shyam in the instant case.
The issue for considerations are
(a) Whether demand for payment of service tax was illegal because Under the agreement, there was no
provision for payment of service tax
(b) Whether levy of service tax on the property or on the income of the Municipality was unsustainable.
The facts of the question are similar to the case of Kishore K.S. v. Cherthala Municipality 2011 (Ker.)
As regards to first issue that there was no mention of the service tax liability in the contract, the Court held that this
is a statutory right of the service provider/Municipality by virtue of the provisions under law to pass it on to the
tenants. It is another matter that they may decide not to pass it on fully or partly. It is not open to the petitioners to
challenge the validity of the demand for service tax, in view of the fact that service tax is an indirect tax and the law
provides that it can be passed on to the beneficiary. Hence, the service tax can be passed on by the service provider
i.e. Municipality.
(b) As regards to Second issue The word “State” in Article 289 does not embrace within its scope the Municipalities.
Hence, when service tax is levied on the Municipality there is no violation of Article 289. Moreover, Municipality has
not raised the contention that there was a violation of Article 289.
Hence, it was held that Municipality can pass on the burden of service tax to the assessee. Thus, in case where
rooms have been rented out by Municipality, it can pass the burden of service tax to the service receivers, that is Mr.
Shyam, in the present case.
(13)
Were services provided to the pilgrims taxable under short term accommodation service?
Tirumala Tirupati Devasthanams, (2012-HC-AP)
Assesse was running guest houses for the pilgrims. the department issued S.C.N stating that the assesse were liable
to get service tax registration under “short term accommodation service” and thus liable to pay service tax. The
assesse, on the other hand submitted that they were not club or any other association and thus, were not liable get
registered under service tax.
: Assessee contested that since they were running guest houses without any profit motive hence they were not
liable to pay service tax.
The Andhra Pradesh High Court held that the petitioner was religious and charitable institution and was running
guest houses by whatever name they were called, whether it was a shelter for pilgrims or any other name for a
considerable time and thus was liable to get itself registered under ‘Short term accommodation service’ and pay
service tax on the same.
Note: after introduction of negative list, this case would fall in short accommodation service.
10. M/s Mehta Enterprise Limited was engaged in the manufacture of sugar. The Central
Government directed him to maintain buffer stock of free sale sugar for the specified period. In
order to compensate M/s Mehta Enterprise Limited, the Government of India extended buffer
subsidy towards storage, interest and insurance charges for the said buffer stock of sugar.
Revenue issued a show cause notice to M/s Mehta Enterprise Limited raising the demand of service tax
alleging that amount received by M/s Mehta Enterprise Limited as buffer subsidy was for the services
covered within the definition of `storage and warehousing services’.
Briefly discuss, with reference to case law, whether the show cause notice is sustainable in law.
(14)
MANOJ BATRA
www.camanojbatra.com
~ 62 ~
Ans- No, the show cause notice is not sustainable in law. The facts of the given case are similar to case of CCE v.
Nahar Industrial Enterprises Ltd. 2010 (19) STR 166 (P & H).
It was held that service tax could be levied only if service of `storage and warehousing' was provided to any other
person. Nobody can provide service to himself. In the instant case, the assessee stored the goods owned by him.
After the expiry of storage period, he was free to sell them to the buyers of its own choice. He had stored goods in
compliance to directions of Government of India issued under the Sugar Development Fund Act, 1982. He had
received subsidy not on account of services rendered to Government of India, but had received compensation on
account of loss of interest, cost of insurance etc. incurred on account of maintenance of stock. Hence, the act of
assessee could not be called as rendering of services.
It was further held that just because the storage period of free sale sugar had to be extended at the behest of
Government of India, neither the assessee becomes `storage and warehouse keeper' nor the Government of
India becomes their ‘client’ in this regard. . Hence service tax is not chargeable on the buffer subsidy
provided by the Government for storage of free sale sugar, under the`storage and warehousing service’.
(15)
LINCOLN HELIOS (INDIA) LTD.(2011)(KAR.)
The assessee is a manufacturer and supplier of centralized lubrication system and it also undertakes erection and
commissioning at site as a part of their business activity. Customer charged for services rendered as well as value of
goods. THE assessee has paid the Excise duty paid on whole value including that for services. But The assessee did
not pay the service tax on the value of commission and erection services on the ground that it forms part of the
finished product and that they have paid the excise duty on the same. However, the authorities held that the
assessee is liable to pay the service tax on the value of erection and commissioning services.
DecisionIt was held that the excise duty was levied on the aspect of manufacture and service tax is levied on the aspect
of services rendered. Therefore, it will not amount to payment of tax twice. Hence assessee will be liable to pay
service tax on value of services.
(16)
Whether the value of SIM cards sold by the mobile phone companies to their subscribers has to be
included in value of taxable service under ‘telecommunication service’ or it is taxable as sale of goods under
the Sales Tax Act?
Idea Mobile Communication Ltd. 2010 (19) STR 18 (Ker.)
The question that arose before the Bench in this matter was: whether the value of SIM cards sold by the respondents
to their clients was includible in the value of telecommunication service or whether the same would be taxable as sale
of goods under the Sales Tax Act.
The High Court observed that the telephone connection could not be given without the activation of SIM card and it
was impossible for the customer to get service without the SIM card and hence the SIM card is an essential part of
the service. The SIM card has no intrinsic value or purpose other than use in mobile phone and therefore, the SIM
cards are not sold but supplied as part of service. Hence, the value of the SIM card supplied by the respondent was
held to be includible in the taxable value for Service tax purposes.
(17)
Aakar advertising (2009)(Raj.)- IMP
Penalty (Service tax) - Quantum of - Whether under Section 76 of Finance Act, 1994 reducible below the
minimum prescribed therein - Minimum amount of penalty prescribed in Section 76 by use of expression ‘not less
than’ –
If reasonable cause is not shown, and penalty is required to be levied, then, the minimum penalty prescribed
cannot be further reduced, under the garb of any existing discretion; assumed to be vesting with the authority,
including the Tribunal. Where the two limits have been prescribed, being the minimum and upper limit, then
obviously the free play is available between the two limits only, and the discretion can be exercised within those
limits, but then that does not mean, that the authorities have any power to impose penalty less than the minimum
prescribed by the section.
MANOJ BATRA
www.camanojbatra.com
~ 63 ~
AMENDMENT FOR Nov 14
(1) Valuation – Rule 8, rule 9, rule 10
Rule 8 Valuation of clearance for captive consumption
 Where the excisable goods are not sold by the assessee
 But are used for consumption BY HIM in the production or manufacture of other articles
 The value shall be 110% of the cost of production or manufacture of such goods.
Where WHOLE or PART of the excisable goods are not sold by the assessee
 but are used for consumption BY HIM or on his behalf in the production or manufacture of other
articles,
 the value of such goods that are consumed shall be 110% of the cost of production or manufacture of
such goods.”
Note cost of production of captivity consumed goods be done in accordance with CAS 4 issued by ICWAI
As per CAS 4 while computing the cost of material consumed – cenvat credit, credit for CVD, sales tax set off,
VAT, Duty Drawback and other similar duties subsequently recovered/recoverable shall be deducted.
CAS-4- COST OF PRODUCTION
1. direct material
Material Consumed – cenvat credit, credit for CVD, sales tax set off, VAT,DBK and other similar
duties subsequently recoverable by the enterprise shall be deducted.
2 Direct labour
wages & overhead - Allowance & perquisite included
3 Direct Expenses
4 Works overhead ( Ind. Mat + Ind lab + Ind Exp)
5 Quality control cost
6 Research & Development (R&D)
7 Administrative overhead relating to factory included.
8 Packing cost
Note
1.
Selling & distribution overhead, Marketing, Corporate exp. Shall be excluded.
2. Recovery of sale of scrap excluded.
3. Following item not considered as part of cost of production
a) interest & financial charge
MANOJ BATRA
www.camanojbatra.com
~ 64 ~
b) abnormal and non recurring cost- heavy break down of plant, accident, market condition restriction
sales below normal level, abnormal idle capacity, abnormal process loss, abnormal wastage, VRS,
retrenchment compensation.
Valuation of excisable goods
Que- Alpha Ltd., a manufacturer of excisable goods, has two production units-Unit A and Unit
B. Unit A of Alpha Ltd. manufactures product ‘X’. 80% of such production is consumed
captively by Unit B to further manufacture product ‘Y’ and the remaining 20% is sold to
unrelated buyers at ` 75 per unit. In March, 2014, Unit A has manufactured 1000 units of
product ‘X’. Assuming that there is no opening and closing inventory of product X,
compute its assessable value for the purpose of central excise duty from the following
information provided by Alpha Ltd. in relation to Unit A for the month of March, 2014Particulars
`
Cost of direct materials (inclusive of central excise duty @ 12.36%)*
22,472
Cost of direct salaries (includes house rent allowance of ` 12,000)
30,000
Consumable stores and repairs
8,400
Depreciation of machinery
500
Quality control cost
4,300
Research & development cost
Administrative cost:
Production related
Project management related
Interest and financial charges
Cost incurred due to break down of machinery
2,700
Amortised cost of moulds and tools received free of cost from the
production unit ‘B’ for being used only in the manufacture of goods to
be consumed by unit ‘B’
600
Selling and distribution cost
4,600
Scrap value realized
1500
2,000
1800
2,400
1,300
*Note: CENVAT credit of the excise duty so paid is available.
ANS- (22472-2472) + 30000 + 8400 + 500 + 4300 + 2700 + 2000 – 1500 = 66400
66400 * 80% = 53120 + 600 ( MOULDS RECEIVEVED FROM UNIT B)
HENCE COST OF PRODUCTION= 53720. AV OF CAPTIVELY CONSUMED GOODS = 110% OF 53720
= 59092
Rule 9 Valuation of sales to related person
Where the assessee so arranges
 That the excisable goods are not sold by the assessee Except To A Person who is related in the
manner specified in either of section 4(3)(b)(ii)(iii) or (iv)
The Value of the goods shall be normal transaction value
Where WHOLE or PART of the excisable goods are sold by the assesse
 to or through a person who is related in the manner specified in either of section 4(3)(b)(ii)(iii) or
(iv),
The Value of the goods shall be normal transaction value
 At which these are sold by the related person at the time of removal
MANOJ BATRA
www.camanojbatra.com
~ 65 ~
To buyers (not being related person); or
Where such goods are further sold to related person
The value of the goods shall be normal transaction value
 At which these are sold by the related person at the time of removal
To related person who sells such good in retail
If Related Person Consumes:
Provided that in a case where the related person does not sell the goods
But uses or consumes such goods in the production or manufacture of articles
The value shall be determined in the manner specified in rule 8
Rule 10 Sale to inter connected undertaking
When the assessee so arranges that the excisable goods are not sold by him
except to an inter-connected undertaking, the value of goods shall be determined in the following manner.
Where WHOLE or PART of the excisable goods are
sold by the assessee to or through an inter-connected undertaking, the value of such goods shall be
determined in the following manner, namely :-”
1. If the undertakings are also related
(a) In any manner referred in section 4(3)(b)(ii)/(iii)/(iv) or
(b) The buyer Is a holding or subsidiary company of the assessee,
Then value shall be determined as per rule 9
2. In any other case the value shall be determined as if they are not related person.
CBEC CLARIFICATION
(1) Rules 8, 9 and 10 of the Central Excise Valuation Rules, 2000 dealing with determination of assessable value in
case of captive consumption and sale to related person have been amended vide notification no. 14/2013-Central Excise
(N.T.), dated 22-11-2013 to clearly state that these rules apply irrespective of whether the whole or a part of the
clearances of manufactured goods are covered by the circumstances given in these rules. Each clearance is required
to be assessed according to section 4(1)(a) or the relevant rule dealing with the circumstances of clearance of the goods,
as the case may be.
(2) For example, if an assessee clears his goods in such a way that FIRST REMOVAL of goods is to an
independent buyers, some goods are captively consumed, SECOND REMOVAL is to such a related person who is
covered under rule 9 and THIRD REMOVAL is to a person who is covered under rule 10, then the FIRST REMOVAL
should assessed under section 4(1)(a), captively consumed goods should be assessed under rule 8, SECOND
REMOVAL should be assessed under rule 9 and THIRD REMOVAL should be assessed under rule 10 of these rules. It
may be noted that Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are not required to
be followed sequentially.
Cool Drinks Ltd. manufactured three health drinks viz. A, B and C. A was sold only to M Ltd., a subsidiary
company of Cool Drinks Ltd. B was sold to N Ltd., where the Managing Director of Cool Drinks Ltd. was a
manager. C was sold to O Ltd. who was the sole distributor of Cool Drinks Ltd. and was coming under the
management of Cool Drinks Ltd. [All transactions are between ICU]
Determine the transaction value of the three products in the hands of Cool Drinks Ltd. on the basis of the
following information:
Price of Cool Drinks Ltd. to M Ltd. Rs. 200
MANOJ BATRA
www.camanojbatra.com
~ 66 ~
Price of Cool Drinks Ltd. to N Ltd. Rs. 150
Price of Cool Drinks Ltd. to O Ltd. Rs. 120
Price of M Ltd. to Consumer Rs. 220
Price of N Ltd. to Consumer Rs. 160
Price of O Ltd. to Consumer Rs. 130
Ans-- Product A - Rs. 220/- , Product B -150 only, Product C -120
(2) Valuation – clarification by CBEC
Clarification on implementation of decision of Supreme Court in case of
goods sold at a price below the cost- [Circular No.979/03/2014–CX dt. 15.01.2014]
(1) In case of M/s Fiat India Ltd. 2012 (283) E.L.T 161 (S.C.) had held that in case the goods were sold at a price
substantially lower than the cost of the manufacture to achieve market penetration, the transaction value declared under
section 4 may be rejected.
(2) CBEC, vide Circular No. 979/03/20014-CX dated 15.01.2014, has clarified that the transaction value cannot be
rejected in every case where the declared value is lower than the manufacturing cost and profit. Due care will be taken at
the level of the Commissioner to see whether the case at hand is similar to the facts and circumstances of the FIAT
case.
(3) Situations for Valuation below Cost: The Supreme Court has cited that in the following cases, a Manufacturer may sell
goods at a price lower than the cost of manufacture and profit and yet the declared value can be considered as Normal
Price:
(a) The Company wants to switch over its business
(b) If a Manufacturer has goods which could not be sold within a reasonable time.
Hence, mere sale of goods below the manufacturing cost and profit cannot be taken as the sole basis for rejecting the
Transaction Value.
(4) Further, extended period of limitation shall apply only if there is a sale in the circumstances similar to the case of
M/s Fiat and yet transaction value of goods is declared as the correct transaction value after the date of the judgment,
ie. 29.08.2012.
(5) For the period prior to the date of the judgment, extended period of limitation is not acceptable. In such cases, only the
normal period of limitation will apply.
(3) CENVAT CREDIT
Explanation inserted in 3(5), (5A), (5B), (5C) AND AMENDMENT IN 3(5C)
(i) Rule 3(5) Reversal of credit in case of removal of inputs or capital goods as such from the factory/premises of the
output service provider
(ii) Rule 3(5A) Reversal of credit in case of removal of capital goods after being used, whether as capital goods or as
scrap or waste
(iii) Rule 3(5B) Reversal of credit in case of full or partial writing off of the value of input or capital goods before being
put to use
(iv) Rule 3(5C) Reversal of credit in case of remission of duty on final product
 by debiting the CENVAT credit or otherwise
 on or before the 5th day of the following month
 except for the month of March, where such payment shall be made on or before the 31st day of the month of
March.
MANOJ BATRA
www.camanojbatra.com
~ 67 ~
Rule 3(5C) of CCR 2004
Reversal of cenvat credit
 Where on any goods manufactured or produced by an assessee
 The payment of duty is ordered to be remitted under rule 21 of CER 2002.
 The CENVAT credit taken on the inputs used in the manufacture or production of said goods and the
CENVAT CREDIT TAKEN ON INPUT SERVICES used in or in relation to the manufacture or production of
said goods shall be reversed.
“Explanation 1. - The amount payable under sub-rules (5), (5A), (5B) and (5C), unless specified
otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the
CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March,
where such payment shall be made on or before the 31st day of the month of March.
Explanation 2. - If the manufacturer of goods or the provider of output service fails to pay the amount
payable under sub-rules (5), (5A), (5B) and (5C), it shall be recovered, in the manner as provided in rule 14,
for recovery of CENVAT credit wrongly taken and utilised.”
(4) CENVAT CREDIT- AMENDMENT IN RULE 7
RULE ‘7. Manner of distribution of credit by input service distributor. The input service distributor may distribute the CENVAT credit in respect of the Service Tax paid on the
input service to its
 manufacturing units or
 units providing output service,
subject to the FOLLOWING CONDITIONS, namely:—
(a) the credit distributed against a document referred to in rule 9 DOES NOT EXCEED THE AMOUNT OF
SERVICE TAX PAID thereon;
(b) credit of service tax attributable to service used in a unit used by one or more units exclusively engaged
in manufacture of exempted goods or providing of exempted services SHALL NOT BE DISTRIBUTED;
(c) credit of service tax attributable to service used wholly in BY a unit shall be DISTRIBUTED ONLY TO
THAT UNIT; and
(d) credit of service tax attributable to service used in more than one unit shall be distributed
prorata on the BASIS OF THE TURNOVER OF THE CONCERNED UNIT TO THE SUM TOTAL OF THE
TURNOVER OF ALL THE UNITS to which the service relates.
(d) credit of service tax attributable to service used by more than one unit shall be distributed pro rata on
the basis of the turnover of such units during the relevant period to the total turnover of all its units,
WHICH ARE OPERATIONAL IN THE CURRENT YEAR, during the said relevant period.
(e) credit of service tax attributable to service used in more than one unit shall be distributed pro rata on
the basis of the turnover DURING THE RELEVANT PERIOD of the concerned unit to the sum total of the
turnover of all the units to which the service relates during the same period
Explanation 1.- For the purposes of this rule, ―unit‖ includes the premises of a provider of output service
and the premises of a manufacturer including the factory, whether registered or otherwise.
MANOJ BATRA
www.camanojbatra.com
~ 68 ~
Explanation 2.- For the purposes of this rule, the total turnover shall be determined in the same manner as
determined under rule 5.’
[Explanation 3. –
(a) The relevant period shall be the month previous to the month during which the CENVAT credit is
distributed.
(b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules,
1994 or rule 8 of Central Excise Rules, 2002 then the relevant period shall be the quarter previous to
the quarter during which the CENVAT credit is distributed.
(c) In case of an assessee who does not have any total turnover in the said period, the input service
distributor shall distribute any credit only after the end of such relevant period wherein the total
turnover of its units is available.]
Explanation 3. - For the purposes of this rule, THE ‘RELEVANT PERIOD’ SHALL BE, a. If the assessee has turnover in the ‘financial year’ PRECEDING TO THE YEAR DURING WHICH
CREDIT IS TO BE DISTRIBUTED for month or quarter, as the case may be, the said financial year; or
b. If the assessee does not have turnover for some or all the units in the preceding financial year, the
LAST QUARTER FOR WHICH DETAILS OF TURNOVER OF ALL THE UNITS ARE AVAILABLE, previous to
the month or quarter for which credit is to be distributed.”.
S.
Position
as
erstwhile rule 7
1.
In case of a unit
exclusively engaged in
manufacture
of
exempted
goods/
providing exempted
services, service tax paid
on input services used IN
such a unit was not allowed
to be distributed as CENVAT
credit.
2.
Credit of service tax
Credit of service tax
Substitution of word ‘IN’ with
attributable to service
attributable to service used wholly ‘BY’ would increase the scope of
used wholly IN a unit was to BY a unit shall be distributed only services pertaining to which credit
be distributed only to that
to that unit.
could be distributed to a unit.
unit.
Resultantly,
credit
for
services like good transport
agency services, rent-a-cab
service, testing and analysis of
the product etc. would now be
available to the unit availing
them.
No.
per
Position as
amended rule 7
per
the
In case of a unit exclusively
engaged in manufacture of
exempted goods/ providing
exempted services, service tax paid
on input services
used BY one or more such
units will not be allowed to be
distributed as CENVAT credit
With the substitution of word
‘IN’ with ‘BY’, credit of services,
which have been used by such
units though not actually
consumed within such units,
would also not be distributed.
MANOJ BATRA
www.camanojbatra.com
~ 69 ~
Credit of service tax
Credit of service tax
In case of common input
attributable to service
attributable to service used BY
services, amount of CENVAT
used IN more than one
more than one unit
credit attributed to a unit may be
unit was to be
shall be distributed pro rata on reduced as now turnover of all
distributed pro rata on the
the basis of the turnover of such
operational units has to be taken
basis of the turnover during
units during the relevant period to in denominator instead of only
the relevant period of the
the total turnover of all its units, the units to
which
the
concerned unit to the sum total which are operational in
service
of
the turnover of all
the current year, during the said
relates.
the units to which relevant period.
the service related
during the same
Relevant period shall be the ‘financial
Distribution of credit is now
Relevant period
4 period.
year’ preceding to the year during which based on previous financial
was the
credit is to be distributed for month/ quarter year’s turnover instead of
month/quarter
previous
to
the provided assessee has turnover in such previous month’s/quarter’s
turnover.
month/quarter during preceding financial year.
If the assessee does not have turnover
which the CENVAT
credit was distributed. for some/ all the units in the preceding
financial year, relevant period shall be the
In case of an
assessee who did not last quarter for which details of turnover of all
the units are available, previous to the month/
have any total
turnover in the said quarter for which credit is to be distributed.
period, the input
service distributor was
to distribute any credit
only after the end of
such relevant
period wherein the
total turnover of its
units was available.
3.
.
(1) Que
PQR ltd having its Head office at Delhi and having input service distributor registration and having
5 units at Haridwar, Delhi, Mumbai, chennai and Ghaziabad provides the following details for the
month of july 2014
1. Service tax paid on advertisement used in all the units- 4 lakh
2. Service tax paid on legal consultancy only for Haridwar unit- 3 lakh
3. Service tax paid for repair and maintenance for Mumbai unit only.- 2 lakh
4. Total turnover during the year 2013-14
a. Unit in Haridwar – 18 lakh ( exclusively manufacturing exempted goods)
b. Unit in Delhi- 8 lakh
c. Unit in Mumbai- 10 lakh
d. Unit in Chennai – 4 lakh
e. Uniy in Ghaziabad- 3 lakh
5. The unit at Ghaziabad is not operational in current year
Determine the CCR distributable to various units.
ANS
Harid
Delhi
---------
80,000
war
Service tax on advertisement
Mumb
ai
Chenna
i
1,00,0
Ghazia
bad
40,000
Nil
MANOJ BATRA
www.camanojbatra.com
--
Service
tax
on
legal
consultancy
Service tax on repair and
maintenance
Total
~ 70 ~
00
---------
----------
--------
----------
---------
80,000
-00
---------
--------
Nil
2,00,0
--------
Nil
3,00,0
40,000
Nil
00
(5) CENVAT CREDIT- AMENDMENT IN RULE 5B
RULE [5B. Refund of CENVAT credit to service providers providing services
taxed on reverse charge basis. —
A PROVIDER OF SERVICE PROVIDING SERVICES
 notified under sub-section (2) of section 68 of the Finance Act AND
 being unable to utilise the CENVAT credit availed on inputs and input services for payment of service
tax on such output services,
shall be allowed refund of such
 UNUTILISED CENVAT CREDIT
subject to procedure, safeguards, conditions and limitations, as may be specified by the Board
notification in the Official Gazette.]
by
1. Safeguards, conditions and limitations. (a)
the refund shall be claimed of unutilised CENVAT credit taken ON INPUTS AND INPUT SERVICES
during the half year for which refund is claimed, for providing following output services namely :(i)
RENTING OF A MOTOR VEHICLE designed to carry passengers on non-abated value, to any person
who is not engaged in a similar business;
(ii)
SUPPLY OF MANPOWER for any purpose or security services; or
(iii)
service portion in the execution of a WORKS CONTRACT;
(hereinafter the above mentioned services will be termed as partial reverse charge services).
Explanation :- For the purpose of this notification,UNUTILISED CENVAT CREDIT TAKEN ON
INPUTS AND INPUT SERVICES during the half
= (A) - (B)
year for providing partial reverse charge
services
Where,
CENVAT
Turnover of output service
credit taken on
under partial reverse charge
inputs and input
during the half year
A=
(*)
services during
Total turnover of goods and
the half year
services during the half year
Service tax paid by the service provider for such partial reverse
B=
charge services during the half year;
MANOJ BATRA
www.camanojbatra.com
~ 71 ~
(b)
the refund of unutilised CENVAT credit shall not exceed an amount of service tax liability paid or
payable by the recipient of service with respect to the partial reverse charge services provided during the
period of half year for which refund is claimed;
(c)
the amount claimed as refund shall be debited by the claimant from his CENVAT credit account at
the time of making the claim;
(d)
in case the amount of refund sanctioned is less than the amount of refund claimed, then the
claimant may take back the credit of the difference between the amount claimed and the amount sanctioned;
(e)
the claimant shall submit not more than one claim of refund under this notification for every half
year;
(f)
the refund claim shall be filed after filing of service tax return as prescribed under rule 7 of the
Service Tax Rules for the period for which refund is claimed;
(g)
no refund shall be admissible for the CENVAT credit taken on input or input services received prior
to the 1st day of July, 2012;
Explanation. - For the purposes of this notification, half year means a period of six consecutive months
with the first half year beginning from the 1st day of April every year and second half year from the 1st day of
October of every year.
2. Procedure for filing the refund claim. - (a) the provider of output service, shall submit an application in
Form A annexed hereto, along with the documents and enclosures specified therein, to the jurisdictional
Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be,
before the expiry of one year from the due date of filing of return for the half year :
Provided that the last date of filing of application in Form A, for the period starting from the 1st day of
July, 2012 to the 30th day of September, 2012, shall be the 30th day of June, 2014;
(b) if more than one return is required to be filed for the half year, then the time limit of one year shall be
calculated from the due date of filing of the return for the later period;
(c) the applicant shall file the refund claim along with copies of the return(s) filed for the half year for
which the refund is claimed;
(d) the Assistant Commissioner or Deputy Commissioner to whom the application for refund is made may
call for any document in case he has reason to believe that information provided in the refund claim is
incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim;
(e) at the time of sanctioning the refund claim, the Assistant Commissioner or Deputy Commissioner shall
satisfy himself or herself in respect of the correctness of the refund claim and that the refund claim is
complete in every respect;
(2) Mr. Raja provides service of manpower supply From 1/4/2013 to 30/9/2013 to Reliance Ltd. For Rs 40 lakh
(i) Duty paid on input purchased- 1,50,000
(ii) Service tax paid on input service received – 2,50,000
Determine the amount of refund admissible under Notification number 12/2014 dated 3 march 2014 read with Rule 5B.
Ans
Service tax payable by Raja = 40 lakh * 12.36% * 25% = 123600
Less- CCR on input and input services
4,00,000
Excess CCR
2,76,400
Refund amount will be – LOWER OF 3
(i) Balance available as CCR
(ii) Amount as per formula of notification
(iii) Service tax paid or payable by Recipient of service
Refund amount = LOWER OF 3
(i)
2,76,400
(ii)
A–B
A = CCR taken on input * T.O of output service under partial reverse charge during half year
and input service
Total turnover of goods and service during the half year
B = SERVICE TAX PAID BY SERVICE PROVIDER FOR SUCH PARTIAL REVERSE CHARGE SERVICES DURING THE
HALF YEAR
MANOJ BATRA
www.camanojbatra.com
~ 72 ~
A = 4,00,000 * 40 LAKH / 40 LAKH = 4 LAKH
B = 123600
A- B = 276400
(iii)
40 lakh * 12.36% * 75% = 370800
HENCE REFUND = 2,76400
(3) Mr. Raja provides service of Renting of immovable property and manpower supply From 1/4/2013 to 30/9/2013 to
Reliance Ltd. For Rs 40 lakh and 30 lakh respectively
(i) Duty paid on input purchased- 2,00,000
(ii) Service tax paid on input service received – 4,50,000
Determine the amount of refund admissible under Notification number 12/2014 dated 3 march 2014 read with Rule 5B.
Service tax on renting of immovable property – 40 lakh * 12.36%
Service tax on supply of manpower – 30 lakh * 12.36% * 25%
Total service tax
Less- CCR on input and input services
EXCESS CCR
494400
92700
587100
650000
62900
Refund amount will be – LOWER OF 3
(i) Balance available as CCR
(ii) Amount as per formula of notification
(iii) Service tax paid or payable by Recipient of service
Refund amount = LOWER OF 3
(i)
62900
(ii)
A–B
A = CCR taken on input * T.O of output service under partial reverse charge during half year
and input service
Total turnover of goods and service during the half year
B = SERVICE TAX PAID BY SERVICE PROVIDER FOR SUCH PARTIAL REVERSE CHARGE SERVICES DURING THE
HALF YEAR
A = 6,50,000 * 30 LAKH / 70 LAKH =2,78,571
B = 92700
A - B = 185871
(iii)
30 lakh * 12.36% * 75% = 278100
HENCE REFUND = 62900
(6) CER 2002 – PAYMENT OF DUTY- RULE 8
Amendment in the Central Excise Rules, 2002 –For e-payment of central excise duty Threshold limit
reduced from ` 10 lakh to ` 1 lakh
Third proviso to rule 8(1) of the Central Excise Rules, 2002 has been amended to reduce the threshold limit for e-payment of
central excise duty from ` 10 lakh to ` 1 lakh.
with effect from 01.01.2014, where an assessee has paid an excise duty of 1 lakh or more including the amount paid by utilization
of CENVAT credit, in the preceding financial year, he shall deposit the excise duty liable to be paid by him electronically through
internet banking.
MANOJ BATRA
www.camanojbatra.com
~ 73 ~
(7) CER 2002 – REGISTRATION- RULE 9
Importer issuing CENVATable invoices now required to obtain registration and submit quarterly
returns
(i) Importer required to obtain registration [Rule 9(1) of the CER, 2002 amended]
Before Amendment
every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable
goods, was required to get registration under central excise.
After Amendment
With effect from 01.04.2014, an importer who issues an invoice on which CENVAT credit can be taken is ALSO REQUIRED TO
OBTAIN SUCH REGISTRATION. Consequently, Form A [Application for Central Excise Registration] has also been accordingly
amended.
(ii) Importer required to file quarterly return [Rule 9(8) of the CCR, 2004 amended]
Before Amendment
Earlier, rule 9(8) of the CCR, 2004 required a first stage dealer and a second stage dealer to submit a return (electronically) within
15 days from the close of each quarter of a year to the Superintendent of Central Excise.
After Amendment
With effect from 01.04.2014, said rule has been amended. Thus, NOW A REGISTERED IMPORTER IS ALSO REQUIRED TO
SUBMIT SUCH QUARTERLY RETURN. Consequently, the return form prescribed for the same has also been accordingly
amended.
(8) CLARIFICATION FOR CESS
Clarification regarding levy of the Education Cess and the Secondary and Higher Education Cess
on other cesses
Education Cess and the Secondary and Higher Education Cess are not to be calculated on cesses which are levied under Acts
administered by Department/Ministries other than Ministry of Finance (Department of Revenue) [for instance, Sugar cess levied
under the Sugar Cess Act, 1982, Tea Cess levied under Tea Act, 1953] but are only collected by the Department of
Revenue in terms of those Acts.
[Circular No. 978/02/2014-CX dated 07.01.2014]
(9) Extension of warehousing and acceptance of Letter of undertaking in place of Bank
Guarantee for export warehousing
Circular No. 976/10/2013-CX dated 12.12.2013 has made following amendments in Circular No. 579/16/2001CX. dated 26-6-2001 and Circular No. 581/18/2001-CX. dated 29-6-2001 which prescribe conditions, procedures and
safeguards applicable for storage in a warehouse registered at such places as may be specified by the Board and
export therefrom regarding all excisable goods specified in the First Schedule to the Central Excise Tariff Act, 1985:
S.No.
Basis
Circular
579/16/2001
No.
Circular No. 976/10/2013
MANOJ BATRA
1.
Period
warehousing
www.camanojbatra.com
of
Any
goods •
warehoused may be left
in
the warehouse in
which they are
deposited, or in any
warehouse to which such
goods have been
removed, till the expiry
of 3 years from the date
on which such
•
goods were first
warehoused.
•
~ 74 ~
Warehousing
of
goods
shall
initially be allowed for a period
upto 6 months, which may be
further
extended
by
Assistant/
Deputy
Commissioner,
each
extension being for a period not
exceeding 6 months, subject to
verification that the goods have
not deteriorated in quality.
The maximum period, for which
goods
may
be
left
in
the
warehouse
in
which
they
are
deposited, or in any warehouse to
which
such
goods
have
been
removed, shall be three years from
the date on which such goods
were first warehoused.
Excisable goods shall be deemed
to
be
cleared
for
home
consumption on expiry of
warehousing period including
extensions granted, if any. • Duty and
interest @ 24% per annum shall be charged
on such deemed removal.
2.
S.N
o.
3.
Revocation/
suspension
of
warehouse
registration
Basis
The
excisable
goods
lodged
therein shall either be
cleared for home
consumption on
payment of duty or be
removed to another
warehouse without
payment of duty.
Circular
581/18/2001
No.
Requirement to
An exporter is
furnish security
required to furnish
equal to 25% of the
security equal to 25%
Bond amount
of the Bond amount for
availing the facility of
export warehousing.
The excisable goods lodged therein shall
either be cleared for home consumption on
payment of duty and interest @ 24% per
annum or shall be removed to another
warehouse without payment of duty.
Circular No. 976/10/2013
Now, where exporter is a manufacturer and
a Status Holder with a clean track record,
requirement to furnish security equal to 25% of
bond amount shall be replaced by the
requirement of furnishing an LUT initially for a
period upto 6 months which may be extended
by a further period not exceeding 6 months.
Further, extensions in the warehousing period
as provided in point 1. above shall be allowed to
such exporter only on furnishing security of 25%
of the bond amount.
MANOJ BATRA
(10)
www.camanojbatra.com
~ 75 ~
CER 2002 & CCR PROVISION
"Rule12AAA: CCR 2004-Power to impose restrictions in certain types of
cases.Notwithstanding anything contained in these rules,
where the CG, having regard to
 the extent of misuse of CENVAT credit, nature and type of such misuse and
 such other factors as may be relevant,
is of the opinion that in order to prevent the misuse of the provisions of CENVAT credit as specified in
these rules, it is necessary in the public interest to provide for certain measures including restrictions on
 a manufacturer, FSD and SSD or an exporter, may by a notification in the Official Gazette,
 specify the nature of restrictions including
 restrictions on utilization of CENVAT credit and
 suspension of registration in case of a dealer and
 type of facilities to be withdrawn and procedure for issue of such order by an officer authorized by
the Board". by the Chief Commissioner of Central Excise.
"12CCC OF CER 02: Power to impose restrictions in certain types of cases.Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent
of evasion of duty, nature and type of offences or such other factors as may be relevant, is of the opinion that in
order to prevent evasion of, and default in payment of, duty of excise, it is necessary in the public interest to provide
for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter,
may by a notification in the Official Gazette, specify the nature of restrictions including suspension of registration in
case of a dealer, types of facilities to be withdrawn and procedure for issue of such order by an officer authorized by
the Board". the Chief Commissioner of Central Excise.
1
.
Notification No. 5/2012
Notification No. 16/2014
Specified offences
Same under both the notifications
2
Who is authorized to
order the withdrawal of
facilities
&
imposition
of
restrictions?
An officer authorized by
CBEC
Chief Commissioner of Central
Excise
3
Time period for
which restrictions
could be imposed on the
commission of
specified offences
Earlier, no time – limit was
prescribed for which
restrictions might be
imposed/ facilities might be
withdrawn for the offences
committed-whether for the
first time or subsequently.
Restrictions
could
be
imposed for a
period upto
.
.
Particulars
(i)
6 months
(ii) 1 year
for the
offence
committed
for the first time
subsequently
MANOJ BATRA
4
Restrictions
that
could be imposed on the
commission of
specified offences for
second time or
subsequently
5
Monetary limit
6
Procedure
.
.
.
www.camanojbatra.com
Earlier, in such case out
of all the specified
restrictions, following two
restrictions may not be
imposed:
(i) the assessee may
be required to maintain
records
of
receipt,
disposal, consumption and
inventory of the principal
inputs on which CENVAT
credit has not been taken.
(ii) the assessee may
be required to intimate the
Superintendent of Central
Excise regarding receipt of
principal inputs in the factory
on which CENVAT credit has
or has not been taken, within
a period specified in the
order and the said inputs
shall be made
available
for verification upto the period
specified in the order.
~ 76 ~
Any of the specified restrictions may
be imposed.
Same under both the notifications
Earlier,
proposal
to
withdraw the facilities and
impose restrictions was
forwarded by Commissioner of
Central
Excise
(CCE)/Additional Director
General of Central Excise
Intelligence (ADGCEI) to
Chief CCE/ DGCEI who,
after giving the defaulter an
opportunity of being heard,
might forward it to CBEC
along
with
its
recommendations.
Thereafter, an officer
authorized by CBEC might
pass the order withdrawing
facilities and imposing
restrictions for the period
specified in the order.
Now, proposal to withdraw the
facilities and impose restrictions is to be
forwarded by CCE/ ADGCEI to Chief
CCE who, after giving the defaulter an
opportunity of being heard, would pass
the order withdrawing facilities and
imposing restrictions for the period
specified in the order.
MANOJ BATRA
www.camanojbatra.com
~ 77 ~
R12AAA
OF CCR
2004
AND
12CCC
OF
CER
02
IMPOSE
certain
restrictio
n
Service tax
(1) Threshold limit for e-payment of service tax reduced from ` 10 lakh to ` 1 lakh
W.e.f. 01.01.2014, E–payment is compulsory if the total Service Tax paid in the Previous Financial Year is ` 1,00,000 or more.
Note: Earlier, the limit was ` 10,00,000.
(2) ST for Services from Foreign Banks
Foreign Banks are recovering certain charges for processing of import/export documents regarding remittance of Foreign Currency.
The Banks in India would be treated as Recipient of Service, and therefore required to pay Service Tax. (Trade Notice No.20/13
dated 10.02.2014)
Mega exemption
(3) Services provided by cord blood banks by way of preservation of stem cells exempted[Notification No. 04/2014-ST dated 17.02.2014]
Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation
have been exempted from service tax.
(4) Loading/unloading/packing/storage/warehousing of rice exempted- [Notification No. 04/2014ST dated 17.02.2014]
Services by way of loading, unloading, packing, storage or warehousing of rice have been exempted from service tax.
(5) Expansion in the scope of exemption of services provided by way of sponsorship of sports
events- [Notification No. 01/2014-ST dated 10.01.2014]
MANOJ BATRA
www.camanojbatra.com
~ 78 ~
Hitherto, services provided by way of sponsorship of sporting events organized by a national sports federation, or its affiliated
federations were exempt from service tax where the participating teams or individuals represent any district, State or zone. The
said exemption has been extended even in a case where the participating teams or individuals represent any COUNTRY.
(6) Notification No.3/2014 dt. 03.02.2014)
Services provided by an Authorised Person or Sub–Broker, to the Member of a Recognized Association or a Registered Association,
in relation to a Forward Contract, is exempted from service tax. (
(7) Clarification as to whether “agricultural produce” includes rice and benefits available
in respect of rice under mega exemption notification
CBEC vide Circular No.177/03/2014 – ST dated 17.02.2014, has clarified that the definition of agricultural produce
under section 65(5) of the Finance Act, 1994 covers ‘paddy’; but excludes ‘rice’. It implies that benefits available to agricultural
produce in the negative list [Section 66D(d)] are not available to rice.
However, many such benefits have been extended to rice by way of appropriate entries in the mega exemption notification as
follows:(i) Services by way of transportation of food stuff by rail/vessel/goods transport agency is exempt from service tax. Food stuff
includes rice.
(ii) Services by way of loading, unloading, packing, storage or warehousing of rice are exempt from service tax.
(iii) Carrying out an intermediate production process as job work in relation to agriculture is exempt from service tax. It is
clarified that paddy milled into rice, on job work basis is also exempt from service tax since such milling of paddy is an
intermediate production process in relation to agriculture.
(8) Scope of definition of ‘Governmental authority’ widened
The definition of “Governmental authority” has been substituted with the following new definition:“Governmental authority” means an authority or a board or any other body;
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by Government,
with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W
of the Constitution.
Thus, the scope of the definition has been enhanced. Henceforth, an authority or a board or any other body established by
Government with 90% or more participation by way of equity or control need not be set up under an Act of Parliament or a State
Legislature to qualify as Governmental authority.
CUSTOM
(1) Exemption from Special Additional Duty of Customs (SAD) is not available on goods cleared
from the SEZ / FTWZ into the DTA on stock transfer basis.
Notification No. 45/2005-Cus. dated 16.05.2005 exempts all goods produced or manufactured in an Special Economic
Zone (SEZ) and brought to Domestic Tariff Area (DTA), from the whole of the additional duty of customs leviable under section 3(5)
of the Customs Tariff Act, 1975 [hereinafter referred as SAD]. However, such exemption shall not be available if such goods, when
sold in DTA, are exempted by the State Government from payment of sales tax or VAT.
Issue: Would the benefit of exemption from SAD under aforersaid notification be available when the goods are cleared in the
nature of stock transfer from an SEZ/ FTWZ unit to its DTA unit for self-consumption.
Clarification: The aforesaid notification clearly states that the exemption shall not be available if such goods, when sold in
DTA, are exempt from payment of sales tax/VAT. In case of clearances which are in the nature of stock transfer from SEZ/FTWZ
unit to the DTA unit for self-consumption i.e. otherwise than for sale as such, no sales tax/VAT is leviable on such a transaction.
Since no sales tax/VAT is leviable on the said transaction, SAD is payable.
Hence, the benefit of exemption from SAD under aforersaid notification would NOT be available when a DTA unit imports goods
and routes it through SEZ/FTWZ for selfconsumption i.e. in the nature of stock transfer from SEZ/FTWZ.
[Circular No. 44/2013 Cus dated 30.12.2013
MANOJ BATRA
www.camanojbatra.com
~ 79 ~
(2) Classification of various imported items:
CBEC has clarified with regard to the classification issues arising in the following products:S.No.
1.
Circular
No.
36/2013
dated
05.09.2013
Product
Bluetooth
Wireless
Headset for
mobile
phones /
cell phones
Disputed tariff entries
8517 “…; other apparatus for the
transmission or reception of
voice, images or other data,
including
apparatus
for
communication in a wired or
wireless network (such as a local or
wide area network),…”
Clarification
Bluetooth
Wireless headsets for
mobile phones / cell
phones is correctly
classifiable
in heading 8517.
8518 “…; headphones
and
earphones, whether or not
combined with a microphone,…”
2.
28/2013
dated
01.08.2013
Cockroac
h traps and
Mosquito
Repellent
3506 –“Prepared glues and other
prepared
adhesives,
not
elsewhere specified or included;
products suitable for use as glues or
adhesives, put up for retail sale as
glues or adhesives, not exceeding a
net weight of 1 kg”;
3822 –“Diagnostic or laboratory
reagents on a backing, prepared
diagnostic or laboratory reagents
whether or not on a backing, other
than those of heading 3002 or 3006;
certified reference materials”;
3926 – “Other articles of plastics
and articles of other materials of
headings 3901 to 3914”;
3808 –
“Insecticides,
rodenticides,
fungicides,
herbicides,
anti-sprouting
products and plant-growth
regulators, disinfectants and
similar products, put up in forms
or packings for retail sale or as
preparations or articles(for example,
sulphur-treated bands, wicks and
candles, and fly-papers)”;
4823 –“Other paper, paperboard,
cellulose wadding and webs of
cellulose fibers, cut to size or
shape; other articles of paper pulp,
paper,
paperboard, cellulose
wadding or webs of cellulose fibers.
Such
products should
merit classification
under
heading
3808.
MANOJ BATRA
www.camanojbatra.com
~ 80 ~
3.
20/2013
dated
14.05.2013
Tablet
computers
8517- “Telephone sets,……….”
8471- Automatic data processing
machines and units thereof;
magnetic or optical readers,
machines for transcribing data onto
data media in coded from and
machines for processing such
data, not elsewhere specified or
included
Tablet
Computers
are
classifiable
under
heading 8471.
4.
2/2014
dated
09.01.2014.
Transmis
sio n shafts
/ Power
takeoff
(PTO)
shafts
8432-Agricultural, horticultural or
forestry machinery for soil
preparation or cultivation; lawn or
sports- ground rollers
Transmission
shafts / PTO
shafts
are
classifiable under
heading 8483.
8433-Harvesting or threshing
machinery, including straw or fodder
balers; grass or hay mowers;
machines for cleaning, sorting or
grading eggs, fruit or other agricultural
produce, other than machinery of
heading 8437”.
8483-Transmission
shafts
(including cam shafts and crank
shafts) and cranks; bearing housings
and plain shaft bearings; gears and
gearing; ball or roller screws; gear
boxes and other speed changers,
including torque converters; flywheels
and pulleys, including pulley blocks;
clutches
and
shaft
couplings
(including universal joints
MANOJ BATRA
www.camanojbatra.com
~ 81 ~
AMENDMENT FOR MAY 14
Excise
CCR 2004
(1) Rule 3(5A) [Notification No. 12/2013, dated 27-9-2013]
(a) If the capital goods, on which CENVAT credit has been taken,
are REMOVED After Being Used,
 whether as capital goods or
 as scrap or waste,
the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken
on the said capital goods reduced by the percentage points calculated by straight line method as
specified below for each quarter of a year or part thereof from the date of taking the CEVAT Credit,
namely:(i) for computers and computer peripherals :
for each quarter in the first year @ 10%
for each quarter in the second year @ 8%
for each quarter in the third year @5%
for each quarter in the fourth and fifth year
@1%
(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:
PROVIDED THAT If the amount so calculated is less than the amount equal to the duty leviable on
transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.‖.
(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to
the duty leviable on transaction value.”
Author note- earlier if CG removed as Waste & scrap – higher of 2 ( duty on TV or Amt on basis of %
basis) payable. But now amout equal to duty on TV paid.
(2) Goods cleared against specified duty credit scrips not to be treated as exempted
goods
Notifications Nos. 29/2012-CE, 30/2012-CE, 31/2012-CE, 32/2012-CE and 33/2012-CE all dated
09.07.2012 provide exemption to certain manufactured goods when cleared against the specified duty credit scrips issued to an
exporter. The specified duty credit scrips are:
 Focus Product Scheme (FPS) duty credit scrip,
 Focus Market Scheme (FMS) duty credit scrip
 VKGUY (Special Agriculture and Village Industry Scheme) duty credit scrip
 Agri Infrastructure Incentive Scrip duty credit scrip
MANOJ BATRA
www.camanojbatra.com
~ 82 ~
 Status Holder Incentive Scheme duty credit scrip
One of the conditions for availing of these exemptions is that duties leviable, but for these exemptions, are debited in or on the
reverse of said scrip and the scrip holder is permitted to avail of CENVAT credit of the duties debited in the scrip. In view of these
provisions it has been clarified that such debit of duty in these scrips shall be treated as payment of duty for the purpose of
determining the applicability of rule 6 of the CENVAT Credit Rules, 2004. The clearance of excisable goods against such specified
duty credit scrips cannot be considered as clearances of exempted goods and therefore, the provisions regarding payment of
amount under rule 6(3) of the CENVAT Credit Rules, 2004 will not apply in such a case.
[Circular No. 973/07/2013-CX dated 04.09.2013]
CER 2002
(3) Exemption from registration
(i) Exempts From Registration under sub-rule (1) of rule 9 of said rules, unregistered premises used
solely for affixing a sticker or re-printing or re-labeling or re-packing OF
PHARMACEUTICAL PRODUCTS falling under Chapter 30 of the First Schedule to the Central Excise
Tariff Act, 1985 with lower ceiling price to comply with the notifications issued by the National
Pharmaceutical Pricing Authority under Drugs (Prices Control) Order, 2013 subject to the conditions
specified in the notification no. 22/2013 exempting the pharmaceutical products from payment of
Central Excise duty.
Author note- As per Durg price control orde prices of medicines were decreased and 45 days were given to decrease the prices to
existing manufacturers/ traders selling medicines, for this purpose drug-makers has to re-print/ relabel or re-pack the medicine
which has already been removed. And these processes are treated as deemed-manufacture in sec 2(f)(iii) of CEA 1944. So CG
firstly exempted duty on these processes due to DPCO 2013 and secondly exempted the unregistered premises where these
processes will be done.
(ii) where a godown or retail outlet of a Duty Free Shop is appointed or licensed under the provisions
of sections 57 or 58 of the Customs Act, 1962, as the case may be, Such Godown Or Retail Outlet
Shall Be Deemed To Be Registered As Warehouse under rule 9 of the Central Excise Rules, 2002.
EALIER only foreign goods were sold in Duty Free Shops located in the International Airports. Now domestic
goods also available and excise duty exempted on sale of goods manufactured in India sent to duty free
shops (DFS). Therefore, now a passenger arriving from abroad shall have the choice to buy either duty-free
imported goods or duty-free indigenous goods within his overall permissible baggage allowance
Offences and penalties
(4)
Sec 9 of CEA
Offences
Whoever commits any of the following offences:1. contravenes any provisions of registration or transit of goods of the act or rules [ 9(1)(a) ] = [NC + B]
2. evades payment of any duty payable [ 9(1)(b) ] = [C +N B – IF DUTY > 50 L ]
3. removes any excisable goods in contravention of the provisions or rules [ 9(1)(bb) ] = [NC + B]
MANOJ BATRA
www.camanojbatra.com
~ 83 ~
4. acquires possession of or in any way concerns himself in transporting, depositing, keeping, concealing, selling or
purchasing or in any other manner deals with any excisable goods which he knows or has reason to believe are
liable to confiscation. [ 9(1)(bbb) ] = [NC + B]
5. contravenes any of the provisions of credit of any duty allowed to be utilized [ 9(1)(bbbb) ] [C +N B – IF DUTY > 50
L]
6. fails to supply any information which he is required to supply or(unless with a reasonable belief the burden of
proving which shall be upon him, that the information supplied by him is true) supplies false information. [ 9(1)(c) ]
= [NC + B]
7. attempts to commit, or abets the commission of any of the offences [ 9(1)(d) ] = [NC + B]
* NC = NON-COGNISABLE , * B = BAILABLE , * C = COGNISABLE, * NB = NON-BAILABLE
Punishment for the first time
DUTY LEVIABLE ON EXCISABLE GOODS
Up to 30 50 lakh [F.ACT 2013]
PUNISHMENT
imprisonment up to 3 years or with fine or With both
Exceeding 30 50 lakh [F.ACT 2013]
imprisonment which may extend to 7 years And with fine.
NOTE- Such imprisonment shall not be for a term of less than 6 months except in
case of special and adequate reasons to be recorded in the judgement of the court
Punishment for subsequent offences
If any person is again convicted of any offence, then he shall be punishable for the second and for every subsequent
offence with imprisonment upto 7 years and fine
Such imprisonment shall not be for a term of less than 6 months EXCEPT IN CASE OF SPECIAL AND ADEQUATE
REASONS to be recorded in the judgement of the court.
Reasons not to considered special and adequate
The following shall not be considered as special and adequate reasons for awarding imprisonment of less than 6
months
1. that the accused has been convicted for the first time under this act.
2. that the accused has been ordered to pay penalty or the goods has been confiscated or any other action has taken
against him for the same act.
3. that the accused was not the principal offender and was acting merely as a carrier of goods or otherwise was a
secondary party in the commission of the offence.
4. the age of accused.
AUTHOR NOTE- LIMIT OF 30 LAKH INCREASED TO 50 LAKH
(5) OFFENCES INVOLVING EVASION OF DUTY EXCEEDING `50 LAKH TO ATTRACT 7 YEARS
IMPRISONMENT AND FINE INSTEAD OF EARLIER `30 LAKH [Sub-clause (C) and (D) of
section 135(1)(i)]
Section 135 stipulates the penal provisions applicable to a person who has committed any of the offences specified therein
(hereafter referred to as offender).
MANOJ BATRA
www.camanojbatra.com
~ 84 ~
BEFORE AMENDMENT
Earlier, such an offender was punishable with an imprisonment for a term which may extend upto 7 years and with fine in case of
an offence relating to:(i) evasion or attempted evasion of duty exceeding `30 lakh or
(ii) fraudulently availing of or attempting to avail of drawback or any exemption from duty provided under the Customs Act in
connection with export of goods, if the amount of drawback or exemption from duty exceeds `30 lakh.
AFTER AMENDMENT
The said monetary limit has been increased from `30 lakh to `50 lakh. Thus, now the offender would be punishable with an
imprisonment upto 7 years and with fine in case the evasion or attempted evasion of duty exceeds `50 lakh or in case of fraudulent
availment of or attempt to avail the drawback or any exemption from duty for export of goods, the amount of drawback or
exemption from duty exceeds `50 lakh.
[Effective from 10.05.2013]
Cognizable Offence
A cognizable offence is a criminal offence in which the police is empowered to register an FIR, investigate, and arrest
an accused without a court issued warrant
Non-cognizable Offence
A non-cognizable offence is an offence in which police can neither register an FIR, investigate, nor effect arrest
without the express permission or directions from the court.
Bailable Offence
A bailable offence is a criminal offence in which the accused shall be offered to be released on suitable bail upon his
arrest by the police or the court informing about his right to be so released.
Non -bailable Offence
A non-bailable offence is an offence in which the accused person shall not be automatically entitled to be released
on bail. However, it does not mean that the court may not order him to be released on a suitable bail - with or
without any conditions
(6) Certain offences to be non-cognisable
-- Sec 9A
1) Offences u/s 9 shall be deemed to be non-cognisable i.e arrest of a person can be made with an arrest
warrant only and there can be no arrest without warrant.
“(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, offences under section 9,
EXCEPT THE OFFENCES REFERRED TO IN SUB-SECTION (1A), shall be non-cognizable within the meaning of that
Code.
(1A) The offences relating to excisable goods where the duty leviable thereon under this Act EXCEEDS 50 LAKH
RUPEES and punishable under clause (b) or clause (bbbb) of sub-section (1) of section 9, SHALL BE COGNIZABLE AND
NON-BAILABLE.”
2) any offence, either before or after the institution of prosecution, be compounded by the chief
commissioner on payment of such compounding amount and in such manner of compounding as may be
prescribed.
MANOJ BATRA
www.camanojbatra.com
~ 85 ~
Provided that nothing contained in this sub-section shall apply to —
a) a person who has been allowed to compound once in respect of any of the offences under the
provisions of clause (a), (b), (bb), (bbb), (bbbb) or (c) of sub-section (1) of section 9;
b) a person who has been accused of committing an offence under this Act which is also an offence
under the Narcotic Drugs and Psychotropic Substances Act, 1985;
c)
a person who has been allowed to compound once in respect of any offence under this Chapter
for goods of value exceeding rupees 1 crore;
d) a person who has been convicted by the court under this Act on or after the 30th day of
December, 2005.”
AUTHOR NOTEFollowing 2 offences have been made cognizable and non-bailable if the duty liability exceeds ` 50 lakh :(i) Evasion of payment of duty
(ii) Contravention of any of Central Excise provisions in relation to credit of any duty allowed to be utilized towards
payment of excise duty.
(7) SECTION 20. Procedure to be followed by officer-in-charge of police station.—
The officer-in-charge of a police station to whom any person is forwarded under section 19 [shall, where the
offence is non-cognizable, either admit him] to bail to appear before the Magistrate having jurisdiction, or in
default of bail forward him in custody to such Magistrate
AUTHOR NOTE- The Finance Act, 2013 has amended section 20 to provide that a person can be admitted to bail by
an officer-in-charge of the police station only in respect of an offence which is non-cognizable. Similar amendment
has been made under section 21 whereby the provisions relating to release of arrested persons on bail or personal
bond by the nearest Central Excise Officer have been made applicable only to non-cognizable offences
(8) SECTION 21. Inquiry how to be made by Central Excise Officers against arrested
persons forwarded to them under section 19. —
(1) When any person is forwarded under section 19 to a Central Excise Officer empowered to send persons so
arrested to a Magistrate, the Central Excise Officer shall proceed to enquire into the charge against him.
(2) For this purpose the Central Excise Officer may exercise the same powers and shall be subject to the same
provisions as the officer-in-charge of a police station may exercise and is subject to under the Code of Criminal
Procedure, 1898 (5 of 1898), when investigating a cognizable case :
Provided that —
(a) if the Central Excise Officer is of opinion that there is sufficient evidence or reasonable ground of suspicion
against the accused person, he [shall, where the offence is non-cognizable, either admit him] to bail to appear
before a Magistrate having jurisdiction in the case, or forward him in custody to such Magistrate;
(b) if it appears to the Central Excise Officer that there is not sufficient evidence or reasonable ground of suspicion
against the accused person [in respect of offence which is non-cognizable], he shall release the accused person on
his executing a bond, with or without sureties as the Central Excise Officer may direct, to appear, if and when so
required, before the Magistrate having jurisdiction, and shall make a full report of all the particulars of the case to
his official superior.
MANOJ BATRA
www.camanojbatra.com
~ 86 ~
(9) Guidelines for arrest and bail under the Central Excise Act, 1944
In view of the amendments made in sections 9A, 20 and 21 of the Central Excise Act, 1944 vide the Finance Act, 2013, certain
offences have been made cognizable and nonbailable. The following significant guidelines have been issued by CBEC vide
Circular No. 974/08/2013 CX dated 17.09.2013 with regard to implementation of arrest and bail provisions under the
amended central excise law:
(i) A person can be arrested for both bailable and non-bailable offences. Since arrest takes away the liberty of an individual, the
power must be exercised with utmost care and caution and only when the exigencies of the situation demand arrest.
(ii) Decision to arrest needs to be taken on case-to-case basis considering various factors, such as, nature & gravity of offence,
quantum of duty evaded or credit wrongfully availed, nature & quality of evidence, possibility of evidences being tampered with
or witnesses being influenced, cooperation with the investigation, etc. Thus, power to arrest has to be exercised after careful
consideration of the facts of the case and the above factors.
(iii) A person can be arrested for non-bailable offence only when the offence committed by him is covered under clause (b) or
clause (bbbb) of sub-section 9(1) and the duty involvement exceeds Rs. 50 lakh. Any person arrested for offences under these
(iv) clauses should be informed of the grounds of arrest and produced before a magistrate without unnecessary delay and within
24 hours of arrest.
a. In respect of the following non-bailable offences, decision to arrest may be taken by the Commissioner:
(a) clandestine removal of manufactured goods;
(b) removal of goods without declaring the correct assessable value and receiving a portion of sale price in cash which is in
excess of invoice price and not accounted for in the books of account;
(c) taking CENVAT credit without receiving the goods specified in the invoice;
(d) taking CENVAT credit on fake invoices;
(e) issuing Cenvatable invoices without delivering the goods specified in the said invoice.
(v) In all other cases of cognizable and non-bailable offences, not referred above, the decision to arrest shall be taken by the
Commissioner only with the approval of the jurisdictional Chief Commissioner. Examples of such cases are:
(a) removal of inputs as such, without reflecting such removal in records, on which CENVAT credit has been taken, without
payment of amount equal to the credit availed on such inputs
(b) irregular and wrongful availment of benefit of central excise duty exemption by reason of fraud, collusion, willful
misstatement, suppression of facts, or contravention of the provisions of the Act or the rules with intent to evade payment
of duty, etc.
(vi) Chief Commissioners/ Commissioners of Central Excise are required to ensure that approval for arrest for non-bailable offence
is granted only where the intent to evade duty is evident and element of mens rea/guilty mind is palpable.
(vii) Any person arrested for non-cognizable and bailable offence shall have to be released on bail, if he offers bail, and in case of
default of bail, he is to be forwarded to the custody of magistrate. In terms of Notification no 9/99-C.E.(N.T.) dated 10-2-99, an
officer not below the rank of Superintendent of Central Excise can exercise powers under section 21 including powers to grant
bail.
(viii) Bail should be subject to the condition(s), as deemed fit, depending upon the facts and circumstances of each individual case.
It has to be ensured that the amount of bail bond/ surety should not be excessive and should be commensurate with the
financial status of the arrested person. Further the bail conditions should be informed by the arresting officer in writing to the
person arrested and also informed on telephone to the nominated person of the person(s) arrested. Arrested person should be
allowed to talk to the nominated person.
(ix) If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail.
(x) The arresting officer may, and shall if such a person is indigent and unable to furnish surety, instead of taking bail, discharge
him on executing a bond without sureties to his appearance as provided under section 436 of Cr PC. However, in cases where
the conditions for granting bail are not fulfilled, the arrested person shall be produced before the appropriate magistrate within
24 hours of arrest.
(xi) Only in the event of circumstances preventing the production of the person arrested before a Magistrate without unnecessary
delay, the arrested person may be handed over to nearest Police Station for his safe custody during night, under proper
Challan and produced before the magistrate the next day. These provisions shall apply for non-bailable offence also. The
nominated person of the arrested person may also be informed accordingly.
MANOJ BATRA
www.camanojbatra.com
~ 87 ~
COMMON TOPIC
(1) SEC 11A(7A)
Notwithstanding anything contained in sub-section (1) or sub-section (3) or sub-section (4) or sub-section (5), the
CEO may, serve, subsequent to any notice or notices served under any of those sub-sections, as the case
may be, a statement, containing the details of duty of central excise not levied or paid or short-levied or
short-paid or erroneously refunded for the subsequent period, on the person chargeable to duty of central
excise, then, service of such statement shall be deemed to be service of notice on such person under the
aforesaid sub-section (1) or sub-section (3) or sub-section (4) or sub-section (5), subject to the condition that
the grounds relied upon for the subsequent period are the same as are mentioned in the earlier notice or
notices.]
Where any appellate authority or Tribunal or court concludes that the notice issued under sub-section (4) is not
sustainable for the reason that the charges of FRAUD or collusion or any wilful mis-statement or suppression of
facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade
payment of duty has not been established against the person to whom the notice was issued, the Central Excise
Officer shall determine the duty of excise payable by such person for the period of 1 year, deeming as if the
notice were issued under clause (a) of sub-section (1).
(2) SECTION 37C - SERVICE OF DECISIONS, ORDERS, SUMMONS OR NOTICES ETC.
(1) Any decision or order passed or any summons or notices issued under this Act or the rules made there under,
shall be served,
(a) by tendering(hand delivery) the decision, order, summons or notice, or
sending it by registered post with
acknowledgment due, [or by speed post with proof of delivery or
by courier approved by the Central Board of Excise and Customs constituted under the Central Boards of
Revenue Act, 1963] to the person for whom it is intended or his authorized agent;
(b) if the decision etc. cannot be served in the manner provided in clause (a),
Bv Affixing A Copy thereof to some conspicuous part of the factory or warehouse or other place of business
or usual place of residence of the person;
(c) if the decision etc. cannot be served in the manner provided in clauses (a) and (b), by affixing a copy thereof
on the notice board of the officer who passed such decision or order or issued such summons or notice.
(2) Every decision or order passed or any summons or notice issued, shall be deemed to have been served on the
date on which the decision, order, summons or notice is tendered or delivered by post [or courier referred to in
sub-section (1)] or a copy thereof is affixed in the manner provided in sub-section (1).
REFUSAL TO ACCEPT NOTICE IS DUE SERVICE OF NOTICE.
Que- whether SCN Can be served through Courier- No [Nirmal Products (2010)(Tri)]
Author note- Speed post with proof of delivery or courier approved by the CBEC will also be the authorized modes of
delivery of any decision or order or any summons or notices.
MANOJ BATRA
www.camanojbatra.com
~ 88 ~
(3) RECOVERY OF SUMS DUE TO GOVT. SEC 11
(1) In respect of duty and any other sums of any kind payable to the CG under any of the provisions of this Act or of
the rules made thereunder [including the amount required to be paid to the credit of the CG u/s 11D], the officer
empowered by the CBEC to levy such duty or require the payment of such sums
 [MAY DEDUCT or REQUIRE ANY OTHER CEO or a PROPER OFFICER referred to in section 142 of the
Customs Act, 1962 TO DEDUCT the amount so payable from any money owing to the person from
whom such sums may be recoverable or due which may be in his hands or under his disposal or
control or may be in the hands or under disposal or control of such other officer, or
 MAY RECOVER THE AMOUNT By Attachment And Sale Of Excisable Goods belonging to such person; and
if the amount payable is not so recovered,
 he may PREPARE A CERTIFICATE SIGNED BY HIM SPECIFYING THE AMOUNT DUE from the person liable
to pay the same and SEND IT TO THE COLLECTOR OF THE DISTRICT in which such person resides or
conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from
the said person the amount specified therein as if it were an arrear of land revenue :
RECOVERY FROM SUCESSOR OF BUSINESS
[Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of
any kind, as specified in this section, is recoverable or due,
 TRANSFERS OR OTHERWISE DISPOSES OF HIS BUSINESS or trade in whole or in part, or effects any
change in the ownership thereof, in consequence of
 WHICH HE IS SUCCEEDED in such business or trade BY ANY OTHER PERSON,
All excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the
custody or possession of the person so succeeding may
 also be attached and sold by such officer empowered by the CBEC, after obtaining written approval from
the CCE,
 for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the
time of such transfer or otherwise disposal or change.]
(2) GARNISHEE PROCEEDING
(i) The CEO may, BY A NOTICE in writing, REQUIRE ANY OTHER PERSON from whom money is due to such
person, or may become due to such person, or who holds or may subsequently hold money for or on
account of such person, TO PAY TO THE CREDIT OF THE CG either forthwith upon the money becoming
due or being held, or at or within the time specified in the notice, not being before the money becomes
due or is held, so much of the money as is sufficient to pay the amount due from such person or the
whole of the money when it is equal to or less than that amount;
(ii) Every person to whom a notice is issued under this sub-section
 shall be bound to comply with such notice, and in particular,
MANOJ BATRA
www.camanojbatra.com
~ 89 ~
Where any such notice is issued to a post office, banking company or an insurer,
 IT SHALL NOT BE NECESSARY to produce any pass book, deposit receipt, policy or any other
document
 for the purpose of any entry, endorsement or the like being made before payment is made,
notwithstanding any rule, practice or requirement to the contrary;
(iii) in a case where the person to whom a notice under this sub-section has been
 issued, FAILS TO MAKE THE PAYMENT in pursuance thereof to the Central Government,
 he shall be DEEMED TO BE A PERSON FROM WHOM DUTY AND ANY OTHER SUMS OF ANY KIND
PAYABLE to the Central Government under any of the provisions of this Act or the rules made
thereunder have become due,
 in respect of the amount specified in the notice and all the consequences under this Act shall follow.]
ANALYSIS OF AMENDMENT

Powers of recovery of excise duty may be extended to a Central Excise Officer/ proper officer authorised
section 142 of the Customs Act also.
• Money due to the Government may now be recovered from any person other than from whom money is due
after giving proper notice, if that other person holds money for/on account of the first person.
(4) Money due to the Government may now be recovered from any person other than from
whom money is due after giving proper notice, if that other person holds money for/on
account of the first person - Garnishee Proceedings [New clause (d) inserted to section
142(1)]
New clause (d) inserted to section 142(1) empowers the Proper Officer to recover the monies due to the Government from any
person other than from whom money is due, if that other person holds money for/on account of the first person. The procedure for
the same is as under:(i) Issuance of the notice for recovery to any person other than from whom money is due: The Proper Officer may issue a
written recovery notice to the following persons:
• any person from whom money is due to such person
• any person from whom money may become due to such person
• any person who holds money for or on account of such person
• any person who may subsequently hold money for or on account of such person.
The noticee would be required to pay to the credit of the Central Government so much of the money as is sufficient to pay the
amount due from such person or the whole of the money when it is equal to or less than that amount.
The money would be paid either forthwith upon the same becoming due or being held, or at or within the time specified in the
notice. However, in no case the money would be required to be paid before the same becomes due or is held.
(ii) Noticee bound to comply with the notice: Every person to whom a notice is issued under this sub-section shall be bound to
comply with such notice. In case any such notice is issued to a post office, banking company or an insurer, it shall not be
necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or
the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary.
(iii) In case of failure to make the payment, the noticee deemed to be the assessee in default: In a case where the person to
whom a notice under this sub-section has been issued, fails to make the payment, he shall be deemed to be a defaulter in respect
MANOJ BATRA
www.camanojbatra.com
~ 90 ~
of the amount specified in the notice. Therefore, all the consequences prescribed for assessee in default would apply for such
other person as well.
[Effective from 10.05.2013]
(5) SECTION 11DDA.PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES.
(1) Where, during the Pendency Of Any Proceedings
 under section 11A or section 11D,
 the CEO is of the opinion
 that for the purpose of protecting the interest of revenue,
 it is necessary so to do,
He may, with the previous approval of the Commissioner of Central Excise, by order in writing,
 attach provisionally any property belonging to the person
 on whom notice is served under sub section (1) of (F.Act 2013) Sec 11A or sub-section (2) of sec 11D,
(2) Every such provisional attachment shall cease to have effect after the expiry of 6 months from the date of the
order made under sub-section (1) :
Provided that the Chief CCE may, for reasons to be recorded in writing, extend the aforesaid period by such
further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case
exceed 2 years :
Provided further that where an application for settlement of case under section 32E is made to the Settlement
Commission, the period commencing from the date on which such application is made and ending with the date
on which an order under sub-section (1) of section 32F is made shall be excluded from the period specified in the
preceding proviso.
ANALYSIS OF AMENDMENT BY F.ACT 2013
BEFORE AMENDMENT
Earlier, a CEO could provisionally attach the property belonging to only such person on whom notice had
been served under sub-section (1) of section 11A. Thus, in respect of notices issued under other sub-sections
of section 11A namely, sub-section (3), or (4) or (5), provisional attachment of property could not be
ordered.
AFTER AMENDMENT
Central Excise Officer has been empowered to attach the property belonging to person on whom notice is
served under ANY sub-section of section 11A.
MANOJ BATRA
www.camanojbatra.com
~ 91 ~
(6) SECTION [28BA. Provisional attachment to protect revenue in certain cases. –
(1) Where, during the pendency of any proceeding under section 28 [or section 28AAA or section 28B], the proper
officer is of the opinion that for the purpose of protecting the interests of revenue, it is necessary so to do, he
may, with the previous approval of the Commissioner of Customs, by order in writing, attach provisionally any
property belonging to the person on whom notice is served under sub-section (1) of section 28 or sub-section (4)
of section 28 [f act 2013] [or sub-section (3) of section 28AAA or sub-section (2) of section 28B], as the case may be,
in accordance with the rules made in this behalf under section 142.
ANALYSIS OF AMENDMENT
Proper officer empowered to provisionally attach the property in case of non-payment of customs duty or
interest thereon on account of fraud, collusion, suppression of facts etc. as well.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of 6 months from the
date of the order made under sub-section (1) :
Provided that the Chief Commissioner of Customs may, for reasons to be recorded in writing, extend the
aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension
shall not in any case exceed two years :
Provided further that where an application for settlement of case under section 127B is made to the Settlement
Commission, the period commencing from the date on which such application is made and ending with the date
on which an order under sub-section (1) of section 127C is made shall be excluded from the period specified in
the preceding proviso.]
ASSESSMENT UNDER SERVICE TAX
(7) SECTION [73. RECOVERY OF SERVICE TAX NOT LEVIED OR PAID OR SHORT-LEVIED OR
SHORT-PAID OR ERRONEOUSLY REFUNDED.
73(1) – FROM F.act 2012 SCN can be served within 18 month from the Relevant date (earlier this period was 1 year)
“(1A) Notwithstanding anything contained in sub-section (1) (except the period of 18 months of serving the
notice for recovery of service tax), the Central Excise Officer may serve, subsequent to any notice or notices
served under that sub-section, a statement, containing the details of service tax not levied or paid or short levied
or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then,
service of such statement shall be deemed to be service of notice on such person, subject to the condition that the
grounds relied upon for the subsequent period are same as are mentioned in the earlier notices.”;F ACT 2012
[(2A) Where any appellate authority or tribunal or court concludes that the notice issued under the proviso to subsection (1) is not sustainable for the reason that the charge of,—
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
MANOJ BATRA
www.camanojbatra.com
~ 92 ~
(e) contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade
payment of service tax,
has not been established against the person chargeable with the service tax, to whom the notice was issued, the
Central Excise Officer shall determine the service tax payable by such person for the period of 18 months, as if the
notice was issued for the offences for which limitation of 18 months applies under sub-section (1).]
(8) SEC 27(1) OF CUSTOM ACT 1962
Third proviso inserted in section 27(1)
There would be no refund if the amount of customs duty involved is less than ` 100.
(9) SEC 28`(1) OF CUSTOM ACT 1962
Proviso inserted in section 28(1)
There would be no recovery of the customs duty if the amount of customs duty involved is less than ` 100.
Advance ruling
(10)
MEANING OF ADVANCE RULING- [SEC 23A (B)]-
CEA 1944
It means determination by the authority of a question of law or fact
 specified in the application

regarding the liability to pay duty,
 in relation to the activity proposed to be undertaken by the applicant
Note-Activity in case of Excise (production/manufacture), custom(import, export) service tax (liability to pay service
tax)
FOR EXCISE- “Activity” means production or manufacture of goods and includes any new business of production or
manufacture proposed to be undertaken by the existing producer or manufacturer, as the case may be;](F.Act 2013)
FOR CUSTOM - “activity” means import or export and includes any new business of import or export proposed to be
undertaken by the existing importer or exporter, as the case may be;’
(11)
SEC 23C
Advance ruling can also be sought on the issue of admissibility of credit of service tax paid or deemed to have been paid.
APPEALS
(12)
APPEAL TO CESTAT- PASSING OF ORDER-- 35C(2A)
The tribunal shall where it is possible to do so
 Decide every appeal within 3 years
 From the date on which such appeal is filed
Provided that where an order of stay is made in any proceeding relating to an appeal filed under sub-section (1) of
MANOJ BATRA
www.camanojbatra.com
~ 93 ~
section 35B, the Appellate Tribunal shall dispose of the appeal within a period of 180 days from the date of such
order :
Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order
shall, on the expiry of that period, stand vacated.].
Provided also that where such appeal is not disposed of within the period specified in the first proviso, the Appellate
Tribunal may, on an application made in this behalf by a party and on being satisfied that the delay in disposing of
the appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit, not
exceeding 185 days, and in case the appeal is not so disposed of within the total period of 365 days from the date of
order referred to in the first proviso, the stay order shall, on the expiry of the said period, stand vacated.]
The appellant tribunal shall send a copy of order to commissioner and assessee.
AUTHOR NOTE- Similar provision has been made in custom in sec 129 B (2A) for extension of stay for Appeal in CESTAT.
(13)
SECTION 35D. Procedure of Appellate Tribunal. —
(1) The provisions of sub-sections (1), (2), (5) and (6) of section 129C of the Customs Act, 1962 (52 of 1962), shall
apply to the Appellate Tribunal in the discharge of its functions under this Act as they apply to it in the discharge
of its functions under the Customs Act, 1962.
(2) [*
*
*]
(3) The President or any other member of the Appellate Tribunal authorised in this behalf by the President may,
sitting singly, dispose of any case which has been allotted to the Bench of which he is a member where —
 in any disputed case, other than a case where the determination of any question having a relation to the
rate of duty of excise or to the value of goods for purposes of assessment is in issue or is one of the points in
issue, the difference in duty involved or the duty involved; or
 the amount of fine or penalty involved, does not exceed [50 lakh rupees].
Author note- Monetary limit of the Single Bench of the CESTAT to hear and dispose of appeals has been enhanced from ` 10 lakh
to ` 50 lakh.
(14)
Monetary limit of the Single Bench of the Tribunal to hear and dispose of appeals
enhanced from ` 10 lakh to ` 50 lakh [Section 129C(4)]
Before amendment
Earlier, single bench of CESTAT could hear and dispose of appeals where:(i) the value of the goods confiscated without option having been given to the owner of the goods to pay a fine in lieu of
confiscation under Section 125;
(ii) in any other disputed case other than case of determination of any question relating to the rate of duty of customs or to
the value of goods for the purpose of assessment is in issue or is one of the points in issue the difference in duty involved
or the duty involved; or
(iii) the amount of fine or penalty involved
was upto `10 lakh [Section 129C(4)].
After amendment
The Finance Act, 2013 has amended section 129C(4) to enhance this monetary limit to ` 50 lakh.
[Effective from 10.05.2013]
MANOJ BATRA
www.camanojbatra.com
~ 94 ~
(15)
TRIBUNAL EMPOWERED TO CONDONE THE DELAY IN FILING OF AN APPEAL BY THE ASSESSEE [SECTION
86(5)]
Before amendment
Hitherto, section 86(5) of the Finance Act, 1994 empowered the Appellate Tribunal to admit an appeal filed by the Commissioner of
Central Excise or a Central Excise Officer following the direction of Committee of Chief Commissioners of Central Excise or
Committee of Commissioners of Central Excise respectively after the expiry of the statutory period (4 months) for filing the same, if
it was satisfied that there was sufficient cause for not presenting it within that period.
Similarly, the Tribunal also had the powers to permit the filing of a memorandum of cross-objections by the Commissioner/ Central
Excise Officer/ assessee after the expiry of the statutory period (45 days) for filing the same, if it is satisfied that there was sufficient
cause for not presenting it within that period.
Thus, there was no provision enabling the Tribunal to condone the delay in filing of an appeal by the assessee.
After amendment
The Finance Act, 2013 has amended section 86(5) so as to empower the Appellate Tribunal to also admit an appeal filed by the
assessee after the expiry of the statutory period for filing the same, i.e., 4 months if it is satisfied that there was sufficient cause for
not presenting it within that period.
CUSTOM
(1) Central Government empowered to prohibit the importation/exportation of goods for protection of "designs and
geographical indications" also [Section 11(2)(n)]
Section 11(1) of the Customs Act, 1962 empowers the Central Government to prohibit either absolutely or conditionally the import
or export of specified goods, for any of the purposes enumerated in various clauses of sub-section (2).
Clause (n) of section 11(2) provided that importation/exportation of goods may be prohibited for the protection of patents,
trademarks and copyrights.
The Finance Act, 2013 has expanded the scope of clause (n) to include designs and geographical indications so as to provide
for protection of these legal rights also. Consequently, Central Government can now prohibit the import/export of specified goods
for protection of designs and geographical indications also apart from patents, trademarks and copyrights.
[Effective from 10.05.2013]
(2) SECTION 29 CALLING OR LANDING AT CUSTOM PORT/AIRPORT ONLY
(1) The person-in-charge of a vessel or an aircraft entering India from any place outside India shall NOT CAUSE or
permit the vessel or aircraft to call or land
(a) for the first time after arrival in India or
(b) at any time while it is carrying passengers or cargo brought in that vessel or aircraft
at any place other than a custom port or a customs airport as the case may be [, UNLESS PERMITTED BY THE
BOARD].
AUTHOR NOTE- The Finance Act, 2013 has amended section 29(1) to empower CBEC to permit landing of vessels and
aircrafts at any place other than customs port or customs airport.
(3) ELECTRONIC FILING OF IMPORT/EXPORT MANIFEST MANDATORY EXCEPT IN CASES ALLOWED
BY COMMISSIONER OF CUSTOMS [SECTION 30(1) & SECTION 41(1)]
Before amendment
Earlier, the person-in-charge was required to deliver the import/export manifest to the proper officer manually.
After amendment
MANOJ BATRA
www.camanojbatra.com
~ 95 ~
Section 30(1) and section 41(1) have been amended vide the Finance Act, 2013 to provide for the mandatory electronic filing of
the import manifest and export manifest respectively. However, in cases where it is not feasible to deliver import/export manifest by
presenting them electronically, the Commissioner of Customs may, allow the same to be delivered in any other manner.
[Effective from 10.05.2013]
(4) CLEARANCE OF GOODS FOR HOME CONSUMPTION SECTION 47
(i) if the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer
has Paid The Import Duty, the proper officer may make an order permitting clearance of the goods for home consumption.
(ii) if importer fails to pay the import duty within 5 [2] days(excluding holidays)
from the date on which the bill of entry is returned to him for payment of duty, he shall pay interest at
prescribed rate. (presently %)
Author noteThe Finance Act, 2013 has amended section 47(2) so as to reduce the interest free period for payment of import duty from 5 days
to 2 days.
(5) STORAGE OF IMPORTED GOODS IN WAREHOUSE PENDING CLEARANCE: (SEC_49)
WAREHOUSING WITHOUT WAREHOUSING
(1) if the imported goods whether dutiable or not are entered for home consumption
the [AC or DC] is satisfied on the application of the importer that the goods cannot be cleared within a
reasonable time, the goods may, pending clearance, [be permitted to be stored for a period not exceeding 30
days in a public warehouse], or in a private warehouse if facilities for deposit in a public warehouse are not
available; but such goods shall not be deemed to be warehoused goods for the purposes of this Act, and
accordingly the provisions of warehousing shall not apply to such goods
[Provided that the Commissioner of Customs may extend the period of storage for a further period not
exceeding thirty days at a time.]
Author NoteEarlier, no time-period had been specified under section 49 for which imported goods could be stored in a warehouse
(6) EXPORT OF WAREHOUSED GOODS WITHOUT PAYMENT OF IMPORT DUTY ALLOWED ON
PRESENTING POSTAL EXPORT DOCUMENTS ALSO [Section 69(1)(a)]
As per section 69(1)(a) of the Customs Act, 1962, any warehoused goods might be exported to a place outside India without
payment of import duty provided a shipping bill or a bill of export had been presented in respect of such goods in the prescribed
form.
This section had been amended to allow export of warehoused goods under postal export documents [as referred to in section 82]
also.
Note: In the case of goods exported by post, any label or declaration accompanying the goods, which contains the description,
quantity and value thereof, is deemed to be an entry for export
(7) SECTION 104.
POWER TO ARREST. –
(1)
If an officer of Customs empowered in this behalf by general or special order of the Commissioner of
Customs
MANOJ BATRA
www.camanojbatra.com
~ 96 ~
 has reason to believe that any person in India or within the Indian customs waters has
 committed an offence punishable under section 132 or section 133 or section 135 or section 135A or
section 136,
 he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.]
(2)
Every person arrested under sub-section (1) shall, without unnecessary delay, be taken to a magistrate.
(3)
Where an officer of customs has arrested any person under sub-section (1),
 he shall, for the purpose of releasing such person on bail or otherwise,
 have the same powers and be subject to the same provisions as the officer-in-charge of a policestation has and is subject to under the Code of Criminal Procedure, 1898 .
(4)
Notwithstanding anything contained in the Code of Criminal Procedure, 1898 , an offence under this Act
shall not be cognizable.
[(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973), any offence relating to —F.ACT
2012
(a) prohibited goods; or
(b) evasion or attempted evasion of duty exceeding fifty lakh rupees,
(c) shall be cognizable.
(5)
Save as otherwise provided in sub-section (4), all other offences under the Act shall be non-cognizable.F.ACT 2012
(6)
Notwithstanding anything contained in the Code of Criminal Procedure, 1973, an offence punishable under
section 135 relating to —
(a) evasion or attempted evasion of duty exceeding 50 lakh rupees; or
(b) prohibited goods notified under section 11 which are also notified under sub-clause (C) of clause (i) of
sub-section (1) of section 135; or
(c) import or export of any goods which have not been declared in accordance with the provisions of this
Act and the market price of which exceeds 1 crore rupees; or
(d) fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this
Act, if the amount of drawback or exemption from duty exceeds 50 lakh rupees,
(e) shall be non-bailable.
(7) Save as otherwise provided in sub-section (6), all other offences under this Act shall be bailable.]F.ACT 2013
AUTHOR NOTE- Certain specified offences IN SUB-SEC(6) have been made non-bailable. Rest of the offences would be
bailable as before.
MANOJ BATRA
www.camanojbatra.com
~ 97 ~
(8) Provisions of section 143A omitted
Section 143A providing option for duty deferment for adjustment of duty payable against drawback has been omitted.
[Effective from 10.05.2013]
(9) Removal of duty liability on any sample of goods consumed/destroyed during the course of testing/examination
[Section 144(3)]
Erstwhile position
Earlier, section 144(3) stipulated that no duty shall be chargeable on any sample of goods taken under this section which is
consumed or destroyed during the course of any test or examination thereof, if such duty amounts to ` 5 or more.
New position
The words “if such duty amounts to ` 5 or more” have been omitted from the aforesaid section. Consequently, there shall be no
duty liability on a sample of goods consumed/destroyed during the course of testing/examination.
[Effective from 10.05.2013]
(10) Change of nomenclature of “customs house agents” to “customs brokers” [Section 146 and section 146A(2)(b)]
Considering the global practice and internationally accepted nomenclature, nomenclature of “customs house agents”, wherever
used in the Customs Act, 1962, has been replaced with “customs brokers”. Consequently, reference to “customs house agents”, in
section 146 and 146A(2)(b) in the Customs Act, 1962, has been substituted with “customs brokers”.
[Effective from 10.05.2013]
(11)
Person who has committed offence under the Finance Act, 1994 also disqualified to act as authorized
representative [Section 146A(4)(b)]
Erstwhile position
Hitherto, any person who was convicted of an offence connected with any proceeding under the Customs Act, 1962, the Central
Excises and Salt Act, 1944, or the Gold (Control) Act, 1968 was disqualified from acting as an authorized representative in customs
matters.
New position
Clause (b) to section 146A(4) has been substituted with new clause (b) to provide that any person who was convicted of an offence
connected with any proceeding under the Customs Act, 1962, the Central Excise Act, 1944, or the Gold (Control) Act, 1968 or the
Finance Act, 1994 is disqualified from acting as an authorized representative in customs matters. Hence, a person convicted
under the Finance Act, 1994 has also been disqualified from acting as an authorized representative in customs matters.
[Effective from 10.05.2013]
(12)
Expansion of scope of liability of the owner/importer/exporter of any goods [Section 147(3)]
Section 147 stipulates that anything required to be done by the owner/importer/exporter of any goods can be done by his agent.
However, the owner/importer/exporter shall be liable for all the acts of his agent.
Further, agent would be deemed to be the owner/importer/exporter of such goods for the purposes of the Customs Act, 1962.
Finance Act, 2013 has amended sub-section (3) of section 147 to enhance the scope of the liability of agents of the
owner/importer/exporter of any goods. It now casts equal responsibility on agents for making correct self-assessment.
(13)
Drawback allowed on milk products and ceasin, caseinates etc. and disallowed on
wheat
Earlier, no drawback was allowed on milk products falling under headings 0401, 0402, 0403, 0404, 0405, 0406, rice falling under
heading 1006 and casein, caseinates and other casein derivatives; casein glues falling under heading 3501 of the Customs Tariff.
However, with effect from 21.09.2013, drawback will not be allowed only in respect of rice falling under heading 1006 and
wheat falling under heading 1001 of the Customs Tariff. In effect, drawback will
• be allowed in respect of milk products falling under the above-mentioned headings and ceasin, caseinates etc. falling under
heading 3501 (which was not allowed prior to 21.09.2013); and
• not be allowed on wheat falling under heading 1001 (which was allowed prior to 21.09.2013).
Rule 3 of the Central Excise Duties and Service Tax Drawback Rules, 1995 has been amended vide Notification No. 97/2013
Cus. (NT) dated 14.09.2013 to give effect to this amendment. Consequential amendments have been made in rule 6(4) and
rule 7(5) of the said rules.
MANOJ BATRA
www.camanojbatra.com
~ 98 ~
(14) Import of LCD/LED/Plasma TV as part of free baggage allowance disallowed
With effect from 26.08.2013, Annexure I to the Baggage Rules, 1988 which specifies the items that cannot be allowed duty
free clearance as part of free baggage allowance has been amended vide Notification No. 84/2013 Cus (NT) dated
19.08.2013 to include
Flat panel (LCD/LED/Plasma) Television therein.
Therefore, import of flat panel (LCD/LED/Plasma) television as part of free baggage allowance has been disallowed from August
26 and travelers bringing in LCD/LED/Plasma TV as part of baggage will have to pay customs duty at 36.05% (35% + 3%
education cesses).
(15)
Period of 90 days under section 61(2)(ii) of the Customs Act, 1962 commences from the date of
deposit of goods in the warehouse
Circular No. 39/2013 Cus dated 01.10.2013 has clarified that the period of 90 days, under section 61(2)(ii) of the
Customs Act, 1962 would commence from the date of deposit of goods in the warehouse.
As per section 61(2)(ii) of the Customs Act, 1962 where any warehoused goods (not intended for being used in 100% EOU)
remain in a warehouse beyond a period of ninety days, interest shall be payable for the period from the
expiry of the said ninety days till the date of payment of duty on the warehoused goods. Section 2(44) of the
Customs Act, 1962 defines ‘warehoused goods’ as ‘goods deposited in a warehouse’.
Thus, a harmonious reading of section 61(2)(ii) and section 2(44) indicates that when the goods deposited in a warehouse remain
warehoused beyond a period of ninety days, then the interest starts accruing. In other words, the relevant date when the period of
90 days would commence would be the date of depositing the goods in the warehouse.
(16)
Guidelines for arrest and bail under Customs Act, 1962
In view of the amendments made in section 104 of the Customs Act, 1962 vide Finance Act, 2013, offences punishable under
section 135 of the Act have been made as non-bailable. The following significant guidelines have been issued by CBEC vide
Circular No. 974/08/2013-CX dated 17.09.2013 with regard to implementation of arrest and bail provisions under the
amended customs law:
(i) Since arrest takes away the liberty of an individual, the power must be exercised with utmost care and caution in cases where a
Commissioner of Customs or Additional Director General has reason to believe on basis of information or suspicion that such
person has committed an offence under the Act punishable under the sections 132 or 133 or 135 or 135A or 136 of the Customs
Act, 1962.
(ii) The decision to arrest should be taken in cases which fulfil the requirement of the provisions of section 104(1) of Customs Act,
1962 and after considering the nature of offence, the role of the person involved and evidence available.
(iii) Persons involved should not be arrested unless the exigencies of certain situations demand their immediate arrest. These
situations may include circumstances:
(a) to ensure proper investigation of the offence;
(b) to prevent such person from absconding;
(c) cases involving organised smuggling of goods or evasion of customs duty by way of concealment;
(d) masterminds or key operators effecting proxy/benami imports/ exports in the name of dummy or non-existent persons/IECs, etc.
(iv) While the Act does not specify any value limits for exercising the powers of arrest, the same should be effected in respect of
bailable offence only in exceptional situations which may include :
(a) Outright smuggling of high value goods such as precious metal, restricted items or prohibited items or goods notified under
section 123 of the Customs Act, 1962 or foreign currency where the value of offending goods exceeds ` 20 lakh.
(b) In a case related to importation of trade goods (i.e. appraising cases) involving wilful mis-declaration in description of goods/
concealment of goods/goods covered under section 123 of Customs Act, 1962 with a view to import restricted or prohibited items
and where the CIF value of the offending goods exceeds ` 50 lakh.
(v) In every case of arrest effected in accordance with the provisions of section 104(1) of the Customs Act, 1962, there should be
immediate intimation to the jurisdictional Chief Commissioner or DGRI, as the case may be.
(vi) A person arrested for a non-bailable offence should be produced before concerned Magistrate without unnecessary delay
in terms of provisions of section 104(2) of the Act.
(vii) However, a Customs officer (arresting officer) is bound to offer release on bail to a person arrested in respect of bailable
offence and accept bail bond for bailable offence.
(vii) The guidelines relating to bail prescribed under central excise vide Circular No. 974/08/2013 CX dated 17.09.2013
(given above from nos. (viii) to no. (xi) under point 5 in Central Excise) will apply in relation to grating of bails under customs law as
well.
MANOJ BATRA
www.camanojbatra.com
~ 99 ~
SERVICE TAX
(1) “66BA. REFERENCE TO SECTION 66 TO BE CONSTRUED AS REFERENCE TO SECTION 66B. —
(1) For the purpose of levy and collection of service tax, any reference to section 66 in the Finance Act, 1994 (32 of
1994) or any other Act for the time being in force, shall be construed as reference to section 66B thereof.
[Retrospectively effective from July 1, 2012]
Analysis- Hence, reference to section 66 appearing in the Finance (No.2) Act, 2004 [in the context of education cess] and the
Finance Act, 2007 [in the context of secondary and higher education cess] will also be read as 66B, in accordance with this new
section.
(2) Describe the exemption to taxable service provided against issue of scrips under various schemes
of Government
Exemption to taxable services provided against issue of scrips under various schemes of Government
Notification No. 06/07/08/ 2013- ST dated 18-4-2013
(1) The CG has exemption the taxable services provided or agreed to be provided to the exporters located in taxable
territory being holder of the following scrips, issued by the Regional Authority ( authority under the Foreign Trade (
development and regulation ) act 1922) from whole of the service tax leviable under sec 66B of the Finance act
1994.
s. no
1
2
3
Name of scrip
Focus market duty credit scrip
Focus Product scheme duty credit scrip
Vishesh Krishi and Gram Udyog yojana duty
credit scrip
Paragraph of FTP
3.14 of FTP
3.15 of FTP
3.13.2 of FTP
(2) Exemption is allowed if such scrip is issued against exports to the countries notified the Government of India.
Further export of imported goods or exports made thorugh transhipment or export from SEZ or EOU or EHTP or
STPI or BTP or FTWZ or Deemed exports; or service exports; or third party exports; or exports of specified
products etc are not included for determination of eligible scrip amount
(3) Conditions to be complied with
a. Holder of scrip, to whome taxable service are provided agreed to be provided, shall be located in taxable
territory
b. Such holder of the scrip shall be entitled to avail the drawback or cenvat credit of the service tax, debited
in the scrip and validated by the jurisdictional central excise officer.
c. The said scrip, to be registered with the customs authority at the port of registration
d. Holder of the scrip may be the person to whom it was originally issued or may be a transferee holder.
e. Scrip holder shall present scrip to customs authority along with letter, invoice or challna, bill issued by
service provider, description and value of taxable service and service tax leviable, after which authority
shall debit the tax amount and update the necessary details on scrip and in their own records.
f. That the date of debit of service tax leviable, in the scrip, by the said customs authority shall be taken as
the date of payment of service tax
g. That in case point of taxation as per the POT Rules 2011 is prior to date of debit, the holder of the scrip
will be liable to pay interest.
h. In case the rate of tax determined in terms of rule 4 of the POT Rules 2011 is in excess of the rate of
service tax mentioned in the invoice, bill or challan, as the case may be the holder of the scrip shall pay
short-paid service tax along with interest, as the case may be.
i. All the documents shall be submitted within 30 days to jurisdictional central excise officer to shall verify
and validate it and keep the record of the same
j. The service provider shall keep a copy of the record of the verified scrip.
MANOJ BATRA
www.camanojbatra.com
~ 100 ~
(4) Any amount due to the CG under this notification shall be recoverable under the provisions of the F. Act 1994 and
the rules made thereunder.
(3) E/N SEZ EXEMPTION- Notification No. 12/2013
Exemption to taxable services received by unit or developer of Special Economic Zone
(1) All the services on which service tax is leviable under section 66B of the said Act, received by a unit located in
a Special Economic Zone (hereinafter referred to as SEZ Unit) or Developer of SEZ and used for the authorised
operation is exempt from the whole of the service tax, education cess, and secondary and higher education
cess leviable thereon.
REFUND ALLOWED
(2) The exemption shall be provided by way of refund of service tax paid on the specified services received by the
SEZ Unit or the Developer and used for the authorised operations :
Provided that where the specified services received by the SEZ Unit or the Developer are used exclusively for
the authorised operations, the person liable to pay service tax has the option not to pay the service tax ab
initio, subject to the conditions and procedure as stated below.
Where the specified services received by the SEZ unit or Developer are not exclusively used for authorised
operation, or (ii) the specified services on which ab initio exemption is admissible but not claimed, shall be
allowed subject to the following procedure and conditions, namely :(a)
the service tax paid on the specified services that are common to the authorised operation in an SEZ and
the operation in domestic tariff area [DTA unit(s)] shall be distributed amongst the SEZ Unit or the Developer and
the DTA unit (s) in the manner as prescribed in rule 7 of the Cenvat Credit Rules. For the purpose of distribution,
the turnover of the SEZ Unit or the Developer shall be taken as the turnover of authorised operation during the
relevant period.
(b)
the SEZ Unit or the Developer shall be entitled to refund of the service tax paid on (i) the specified services
on which ab-initio exemption is admissible but not claimed, and (ii) the amount distributed to it in terms of clause
(a).
(d)
the amount indicated in the invoice, bill or, as the case may be, challan, on the basis of which this refund is
being claimed, including the service tax payable thereon shall have been paid to the person liable to pay the
service tax thereon, or as the case may be, the amount of service tax payable under reverse charge shall have
been paid under the provisions of the said Act;
4. Where any sum of service tax paid on specified services is erroneously refunded for any reason whatsoever,
such service tax refunded shall be recoverable under the provisions of the said Act and the rules made
thereunder, as if it is recovery of service tax erroneously refunded :
5. Notwithstanding anything contained in this notification, SEZ Unit or the Developer shall have the option not to
avail of this exemption and instead take CENVAT credit on the specified services in accordance with the CENVAT
Credit Rules, 2004.
Basis
NN 40/2012
Services eligible for ab
initio exemption
Only specified services WHOLLY
CONSUMED WITHIN SEZ were
eligible for the ab initio
exemption. Further, the definition
of wholly consumed services,
linked with the Place of Provision
NN 12/2013
SUPERSEDED EARLIER NN-40/2012
Specified services received by the SEZ Unit
or the Developer used exclusively for the
authorized operations are eligible for the ab
initio exemption. Consequently, any
services used exclusively for the authorized
operations WHETHER PROVIDED WITHIN
MANOJ BATRA
www.camanojbatra.com
~ 101 ~
of Services Rules, 2012,
emphasized that the
specified services must be
provided only within SEZ.
SEZ OR OUTSIDE, will be eligible for
upfront exemption.
Refund of service tax paid
on the common services
shared between
authorized operations in
SEZ and its DTA
operations
Maximum refund was restricted
as under:Maximum refund
= ST × ET / TT
where
ST stands for service tax paid
on services other than wholly
consumed services (used for
both SEZ and DTA Unit)
ET stands for Export turnover
of goods and services of SEZ
Unit/Developer
TT stands for Total turnover for
the period
The service tax paid on the specified
services that are common to the authorized
operation in an SEZ and the operation in
domestic tariff area [DTA unit(s)] shall be
distributed amongst the SEZ Unit or the
Developer and the DTA unit(s) in the manner
as prescribed in rule 7 of the CENVAT Credit
Rules, 2004. For the purpose of distribution,
the turnover of the SEZ Unit or the
Developer shall be taken as the turnover of
authorized operation during the relevant
period. Such amount would be available as
refund.
Option not to avail the
exemption and instead take
CENVAT credit as usual
Earlier scheme did not
expressly provide for such an
option.
SEZ Unit/the Developer has an option not to
avail of this exemption and instead take
CENVAT credit on the specified services in
accordance with the CENVAT Credit Rules,
2004.
Availability of refund of
service tax on the specified
services on which abinitio exemption is
admissible but not claimed
Refund of service tax on the
specified services on which
abinitio exemption is admissible
but not claimed was not expressly
provided in the earlier
scheme.
The SEZ Unit or the Developer shall be
entitled to the refund of service tax on the
specified services on which ab-initio
exemption is admissible but not claimed.
Que- A unit in SEZ received services for authorized operation in SEZ
(1) Value of taxable service wholly consumed within SEZ – 4 lakh
(2) Value of taxable service not wholly consumed within SEZ – 5 lakh
(3) Value of shared services between SEZ and DTA units- 10 lakh
(4) Value of services used wholly for DTA units – 2 lakj
(5) Export turnover of SEZ – 80 lakh
(6) Total turnover- 100 lakh
Calculate service tax and refund allowed to SEZ UNIT.
SOLUTION
Taxable service wholly consumedTaxable service not wholly consumed – 5 lakh
Shared services
Services for DTA
total
Note – CCR ALLOWABLE =
Service tax
exempt
----123600
24720
Refund
-------------98880
------
MANOJ BATRA
www.camanojbatra.com
~ 102 ~
(4) Penalty for failure to take registration- sec 77
1) failure to take registration as per
Penalty which may extend to (a) Rs. 200 for
provisions of sec 69 or rules made under every day during which such failure continues
starting with the first day after the due date, till
this chapter
the date of actual compliance, or (b) Rs 10000
whichever is higher.
A Ltd. starts an advertising agency on April 1, 2013. The details of the bills raised by it during April to June, 2013 are given as
under:
Bil
Date
Value of taxable services (`)
1
2
3
4
5
6
7
8
9
10
05.04.2013
11.04.2013
18.04.2013
28.04.2013
13.05.2013
15.05.2013
30.05.2013
01.06.2013
17.06.2013
25.06.2013
82,500
95,000
1,65,000
95,000
2,75,000
1,68,000
1,07,000
82,500
89,500
47,600
l No
A Ltd. applies for registration on 22.08.2013. Is A Ltd. at any default? If yes, what are the penal
consequences?
Solution: Since A Ltd. has started its business in the year 2013-14, it would be entitled for small service
providers exemption available under Notification No. 33/2012 ST dated 20.06.2012. Thus, A Ltd. will be
exempt from paying service tax on the taxable services of aggregate value up to `10 lakh.
However, section 69 of the Finance Act, 1994 read with the Service Tax (Registration of Special Category of
Persons) Rules, 2005 provides that a provider of taxable service whose aggregate value of taxable services in a
financial year exceeds `9,00,000 has to make an application for registration within a period of 30 days of exceeding
the aggregate value of taxable service of `9,00,000.
The aggregate value of taxable services of A Ltd. exceeds `9,00,000 on 30.05.2013 when it issues Bill No. 7 of
`1,07,000. Thus, A Ltd. should apply for registration on or before 29.06.2013. However, the application for
registration is made on 22.08.2013. Thus, there is delay of total 54 days.
A Ltd. will, therefore, be liable to a penalty which may extend to `10,000. Under the old provisions of section
77(1)(a), A Ltd. would have been liable to a penalty of `10,800 [`10,000 or `200 x 54 days, whichever is
greater].
(5) SECTION 89. OFFENCES AND PENALTIES. —
(1) Whoever commits any of the following offences, namely :—
Provision of service without issuance of invoice
(a) provides any taxable service chargeable to service tax under sub-section (1) of section 68 or receives any
taxable service chargeable to tax under sub-section (2) of said section, without an invoice issued in accordance
with the provisions of this Chapter or the rules made thereunder; or
[(a) knowingly evades the payment of service tax under this Chapter; or]
Availment and utilization of CCR without actual receipt of inputs/input services
MANOJ BATRA
www.camanojbatra.com
~ 103 ~
(b) avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods either fully
or partially in violation of the rules made under the provisions of this Chapter; or
Maintaining false books of accounts/failure to supply any information/submitting false information
(c) maintains false books of account or fails to supply any information which he is required to supply under this
Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be
upon him, that the information supplied by him is true) supplies false information; or
Non-payment of amount collected as service tax for a period of more THAN 6 months from the due
date of payment
(d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central
Government beyond a period of 6 months from the date on which such payment becomes due,
shall be punishable,—
(i) in the case of an offence specified in clause (a), (b) or (c) where the amount exceeds 50 lakh rupees, with
imprisonment for a term which may extend to 3 years :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment
of the court, such imprisonment shall not be for a term of less than 6 months;
(ii) in the case of the offence specified in clause (d), where the amount exceeds 50 lakh rupees, with
imprisonment for a term which may extend to seven years :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment
of the court, such imprisonment shall not be for a term of less than 6 months;
(iii) in the case of any other offences, with imprisonment for a term, which may extend to 1 year.]
EARLIER BEFORE F.ACT 2013
(I) in the case of an offence where the amount exceeds 50 lakh rupees, with imprisonment for a term which
may extend to 3 years :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment
of the court, such imprisonment shall not be for a term of less than 6 months;
(II) in any other case, with imprisonment for a term, which may extend to 1 year.
(2)
If any person is convicted of an offence punishable under —
(a) clause (i) or clause (iii), then, he shall be punished for the second and for every subsequent offence with
imprisonment for a term which may extend to three years;
(b) clause (ii), then, he shall be punished for the second and for every subsequent offence with imprisonment
for a term which may extend to seven years :]
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the
court, such imprisonment shall not be for a term less than 6 months.
BEFORE F. ACT 2013
(2) If any person convicted of an offence under this section is again convicted of an offence under this section,
then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which
may extend to 3 years :
(3) For the purposes of sub-sections (1) and (2), the following shall not be considered as special and adequate
reasons for awarding a sentence of imprisonment for a term of less than 6 months, namely :—
(i) the fact that the accused has been convicted for the first time for an offence under this Chapter;
(ii) the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay a
penalty or any other action has been taken against him for the same act which constitutes the offence;
(iii) the fact that the accused was not the principal offender and was acting merely as a secondary party in the
commission of offence;
MANOJ BATRA
www.camanojbatra.com
~ 104 ~
(iv) the age of the accused.
(4) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Chief
Commissioner of Central Excise.]
(6) SECTION [78A. PENALTY FOR OFFENCES BY DIRECTOR, ETC., OF COMPANY. —
Where a company has committed any of the following contraventions, namely :—
(a) evasion of service tax; or
(b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in violation of
the rules made under the provisions of this Chapter; or
(c) availment and utilisation of credit of taxes or duty without actual receipt of taxable service or excisable
goods either fully or partially in violation of the rules made under the provisions of this Chapter; or
(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period
of 6 months from the date on which such payment becomes due,
then any director, manager, secretary or other officer of such company, who at the time of such contravention
was in charge of, and was responsible to, the company for the conduct of business of such company and was
knowingly concerned with such contravention, shall be liable to a penalty which may extend to 1 lakh rupees.
(7) SECTION [90. COGNIZANCE OF OFFENCES. —
(1) An offence under clause (ii) of sub-section (1) of section 89 shall be cognizable.
(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences, except
the offences specified in sub-section (1), shall be non-cognizable and bailable.
(8) SECTION 91. POWER TO ARREST. —
(1) If the Commissioner of Central Excise has reason to believe that any person has committed an offence
specified in clause (i) or clause (ii) of sub-section (1) of section 89, he may, by general or special order,
authorise any officer of Central Excise, not below the rank of Superintendent of Central Excise, to arrest such
person.
(2) Where a person is arrested for any cognizable offence, every officer authorised to arrest a person shall, inform
such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.
(3) In the case of a non-cognizable and bailable offence, the Assistant Commissioner, or the Deputy
Commissioner, as the case may be, shall, for the purpose of releasing an arrested person on bail or otherwise,
have the same powers and be subject to the same provisions as an officer in charge of a police station has,
and is subject to, under section 436 of the Code of Criminal Procedure, 1973 (2 of 1974).
(4) All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal
Procedure, 1973 (2 of 1974) relating to arrests.]
Example
Discuss the prosecution, arrest and bail implications, if any, in respect of the following cases pertaining to the period June, 2013:
(i) ‘A’ avails CENVAT credit of `52 lakh without actual receipt of excisable goods. However, he is yet to utilize the same.
(ii) ‘B’ willfully evades payment of service tax of `55 lakh.
(iii) ‘C’ knowingly supplies false information sought by the Central Excise Officer. The amount of service tax involved is ` 10 lakh.
(iv) ‘D’ collects `65 lakh as service tax from its clients but deposits only ` 5 lakh with the Central Government.
(v) ‘E’ collects ` 55 lakh as service tax from its clients and deposits ` 51 lakh with the Central Government.
Solution:
Person
‘A’
Offence
No offence as both availment and
utilization of credit without actual receipt
of excisable goods constitutes an
offence [Section 89(1)(b)]
Prosecution
NA
Arrest
NA
Bail
NA
‘B’
Non-cognizable offence [Section 90(2)]
6 months to 3
years [Section
89(1)(i)]
Bailable Offence
[Section 90(2)]
‘C’
Non-cognizable offence [Section
‘D’
90(2)]
Cognizable offence [Section 90(1A)]
Upto 1 year
[Section
89(1)(iii)]
6 months to 7
years [Section
89(1)(ii)]
Arrest can be ordered
by Commissioner of
Central Excise
[Section 91(1)]
No arrest [Section
91(1)]
‘E’
Non-cognizable offence [Section 90(2)]
Upto 1 year
[Section 89(1)(iii)]
Arrest can be ordered
by Commissioner of
Central Excise without
arrest warrant [Section
91(2)]
No arrest [Section
91(1)]
Bailable Offence
[Section 90(2)]
Non-Bailable/Bailable
Offence [Section
90(2)]
Bailable Offence
[Section 90(2)]
Example
In the above Example, what will be the prosecution implications, if B, D and E are convicted for subsequent
offences?
Solution: Person
‘B’
‘D’
‘E’
Prosecution for subsequent offences
Imprisonment upto 3 years [Section 89(2)(a)]
Imprisonment upto 7 years [Section 89(2)(b)]
Imprisonment upto 3 years [Section 89(2)(a)]
(9) Guidelines for arrest and bail in relation to offences punishable under the Finance Act,
1994.
Powers to arrest is introduced under the service tax law by the Finance Act, 2013. Accordingly, a person who has
committed any of the offences specified under section 89(1) and the amount involved in the offence exceeds `50
lakh, can be arrested.
Circular No. 171/6/2013-ST dated 17.09.2013 outlines post arrest procedure as follows:(i) Procedure in case of non-cognizable and bailable offence:
• The Assistant Commissioner/Deputy Commissioner is bound to release a person on bail against a bail bond. The
bail conditions should be informed to the arrested person as well as to the nominated person of the person(s)
arrested. The conditions will relate to, inter alia, execution of a personal bail bond and one surety of like amount
given by a local person of repute, appearance before the investigating officer when required and not leaving the
country without informing the officer.
• If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail
forthwith. Otherwise, the arrested person shall be produced before the appropriate Magistrate without unnecessary
delay and within 24 hours of arrest. The arrested person may be handed over to the nearest police station for his
safe custody, within 24 hours, during the night under a challan, before he is produced before the Court.
(ii) Procedure in case of cognizable offence:
Only in the event of circumstances preventing the production of the arrested person before a Magistrate without
unnecessary delay, the arrested person may be handed over to nearest Police Station for his safe custody, within 24
hours, under a proper challan, and produced before the Magistrate on the next day, and the nominated person of the
arrested person may be also informed accordingly.
MANOJ BATRA
(10)
| 106
Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES)
The Finance Act, 2013 has introduced an amnesty scheme for service tax assessees known as ‘Service Tax
Voluntary Compliance Encouragement Scheme’ to encourage the service providers as well as service receivers liable to pay service tax under reverse charge - who are either stop filers, non-filers or non-registrants or who have
not disclosed their true liability in the returns filed by them to pay their tax dues without payment of interest and
penalty. The salient features of the scheme are:
(i) Any person who is liable to pay tax for the period 01.10.2007 to 31.12.2012, but has not paid the same till
01.03.2013 would be eligible for claiming the benefit of this scheme. However, the following persons would not
be allowed to declare their tax dues under VCES:
(a) a person to whom any notice or order has been issued before 1st March 2013.
(b) a person who has filed the returns disclosing his true liability and not discharged the service tax amount
shown in the same.
(c) a person whose tax dues pertain to a issue for which a notice has been served or an order has been passed
in the previous period.
(d) a person against whom an inquiry or investigation in respect of non/short levy or non/short- payment of
service tax has been initiated by way of search of premises
or summons or requiring production of accounts, documents or other evidences and such
inquiry/investigation is pending as on 01.03.2013.
(e) a person against whom an audit has been initiated and such audit is pending as on 01.03.2013.
(ii) The defaulter is required to make a truthful declaration of all his pending tax dues (from October 1, 2007 to
December 31, 2012) on or before 31.12.2013. However, if the Commissioner has reasons to believe that the
declaration made by a declarant under VCES was substantially false, he may serve a show cause notice within
one year from the date of declaration.
(iii) At least half of the declared tax dues need to be paid by December 31, 2013. The remaining half can be paid by:
(a) June 30, 2014 without interest; or
(b) by December 31, 2014 with interest @ 18% from July 1, 2014 onwards.
The amount so paid would be non-refundable.
(iv) On compliance with all the prescribed requirements, the declarant will be granted immunity from interest (as
specified), penalties and other proceedings. The proceeding under VCES would be final and cannot be
reopened by any forum.
(v) If the declared tax dues are not paid either in part or in full, such dues will be recovered along with interest as per
the provisions of section 87.
(vi) The tax-payers will need to settle their dues for the period after December 31, 2012 as per the provisions
applicable under the present law.
TAXABLE SERVICES
(1) JOB WORK
(i) NEGATIVE LIST
SEC 66D(f)- ANY PROCESS AMOUNTING TO MANUFACTURE OR PRODUCTION OF GOODS;
(ii) DEFINTION
AS PER SEC 65B(40)
“process amounting to manufacture or production of goods” means
 a process on which DUTIES OF EXCISE ARE LEVIABLE under section 3 of the CENTRAL EXCISE
MANOJ BATRA
| 107
ACT, 1944 OR [OR THE MEDICINAL AND TOILET PREPARATIONS (EXCISE DUTIES) ACT, 1955
OR
 any process amounting to manufacture of alcoholic liquors for human consumption, opium,
Indian hemp and other narcotic drugs and narcotics on which DUTIES OF EXCISE are LEVIABLE
UNDER ANY STATE ACT for the time being in force;
Note(1) MANUFACTURING ACTIVITY CARRIED OUT ON CONTRACT OR JOB WORK BASIS NOT AMOUNTING
TO MANUFACTURE- liable to service tax unless specified in negative list or specifically exempted
from service tax.
(2) EXCISE DUTY IS WRONGLY PAID ON A CERTAIN PROCESS WHICH DOES NOT AMOUNT TO
MANUFACTURE. Then such wrong payment of excise duty can’t escape service tax on job work
carried out on such process.
(3) PROCESSES CHARGEABLE TO EXCISE DUTY UNDER CENTRAL EXCISE BUT PRESENTLY EXEMPT FROM
DUTY - not liable to service tax since the process is manufacture and that would be covered in
negative list.
IF THE PROCESS EQUAL TO MANUFACTURE
 LEVIABLE TO ED U/S 3 OF CEA 1944
 LEVIABLE TO ED UNDER STATE ACT
IF THE PROCESS NOT EQUAL TO MANUFACTURE
SERVICE TAX NOT LEVIABLE
SERVICE TAX LEVIABLE
(iii) AS PER EXEMPTION NOTIFICATION- 25/2012- ENTRY NO. 30
Carrying out an intermediate production process as JOB WORK in relation to (a) agriculture, printing or textile processing;
(b) cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other
precious metals, falling under Chapter 71 of the Central Excise Tariff Act, 1985 (5 of 1986);
(c) any goods on which appropriate duty is payable by the principal manufacturer; or
(d) processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting
including spray painting or auto black, during the course of manufacture of parts of cycles or
sewing machines upto an aggregate value of taxable service of the specified processes of 150
lakh rupees in a financial year subject to the condition that such aggregate value had not
exceeded 150 lakh rupees during the preceding financial year;
Would service tax be leviable on processes on which Central Excise Duty is leviable under the Central
Excise Act, 1944 but are otherwise exempted?
No. If Central Excise duty is leviable on a particular process, as the same amounts to manufacture, then
such process would be covered in the negative list even if there is a central excise duty exemption for
MANOJ BATRA
| 108
such process.
Note- Job work may amount to works contract(i) job-work falls within scope of works contract- value as per Rule 2A of Service tax
(determination of Value) Rules, 2006. ( CCR of IP not allowed but CCR of CG/IS allowed)
(ii) job-work doesn’t fall within scope of works contract- entire value treated as Service. ( CCR of
IP/ CG/IS allowed)
Example
State whether following activities undertaken by M & M Manufacturers of Chandigarh would be liable to
service tax during April, 2013 and June, 2013:
(i) Manufacture of herbal cosmetics liable to excise duty under the Central Excise Act, 1944
(ii) Manufacture of alcoholic drinks liable to excise duty under the Punjab Excise Act, 1914
(iii) Processing of raw materials to make them fit for further production. The process is not liable to
any excise duty
(iv) Manufacture of medicines liable to excise duty under the Medicinal and Toilet Preparations
(Excise Duties) Act, 1955
Solution:
Sl. No.
(i)
(ii)
(iii)
(iv)
Activity
Manufacture of herbal cosmetics liable to excise duty under the Central
Excise Act, 1944 – covered in the definition of process amounting to
manufacture. Thus, included in the negative list.
Manufacture of alcoholic drinks liable to excise duty under the Punjab
Excise Act, 1914 – covered in the definition of process amounting to
manufacture. Thus, included in the negative list.
Processing of raw materials to make them fit for further production. The
process is not liable to any excise duty.
This will be a service liable to service tax.
Manufacture of medicines liable to excise duty under Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 – The Finance Act, 2013 has
included such manufacture in the definition of process amounting to
manufacture. Thus, with effect from 10.05.2013, such a manufacture is
included in the negative list.
April, 2013
Non-taxable
June, 2013
Non-taxable
Non-taxable
Non-taxable
Taxable
Taxable
Taxable
Non-taxable
Que
1) Charges for textile or agriculture processing
2) Processing charges for jobwork for printing work for J. G glass industries
3) Processing charges for jobwork for cutting, polishing diamond and gemstones
work for jai Jewelleries.
Amt in lakh
1
3
6
MANOJ BATRA
| 109
4) Charges for process of electroplating of parts of cycle. In P.Y total value of
specified processes was Rs 90 lakh
5) Amount charged by Mahalaxmi manufactures “ Table” on job- work Basis
6) Job work for a process for cleaning the wood which doesn’t amount to mfr.
7) Job work for processes undertaken i.e cleaning of wood which doesn’t amount to
manufacture of product but paid excise duty
8) Processing charges for job work for Prince of intermediate goods (i.e cutting
wood) which are further used by Prince for manufacture of dutiable goods. (i.e
Table)
9
9) Job work for processes undertaken amounts to manufacture of product i.e
Register - liable to NIL Rate of duty
10) Job work for processes undertaken amounts to manufacture of product liable to
duty @ 12%
3
3
4
5
6
5
Calculate value of taxable service
1) Charges for textile or agriculture processing
2) Processing charges for jobwork for printing work for J. G glass industries
3) Processing charges for jobwork for cutting, polishing diamond and gemstones
work for jai Jewelleries.
4) Charges for process of electroplating of parts of cycle. In P.Y total value of
specified processes was Rs 90 lakh
5) Amount charged by Mahalaxmi manufactures “ Table” on job- work Basis
6) Job work for a process for cleaning the wood which doesn’t amount to mfr.
7) Job work for processes undertaken i.e cleaning of wood which doesn’t amount to
manufacture of product but paid excise duty
8) Processing charges for job work for Prince of intermediate goods (i.e cutting
wood) which are further used by Prince for manufacture of dutiable goods. (i.e
Table)
9) Job work for processes undertaken amounts to manufacture of product i.e
Register - liable to NIL Rate of duty
10) Job work for processes undertaken amounts to manufacture of product liable to
duty @ 12%
VALUE OF TAXABLE SERVICE
Amt in lakh
-----------4
5
----
-----
(2) EXEMPTION
Sl. No.
1.
(i)
IN
A
Doubt
RESIDENTIAL
COMPLEX,
Clarification
Exemption at Sl. No. 28 (c) in notification No.
MANOJ BATRA
MONTHLY
CONTRIBUTION
COLLECTED FROM MEMBERS IS
USED BY THE RWA FOR THE
PURPOSE OF MAKING PAYMENTS TO
THE 3RD PARTIES, in respect of
commonly used services or goods
[Example: for providing security service
for the residential complex, maintenance
or upkeep of common area and common
facilities like lift, water sump, health and
fitness centre, swimming pool, payment of
electricity Bill for the common area and
lift, etc.]. Is service tax leviable?
(ii) If the contribution of a member/s of a
RWA exceeds RS 5000 per month, how
should
the
service
tax
liability be calculated?
2.
(i) Is threshold exemption under
notification No. 33/2012-ST available to
RWA?
(ii) Does ‘aggregate value’ for the
pusrpose of threshold exemption, include
the value of exempt service?
3.
If a RWA provides certain services such
as payment of ELECTRICITY OR
WATER BILL ISSUED BY THIRD
PERSON, IN THE NAME OF ITS
MEMBERS, acting as a ‘pure agent’ of its
members, IS EXCLUSION FROM VALUE
OF TAXABLE SERVICE available for the
purposes of exemptions provided in
Notification 33/2012-ST or 25/2012-ST ?
4.
Is CENVAT credit available to RWA for
payment of service tax?
| 110
25/2012-ST is provided specifically with reference to
service provided by an unincorporated body or a
non–profit entity registered under any law for the
time being in force such as RWAs, to its own
members.
However, a monetary ceiling has been
prescribed for this exemption, calculated in the
form of 5000 rupees per month per member
contribution to the RWA, for sourcing of goods or
services from third person for the common use of its
members.
If per month per member contribution of any or
some members of a RWA exceeds five thousand
rupees, the entire contribution of such members
whose per month contribution exceeds 5000
rupees would be ineligible for the exemption
under the said notification. Service tax would then
be leviable on the aggregate amount of monthly
contribution of such members.
Threshold exemption available under notification
No. 33/2012-ST is applicable to a RWA, subject to
conditions prescribed in the notification. Under this
notification, taxable services of aggregate value not
exceeding 10 lakh rupees in any financial year is
exempted from service tax. As per the definition of
‘aggregate value’ provided in Explanation B of the
notification, aggregate value does not include the
value of services which are exempt from service tax.
In Rule 5(2) of the Service Tax (Determination of
Value) Rules, 2006, it is provided that expenditure
or costs incurred by a service provider as a pure
agent of the recipient of service shall be excluded
from the value of taxable service, subject to the
conditions specified in the Rule.
For illustration, WHERE THE PAYMENT FOR AN
ELECTRICITY BILL RAISED by an electricity
transmission or distribution utility in the name of
the owner of an apartment in respect of electricity
consumed thereon, is collected and paid by the
RWA to the utility, without charging any commission
or a consideration by any other name, the RWA is
acting as a pure agent and hence exclusion from
the value of taxable service would be available.
HOWEVER, IN THE CASE OF ELECTRICITY
BILLS ISSUED IN THE NAME OF RWA, in respect
of electricity consumed for common use of lifts,
motor pumps for water supply, lights in common
area, etc., since there is no agent involved in these
transactions, the exclusion from the value of
taxable service would not be available.
RWA may avail cenvat credit and use the same for
payment of service tax, in accordance with the
Cenvat Credit Rules.
MANOJ BATRA
| 111
Ans-value of taxable service= 21 lakh + 2lakh – 10 lakh = 13 lakh
(3) MEGA EXEMPTION NOTIFICATION AMENDED
(a) Services provided in relation to serving of food or beverages by a canteen maintained in a factory
covered under the Factories Act, 1948, having the facility of air-conditioning or central air-heating at
any time during the year.
(1) Exemption to Services Provided in the State of Uttrakhand ( Order No. 1-01-2013)
The taxable services provided to any person by way of renting of a room in a hotel, inn, guest
house, club, campsite or other commercial place meant for residential or lodging purposes in
MANOJ BATRA
| 112
the state of Uttrakhand shall be exempt from the whole of service tax leviable thereon under
section 66B of the F.Act 1994. This exemption order is applicable for the taxable services
provided during the period 17-9-2013 to 31-3-2014.
Food related service
RESTAURANT, eating joint or mess- S. tax only If 1 cond. Satisified (1) having licence to serve alcoholic
beverage ( liquor) (2) having AC or Central Heating system in any part of establishment at any time during
the year (3) Exemption to services in relation to serving of food/ beverages by an air
conditioned canteen maintained in a factory (4) Exemption to restaurant services provided between
17.09.2013 and 31.03.2013 in Uttarakhand
Value OF TAXABLE SERVICERESTAURANT- TV = 40% OF TOTAL AMT [ CCR OF CG/IS, NO CCR OF GOODS(CH-1to 22)]
OUTDOOOR Caterer- TV = 60% OF TOTAL AMT [CCR OF CG/IS, NO CCR OF GOODS(CH-1to 22)]
Total amt = [GAC + FMV Of goods & services supplied – amt paid to SR for supply of Service]
(1) In case of BUNDLED SERVICE of Supply of Food together with Renting IN HOTEL ETC.- ABATEMENT 30% of Total Amt [ CCR OF
CG/IS, NO CCR OF GOODS(CH-1to 22)]
(2) IF ONLY RENTING OF HOTEL ROOM- ABATEMENT-40%
(3) S.TAX EXEMPT ON CATERING SERVICE PROVIDED UNDER MID-DAY MEAL SCHEME.
CBEC CLARIFICATIONServices are provided by a ‘specified restaurant’ in other areas e.g. swimming
pool or an open area attached to the restaurant
CBEC CLARIFICATION
A. SERVICES PROVIDED (IN RELATION TO SERVING OF FOOD OR BEVERAGES) BY AIR-CONDITIONED AS WELL AS NONAIR-CONDITIONED RESTAURANTS, EATING JOINTS OR MESS, OPERATING IN A COMPLEX
In a complex, air conditioned as well as non-air conditioned restaurants are operational. These restaurants are clearly
demarcated and separately named, but food is sourced from a common kitchen.
In such a case, services provided in relation to serving of food/beverages restaurant having the facility of air conditioning or
central air heating in any part of the establishment, at any time during the year is liable to service tax. However, such
services provided in a non air-conditioned or non centrally air- heated restaurant will be treated as exempted service and thus,
will not be liable to service tax.
B. SERVICES ARE PROVIDED BY A ‘SPECIFIED RESTAURANT’ IN OTHER AREAS E.G. SWIMMING POOL OR AN OPEN AREA
ATTACHED TO THE RESTAURANT
Services provided by restaurant having the facility of air conditioning or central air heating in any part of the establishment, at
any time during the year, in other areas of the hotel are liable to service tax.
C. SERVICE TAX ON GOODS SOLD ON MRP BASIS ACROSS THE COUNTER AS PART OF THE BILL/INVOICE
If goods are sold on MRP basis (fixed under the Legal Metrology Act), they have to be excluded from total amount for the
determination of value of service portion.
Practical Que
ABC provides following details
(6) SERVING OF FOOD OR BEVERAGE BY A CANTEEN MAINTAINED IN
Rs in Lakh
18
30
10
20
15
40
FACTORY COVERED UNDER FACTORY ACT HAVING AC FACILITY
(7) OUTDOOR CATERING SERVICE along with Food PROVIDED TO
30
(1) SERVICE OF FOOD in a NON AC Restaurant
(2) SERVICE OF FOODS in AC Restaurant having license to serve liquor
(3) SERVICE OF FOODS in AC Restaurant NOT having license to serve liquor
(4) RENTING of Hotel Room WITH Supply of Goods
(5) RENTING of Hotel Room WITHOUT Supply of Goods
MANOJ BATRA
| 113
MAHALAXMI ON THE EVE OF HER NEWLY BORN BABY ‘MUNDAN PARTY’
FMV OF GOODS SUPPLIED BY MAHALAXMI - 40
(8) Outdoor catering service without supply of Food- in Simran wedding
(9) CATERING SERVICE PROVIDED UNDER MID-DAY MEAL SCHEME
SPONSORED BY GOVERNMENT
(10) Receipts of AC Hotel includes 10 lakh for goods sold on MRP basis for
which separate Bill is issued
10
80
50
Calculate the taxable value of service
ANS(1) SERVICE OF FOOD in a NON AC Restaurant
(2) SERVICE OF FOODS in AC Restaurant having license to serve liquor
30 lakh * 40%
(3) SERVICE OF FOODS in AC Restaurant NOT having license to serve liquor
10 lakh * 40%
(4) RENTING of Hotel Room WITH Supply of Goods
20 lakh less abatement 30%
(5) RENTING of Hotel Room WITHOUT Supply of Goods
15 lakh less abatement 40%
(6) SERVING OF FOOD OR BEVERAGE BY A CANTEEN MAINTAINED IN
FACTORY COVERED UNDER FACTORY ACT HAVING AC FACILITY
(7) OUTDOOR CATERING SERVICE along with Food PROVIDED TO
MAHALAXMI ON THE EVE OF HER NEWLY BORN BABY ‘MUNDAN PARTY’
FMV OF GOODS SUPPLIED BY MAHALAXMI - 40
(8) Outdoor catering service without supply of Food- in Simran wedding
(9) CATERING SERVICE PROVIDED UNDER MID-DAY MEAL SCHEME
SPONSORED BY GOVERNMENT
(10) Receipts of AC Hotel includes 10 lakh for goods sold on MRP basis for
which separate Bill is issued
40 lakh * 40%
Value of taxable service
Rs in Lakh
---12
4
14
9
---42
10
---16
(4) EDUCATION SERVICE
Approved vocational education course means,—
(i) a course run by an industrial training institute or an industrial training centre affiliated
to the National Council for Vocational [or State Council for Vocational Training] Training
offering courses in designated trades notified under the Apprentices Act, 1961; or
(ii) a Modular Employable Skill Course, approved by the National Council of Vocational
Training, run by a person registered with the Directorate General of Employment and
Training, Union Ministry of Labour and Employment; or
(iii) a course run by an institute affiliated to the National Skill Development Corporation set
up by the Government of India [Section 65B(11)].
MANOJ BATRA
| 114
MEGA EXEMPTION
ENTRY- “9A. Any services provided by, (i) the National Skill Development Corporation set up by the Government of India;
(ii) a Sector Skill Council approved by the National Skill Development Corporation;
(iii) an assessment agency approved by the Sector Skill Council or the National Skill Development
Corporation;
(iv) a training partner approved by the National Skill Development Corporation or the Sector Skill
Council
in relation to (a) the National Skill Development Programme implemented by the National Skill
Development Corporation; or (b) a vocational skill development course under the National Skill
Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill
Development Corporation.”
Example
Comment on the applicability of service tax in case of vocational educational courses (VEC) run by the following
institutes during the month of February, 2013 and June, 2013:
(a) ‘Udaan’ an industrial training institute (ITI) affiliated to the National Council for Vocational Training (NCVT)
(b) ‘A-Star’ a vocational education provider affiliated to Sector Skill Council formed under National Skill
Development Corporation (NSDC)
(c) ‘Best Skill Centre’ an industrial training centre (ITC) affiliated to the State Council for Vocational Training,
Delhi
(d) ‘Horizon’, an institute, registered with Directorate General of Employment and Training (DGET), Union
Ministry of Labour and Employment, running a Modular Employable Skill Course (MESC) approved by the
National Council of Vocational Training.
The courses offered in point (a), (b) and (c) are in designated trades notified under the Apprentices Act, 1961.
(e) Receipt OF GaapBright a commercial Coaching centre
Solution:
Sl.
Institute/Centre
No.
1.
2.
3.
4.
‘Udaan’ – ITIs affiliated to NCVT are covered under the definition of
approved VEC. Thus, the same are included in the negative list.
‘A-Star’ – With effect from 10.05.2013, institutes affiliated to NSDC
have been removed from the definition of approved VEC vide the
Finance Act, 2013. Thus, the same are outside the purview of negative
list.
‘Best Skill Centre’ – With effect from 10.05.2013, ITCs affiliated to
SCVTs have been included in the definition of approved VEC vide the
Finance Act, 2013. Thus, the same are included in the negative list.
‘Horizon’ – Institutes registered with DGET running MESC
approved by NCVT are covered under the definition of approved VEC.
Thus, the same are included in the negative list.
February,
2013
Nontaxable
Nontaxable
Taxable
Nontaxable
June, 2013
Non-taxable
TAXABLE
IN JUNE BUT
EXEMPTED from
10-9-2013 vide
entry 9A in E/N25/2012
Non-taxable
Non-taxable
MANOJ BATRA
| 115
Receipt OF GaapBright a commercial Coaching
centre
Taxable
Taxable
(5) testing activities including seed testing directly related to production of any agricultural produce not
liable to service tax [Section 66D(d)(i)]
BEFORE AMENDMENT
Earlier, sub-clause (i) of Section 66D(d) [Negative list], inter alia, included only the “seed testing” directly related to
production of any agricultural produce. Consequently, other type of testing activities directly related to production of
any agricultural produce like soil testing, animal feed testing, testing of samples from plants or animals, for pests and
disease causing microbes etc. became liable to service tax.
AFTER AMENDMENT
The Finance Act, 2013 has expanded the scope of the said negative list entry by deleting the word “seed”. As a
result, all types of testing activities which are directly related to production of any agricultural produce have been
covered under the negative list.
[Effective from 10.05.2013]
services relating to AGRICULTURE or AGRICULTURAL PRODUCE
(i) NEGATIVE LIST
Sec 66D(d)—services relating to AGRICULTURE or AGRICULTURAL PRODUCE by way of—
(i) AGRICULTURAL OPERATIONS directly related to production of any agricultural produce including
cultivation, harvesting, threshing, plant protection or seed testing;
ANALYSIS OF AMENDMENT BY F. ACT 2013
Besides seed testing, other testing activities directly related to production of any agricultural produce like
soil testing, animal feed testing, testing of samples from plants or animals, for pests and disease causing
microbes are also exempt from service tax.
(ii) SUPPLY OF FARM LABOUR;
(iii) PROCESSES carried out at an agricultural farm including tending, pruning, cutting, harvesting,
drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk
packaging and such like operations which do not alter the essential characteristics of agricultural
produce but MAKE IT ONLY MARKETABLE for the primary market;
(iv) RENTING OR LEASING of
AGRO MACHINERY OR
VACANT LAND with or without a structure incidental to its use;
(v) LOADING, UNLOADING, PACKING, STORAGE OR WAREHOUSING OF AGRICULTURAL PRODUCE;
(vi) AGRICULTURAL EXTENSION services;
MANOJ BATRA
| 116
(vii) services BY ANY AGRICULTURAL PRODUCE MARKETING COMMITTEE OR BOARD or
services provided BY A COMMISSION AGENT FOR SALE OR PURCHASE OF
AGRICULTURAL PRODUCE;
(ii) DEFINITIONS
(1) Sec 65B(3) “agriculture” means the cultivation of plants and rearing of all life-forms of
animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar
products;
EDUCATION GUIDE
activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation
of ornamental flowers (floriculture) and horticulture, forestry included in the definition of
agriculture
(2) Sec 65B(4) “agricultural extension” means application of scientific research and knowledge
to agricultural practices through farmer education or training;
(3) Sec 65B(5) “agricultural produce” means any produce of agriculture on which either no
further processing is done or such processing is done as is usually done by a cultivator or
producer which does not alter its essential characteristics but makes it marketable for primary
market;
EDUCATION GUIDE
Plantation crops like rubber, tea or coffee be also covered under agricultural produce Potato
chips or tomato ketchup not qualify as agricultural produce
The processes contemplated in the definition of agricultural produce are those as are 'usually
done by the cultivator or producer'. Thus agricultural products like cereals, pulses, copra and
jaggery where certain amount of processing on these products is done by a person other than a
cultivator or producer may not get covered in the ambit of 'agricultural produce'.
(4) Sec 65B(6) “Agricultural Produce Marketing Committee or Board” means any committee or
board constituted under a State law for the time being in force for the purpose of regulating
the marketing of agricultural produce;
(iii) CERTAIN ISSUES
(a) CLEANING OF WHEAT - not taxable even if the same is done outside the farm.
It is process which do not alter the essential characteristic of agricultural produce’. but
only make it marketable in the primary market. Therefore, cleaning of wheat would be
covered in the negative list entry even if the same is done outside the farm.
(b) SHELLING OF PADDY- not covered in the negative list entry
As this process is never done on a farm but in a rice sheller normally located away from
the farm.
However, if shelling is done by way of a service i.e. on job work then the same would be
covered under the exemption relating to ‘carrying out of intermediate production process as
MANOJ BATRA
| 117
job work in relation to agriculture’ vide E/N- 25/2012
(c) The processes of grinding, sterilizing, extraction packaging in retail packs of agricultural
products, which make the agricultural products marketable in retail market, would NOT be
covered in the negative list. Only such processes are covered in the negative list which makes
agricultural produce marketable in the primary market.
(d) Leasing of vacant land with a green house or a storage shed meant for agriculture produce –
not taxable, if vacant land has a structure like storage shed or a green house built on it which is
incidental to its use for agriculture then its lease would be covered under negative list.
(iv) MEGA EXEMPTION- 25/2012
Carrying out an intermediate production process as job- work in relation to agriculture is
exempt.
Agricultural Produce Marketing Committees or Boards are set up under a State Law for
purpose of regulating the marketing of agricultural produce. Such marketing committees or
boards have been set up in most of the States and provide a variety of support services for
facilitating the marketing of agricultural produce by provision of facilities and amenities like,
sheds, water, light, electricity, grading facilities etc. They also take measures for prevention of sale
or purchase of agricultural produce below the minimum support price. APMCs collect market fees,
license fees, rents etc.
Services provided by such Agricultural Produce Marketing Committee or Board are covered in the
negative list. However any service provided by such bodies which is not directly related to
agriculture or agricultural produce will be liable to tax e.g. renting of shops or other property.
Example
‘Big Agro Handlers’ furnishes the following details with respect to the activities undertaken by them in the month
of June, 2013:
Sl.
Particulars
Amount (`)
No.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Supply of farm labour
Warehousing of biscuits
Sale of rice on commission basis
Training of farmers on use of new pesticides and fertilizers
developed through scientific research
Renting of vacant land to a stud farm
Testing undertaken for soil of a farm land
Leasing of vacant land to a poultry farm
58,000
1,65,000
68,000
10,000
1,31,500
1,21,500
83,500
Assume that the point of taxation in respect of all the activities mentioned above falls in the
month of June, 2013 itself.
‘Big Agro Handlers’ has paid service tax of `6,18,000 during the Financial Year 2012-13.
Solution:
Computation of service tax payable by Big Agro Handlers for June, 2013
Sl.
Particulars
Amount (`)
MANOJ BATRA
| 118
No.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Supply of farm labour
Warehousing of biscuits
Sale of rice on commission basis
Training of farmers on use of new pesticides and fertilizers
developed through scientific research
Renting of vacant land to a stud farm
Testing undertaken for soil of a farm land
Leasing of vacant land to a poultry farm
TOTAL
SERVICE TAX – 12.36 %
NIL
1,65,000
NIL
NIL
1,31,400
NIL
NIL
2,96,500
36,586
(6) ABATEMENT- NN- 26/2012- CONSTRUCTION SERVICE
PARTICULARS
ABATEMENT %
Construction of a complex, building, civil
structure or a part thereof, intended for
a sale to a buyer, wholly or partly except
where entire consideration is received
after issuance of completion certificate
by the competent authority.
(a) for a residential unit satisfying
both the following conditions,
namely :(i) THE carpet of the unit is less
than 2000 square feet; and
(ii) the amount charged for the unit
is less than rupees one crore
(b) for other than (a) above
CONDITION
(i) CENVAT credit on inputs used
for providing the taxable service has
not been taken under the provisions
of the CENVAT Credit Rules, 2004.
(ii) The value of land is included in
the amount charged from the
service receiver.
75%
70%
Explanation- The amount charged shall be the sum total of the amount charged for the service including
the Fair Market Value of all goods and services SUPPLIED BY THE RECIPIENT(s) in or in relation to the
service, whether or not supplied under the same contract or any other contract, after deducting(i) the amount charged for such goods or services supplied to the service provider, if any; and
(ii) the value added tax or sales tax, if any, levied thereon :
MANOJ BATRA
| 119
Provided that the fair market value of goods and services so supplied may be determined in accordance
with the generally accepted accounting principles.
Example: ABC Constructions Ltd. has provided the following details with respect to individual residential
units constructed by it at various cities as part of residential apartments:
Flat
Type
A
Carpet Area
(sq. ft.)
1980
Amount Charged (`)
B
C
D
2000
2500
2400
1,00,00,000
1,05,00,000
99,50,000
E
F
G
2100
1600
1940
1,00,00,000
80,00,000
90,00,000
1,10,00,000
Part of consideration received before issuance of
completion certificate by the competent authority
Entire consideration received before issuance of
completion certificate by the competent authority
Entire consideration received after issuance of
completion certificate by the competent authority
Following details are also available:
Type of building
Multi-level parking for
Local Development
Authority
Office Complex
Amount charged (`)
3,10,00,000
Part of consideration received before issuance of
completion certificate by the competent authority
Shopping Mall
30,00,00,000
12,20,00,000
Entire consideration received before issuance of
completion certificate by the competent authority
Entire consideration received after issuance of
completion certificate by the competent authority
In all the above construction activities, value of land is included in the amount charged from the service receiver and
CENVAT credit on inputs used for construction has not been availed.
You are required to compute the taxable value of the construction service, if any, in each of the case separately on
the basis of the service tax law as applicable for the months of (i) February, 2013, and
(ii) June, 2013.
Solution: With effect from May 8, 2013, service tax abatement has been decreased from 75% to 70% in case of
commercial and high-end residential construction. However, abatement of 75% would be available in case of
residential units having carpet area of less than 2000 sq. ft. and where the amount charged is less than ` 1 crore.
MANOJ BATRA
Flat
Typ
e
Carpet
Area
(sq. ft.)
| 120
Amount
charged (`)
Abat
eme
nt %
February,
Taxable
Value
(25%)
Amount
charged (`)
Abatement %
Taxable Value
Amount charged
– Abatement
June, 2013
2013
A
1980
1,10,00,000
75
27,50,000
1,10,00,000
70
33,00,000
B
C
D
E
F
G
1,00,00,000
1,05,00,000
99,50,000
1,00,00,000
80,00,000
90,00,000
75
75
75
75
75
NA
25,00,000
26,25,000
24,87,500
25,00,000
20,00,000
1,00,00,000
1,05,00,000
99,50,000
1,00,00,000
80,00,000
90,00,000
70
70
70
70
75
NA
30,00,000
31,50,000
29,85,000
30,00,000
20,00,000
It is not a case of
service but a sale.
2000
2500
2400
2100
1600
1940
Type of
building
Amount
charged (`)
February, 2013
Multi-level
3,10,00,000
parking for
Local
Development
Authority
Office Complex 12,20,00,000
Shopping Mall 30,00,00,000
Abate
ment
%
Taxable
Value
(25%)
Amount
charged (`)
June, 2013
3,10,00,000
75
77,50,000
75
NA
3,05,00,000 12,20,00,000
30,00,00,000
Abate
ment
%
Taxable Value
Amount
charged –
Abatement
70
93,00,000
70
NA
3,66,00,000
It is not a case
of service but a
sale.
MANOJ BATRA
| 121
AMENDMENT FOR NOV 13
EXCISE
CENVAT CREDIT RULES, 2004
Recovery under rule 14 in case OF FAILURE TO PAY the amount
(i) ON REMOVAL OF INPUTS/CAPITAL GOODS AS SUCH,
(ii) REMOVAL OF CAPITAL GOODS AFTER USE AND
(iii) WRITING OFF THE VALUE OF THE INPUTS/CAPITAL GOODS
“Explanation. - If the manufacturer of goods or the provider of output service fails to pay the
amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in
rule 14, for recovery of CENVAT credit wrongly taken.”
Following are the Rules 3(5), 3(5A), 3(5B)
(i) Removal of inputs/ capital goods as such Rule 3(5)







Where inputs or capital goods,
On which cenvat credit has been taken
Are removed as such from the factory, or premises of the provider of output service
The manufacturer or provider of output service
Shall pay an amount
Equal to the credit availed in respect of such inputs or capital goods and
Such removal shall be made under the cover of an invoice referred to in rule 9
(ii) Rule 3(5B) of CCR 2004 Reversal of cenvat credit
If the value of any
(i) inputs or
(ii) capital goods
Before Being Put To Use
 on which CENVAT credit has been taken
 is fully written off or partially OR any provision has been made in books of account to write
it off fully or partially
 then, the manufacturer or service provider, as the case may be, shall pay an amount
equivalent to the CENVAT credit taken on such inputs or capital goods.
Provided that if the said input or capital goods is SUBSEQUENTLY USED in the manufacture of final
products or the provision of [output] services the manufacturer or output service provider, as the case
may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier
subject to other provisions of these rules.
MANOJ BATRA
| 122
CENTRAL EXCISE RULES 2002
AMENDMENT IN Time period for computing interest on refund arising out of finalization of provisional
assessment
Mr. Raja, a manufacturer was unable to determine the value or Rate of duty applicable to his
product in the month of April 2013. Therefore, he applied for provisional assessment and paid excise duty
provisionally. However, subsequently on finalization of the provisional assessment on 20.08.2013, Mr. Raja was
eligible for refund. So he filed the refund application on 25.08.2013.
Mr. Shubh received the refund along with interest on 31.08.2013. Interest on delayed refund was computed from
01.05.2013 till 31.8.2013. Discuss the correctness or otherwise of the manner of computation of interest.
Ans- the computation of interest is wrong. No interest will be paid on the refund as the refund is paid
before the expiry of three months from the date of refund application. ( Now Amended w.e.f- 1-3-2013)
Rule 7 Provisional assessment
1. Order of provisional assessment:Where the assessee is Unable To Determine
 the value of excisable goods or
 the rate of duty applicable thereto,
He may request AC/DC, in writing giving reasons for payment of duty on provisional basis
and AC/DC, may order allowing payment of duty on provisional basis at such rate or on such
value as may be specified by him.
2. Furnishing of bond:-= (Duty on final assessment ---- duty on prov. Assessment)
 The payment of duty on provisional basis may be allowed,
 If assessee executed a bond in proper form ( Form B-2)
 With such surety or security in such amount as AC/DC deem fit,
 Binding the assessee for payment of difference between the amounts of duty
as may be finally assessed and the amount of duty provisionally assessed.
3. Final Assessment:-=(with in 6 months + Extension)
AC/DC shall pass order for final assessment, as soon as the relevant information, required
for finalizing the assessment, is available,
But within a period not exceeding six months from the date of the communication of the
order issued under sub-rule (1).
Provided that this period may be extended
a) by the Commissioner for a further period not exceeding six months and
b) by Chief Commissioner for such further period as he may deem fit.
4. Interest payable by assessee:-( final duty more than provisionally assessed)
The assessee shall be liable to pay interest
a) On any amount payable to Central Government, consequent to order for final
assessment
MANOJ BATRA
| 123
b) At the rate of 18% p.a.
c) From the first day of the month succeeding the month for which such amount is
determined till the date of payment.
5. Interest payable to assessee:-(final duty less than provisionally assessed)
Where assessee is entitled to refund consequent to final assessment, subject to sub-rule (6),
there shall be paid an interest
a) on such refund
b) At the rate of 6% p.a.
c) From the first day of the month succeeding the month for which such refund is
determined, till the date of refund.
“(5) Where the assessee is entitled to a refund consequent to an order of final assessment under
sub-rule (3), then, subject to sub-rule (6), there shall be paid an interest on such refund as provided
under section 11BB of the Act.” ( Amended w.e.f- 1-3-2013)
ADVANCE RULING
(i) Benefit of advance ruling extended to Resident Public Limited Companies
(ii) EARLIER Application for Advance Ruling in CUSTOM can be made by Resident public limited
company. NOW can also make application in relation to EXCISE AND SERVICE TAX MATTERS w.e.f
1-3-2013
Explanation.— For the purposes of this notification.-
(1) “public limited company” shall have the same meaning as is assigned to “public company” in
clause (iv) of sub-section (1) of section 3 of the Companies Act , 1956 and shall include a
private company that becomes a public company by virtue of section 43A of the said
Companies Act, 1956;
(2) “resident” shall have the same meaning as is assigned to it in clause (42) of section 2 of the
Income-tax Act, 1961 in so far it applies to a company.
Examine the validity of the following statements:
Only public sector companies are notified as the class or category of residents who can apply for advance ruling
in case of specified matters relating to central excise.
Ans- the statement is invalid.
APPEALS
RECOVERY PROCEDURE AGAINST CONFIRMED DEMAND ORDERS – CBEC AMENDS THE EXISTING
PROCEDURES
CBEC has amended the procedure of initiation of recovery proceedings against a confirmed demand in the
following manner:
(a) Where NO appeal is filed with Commissioner (Appeals)/ CESTAT
Recovery to be initiated after the expiry of statutory period for filing appeal i.e 60 days / 90 days.
(b) Where an appeal is filed with Commissioner (Appeals)/ CESTAT, WITHOUT a stay application
Recovery to be initiated after filing of such appeal, without waiting for the statutory period of filling an appeal to
be exhausted.
(c) Where an appeal is filed WITH a stay application with Commissioner (Appeals)/ CESTAT
Recovery to be initiated 30 days after the filing of appeal, if no stay is granted, otherwise as per the conditions
of the stay order.
Further, apart from above, recovery proceedings will be initiated IMMEDIATELY in the following cases :
• Where Commissioners (Appeals) confirms demand in the order in original
MANOJ BATRA
| 124
• Where Tribunal or High Court confirms the demand, with no stay in operation.
Note- however various courts have given stay against this circular.
DEMAND & REFUND
28AAA
(1) Issued instrument to PAPPU under FTA 1992 – under any reward/incentive scheme or
duty exemption/remission bestowing financial benefits (2) HE has obtained that instrument by
means of Fraud, misrepresentation of fact/ suppression of Facts (3) the instrument is
transferred to another person say IMPORTER ( Ms. PARO) (4) Ms PARO imported goods
against such instrument without payment of import duty (5) now w.e.f F. ACT 2012- DUTY can
be recovered from person ( Pappu) to whom instrument was inssued alongwith interest 18%
p.a- SCN issued for recovery. If he fails to pay then recovery action taken against him. (6) if
however recovery action has already been taken against IMPORTER (PARO) then sec 28AAA
will not be invoked against PAPPU.
PROVISIONS OF SECTION 28AAA OF THE CUSTOMS ACT, 1962 MADE APPLICABLE TO EXCISE DUTY ALSO
Provisions of section 28AAA of the Customs Act, 1962 shall be applicable in regard to like matters in respect of the
duties imposed by section 3 of the Central Excise Act, 1944, subject to the necessary modifications and alterations which the
Central Government considers necessary and desirable to adapt those provisions to the circumstances.
CUSTOM LAW-- BAGGAGE
Rule 6
Rule 8
Passenger returing to india shall be allowed clearance free of duty of the jewellery in his
bonafide baggage – returning after residing abroad over 1 year
For gentleman passenger- Rs 50000
For lady passenger- Rs 100000
Permanent transfer of residence
IN addition to general free allowance under rule 3 and 4, following other exemptions
(1) used personal effect (2) jewellery upto 50000 for gentleman and 100000 for lady
passenger
Conditions
conditions
1
relaxation
Minimum stay of 2 years abroad,
Short fall of upto 2 months in
Immediately preceding the date of his stay abroad can be condoned by AC
arrival on transfer of his residence
If the early return is on account
of
terminal leave being availed
by the passenger
or any other
2
Total stay in India on short visit during the
2 preceding years should not exceed 6
months and
3
.
Passenger
special
circumstances.
Commissioner may condone
short visit in excess of 6 months in
has
not
concession in preceding 3 years
availed
this deserving cases
No relaxation
Further exemption allowed on Jewellery taken out earlier by the passenger or by a member of his family from
MANOJ BATRA
| 125
India.- if AC is satisfied regarding jewellery taken outside india.
Rule 10- A crew member of a vessel/aircraft is allowed to bring items like chocolates, cheese,
cosmetics and other petty gift items for their personal or family use while returning from a foreign
journey upto a value of ` 1500.
Mr. Ajay, an Indian entrepreneur, went to
London to explore new business
opportunities on 01.04.2013. His wife also
joined him in London on 01.12.2013. The
following details are submitted by them
with the Customs authorities on their
return to India on 30.04.2014.(a) used personal effects worth ` 80,000
(b) a music system worth ` 35,000
(c) the jewellery brought by Mr. Ajay for `
48,000 and the jewellery brought by his
wife worth ` 20,000
Determine their eligibility with regard to
duty free allowance.
Ans
As per rule 3 of Baggage Rules, 1998, used personal effects is exempt and general free allowance is `
35,000 per passenger. Therefore no duty on personal effects and a music system is also exempt due to GFA.
However DUTY ON jewellery is exempt if the person is of Indian origin who had stayed abroad for period
exceeding one year.
Exemption for jewellery is as follows:Gentleman Passenger - ` 50,000/Lady Passenger - ` 1,00,000/-
MANOJ BATRA
| 126
Thus, there is no duty liability on the jewellary brought by Mr. Ajay as his stay abroad is more than 1
year. However, duty on jewellery of his wife will be leviable as she stayed abroad for a period less than 1
year. She has to pay custom duty on jewellery.
SERVICE TAX
AMENDMENT IN MEGA EXEMPTION
ANALYSIS
(1) Services Provided To Or By (W.E.F 1-4-2013) An
Educational Institution In Respect Of Education Exempted
from service tax, BY WAY OF,-
(a) Auxiliary Educational Services; or
(b) Renting of immovable property;
w.e.f. 01.04.2013- service tax leviable on
auxiliary educational services and renting of
immovable property provided BY an
educational institution.
(2) Temporary transfer or permitting the use or enjoyment of a
copyright covered under clauses (a) or (b) of sub-section
(1) of section 13 of the Indian Copyright Act, 1957, relating
to original literary, dramatic, musical, artistic works or
cinematograph films;
(W.E.F 1-4-2013)
Services provided by way of temporary transfer or
permitting the use or enjoyment of a copyright,(a) covered under clause (a) of sub-section (1) of section
13 of the Copyright Act, 1957 , relating to original literary,
dramatic, musical or artistic works; or
(b) of cinematograph films for exhibition in a cinema hall
or cinema theatre;”;
(3) Services provided in relation to serving of food or
beverages by a restaurant, eating joint or a mess, other
than those having (i) the facility of air-conditioning or
central air-heating in any part of the establishment, at any
time during the year, AND (ii) a licence to serve alcoholic
beverages; (W.E.F 1-4-2013)
(4) Services by way of transportation by rail or a vessel from
one place in India to another of the following goods (a) petroleum and petroleum products falling under
Chapter heading 2710 and 2711 of the First
Schedule to the Central Excise Tariff Act, 1985 (5
of 1986);
(b) relief materials meant for victims of natural or
man-made disasters, calamities, accidents or
mishap;
(c) defence or military equipments;
After
amendment,
exhibition
of
cinematograph films in a place other than
cinema hall or theatre, will be taxable.
w.e.f – 1-4-2013 - only non airconditioned/non-centrally
air-heated
restaurants can claim exemption.
MANOJ BATRA
(d) postal mail or mail bags;
(e) household effects;
(f) newspaper or magazines registered with the
Registrar of Newspapers;
(g) railway equipments or materials;
(h) agricultural produce;
(i) foodstuff including flours, tea, coffee, jaggery,
sugar, milk products, salt and edible oil, excluding
alcoholic beverages; or
(j) chemical fertilizer and oilcakes;
(5) Services provided by a goods transport agency by way of
transportation of -
(a) fruits, vegetables, eggs, milk, food grains or
pulses in a goods carriage;
(b) goods where gross amount charged for the
transportation of goods on a consignment
transported in a single goods carriage does not
exceed Rs 1500/-; or
(c) goods,
where gross amount charged for
transportation of all such goods for a single
consignee in the goods carriage does not exceed
Rs 750/-;
(W.E.F 1-4-2013)
Services provided by a goods transport agency, by way of
transport in a goods carriage of,(a) agricultural produce;
(b) goods, where gross amount charged for the
transportation of goods on a consignment transported in a
single carriage does not exceed Rs 1500/;
(c) goods, where gross amount charged for transportation
of all such goods for a single consignee does not exceed Rs
750/;
(d) foodstuff including flours, tea, coffee, jaggery, sugar,
milk products, salt and edible oil, excluding alcoholic beverages;
(e) chemical fertilizer and oilcakes;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or manmade disasters, calamities, accidents or mishap; or
(h) defence or military equipments;”;
| 127
MANOJ BATRA
| 128
(6) Services by way of vehicle parking to general public
excluding leasing of space to an entity for providing such
parking facility;
(W.E.F 1-4-2013)
w.e.f -1-4-2013- Exemption to parking
of vehicles withdrawn
(7) Services provided to Government, a local authority or a
governmental authority BY WAY OF (a) carrying out any activity in relation to any function
ordinarily entrusted to a municipality in relation to
water
supply,
public
health,
sanitation
conservancy, solid waste management or slum
improvement and upgradation; or
(b) repair or maintenance of a vessel or an aircraft;
(W.E.F 1-4-2013)
With effect from 01.04.2013, service tax
leviable repair or maintenance of
Government aircrafts.
(“26A). Services of life insurance business provided under
following schemes – (INSERTED W.E.F-24-12-12)
(a) Janashree Bima Yojana (JBY); or
(b) Aam Aadmi Bima Yojana (AABY)
(8) Services by way of slaughtering of BOVINE animals;
[DELETED W.E.F 7-8-12]
Exemption upto `25 lakh available to entity registered under section 12AA of the Income tax Act, 1961
providing services for advancement of “any other object of general public utility” withdrawn
The exemption available to entity registered under section 12AA of the Income tax Act, 1961 providing services
for advancement of “any other object of general public utility” up to ` 25 lakh has been withdrawn. The said
MANOJ BATRA
| 129
amendment has been given effect to by modifying the definition of “charitable activities”. The threshold exemption
as available to all other taxable services will continue to be available up to ` 10 lakh.
Example
Answer with respect to applicability of service tax in the following cases during the month of June, 2013:
(i) Transport facility provided by a School to its students through a fleet of buses and cabs owned by the School.
(ii) Transport facility provided by a School to its students through a private Bus/Cab Operator.
(iii) Service provided by a private transport operator to a School in relation to transportation of students to and
from a School.
(iv) Services provided by way of vehicle parking to general public in a shopping mall.
(v) Service provided in relation to repair or maintenance of aircraft owned by a State Government.
(vi) Services of a NGO registered under section 12AA of the Income tax Act, 1961 working for the rehabilitation
of disabled. The aggregate value of taxable services of the NGO is ` 20 lakh.
(vii) Exhibiting movies on television channels.
(viii) Transport of foodstuff, agricultural produce, chemical fertilizers and newspaper registered with the Registrar
of Newspapers by a goods transport agency in a goods carriage.
(ix) Transportation of petroleum and petroleum products and household effects by railways.
(x) Transportation of postal mails or mail bags by a vessel.
Ans- (i) Taxable. (ii) Taxable (iii) Exempt (iv) Taxable (v) Taxable (vi) Taxable (vii) Taxable (viii) Exempt
(ix) Taxable (x) Taxable
Exemption to specified export promotion schemes-Focus Market Scheme, Focus Product Scheme and
Vishesh Krishi and Gram Udyog Yojana
The taxable services provided or agreed to be provided against the following duty credit scrips by a person
located in the taxable territory are exempt from service tax:(i) Focus Market Scheme duty credit scrip issued to an exporter by the Regional Authority in accordance the
Foreign Trade Policy.
(ii) Focus Product Scheme duty credit scrip issued to an exporter by the Regional Authority in accordance with
the Foreign Trade Policy.
(iii) Vishesh Krishi and Gram Udyog Yojana (Special Agriculture and Village Industry Scheme) duty credit scrip
issued to an exporter by the Regional Authority in accordance with the Foreign Trade Policy.
[Notification No.s 6/2013 to 8/2013-ST dated 18.04.2013]
Clarification in respect of notices/ reminder letters issued for life insurance policies regarding.
It has been represented by life insurance companies that in terms of the practice followed,
reminder notices/letters are being issued to the policy holders to pay renewal premiums. Such reminder
notices only solicit furtherance of service which if accepted by policy holder by payment of premium
results in a service. Clarification has been desired whether service tax needs to be paid on the basis of
such reminders.
The matter has been examined. Under the Point of Taxation Rules 2011, the point of taxation
generally is the date of issue of invoice or receipt of payment whichever is earlier. The invoice mentioned
refers to the invoices as issued under Rule 4A of the Service Tax Rules 1994. No tax point arises on
account of such reminders. Thus it is clarified that reminder letters/notices for insurance policies not
being invoices would not invite levy of service tax. In case of issuance of any invoice, point of taxation
shall accordingly be determined.
MANOJ BATRA
| 130
The above clarification is issued only for life insurance sector.
Subject: Tax on service provided by way of erection of pandal or shamiana - regarding.
Several representations have been received seeking clarification on the levy of service tax on
the activity of preparation of place for organizing event or function by way of
erection/laying of pandal andshamiana. The doubt that has been raised is that this may be a transaction
involving “transfer of right to use goods” and hence deemed sale.
2.
The issue has been examined. “Service” defined in section 65B (44) of the Finance Act, 1994,
includes a ‘declared service’. Activity by way of erection of pandal or shamiana is a declared service,
under section 66E 8(f). The process of erection of Pandal or shamiana is a reasonably specialized job and
is carried out by the supplier with the help of his own labour. In addition to the erection
of pandal or shamianathe service is generally coupled with other services like supply of crockery,
furniture, sound system, lighting arrangements, etc.
3.
For a transaction to be regarded as “transfer of right to use goods”, the transfer has to be
coupled with possession. Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. Vs. CTO
[1990 77 STC 182] held that since the effective control and possession was with the supplier, there is no
transfer of right to use. This decision of the Andhra Pradesh High Court was upheld by the Supreme Court
subsequently [2002] 126 STC 0114. In the matter of Harbans Lal vs. State of Haryana – [1993] 088 STC
0357 [Punjab and Haryana High Court], a view was taken that if pandal, is given to the customers for use
only after having been erected, then it is not transfer of right to use goods.
4.
In the case of BSNL Vs. UOI [2006] 3 STT 245 Hon’ble Supreme Court held that to constitute
the transaction for the transfer of the right to use the goods, the transaction must have the following
attributes:a. There must be goods available for delivery;
b. There must be a consensus ad idem as to the identity of the goods;
c. The transferee should have a legal right to use the goods and, consequently, all legal
consequences of such use including any permissions or licenses required therefor should be available to
the transferee;
d. For the period during which the transferee has such legal right, it has to be the exclusion of the
transferor : this is the necessary concomitant or the plain language of the statute, viz., a “transfer of the
right to use” and not merely a license to use the goods:
e. Having transferred the right to use the goods during the period for which it is to be transferred,
the owner cannot again transfer the same right to others.
5.
Applying the ratio of above judgments and the test formulated by Hon’ble Supreme Court, the
activity of providing pandal and shamiana along with erection thereof and other incidental activities do
not amount to transfer of right to use goods. It is a service of preparation of a place to hold a function or
event. Effective possession and control over the pandal or shamiana remains with the service provider,
even after the erection is complete and the specially made–up space for temporary use handed over to
the customer.
6.
Accordingly services provided by way of erection of pandal or shamiana would attract the levy
of service tax.
MANOJ BATRA
| 131
Important questions
QUE-1 Chunni Lal is engaged in the activity of preparation of place for organizing event or function by way of
erection/laying of pandal and shamiana. He is of the view that service tax is not leviable on his activity as it is a
transaction involving “transfer of right to use goods” and hence, is a deemed sale.
Examine whether the contention of Chunni Lal is valid in law.
ANS- NO CONTENTION OF Chunni lal is not valid, since it is covered under declared service of right to use goods.
Basic concepts of service tax
Que- 2- Mr. A owns a residential building in a prime commercial locality. Basement of the building is leased to Mr. B,
a wholesaler. One-fourth of the basement is used by Mr. B as his office and remaining portion is used as a godown
for storing his merchandise. Ground floor of the building is given on rent to Mr. C who uses the same as a guest
house for his business contacts. First floor of the building is occupied by Mr. A. and his family. Second floor is given
on rent to Mr. D who uses the same as his residence. There is a large vacant land in the backyard of the building
which is also given on rent to a parking contractor, Mr. E who has set up a parking facility on the said land.
Separate rent/lease deeds have been executed in respect of each floor of the building and vacant land given on
rent/lease.
Examine the service tax liability of Mr. A with respect to the residential building owned by him.
Ansthe taxability of each of the floor of the building and vacant land owned by Mr. A is discussed as under:
(i) Basement: As per section 65B(41) of the Act, renting includes letting, leasing, licensing or other similar
arrangements in respect of immovable property.
Therefore, leasing out of the basement of the building to Mr. B would not be covered under negative list of services
as Mr. B uses the basement for commercial purpose. Thus, it would be liable to service tax as declared service.
(ii) Ground floor: Renting of ground floor of the building to Mr. C for being used as a guest house will not be
covered under negative list of services since Mr. C uses it for commercial purpose. Thus, it would be liable to service
tax as declared service.
(iii) First floor: Since Mr. A uses the first floor of the building himself, it would not be a service and thus, would not
be liable to service tax.
(iv) Second floor: Renting of second floor of the building to Mr. D for being used as a residence would not be
chargeable to service tax as it is covered in negative list of services under section 66D(m) of Finance Act, 1994.
(v) Vacant land: Though vacant land is also an immovable property, renting thereof to Mr. E, a parking contractor,
will not be covered under negative list of services since Mr. E uses it for commercial purpose. Thus, it would be liable
to service tax as declared service.
Place of provision of service
Que- 3- With reference to Place of Provision of Services Rules, 2012, answer the following question:
(i) A movie-on-demand is provided as on-board entertainment during the Bangalore-Delhi leg of a SingaporeBangalore-Delhi flight against a charge of ` 500 per passenger in addition to the fare of ` 25,000 per passenger. What
will be the place of provision of service in this case? Will your answer change, if the above service is provided on a
Delhi-Bangalore-Singapore-Malaysia flight during the Singapore-Malaysia leg?
MANOJ BATRA
| 132
(ii) Mr. Sumit has a permanent residence at Ahmedabad. He has a savings bank account with Ahmedabad Branch of
Safe and Sound Bank. On April 1, 2012, Mr. Sumit opened a safe deposit locker with the Ahmedabad Branch of Safe
and Sound Bank. Mr. Sumit went to USA for official work in December, 2012 and has been residing there since then.
Mr. Sumit contends that since he is a non-resident during the year 2013-14 in terms of the Income-tax Act, service
tax cannot be levied on the locker fee charged by Safe and Sound Bank for the year 2013-14.
Examine the correctness of the contention of Mr. Sumit.
(i) As per rule 12 of Place of Provision of Service Rules, 2012, the place of provision of services provided on board a
conveyance during the course of a passenger transport operation, including services intended to be wholly or
substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the
journey. Hence, in this case the place of provision of this service will be Singapore, which is outside the taxable
territory and hence, would not be liable to service tax.
However, if the above service is provided on a Delhi-Bangalore-Singapore-Malaysia flight during the SingaporeMalaysia leg, then the place of provision of this service will be Delhi, which is in the taxable territory and hence,
would be liable to service tax.
(ii) Leviability of service tax is determined in terms of the provisions of Finance Act, 1994 and not in terms of
Income-tax Act, 1961. The fact that Mr. Sumit is a non-resident is irrelevant for determining the taxability of services
received by him.
As per section 66B of Finance Act, 1994, service tax is levied on the value of all services, other than those services
specified in the negative list, provided or agreed to be provided in the taxable territory by one person to
another. As per rule 9 of Place of Provision of Service Rules, 2012 [POPS Rules], the place of provision of services
provided by a banking company, or a financial institution, or a non-banking financial company, to account holders is
the location of the service provider.
Account has been defined under rule 2(b) of POPS Rules to mean an account bearing interest to the depositor, and
includes a non-resident external account and a non-resident ordinary account. Services linked to or requiring opening
and operation of bank accounts such as lending, deposits, safe deposit locker etc. are few examples of services that
are provided by a banking company or financial institution to an “account holder” in the ordinary course of business.
Since, in the present case, services (safe deposit locker) are provided by Ahmedabad Branch of Safe and Sound
Bank to an account holder (Mr. Sumit), rule 9 of POPS Rules will apply. Thus, the place of provision of service would
be Ahmedabad and since Ahmedabad falls in taxable territory, locker fee would be liable to service tax.
Point of taxation
Que- 4- Determine whether the following services amount to continuous supply of service in the following
independent cases:(i) XYZ & Co., a firm of interior decorators, enters in to a contract with Mr. Mehta on 01.08.2013 for doing up
the interiors of his newly constructed home for a total consideration of ` 60 lakh. As per the terms of the
contract, XYZ & Co. will complete the work by 31.01.2014 and consideration will be paid in six equal
instalments on the first day of each month covered during the period of contract.
(ii) Mr. Kapoor has taken a mobile connection from Cell Two, a telecom service provider, on 10.01.2014.
However, on account of poor service, he discontinued the services of Cell Two on 15.03.2014.
Ans
(i)
(ii)
Since in the given case, service is provided for a period of six months with the obligation of periodic
payment, the same will amount to continuous supply of service
Central Government has notified that provision of, inter alia, telecommunication services shall be treated as
continuous supply of service. Since in the given case, service provided is telecommunication service, the
provision thereof would amount to continuous supply of service irrespective of the period for which the
service has been rendered
Valuation of taxable service
MANOJ BATRA
| 133
Que- 5- Shambhu Pvt. Ltd. was awarded a contract in November, 2013 for providing flooring and wall tiling
services in respect of a building located in Delhi by Nath Ltd. As per the terms of contract, Shambhu Pvt.
Ltd. was to provide all the required material for execution of the contract. However, a portion of the material
was also provided by Nath Ltd.
Whether the services provided by Shambhu Pvt. Ltd. are subject to service tax? If yes, determine the service
tax liability of Shambhu Pvt. Ltd. from the following particularsParticulars
Gross amount (excluding all taxes) charged by the Shambhu Pvt. Ltd. for the contract
?
6,00,000
Fair market value of the material supplied by Nath Ltd.
Amount charged by Nath Ltd. for the material (inclusive of VAT)
Excise duty paid on inputs
Service tax paid on input services
Excise duty paid on capital goods, purchased during the year, used in the contract
1,00,000
60,000
12,750
6,000
4,000
Ans- value of taxable service – 60% of 640000 = 384000 . service tax 47462 – less cenvat credit 6000 + 2000
Service tax payable = 39462
Special audit
Que- 6-.Raman, a service provider, has his operations spread out in multiple locations. His registered
premises are situated in Mumbai. The jurisdictional Commissioner is of the view that it is not possible to
obtain a true and complete picture of the accounts of Raman from his registered premises. Thus, he has
directed Raman to get his accounts
audited by Mr. P, a Chartered Accountant, nominated by him for the relevant financial year. However, Raman
contests that his accounts have already been audited under Income-tax Act, 1961 by Mr. Y, another
Chartered Accountant, and thus, do not require any other audit.
With reference to the provisions of Finance Act, 1994, examine the correctness of the contention of Raman.
Ans- Refer sec 72 A of special audit
The fact that Raman’s accounts have been audited under Income-tax Act, 1961 will not have any bearing on special
audit ordered under section 72A of Finance Act, 1994. Thus, the contention of Raman is not correct in law.
Penalties
Que- 7-.Steft (P) Ltd., a service provider, has availed and utilized credit of excise duty without actual receipt
of excisable goods. A personal penalty of ` 1,90,000 has been imposed on Mr. Mudit, Manager of Steft (P) Ltd.
and ` 72,000 on Miss Sneha, an officer of Steft (P) Ltd. who were in charge of, and were responsible to, Steft
(P) Ltd. for the conduct of its business at the time of such availment and utilization of the credit. Discuss
whether such penalty can be imposed on Mr. Mudit and Miss Sneha under section 78A of Finance Act, 1994.
Can penalty be imposed on manager or officer of a company in any other case? Explain.
AnsSection 78A of the Finance Act, 1994 makes a director, manager, secretary or other officer of the company
personally liable to a penalty upto ` 1 lakh in case of certain specified contraventions committed by the company.
Such penalty is leviable if the director, manager, secretary or other officer of the company was in charge of, and was
responsible to, the company for the conduct of business of such company at a time when any of the specified
contraventions was committed provided the same was within the knowledge of such director, manager, secretary or
other officer of the company.
MANOJ BATRA
| 134
The specified contraventions inter alia include availment and utilisation of credit of taxes or duty without actual
receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions
of Chapter V. Though in the given case, Mr. Mudit and Miss. Sneha were in charge of, and were responsible to Steft
(P) Ltd. for the conduct of its business at the time of such irregular availment and utilization of the credit, personal
penalty could be imposed on both of them only if they are knowingly concerned with such contravention. Further, if it
is established that Mr. Mudit and Miss. Sneha are knowingly concerned with the contravention, the amount of penalty
in case of Mr. Mudit will have to be restricted to ` 1,00,000.
Yes, penalty can be imposed on manager or officer of a company in other cases as well. As per section 78A, such
other cases are(a) evasion of service tax; or
(b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in violation of the
rules made under the provisions of Chapter V; or
(c) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six
months from the date on which such payment becomes due.
Large tax payer
Que- 8-. BPT Ltd., a service provider, has been granted the acceptance of being a large tax payer unit by the
Chief Commissioner of Central Excise, Large Tax payer Unit on 12.12.2013. BPT Ltd. wants to know the
procedure to be followed by it as a large tax payer and the facilities available to it under service tax law. You
are required to advice BPT Ltd. in this regard.
Ans=
Rule 10 of Service Tax Rules, 1994 lays down the procedure and facilities for the large taxpayer. The provisions of
this rule as applicable to BPT Ltd. are given hereunder:
(1) BPT Ltd. shall have to submit the prescribed returns for each of the registered premises. If BPT Ltd. has obtained
a centralized registration under rule 4(2) of Service Tax Rules, 1994, it shall submit a consolidated return for all such
premises.
(2) BPT Ltd., on demand, may be required to make available the financial, stores and CENVAT credit records in
electronic media, such as, compact disc or tape for the purposes of carrying out any scrutiny and verification, as may
be necessary.
(3) BPT Ltd. may, with intimation of at least 30 days in advance, opt out to be a large taxpayer from the first day of
the following financial year.
(4) Any notice issued but not adjudged by any of the Central Excise Officer administering the Act or rules made
thereunder immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large
Taxpayer Unit (12.12.2013 in this case), shall be deemed to have been issued by Central Excise Officers of the said
unit.
(5) Provisions of Service Tax Rules, in so far as they are not inconsistent with the provisions of this rule shall mutatis
mutandis apply in case of BPT Ltd.
Best judgment assessment under service tax
Que- 9- The best judgment assessment under section 72 of the Finance Act, 1994 is an ex-parte assessment
procedure. Examine the validity of the statement.
Ans- Refer case law of N.B.C CORPORATION LTD.
Special provision for payment of service tax
Que- 10- Arihant Life Insurance Company Ltd. (ALICL) has started its operations in the year 2013- 14. During the
year 2013-14, Arihant Life Insurance Company Ltd. (ALICL) has charged gross premium of ` 180 lakh from policy
holders with respect to life insurance policies; out of which ` 100 lakh have been allocated for investment on behalf of
the policy holders.
Compute the service tax liability of ALICL for the year 2013-14 under rule 6(7A) of the Service Tax Rules, 1994
MANOJ BATRA
| 135
(i) if the amount allocated for investment has been intimated by ALICL to policy holders at the time of providing
service.
(ii) if the amount allocated for investment has not been intimated by ALICL to policy holders at the time of
providing of service.
(iii) if the gross premium charged by ALICL from policy holders is only towards risk cover.
Note: ALICL has not opted for small service provider’s exemption available under Notification No. 33/2012 ST dated
20.06.2012.
ANS (i) (180-100) lakh × 12.36%= Rs 9,88,800 (ii) 180 lakh × 3.09% (inclusive of 3% education cesses) = Rs
5,56,200 (iii) 180 lakh × 12.36%= Rs 22,24,800
Types of duty
Que- 11.With reference to the Customs Tariff Act, 1975, discuss the validity of the imposition of customs duties in the
following cases:(i) Both countervailing duty and anti-dumping duty have been imposed on an article to compensate for the
same situation of dumping.
(ii) Countervailing duty has been levied on an article for the reason that the same is exempt from duty borne by
a like article when meant for consumption in the country of origin.
(iii) Definitive anti-dumping duty has been levied on articles imported from a member country of World Trade
Organization as a determination has been made in the prescribed manner that import of such article into
India threatens material injury to the indigenous industry.
Ans(i) Not valid. As per section 9B of the Customs Tariff Act, 1975, no article shall be subjected to both
countervailing and anti-dumping duties to compensate for the same situation of dumping or export
subsidization.
(ii) Not valid. As per section 9B of the Customs Tariff Act, 1975, countervailing or antidumping duties shall
not be levied by reasons of exemption of such articles from duties or taxes borne by the like articles when
meant for consumption in the country of origin or exportation or by reasons of refund of such duties or taxes.
(iii) Valid. As per section 9B of the Customs Tariff Act, 1975, no definitive countervailing duty or anti-dumping
duty shall be levied on the import into India of any article from a member country of the World Trade
Organisation or from a country with whom Government of India has a most favoured nation agreement,
unless a determination has been made in the prescribed manner that import of such article into India causes
or threatens material injury to any established industry in India or materially retards the establishment of any
industry in India.
Warehousing of imported goods
Que- 12- With reference to section 61 of the Customs Act, 1962, comment on the validity of the following statements:
(a) Goods, other than capital goods, intended for use in any hundred per cent exportoriented undertaking, can be
warehoused till the expiry of five years.
(b) Interest free period of ninety (90) days under section 61(2)(ii) in respect of warehoused goods (not intended for
being used in 100% EOU) commences from the date on which an into-bond bill of entry in respect of such goods is
presented.
Ans(a) Invalid. As per section 61 of the Customs Act, 1962, warehousing period for goods other than capital
goods intended to be used in 100% EOU is three (3) years and not five (5) years.
(b) Invalid. As per section 61(2)(ii) of the Customs Act, 1962, where any warehoused goods (not intended for
being used in 100 % EOU) remain in a warehouse beyond a period of ninety days, interest is payable for the
period from the expiry of said ninety days till the date of payment of duty on the warehoused goods. Section
2(44) of the Customs Act, 1962 defines ‘warehoused goods’ as goods deposited in a warehouse.
MANOJ BATRA
| 136
Circular No. 39/2013 Cus dated 01.10.2013 has clarified that a harmonious reading of section 61
and section 2(44) of the Customs Act, 1962 indicates that when the goods deposited in a warehouse remain
warehoused beyond a period of 90 days, then the interest starts accruing. In other words, the relevant date
when the period of 90 days would commence would be the date of depositing the goods in the warehouse
and not the date on which into-bond bill of entry in respect of such goods is presented.
Provisions relating to illegal import, penalty etc.
Que- 13- Cargo Logistics Pvt. Ltd. (Cargo Logistics) is a duly appointed steamer agent of the vessel Queen Mary
Utah. 110 containers of MS Scrap were imported in the said vessel by an Indian importer. Cargo Logistics had affixed
the seal on the said containers after stuffing and took charge of the sealed containers. On the entry of the Vessel in
India, Cargo Logistics filed the Import General Manifest and also dealt with the Customs Department for appropriate
orders that had to be passed in terms of section 42 of the Customs Act, 1962. Section 42 prescribes that no
conveyance can leave without a written order.
Customs Department, on finding that 40 of the said containers were empty, levied a penalty on Cargo Logistics under
section 116 of the Customs Act, 1962 for short landing of the goods. Cargo Logistics is of the view that penalty for
short landing of the goods can only be imposed on the person-in-charge of the vessel and not on a steamer agent.
Discuss with the help of a decided case law, if any, whether penalty for short landing of goods can be imposed on the
steamer agent of a vessel.
Ans- Therefore, in the given case also penalty for short landing of goods can be imposed on Cargo Logistics Pvt.
Ltd., the steamer agent of the vessel, Queen Mary Utah.- Refer Caravel Logistics Pvt. Ltd.
Foreign Trade Policy
Que- 14- Answer the following questions with reference to the provisions of Foreign Trade Policy:
(i) Bestron Ltd. manufactures goods by using imported inputs and supplies the same under Aid Programme of the
United Nations. The payment for such supply is received in free foreign exchange. Can Bestron Manufacturers seek
Advance Authorization in relation to the supplies made by it?
(ii) LMN Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF value of such inputs
is `20,00,000. The inputs are processed and the final product is exported. The exports made by LMN Ltd. are subject
to general rate of value addition prescribed under Advance Authorization Scheme. No other input is being used by
LMN Ltd. in the processing. What should be the minimum FOB value of the exports made by the LMN Ltd. as per the
provisions of Advance Authorization?
Ans(i) Advance Authorization can be issued for supplies made to United Nations Organisations or under Aid Programme
of the United Nations or other multilateral agencies and such supplies need to be paid for in free foreign exchange.
Therefore, Bestron Ltd. can seek an Advance Authorization for the supplies made by it.
(ii) Advance Authorization necessitates exports with a minimum of 15% value addition (VA).
VA = [(A – B)/B x 100]
A = FOB value of export realized, B = CIF value of inputs covered by authorization.
Therefore, the minimum FOB value of the exports made by LMN Ltd. should be ` 23,00,000.
Que- 15
Compute the assessable value and total customs duty payable under the Customs Act,
1962 for an imported machine, based on the following information:
Cost of the machine at the factory of the exporter
Transport charges from the factory of exporter to the port for
shipment
Handling charges paid for loading the machine in the ship
Buying commission paid by the importer
US $
20,000
800
50
100
MANOJ BATRA
| 137
Lighterage charges paid by the importer
Freight incurred from port of entry to Inland Container depot
Ship demurrage charges
Freight charges from exporting country to India
200
1000
400
5000
Date of bill of entry
20.01.2014 (Rate BCD 20%;
Exchange rate as notified by CBEC
` 60 per US $)
25.03.2014 (Rate of BCD 10%;
Exchange rate as notified by CBEC
` 65 per US $)
12%
Date of entry inward
Additional duty payable under section 3(1) of
the Customs Tariff Act, 1975
Additional duty payable under section 3(5) of
the Customs Tariff Act, 1975
4%
ANS
Computation of assessable value and customs duty payable of the imported goods
Particulars
Cost of the machine at the factory
Transport charges up to port
Handling charges at the port
F.O.B.
Freight charges up to India
Insurance charges @ 1.125% of F.O.B. [Note 1]
Lighterage charges paid by the importer [Note 4]
Ship demurrage charges on chartered vessels [Note 4]
C./.F.
C.I.F. in Indian rupees @ ` 60/- per $ [Note 5]
Add: Landing charges @ 1% of CIF [Note 1]
Assessable value
Add: Basic customs duty @ 10% [Note 6] [a]
Total
Add: CVD @ 12% [b] [EC and SHEC on CVD are exempt]
Total
Add: Education cesses @ 3% of [(a) + (b)] [2% education cess + 1%
secondary and higher education cess] [c]
Total [d]
Additional duty u/s 3(5) @ 4% of (d) above [e]
Total custom duty payable [(a) +(b) + (c) + (e)]
Total custom duty payable (rounded off to nearest rupee)
Notes:
US $
20,000
800
50
20,850
5,000
234.56
200
400
26,684.56
(RS)
16,01,073.60
16,010.736
16,17,084.34
1,61,708.43
17,78,792.77
2,13,455.13
19,92,247.90
11,254.91
20,03,502.81
80140.11
4,66,558.58
4,66,559
MANOJ BATRA
| 138
(1) Insurance charges and landing charges are included @ 1.125% of FOB value of
goods and 1% of CIF value of goods respectively [Clauses (iii) and (ii) of first
proviso to rule 10(2) of Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007].
(2) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
(3) Freight incurred from port of entry to Inland Container depot is not includible in
assessable value [Fourth proviso to rule 10(2) of Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007].
(4) Ship demurrage charges and lighterage charges are included in the assessable
value [Explanation to Rule 10(2) of Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007].
(5) Rate of exchange notified by CBEC on the date of presentation of bill of entry is
considered [Explanation to section 14 of the Customs Act, 1962].
(6) Rate of duty is the rate prevalent on the date of presentation of bill of entry or the
rate prevalent on the date of entry inwards, whichever is later [Section 15 of the
Customs Act, 1962].
Question 16
X, an importer (other than 100% EOU) imported some goods and deposited them in the
warehouse
on 12.04.2013. These goods were re-exported without payment of duty on 15.08.2013. With
reference to the Customs Act, 1962, discuss whether any interest is payable by ‘X’?
Answer
As per section 61(2)(ii) of the Customs Act, 1962, if goods (belonging to importer other than
100% EOU) are kept in the warehouse beyond a period of 90 days, interest shall be payable
@15% p.a. on the amount of duty payable at the time of clearance of the goods. The interest
shall be payable after the expiry of the said 90 days till the date of payment of duty.
In Pratibha Processors v. UOI 1996 (88) ELT 12 (SC), the Apex Court has held that when
goods at the time of removal from warehouse are wholly exempted from payment of duty, the
liability to pay interest cannot be saddled on a non-existing duty. Liability to pay interest under
section 61(2) of the Customs Act is solely dependant upon the exigibility or actual liability to
pay duty. In case the liability to pay duty is nil, then, the interest will also be nil.
Therefore, since in this case the goods have been re-exported without payment of duty, no
interest is payable by ‘X’.
Question 17
What are the provisions made under the Customs Act, 1962 regarding control of customs over
the warehoused goods?
Question 18
Briefly state the rights of the owner of warehoused goods under the Customs Act, 1962.
Question 19
MANOJ BATRA
| 139
In the context of section 65 of the Customs Act, 1962 dealing with waste or refuse arising during
the manufacturing operations or other processes done in the warehouse:
(i) Examine the validity of the following statement with brief reasons:
“If finished products are cleared for home consumption, then appropriate duty of customs should
be levied on the imported goods content in the waste or refuse.”
(ii) Explain briefly the “relevant date” for determination of rate of duty leviable on the imported
material content in the waste or refuse.
Answer
(i) Section 65(2)(b) of the Customs Act, 1962, import duly would be charged on the quantity of
the warehoused goods contained in the waste or refuse arising from such operations.
(ii) The relevant date for determination of rate of duty leviable on the imported material
content in the waste or refuse shall be “date of payment of duty” under section 15(1)(c) shall
apply.
Thus, in collecting the import duty on the imported material content in the waste or refuse, the
rate of duty prevalent on the date of payment of duty would be applicable.
Question 20
Write a brief note on “remission of duty in case of volatile goods” under section 70 of the
Customs Act, 1962.
Question 21
Mention the circumstances under which goods are considered to have been removed
improperly from a warehouse under the Customs Act.
MISCELLANEOUS QUE
Bar on subsequent application for settlement in
certain cases.
Que- A show cause notice dated 09.08.2010 demanding duty to the tune of Rs.10,00,000 with interest as
applicable has been received by AB Ltd. on the ground of clandestine removal of the products manufactured
by it in the month of July, 2009. Penalty equal to duty demanded was also imposed. AB Ltd. had filed the ER1 for the month of July on time. AB Ltd. wants to approach the Settlement Commission for this matter and
accept the additional duty liability of Rs.10,00,000. In the year 2006, AB Ltd. had one of its case settled at
Settlement Commission. Neither any penalty was imposed on it nor was it convicted for any offence in
relation to this case. AB Ltd. has approached you as a counsel for advising it in this regard. You are required
to give your views with particular reference to the amendments made in the provisions of Settlement
Commission by the Finance Act, 2010.
Ans The advice to AB Ltd. would be two fold. First would be regarding the eligibility to make an application before
Settlement Commission and second would be regarding the conditions to be fulfilled by AB Ltd. for making an
application to the Settlement Commission.
Eligibility to make an application before Settlement Commission: AB Ltd. can make an
application to Settlement Commission as the following conditions prescribed under section 32E of the Central Excise
Act, 1944 are being fulfilled in this case:
(i) A show cause notice has been received by AB Ltd.
(ii) The additional amount of duty which AB Ltd. would be accepting in the application to the Settlement Commission
exceeds Rs.3,00,000.
(iii) AB Ltd. has filed ER-1 showing production, clearance and central excise duty paid for the month of July, 2009.
(iv) Prior to 08.05.2010, cases involving short levy of duty on goods in respect of which no proper record were
maintained by the assessee in his daily stock register could not be settled in the Settlement Commission. However,
MANOJ BATRA
| 140
with effect from, 08.05.2010, the Finance Act, 2010 has amended section 32E so as to remove the prohibition on
filing of applications for the settlement of cases where an assessee admits short-levy for goods in respect of which he
has not maintained proper records (i.e. cases of misdeclaration, clandestine removal etc.).
(v) Prior to 08.05.2010, the assessee was allowed to apply for settlement under section 32E only once. However,
with effect from, 08.05.2010, the Finance Act, 2010 has relaxed this restriction. Now, the assessee can apply for
settlement more than once if it does not fall in any of the three cases mentioned in section 32-O of the Central
Excise Act, 1944. The said three cases where the assessee cannot apply for settlement more than once are:
(a) where the order of settlement provides for imposition of penalty on the ground of concealment of particulars of
duty liability; or
(b) where after passing of the settlement order, the applicant is convicted of any offence under the Central Excise Act
in relation to that case; or
(c) the case of the applicant is sent back to the Central Excise Officer by the Settlement Commission.
The case of AB Ltd. does not fall in any of the three cases mentioned in section 32-O.
Conditions to be fulfilled by AB Ltd. for making an application to Settlement
Commission:
(i) AB Ltd. will have to make full and true disclosure of his duty liability not disclosed before the Central Excise
Officer, the manner in which such liability has been derived and the particulars of the goods in respect of which it
admits short levy on account of clandestine removal.
(ii) Application will have to be accompanied with a fees of Rs.1000.
(iii) AB Ltd. will have to pay Rs.10,00,000 (additional amount of excise duty accepted by him) along with applicable
interest.
AB Ltd. will be informed that once it makes an application under section 32E, it will not be allowed to withdraw the
same.
Theoretical questions- Must do
(1) Explain briefly the following with reference to Central Excise Act 1944:(a) Excisable goods
(b) Assessee
(c) related person
(d) adjudicating authority
(e) “Place of Removal”.
(f) Taxable event
(g) Assembly would amount to manufacture
(2) Explain briefly with reference to the provisions of the Central Excise Act the term “Deemed
Manufacture”.
(3) Briefly explain any two of the following with reference to the provisions of Central Excise Act, 1944:
(i) Wholesale dealer
(ii) Factory
(iii) Dutiability of waste and scrap
MANOJ BATRA
| 141
(4) Discuss briefly, whether excise duty is attracted on the excisable goods manufactured in the following
cases:
(i) in the State of Jammu and Kashmir;
(ii) by or on behalf of the Government
(5) State briefly whether the following circumstances would constitute “manufacture” for purposes of
section 2(f) of the Central Excise Act, 1944:
(i) Both inputs and the final product fall under the same tariff heading under the first schedule to the Central
Excise Tariff Act, 1985 (Tariff Act.)
(ii) Inputs and final product fall under different tariff headings of the Tariff Act.
Classification
(6) Does the maxim "Latter the Better" apply in classifying the excisable goods?
(7) Short note on
a. harmonized system of nomenclature
b. power of CG to amend first and second sch to CETA 1985.
VALUATION
(1) State the procedure for valuing excisable goods that are to be sold from depot/branch or premises of a
consignment agent under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules,
2000.
(2) Short note on- Compounded levy scheme under rule 15 of CER 2002 or sec 3A of CEA 1944.
(3) Determine the total amount of excise duty payable under section 4 of the Central Excise
Act,
1944 from the following information:
Particulars Rs.
(i) Price of machinery excluding taxes and duties 5,50,000
(ii) Installation and erection expenses 21,000
(iii) Packing charges (primary and secondary) 11,500
(iv) Design and engineering charges 2,000
(v) Cost of material supplied by buyer free of charge 8,500
(vi) Pre-delivery inspection charges 500
Other information:
(a) Cash discount @ 2% on price of machinery was allowed as per terms of contract since
full payment was received before dispatch of machinery.
(b) Bought out accessories supplied along with machinery valued at Rs. 6,000.
(c) Central excise duty rate 10% and educational cess as applicable @ 3%.
Make suitable assumptions as are required and provide brief reasons.
Ans- AV = 550000 + 11500 + 2000 + 8500 + 500 – 11000 = 561500, DUTY= 57835
(4) ABC Limited is engaged in the manufacture of Product ‘X’ for the purpose of
captive
consumption Determine the assessable value of Product ‘X:-.
Direct Wages & Salaries 19,500
Consumbale stores and repairs 5,700
MANOJ BATRA
| 142
Research and Development Costs 3,800
Direct Material (including excise duty of `1800) 35,000
Administrative overheads (relating to production activities) 5,300
Selling and Distribution Costs 1,500
Realisable Value of Scrap 1,300
Amortised cost of fixtures2,500
ANS- (35000- 1800) i.e 33200 + 19500 + 5700 + 3800 + 5300 + 2500 – 1300= 68700
AV = 110 % OF 68700 = 75570
(5) Determine the total amount of excise duty payable on a machine using the details given
below:
(I)
Sale price of the machine excluding taxes and duties 2,00,000
(ii) Sales tax 20,000
(iii) Cost of durable and returnable packing included in the sale price given at (i) above 5,000
(iv) Design and development charges paid by buyer on behalf of seller to a third party
20,000
(v) Warranty charges charged separately by the seller 5,000
Rate of excise duty 10%
Education cess 3%
Calculations should be supported by notes, wherever required
ANS- AV= 2,00,000 + 20000 + 5000 - 5000 = 220000, E. DUTY = 22660
(6) RAJA Ltd. is engaged in the manufacture of water Purifiers. Such cameras are notified
by the under section 4A of the Central Excise Act, 1944 and 30% abatement has been
prescribed on the same. Raja Ltd. manufactured 3000 units of water purifiers and
declared ` 2,000 as retail sale price on each package of water Purifiers. Determine the
assessable value for the purpose of excise duty from the following information provided
by RAJA Ltd.- `
Cost of raw material
Commission payable to dealers
Warranty charges
Advertisement charges
Packing charges
Cost of durable and returnable charges
Freight charges paid for bringing raw material into the factory
Outward Transportation of Final product for forward journey
Profit
28,000
12,000
2,500
2,000
6,000
5,000
4,000
1,000
30,000
Retail sale price of 3000 package = 3000 x 2,000- 60,00,000 Less: Abatement @ 30%18,00,000, Assessable Value- 42,00,000
(7) How will the assessable value under the subject transaction be determined under
section 4 of the CEA, 1944? Give reasons with suitable assumptions where necessary.
Contracted sale price for delivery at buyer's premises as Rs. 9,00,000.
The contracted sale price includes the following elements of cost:
(i) Cost of drawings and designs Rs. 4,000
(ii) Cost of primary packing Rs. 3,000
(iii) Cost of packing at buyer's request for safety during transport Rs. 7,000
MANOJ BATRA
| 143
(iv) Excise duty Rs.1,11,200
(v) VAT (Sales tax) Rs. 37,000
(vi) Octroi Rs. 9,500
(vii) Freight and insurance charges paid from factory to ‘place of removal’ Rs. 20,000
(viii) Actual freight and insurance from ‘place of removal’ to buyer's premises Rs. 42,300
ANS- AV = 900000 – 111200 – 37000 – 9500 – 42300 = 7,00,000
(8) Asha Ltd. supplies raw material to a job worker Kareena Ltd. After completing the jobwork, the finished product of 5,000 packets are returned to Asha Ltd. putting the retail
sale price as ` 20 on each packet. The product in the packet is covered under MRP
provisions and 40% abatement is available on it. Determine the assessable value under
Central Excise law from
the following details:
`
Cost of raw material supplied
Job worker’s charges including profit
Transportation charges for sending the raw material to the job worker
Transportation charges for returning the finished packets to Asha Ltd.
Ans- AV= 1lac- 40000 = 60000
30,000
10,000
3,000
3,000
(9) Surat coth Mills delivered 1000 meters of cloth to Purvanchal Readymade grarments on 10-1-09
from its depot located at ahmedabad @ rs. 110 per meter. The goods were dispatched to the depot
from the factory located in Surat on 5-1-09. Ex-factory price on 5-1-09 was Rs. 90 per meter. The sale
of identical variety of cloth effected from Ahmedabad depot on the two relevant dates is as follows:
On 05-01-09
On 10-01-09
Cloth sold (in mtrs.)
Rate per meter (Rs.)
Cloth sold (in mtrs.)
Rate per meter (Rs.)
100
135
200
120
850
125
1000
110
500
120
550
115
450
115
375
108
Calculate assessable value of 1000 meters of clothe sold by Surat cloth Mills
Ans Assessable value of the goods = 1,000 mtrs. × Rs.125 = Rs. 1,25,000
(10)
What are the situations where transaction value under section 4 of the Central
Excise Act does not apply?
(11)
A trader supplies fabrics to independent processor. Cost of fabrics is Rs.1,150.
The processor charges Rs.450 which includes Rs.350 as processing charges and
Rs.100 as his profit. After processing, goods are sent back to the trader who sells them
at Rs.1,800. Transport charges for receiving goods at the premises of the processor is
Rs.50 and the transport charges for sending goods after processing is Rs.60.Please
determine the assessable value of the goods under Section 4 of the Central Excise Act.
As per rule 10A of the Central Excise (Determination of Price of Excisable Goods) Rules,
2000, the assessable value of the goods in question would the price at which the
manufacturerultimately sells them to the consumer, i.e. Rs. 1,800 in the given case.
ANS- AV = 1800
Small scale industry
MANOJ BATRA
| 144
1) Euro Ltd. Is a small scale industrial unit which is producing ‘Keplin’, a tonic for growing children under
the annual report for the year 2011-12, the SSI unit shows a gross sales turnover of Rs. 18920000. Te
product ‘Keplin’ attracts excise duty @ 14% and sales tax @ 10%. Calculate the duty liability under
notification No. 8/03. FOR The year 2010-11, value of clearance were 1,90,00,000
Ans- Calculation of duty liability under Notification No. 8/2003.
Gross sales turnover is Rs. 1,89,20,000 which includes excise duty and sales tax.
sales excluding sales tax but including excise duty
18920000 – 1720000 [10/110* 18920000] =1,72,00,000
For first 150 lakh clearances , excise duty is Nil. Hence cum duty price after exemption = 1720000015000000=22,00,000
Excise duty payable = 2200000* 14.42/112.42= Rs.2,77,259.22
Total duty payable = Rs.2,77,259.22 or Rs.2,77,260
2) Que
A small scale unit manufacturer had achieved a sales of ` 89 lakh during the year 2011-12.
Turnover achieved during 2012-13 was ` 1.52 crores. Normal duty payable on the product is
12% plus applicable education cesses. Find the total excise duty paid by the manufacturer
during 2012-13 in each of the following cases:(A) If the unit has availed CENVAT Credit.
(B) If the unit has not availed CENVAT Credit
Answer
(A) If the unit has availed CENVAT Credit: In this case the unit is required to pay duty at
normal rates on the entire turnover i.e. 12.36% [consisting of Excise Duty @ 12%, Primary
Education Cess @ 2% on Excise Duty and Secondary and Higher Education Cess @ 1% on
Excise Duty] on 1.52 crores which works out to be ` 18,78,720/(B) If the unit has not availed CENVAT Credit: In this case duty payable will be computed
as under:
(i) On ` 150 lakhs = NIL
(ii) On subsequent sales= Normal duty @ 12.36% i.e. 12.36% on ` 2,00,000 which
works out to be ` 24,720/-
3) CTL Ltd. has a manufacturing unit situated in Lucknow. In the financial year 2006-07, the total value of
(i)
(ii)
(iii)
(iv)
(v)
clearances from the unit was Rs. 450 lakh. The break up of clearances is as under:
Clearances worth Rs. 50 lakh of certain non-excisable goods manufactured by it.
Clearances worth Rs. 50 lakh exempted under specified job work notification.
Exports worth Rs. 100 lakh (Rs. 75 lakh to USA and Rs. 25 lakh to Nepal).
Clearances worth Rs. 50 lakh which were used captively to manufacture finished products that are
exempt under notifications other than Notification No. 8/2003-CE dated 1.3.2003 as amended.
Clearances worth Rs. 200 lakh of excisable goods in the normal course. Explain briefly, the treatment for
various items and state, whether the unit will be eligible for the benefits of exemption under Notification
No. 8/2003-CE dated 1.3.03 as amended for the year 2007-08. (7 Marks)
ansFor the year 2006-07, the turnover of CTL Ltd. will be:= Rs.450 lakh – (Rs.50 lakh + Rs.50 lakh + 75 lakh) = Rs.275 lakh
4) Choti ltd, a small scale industry, provides the following details. Determine the
eligibility for exemption based on value of clearances for the financial year 2011-12 in
terms of Notification No. 8/2003-CE dated 1.3.2003 as amended:
MANOJ BATRA
| 145
Particulars `. (Lakhs)
(i) Total value of clearances during the f.y 2010-11 (including VAT ` 50 lakhs) 870
(ii) Total exports (including for Nepal and Bhutan `.200 lakhs) 500
(iii) Clearances of excisable goods without payment of duty to a unit in Software
Technology Park 20
(iv) Job work under Notification No. 84/94-CE - 50
Job work under Notification No. 214/86-CE -- 50
(v) Clearances of excisable goods bearing brand name of Khadi and Village Industries
ommission
200
Make suitable assumptions and provide brief reasons for your answers where necessary.
Ans- 870-50- (500-200) - 20 – 100= 400 choti lts. Is SSI.
5) MNO Ltd. is in the manufacture of both excisable and non-excisable goods in their
factorybuilding rented by them from October 1, 2012 and have been occupying the same as
a tenant.From the following particulars for the period October 1, 2012 to March 31, 2013,
state brieflywith suitable explanations, whether MNO Ltd. could claim the benefit of
exemption in terms ofNotification No. 8/2003-CE dated 1-3-2003 for the financial year 201314.
` (in
lakhs)
(i) Clearances of branded goods
60
(ii) Export Sales to Nepal
80
(iii) Export Sales to USA and Canada
120
(iv) Clearances of goods (duty paid based on Annual capacity of production under
section 3A
70
of the Central Excise Act, 1944)
(v) Clearances of goods subject to valuation based on retail sale price under
200
section 4A of the Central Excise Act, 1944(said goods are eligible for 30%
abatement)
(vi) Job work under Notification No. 214/86-CE dated 25-3-86
60
During the period April 1, 2012 to Sept 30, 2012 the previous tenant of the building
presentlyoccupied by MNO Ltd. had cleared excisable goods of the aggregate value of` 120
lakhs.
6) Choti Ltd., which is engaged in the manufacture of excisable goods started its business in
May, 2012. It availed small scale exemption in terms of Notification No. 8/2003-C.E. dated 13-2003 as amended for the financial year 2012-13. The following details are provided:
`
15,000 kg of inputs purchased @ ` 992.70 per kg 1,48,90,500 (inclusive of Central excise
duty @ 12.36%)
Capital goods purchased on 28-6-2012 44,12,000 (inclusive of excise duty at 12.36%)
Finished goods sold (at uniform transaction 2,50,00,000 value throughout the year)
Calculate the amount of excise duty payable by M/s. Choti Ltd. in cash, if any, during the
year 2012-13. Rate of duty on finished goods sold may be taken at 12.36% for the year and
you may assume that the selling price is exclusive of central excise duty. There is neither any
processing loss nor any inventory of input and output. Show your workings and notes with
suitable assumptions as required.
7) Aggarwal & Company is a manufacturing company. In the financial year 2012-13, the details
of its clearances of excisable goods are as follows:Particulars `.
(Lakhs)
MANOJ BATRA
| 146
(i) Total exports (including for export to Bhutan `50 lakhs)
600
(ii) Clearances of excisable goods without payment of duty to a 100% EOU
10
(iii) Job work under Notification No. 84/94-CE dated 11.4.94
50
(iv) Job work under Notification No. 214/86-CE dated 25.3.86
50
(v) Clearances of goods bearing brand name of National Small Industries
100
Corporation
(vi) Clearances of corrugated boxes bearing the brand name of Sugar &
200
Spice Confectioners. Sugar & Spice Confectioners use these corrugated boxes
for packing the bakery products produced by them.
On the basis of above information, you are required to ascertain the eligibility of Aggarwal
and Company for exemption based on value of clearances in terms of Notification No. 8/2003CE dated 1.3.2003 as amended for the financial year 2013-14.
Miscellaneous Que
Valuation
3. Examine the validity of the following statements:(i) Excise Department can challenge the reasonability of MRP printed on the package.
(ii) Legal/penal actions can be taken in case the retail sale price is not mentioned or is unduly tampered after the
removal.
Ans (i) The statement is not Valid. The Central Excise Department cannot challenge the reasonability of MRP printed
on the package. As held by Supreme court in ITC Ltd.2004 (SC)
(i) The statement is valid
If the retail sale price is not mentioned on the excisable goods or is unduly tampered after the removal, then
such goods shall be liable to confiscation and the retail sale price of such goods shall be determined in the manner
prescribed by the Central Government and such price shall be deemed to be the retail sale price.
Mahavir Manufacturers, engaged in the manufacture of machines, sold a machine to Highland Enterprises. Cumduty sales price of the machine excluding sales tax is ` 3,50,000. Rate of excise duty is 10%, education cess is 2% and
secondary and higher education cess is 1%. Sales price includes the following charges:S.No. Particulars
Amount (`)
(i) Secondary packing
5,500
(ii) Design and development charges of machine
20,000
(iii) Warranty charges
35,000
(iv) Cost of return fare of vehicles
2,000
(v) Trade discount
3,000
(vi) Advertisement and publicity expenses borne by Highland Enterprises
15,000
(vii) Pre-delivery inspection charges
20,000
Ans -Calculation of assessable value of the machine for the purposes of the levy of the excise duty
Particulars Amount (`)
Cum-duty sales price of the machine excluding sales tax
3,50,000
Less: Cost of return fare of vehicles
2,000
Less: Trade discount
3,000
Cum-duty price for excise duty purposes
3,45,000
Less- excise duty 10.3/110.3 *345000
Assessable value=
3,12,783.30
MANOJ BATRA
1.
2.
3.
4.
5.
6.
7.
| 147
While computing the assessable value:amount charged from the buyer in relation to packing, whether primary or secondary, will be included [Circular No.
643/34/2002 dated 01.07.2002].
design and engineering charges will be included as such payment is ‘in connection with sale’.
advertisement and publicity expenses borne by the buyer shall not be excluded [Circular No. 643/34/2002 dated
01.07.2002]
As per the definition of the transaction value under section 4(3)(d) of the Central Excise Act, 1944, warranty charges
are includible.
cost of return fare of vehicles is not includible [Circular No. 923/13/2010 – CX dated 19.05.2010].
Trade discount is allowable as deduction.
pre-delivery inspection charges are includible [Circular No. 936/26/2010-CX. dated 27-10-2010].
Valuation
Compute the assessable value of the goods manufactured by Bharat Enterprises, under section 4 of the Central Excise
Act, 1944, with the help of the following particulars:Particulars
Contracted sale price for delivery at buyer’s premises
The contracted sale price includes the following elements of cost:(i) Cost of containers supplied by the buyer
(ii) Design and engineering charges
(iii) Loading and handling charges incurred after removal from the factory
(iv) Cost of after sale service
(v) Dharmada charges
Amount (` )
2,42,000
15,200
22,400
6,000
10,000
2,100
Ans- AV= 242000—6000 =236000
Small scale industries
Practical que
Following is detail for the year 2009- 10 of X ltd. Determine whether small scale industry or not for the F.Y 2010-11
Rs.
(1) Total value of clearances of goods with brand name of X ltd
.75,00,000
(2) Total value of clearances of goods with brand name of PQR Ltd.
90,00,000
(3) Value of clearance of packing material manufactured by X ltd. With brand name of KISAN Industries used by
them for their final product
80,00,000
(4) Clearances of goods which are totally exempt under another notification (other than an exemption based on
quantity or value of clearances)
35,00,000
(5) Clearance of non excisable goods
40,00,000
(6) Clearance of excisable goods to SEZ unit
20,00,000
(7) Jobwork under NN- 214/86
70,00,000
(8) Jobwork under NN- 84/94
60,00,000
(9) Total exports during the year including to Nepal & Bhutan – 30 lakh
200 lakh
Ans- 75,00,000 + 80,00,000 + 35,00,000 + 30,00,000 =210 lakh
The unit is small scale unit because total value of clearance doesn’t exceed 400 lakh.
Authors Note- Solve the question with proper working notes as suggested in the class.
QUE - PQR & Co. is eligible for exemption in terms of Notification No. 8/2003 CE dated
01.03.2003 for the year 2013-14. It provides the following particulars with regard to the
clearances of goods effected during the said year:
Particulars
MANOJ BATRA
| 148
Value of domestic clearance of goods with own brand name - 210
Value of clearance of goods with the brand name of others (including ` 40 lakh in respect
of goods manufactured in a rural area) - 100
Value of clearances for exports - 120
Value of clearances for captive consumption (Final products are eligible for SSI
exemption) - 160
Value of clearances of goods exempted under notification other than Notification No. 8/2003- 40
(Assume rate of excise duty at 12%)
Exports made by PQR & Co. are exempt from duty. Determine the total duty payable and duty payable in cash, if any, by
PQR & Co. in respect of the year 2013-14.
Additional Information:
Excise duty paid on inputs consumed in exempt and dutiable clearances in the year 2013-14 is ` 2,25,000 and ` 4,50,000
respectively. Excise duty paid on capital goods purchased in the year 2013-14 is ` 6,35,000.
Show your workings with explanations where required.
`
ANS- VALUE- 250 , DUTY ON 100 LAKH = 12,00,000 + 7,20,000 ( OTHER BN)
= 19,20,000 + CESS 57600 = 19,77,600 LESS CCR ( 4,50,000 + 6,35,000) =
DUTY PAYABLE IN CASH - 892600
Registration under central excise
6. Examine whether the following categories of persons are exempted from obtaining registration under rule 9(2) of
the Central Excise Rules, 2002.
(a) S Ltd. is a small scale unit exempt under Notification No. 8/2003 dated 01.03.2003.
(b) Central Government undertakings manufacturing excisable goods.
(c) Arahnath Enterprises is engaged in the manufacture of the excisable goods which are chargeable to nil rate of
duty.
Ans Every Manufacturer is liable to get registered but CG has exempted the small scale units for taking registration.
However, they have to file the declaration when their clearances in preceding financial year eaual to or more than Rs. 90
lakh. Hence,S Ltd. is exempt from obtaining registration if it gives the declaration when their clearances in preceding
financial year eaual to or more than Rs. 90 lakh.
(b) No, the Central Government undertakings manufacturing excisable goods are
not exempted from obtaining registration.
(c) CG has exempted , for taking registration the persons who manufacture the excisable goods, which are chargeable
to nil rate of duty or are fully exempt from duty by a notification subject provided declaration is filed. Hence, Arahnath
Enterprises is exempt from obtaining registration provided it furnishes the declaration in the specified form.
CENVAT CREDIT RULES
RaJA & Co. is engaged in the manufacture of Inverters. From the following information, you are required to compute the
amount of CENVAT credit available to Raja & Co. under CENVAT Credit Rules, 2004:
(1) Determine the amount of CENVAT credit available to Raja Manufacturing Ltd. in respect of the following
items procured by them in the month of October, 2011:-
Items
Excise duty paid (including EC
and SHEC) (`)
MANOJ BATRA
| 149
Raw materials
Pollution Control Equipment
Capital goods used for generation of electricity for captive use
within the factory
52,000
55,000
1,00,000
Storage Tank
20,000
Grease & Oil
25,000
Light Diesel Oil
5,000
Motor spirit
40,000
Inputs used for construction of a building
1,00,000
Dairy and bakery products consumed by the employees
5,000
Air Conditioner in the office of Manager
15,000
Motor vehicle
4,50,000
(Note: The aggregate value of clearances of Gangotri Manufacturing Ltd. for the financial year 2010-11 is ` 350
lakh)
Ans- 52000 + 55,000 + 1,00,000 + 20,000 + 25,000 + 50000 + 450000
Note- it is assumed that MOTOR VEHICLE IS other than chapter 8702/03/04/11.
Raw material
Pollution Control Equipment
Storage Tank
Grease & Oil
Light Diesel Oil
Air Conditioner in the office of Manager
Food items consumed by the employees
Inputs used for construction of a building
Excise duty paid (including cess) (`)
4,80,000
1,25,000
60,000
25,000
15,000
35,000
18,000
2,50,000
Question
Discuss in detail whether interest can be recovered from an assessee who firstly wrongly takes and subsequently
reverse CENVAT Credit before its utilisation.
Answer
NO, INT CAN’T BE RECOVERED AFTER AMENDMENT BY BUDGET 2012.
Question
Based on the following particulars, arrive at the CENVAT credit available on clearance
of goods to Domestic Tariff Area (DTA) from an Export Oriented Unit (EOU):
Assessable value ` 20 lakhs
Basic customs duty 10%
Excise duty 10%
Education cess 2%
Secondary and Higher Education cess 1%
VAT payable under State VAT law 4%
Answer
As per Notification No. 23/2003 CE dated 31.3.2003, 50% of basic customs duty is exempt in case of clearance of
goods by an EOU to DTA. The amount of excise duty payable by EOU is calculated as under:
(i) Assessable value 20,00,000
(ii) Customs duty @ 5% of `20,00,000 1,00,000
(iii) Additional customs duty (CVD) @ 10% of (`20,00,000 + `1,00,000) 2,10,000
(iv) Education cess of customs @ 2% of `(1,00,000 + 2,10,000)
6,200
(v) S & H education cess of customs @ 1% of `(1,00,000 + 2,10,O00)
3,100
MANOJ BATRA
| 150
Add: Special additional customs (SAD) (It is exempt since VAT is payable) Nil
Excise duty payable in terms of proviso to section 3(1)
=`(1,00,000+2,10,000+6,200+3,100)
3,19,300
Education cess of excise=` (3,19,300×2%)
6,386
Secondary and higher education cess of excise=` (3,19,300×1%) 3,193
Total Excise duty liability of EOU=`(3,19,300+6386+3,193)
3,28,879
As per second proviso to rule 3(7)(a) of CENVAT Credit Rules, 2004, the amount of CENVAT credit will be as under:
`
Additional duty of customs (CVD) 2,10,000
Education cess of excise 6,386
S & H education cess of excise 3,193
Total amount of credit 2,19,579
Note. Notification No. 23/2003-CE dated 31-03-2003, granting partial exemption to EOU, states that ‘duty of excise’
under section 3(1) in excess of duty of customs reduced by 50% is exempt. Some authors are of the opinion that EC &
SHEC will not be levied on total of [BCD + cvd +Custom cess + SP. CVD]
Question
Madan Gopal Ltd. acquired the following assets on 1-4-2009:Kinds of Capital Assets
Amount excluding excise duty
(`)
Computers and Computer Peripherals
5,00,000
Capital Assets other than Computers &
20,00,000
Computer Peripherals
Amount of Excise Duty (`)
50,000
2,00,000
The company removed of above capital Assets after use on 4th May 2012. Computer sold for 1,50,000 and other
cap. Asset sold for 14 lakh. Compute the amount to be paid by the company separately in case of disposal of Computer
and Computer Peripherals and other capital assets respectively.
Answer
As per rule 3 (5A) – higher of 2 payable
(i) Reduced amount as per % specified or
(ii) Duty payable on transaction value.
Madan Gopal Ltd will pay the following amounts:Date of Acquisition of Assets
Date of Disposal of Assets
01-04-2008
4-05-2012
Time Gap in terms of number of quarters/part thereof between above two dates 12 quarters
(A) Case of Computer & Computer Peripherals:Total CENVAT availed in case of Computers & Computer Peripherals:
50,000
Amount reduced for each quarter in the first year @ 10% i.e.4 x 10%=40%
20,000
Amount reduced for each quarter in the second year @ 8% i.e. 4x 8%=32%
16,000
Amount reduced for each quarter in the third year @ 5% i.e. 4 x 5%=20%
10,000
Amount reduced for quarter in the 4th year @ 1% i.e. 1 x 1%=1%
500
Total amount to be reduced
46,500
MANOJ BATRA
| 151
Note- since duty on TV is 18540 (i.e 150000* 12.36%). Hence as per rule 3 (5A)- amt payable –
higher of 2 i.e 18540 OR Amount PAYABLE AS PER % BASIS BY Madan Gopal Ltd.(`` 50,000 – ``
46,500) =3500
HIGHER OF 2 PAYABLE IS 18540
(B) Case of disposal of other Capital Assets:-
Question
M/s TCCL, providing management consultancy to its client, does not maintain any separate accounts and have paid
`1,00,000 as service tax and excise duty towards input services and input material/capital goods used by them. It is
assumed for the sake of simplicity that out of aforementioned ` 1,00,000 they have used the inputs for exempted and
taxable services to the extent of ` 40,000 & ` 60,000 respectively. They are providing the output services amounting to `
14,00,000 and exempted services amounting to ` 7,00,000. How much credit out of `1,00,000 can be availed by them for
paying output service tax liability, if they do not maintain any separate accounts?
Answer
w.e.f. 01-04-2011 Rule 6(3) of the CENVAT Credit Rules, 2004 inter alia provides that where common input/input
services are used for providing taxable as well as exempted services and separate accounts are not maintained, the
output service provider has the following options at his disposal:(i) Pay an amount equal to 6% of the value of exempted services;
OR
(ii) Pay an amount as determined under Rule 6(3A) of CCR, 2004 i.e. Reverse the CENVAT Credit attributable to the
inputs and input services used for providing exempted services
(iii) Maintain separate accounts for inputs as provided for in Rule 6(2)(a) of CCR, 2004 and take credit of only those
inputs which are used for provision of output services excluding exempted services. In addition, a service provider has to
pay an amount determined in accordance with Rule 6(3A) in respect of input services.
Accordingly, in the present case if the above options are applied then:(i) M/s TCCL has to pay ` 42,000/- (6% on ` 7,00,000) on value of exempted services. After making aforementioned
payment, it can take entire CENVAT Credit of ` 1,00,000 available to it.
(ii) TCCL has to reverse CENVAT Credit attributable to inputs and input services used for providing exempted
services which are given as ` 40,000/- .
(iii) In the absence of complete information for maintaining separate accounts for inputs, this option can not worked
out in this case. Consequently, proportionate reversal option only in r/o input services can not be worked out.
Question
Whether CENVAT Credit can be availed in respect of service paid under section 66A of Finance Act, 1994?
Answer
As per Rule 3(1)(ixa), a manufacturer or producer of final products or a provider of taxable service can take cenvat
credit of the service tax leviable under section 66A of the Finance Act.
Question
Punjab National Bank provides the following information for the month of June 2011:
CENVAT Credit available on Inputs ` 2,00,000
CENVAT Credit available on Input Services ` 4,00,000
Service Tax liability before availing eligible CENVAT ` 10,00,000
Determine the amount of CENVAT Credit available to Punjab National Bank for the month of June, 2011 in view of
Rule 6(3B) of CENVAT Credit Rules, 2004. Also determine the net service tax liability of the Bank after availing the
eligible CENVAT Credit.
Answer
service tax liability will be computed as under:
CENVAT Credit available on Inputs `
2000000
MANOJ BATRA
Less: Payment of 50% of CENVAT Credit available on Input by virtue of Rule 6(3B). It
effectively means 50% of available CENVAT Credit is to be disallowed `
Net CENVAT Credit available on Inputs `
CENVAT Credit available on Input Services `
Less: Payment of 50% of CENVAT Credit available on Input Services by
virtue of Rule 6(3B). It effectively means 50% of available CENVAT Credit is
to be disallowed. `
Net CENVAT Credit available on Input Services `
Determination of Net Service Tax liability of Bank for the month of June, 2011-07-09
Service Tax liability of bank before availing eligible CENVAT Credit `
| 152
1000000
1000000
4,00,000
2,00,000
2,,00,000
10,00,000
Less: Net/Eligible CENVAT Credit available on Inputs `
1,00,000
Less: Net/Eligible CENVAT Credit available on Input Services `
2,00,000
Net Service Tax liability of bank after availing eligible CENVAT Credit `
7,00,000
M/s. AJ imported some inputs and paid basic customs duty ` 5 lakh, surcharge on customs duty ` 50,000 and
additional duty of customs leviable under section 3(1) of the Customs Tariff Act, 1975 ` 1 lakh. Additional duty
u/s 3(5) i.e special CVD 40,000. Calculate the amount that he can claim as CENVAT credit. Would it make any
difference, M/S. AJ is not a manufacturer but a service provider?
Ans- if manufacturer CCR = 1 lakh + 40000, if service provider then – 1 lakh
Question
PQR Ltd., a manufacturer of excisable goods, purchased in the month of September, 2013 inputs of `
1,00,000/- on which it pays excise duty of ` 12,360 /- . The company availed the aforementioned CENVAT of `
12,360/- while discharging its excise duty liability for the month of September, 2013. In Dec. 2013 before the said
inputs are put into use, the company has written off ` 20,000 against the said inputs.
What economic consequences the company has to face for foregoing writing off of ` 20,000/- However,
subsequently, in the month of March, 2014 the company put to use the entire inputs of ` 1,00,000/-. Can the
company get some economic benefit now?
Answer
Rule 3(5B) of CENVAT Credit Rules, 2004 requires a manufacturer or service provider to pay an amount equivalent to
the CENVAT credit taken in respect of inputs or capital goods when the value of such inputs or capital goods is written off
fully or partially before being put to use. Thus, PQR Ltd. will have to pay an amount equivalent to the CENVAT credit
taken on inputs valuing ` 20,000 (inputs written off) which is ` 2,472 (12,360/1,00,000 x 20,000).
However, proviso to rule 3(5B) provides that if the said inputs or capital goods is subsequently used in the manufacture of
final products or the provision of output service, the manufacturer or output service provider, shall be entitled to take
credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of CCR, 2004. Thus, in
the present case, by virtue of proviso to rule 3(5B) when in March 2014, the company puts to use entire inputs of `
1,00,000; the company will be entitled to take credit of the amount equivalent to the CENVAT credit paid earlier i.e. `
2,472/-.
Answer the following with reference to CENVAT Credit Rules, 2004:
(a) ‘A’ manufactures a certain final product in which petrol is used among other inputs. Can he avail CENVAT
credit on petrol?
(b) ‘B’ is an outdoor caterer. He has purchased a lorry for carrying utensils, tables, groceries, vegetables etc. to
the place of service. The lorry is registered in the name of ‘B’. Can ‘B’ avail credit of the excise duty paid by him
on the purchase of the lorry?
(c) Can a manufacturer located in Jammu utilize the credit of service tax availed on input services received in
New Delhi for payment of excise duty on his final products cleared in Jammu?
MANOJ BATRA
| 153
(d) Inputs are received in the factory of the manufacturer on 10.11.2013 but are issued for the production process
on 10.12.2013. When should the manufacturer avail credit?
Answer
(a) No. Petrol (motor spirit) is specifically excluded from the list of eligible inputs under rule 2(k).
(b) Yes. As per rule 2(a)(B)(ii), motor vehicle designed for transportation of goods including their chassis registered in the
name of the service provider, when used for transportation of inputs and capital goods used for providing an output
service are treated as capital goods.
(c) No. CENVAT Credit Rules, 2004 in relation to availment and utilization of service tax credit are not applicable in the
State of Jammu and Kashmir, as service tax law does not apply in Jammu and Kashmir.
(d) Credit can be availed on 10.11.2013 immediately on receipt of the inputs in the factory
Question
Naman Ltd. is registered under Central Excise Act, 944. It has paid the following amounts under Central Excise Act,
1944:
Central Excise Duty `
1600000
Amount of Interest `
100000
In addition, it is liable under the following Acts for the amounts indicated against each Act:
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 `
3,00,000
The Securitization and Reconstruction of Financial Assets and the Enforcement of ` Security
2,00,000
Interest Act, 2002
Factories Act, 1948 `
3,00,000
Customs Act, 1962
` 6,00,000
The company has a property worth ` 20 lakhs. What legal remedy is available to Central Excise Department for
recovery of its above-mentioned dues of ` 17 lakhs.
Answer
According to provisions of Section 11E of Central Excise Act, 1944
Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty,
interest, or any other sum payable by an assessee or any other person under this Act or the
rules made thereunder shall be the first charge on the property of the assessee or the concerned. However,
aforementioned first charge shall be subject to the amounts payable under the following Acts:
1. Companies Act, 1956 [Section 529A].
2. The Recovery of Debts Due to Banks and the Financial Institutions Act, 1993.
3. The Securitisation Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002.
In view of above-mentioned provisions of Section 11E of Central Excise Act, 1944, the Department can create first
charge on the property of defaulting assessee Naman Ltd.
However, aforementioned first charge shall be subject to amounts payable under the following Acts:
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
` 3,00,000
The Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002
` 2,00,000
Thus, the Department will be able to create first charge of ` 15 lakh [` 20 lakh less 5 lakh payable under above Acts]
only by virtue of Section 11E of Central Excise Act, 1944.
Determine the amount of CENVAT credit available to PQR Manufacturing Ltd. in respect of the following items procured by
them in the month of October, 2011:Items
Excise duty paid (including EC
MANOJ BATRA
Raw steel
Goods for providing Free warranty
Plastic pipe making machine
Spare parts for the above machine
Parts and components for used in the manufacture of final product
Office equipment
Capital goods used for generation of electricity for captive use within the factory
| 154
and SHEC) (`)
52,000
5000
20,000
8,000
16000
30,000
1,00,000
Input used exclusively in manufacture of goods for which NN- 1/2011 is availed
15000
Capital goods used exclusively in manufacture of goods for which NN- 1/2011 is
60000
availed
Grease and oil
2000
Motor spirit & High Speed Diesel Oil
40,000
Inputs used for construction of a building or making structure for support of CG.
1,00,000
Dairy and bakery products consumed by the employees or in guest house for
5,000
personal use.
Motor vehicle falling under tariff heading 8705
4,50,000
Motor vehicle falling under tariff heading 8702
(Note: The aggregate value of clearances of PQR Manufacturing Ltd. for the financial year 2010-11 is ` 450 lakh)
Ans- 52000 + 5000 + 10000 +4000 +16000+ 50000 +2000 + 225000
(a) Discuss whether the following statements true or false w.r.t Cenvat Credit Rules,2004 with Explanation.
(i) Dumpers or tippers used by Manufacturer or for providing mining services are not treated as capital goods.
(ii) CENVAT credit cannot be used for paying Clean Energy Cess
(iii) Credit of duties of excise on inputs can be availed irrespective of whether payment is made or not
against the invoice, whereas credit of service tax on input services can be availed only after making payment
of the invoice.
(iv) Materials used by a manufacturer for maintaining factory building are eligible for CENVAT credit.
(v) manufacturer or service provider shall be allowed to take credit of the service tax leviable under section 66A of the
Finance Act, 1994.
(vi) If the capital goods are cleared as waste and scrap, the manufacturer has to pay an amount equal to the duty
leviable on transaction value.
(vii) Rule 4 of CENVAT Credit Rules, 2004 allows credit of inputs/CG without bringing them into the premises of output
service provider subject to due documentation regarding their delivery and location.
(viii)CCR not allowed on Motor vehicle falling under 8702/03/04/11 to Maufacturer but allowed to specified service
provider
(ix) credit of the service tax paid on supply of tangible goods through the motor vehicles and hiring of the motor
vehicles, insurance and repair etc. where such motor vehicles are eligible as capital goods, is available.
(x) Credit of the service tax paid on insurance and repair etc. of the motor vehicle, even if not a capital good, is
available to the following:- (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by
him; or (b) a general insurance service provider in respect of a motor vehicle insured or reinsured by him.
(xi) Manufacturer or the service provider, in respect of common input/input services - opting not to maintain separate
accounts, had the option to pay an amount equal to 6% of the value of the exempted goods and exempted
services.
(xii) If wrongly availed CCR reversed before utilization, interest will be payable as decided by SC in case of IND SWIFT
(xiii)Arrears of duty under section 11A can be paid by utilizing the CENVAT credit which has accrued subsequent to the
period to which the arrears pertained.
(xiv)Cenvat credit on inputs can’t be taken without bringing them into the premises of output service provider.
(xv) accessories and goods used for providing free warranty would be eligible as 'input'
(xvi)inward transportation of inputs or capital goods and outward transportation up to the place of removal are eligible
input services for a manufacturer, but outward transport beyond Place of Removal not an input service.
(xvii)
The manufacturer shall not be allowed to transfer unutilized input credit in case of transfer of ownership
of the factory by way of sale along with the inputs and capital goods.
(xviii)
A manufacturer availing CENVAT credit on inputs, capital goods or input services wrongly is liable to a
penalty.
MANOJ BATRA
| 155
ANS- (i) false (ii) True (iii) partially true- Refer Rule 4(7) (iv) false (v) true (vi) True (vii) true (viii) true (ix) true (x) true (xi) true
(xii) false overrule by amendment in rule 14 (xiii) true (xiv) false (xv) True, if value of these included in value of FP. (xvi) True
(xvii) False (xviii) true
Question 1
Discuss the provisions governing packing, re-packing, labelling or re-labelling within the
warehouse in respect of export warehousing.
Answer
The operations of packing, re-packing, labelling or re-labelling within the warehouse in respect of excisable goods
received and stored in the warehouse are governed by the procedure specified under Rule 20 of Central Excise
Rules, 2002. Suitable entries must be made in the Export-Warehouse Register. In case of non-reconciliation of
quantity, after adjusting any wastage or refuse, the differential quantity shall be treated as unaccounted and action for
recovery of duty will be initiated.
The exporter may procure packing or labelling material and bring the same into the warehouse under the
warehousing procedure itself. Duty paid packing material can be brought into the warehouse subject to certain
conditions. Where the process of packing, repacking, labelling or re-labelling amounts to manufacture in terms of the
provisions of the Central Excise Tariff Act, 1985, the goods permitted for clearance for home consumption shall be
assessed accordingly.
Question 2
Briefly discuss the provisions in respect of waiver of physical warehousing in case of exigency.
Answer
The officer-in-charge of the warehouse may permit waiver from physical warehousing (i.e. permitting export without
physically storing the goods in the warehouse) where the exporter so requests in writing. However, aforementioned
permission will be given only if the formalities relating to record-keeping are completed in usual manner with suitable
record in the Warehouse Register: ‘Warehousing waived’. It is to be kept in mind that aforesaid permission
is given in the following exceptional cases:
(i) where delay occurred due to delayed supply from the factory; or
(ii) Longer transit period; or
(iii) Requirement of immediate export; or
(iv) Any other genuine reasons
Besides, it is also essential that the entire consignment is entered for export in the original packing. Such cases of
permission granted are required to be reported to the Superintendentin- charge of the warehouse at the earliest.
Valuation of taxable service
PQR LTD has entered into a contract with RAJA in FEB 2013 for installation of electrical fittings in a building
owned by RAJA. The material required for such installation is also required to be supplied by PQR LTD.
As per the contract, the amount payable (excluding all taxes) by RAJA to PQR LTD is ` 50,00,000 in addition to
the electric cables to be supplied by RAJA for which it charged ` 5,00,000 from PQR LTD. Fair market value of the
electric cables (excluding VAT) is ` 15,00,000.
Whether the foregoing installation services are subject to service tax and if so, how will the service tax liability be
computed?
Ans- yes liable to service tax
Value of taxable service = (50,00,000 + 15,00,000 – 5,00,000) * 60% = 36,00,000
SERVICE TAX – 12.36% ON 36,00,000
Baggage Rules
Calculate the amount of duty drawback allowable under section 74 of the Customs Act 1962 in following
cases:
MANOJ BATRA
| 156
(a) Salman imported a motor car for his personal use and paid Rs. 5,00,000 as import duty. The car is
re-exported after 6 months and 20 days.
(b) Nisha imported wearing apparel and paid Rs. 50000 as import duty. As she did not like the apparel,
these are re-exported after 20 days.
(c) Super Tech Ltd. Imported 10 computer systems paying customs duty of Rs. 50 lakh. Due to some
technical problems, the computer systems were returned to foreign supplier after 2 months without
using them at all.
(d) XYZ Ltd. exported 1000 kgs of a metal of FOB value of ` 1,00,000. Rate of duty drawback on such export is
` 60 per kg. Market price of goods is ` 40,000 (in wholesale market).
Ans
Amount of duty drawback
(a) Period of personal use = 6 months and 20 days i.e 3 quarters
DDB admissible [5lac—4%*3*5lac]= 440000
(b) No drawback admissible on wearing apparel
(c) Drawback= 98% of 50 lakh = 49 lakh
(d) No DDB allowed because As per Sec 76 of CA 1962, the market price of which is less than the
amount of drawback due thereon. In this case, the market price of the goods is ` 40,000, which
is less than the amount of duty drawback, i.e. 1,000 kgs x ` 60 = ` 60,000.
From the following particulars, determine the assessable value of the imported equipment
giving explanation for each item:
Rs.
(1) FOB cost of equipment (Japanese Yen) 2,00,000 Yen
(2) Freight charges in Japanese Yen 20,000 Yen
(3) Charges for development connected to equipment paid in India Rs. 60,000
(4) Insurance charge paid in India for transportation from Japan Rs. 15,000
(5) Commission payable to agent in India Rs. 15,000
Exchange rate as per RBI is 1 Yen = Rs. 0.45
Exchange rate as per CBEC is 1 Yen = Rs. 0.50
Landing charges: one percent of CIF cost
(5 Marks)
Answer
Computation of assessable value:FOB value
Add: Freight from Japan (Note – 1)
Total (in yen)
Exchange rate applicable is 1 Yen = Rs. 0.50 (Note – 4)
Total (in rupees)
Add : Insurance charges
Total
Add : Commission (Note – 2)
CIF value
Add : Landing charges @ 1% of CIF value
Assessable value
1) May 2001/ Nov 2008 (New)
2,00,000 Yen
20,000 Yen
2,20,000 Yen
Rs. 1,10,000
Rs. 15,000
Rs. 1,25,000
Rs. 15,000
Rs. 1,40,000
Rs. 1,400
Rs. 1,41,400
MANOJ BATRA
| 157
A consignment of 800 metric tons of skimmed milk powder of US origin was imported by a non-profit
making organization for free distribution of milk to the children in a tribal area under a scheme designed by
the Food and Agricultural Organisation. This being a special transaction of nominal price of US $ 10per
metric ton was charged for the consignment to cover freight and insurance charges. The customs
department found out at or about the time of importation of this gift consignment there were the following
imports of skimmed milk powder of US origin
S.No.
In metric tons
Quantity imported
US $ C.I.F
1.
2.
3.
4.
5.
6.
20
100
500
900
400
780
unit price in
260
220
200
175
180
160
The rate of exchanges on the relevant date was 1 US $= Rs. 43 and the rate of BCD was 15% advalorem.
There is no CVD and Special CVD. Calculate the amount of duty leviable on the consignment under the
customs Act, 1962 with the appropriate assumption and explanations where required.
Answer
Determination of transaction value of the subject goods:Computation of amount of duty payable:CIF value of 800 metric tonnes:=800 x 160
At the exchange rate of $ 1
CIF Value (in Rupees)
Add: Landing Charges at 1%
15% of Ad Valorem duty
on Rs.55,59,040
Add: Education cess @ 2%
(rounded off)
Add: Secondary and higher education
cess @ 1% (rounded off)
Total custom duty payable
= US $ 1,28,000
= Rs.43
= Rs.55,04,000
= Rs.55,000
= Rs.55,59,040
= Rs.8,33,856
= Rs.16,677
= Rs.8,339
= Rs.8,58,872
Compute the assessable value and customs duty payable from the following information:
(i) F.O.B. value of machine 8,000 UK Pounds
(ii) Freight paid (air) 2,500 UK Pounds
(iii) Design and development charges paid in UK 500 UK Pounds
(iv) Commission payable to local agent @ 2% of F.O.B., in Indian Rupees
(v) Date of bill of entry 24.10.2007 (Rate BCD 20%; Exchange rate as notified by CBEC Rs.68 per UK
Pound)
(vi) Date of entry inward 20.10.2007 (Rate of BCD 18%; Exchange rate as notified by CBEC Rs.70 per
cent UK Pound)
(vii) C.V.D. is payable @ 16% plus education cess as applicable
(viii)
Special C.V.D. – as applicable
(ix) Insurance charges have been actually paid but details are not available.
MANOJ BATRA
| 158
(6 Marks)
Ans
Computation of assessable value and duty thereon:
FOB value
Add: Design and development charges
Add: Freight (air) (Note-1
Add: Insurance 1.125% of FOB (Note-2)
Total
Total in Rupees @ Rs. 68 per pound (Note-3)
Add: Local agency commission (2% of 8000 UK pounds)= 160 UK pounds × Rs. 68
C.I.F value
Add: Landing charges @1%of CIF value
Assessable value
Add: Basic custom duty @ 20% (Note-4)
8000 UK pounds
500 UK pounds
1,600 UK pounds
90 UK pounds
10,190
Rs. 6,92,920
Rs. 10,880
7,03,800
7,038
7,10,838
1,42,167.60
Total Rs
. 8,53,005.60
Add: CVD @16% [ EC & SHEC EXEMPT ON CVD]
Add: Education cess (3% of custom duty)
= 3% of (Rs. 1,42,167.60+ Rs. 1,36,480.90)=Rs. 2,78,648.50
Total for Special CVD
1,36,480.90
Rs. 8,359.45
Special CVD @4%
9,97,845.95
Rs. 39,913.83
Total duty payable: Rs. 1,42,167.60 + Rs. 1,36,480.90 + Rs. 8,359.45 + Rs. 39,913.83
= Rs. 3,26,921.78
or Rs. 3,26,922
Jagat Corporation Limited imported some goods from US .The details of the transaction are as follows:Rate of exchange OF CBEC - 1 US $=Rs 50
Rate of exchange OF RBI - 1 US $=Rs 49.10
CIF value of the goods is $ 1,50,000
Rate of basic custom duty is 10%
Rate of education cess is 2%
Rate of secondary and higher education cess is 1%
If similar goods were manufactured in India, excise duty payable as per Tariff is 12%.
Calculate assessable value and total duty payable thereon.
ANS- AV = 75,75,000, BCD- 757500, CVD- 999900, CUSTOM- EC-35148, SHEC- 17574
Que- calculate DDB as per sec 75 read with rules of CA 1962
FOB VALUE OF EXPORT
RATE OF DDB
IMPORTED
GOODS
MATERIAL VALUE
1
2,00,000
0.5%
70000
2
48000
1%
35000
3
80000
0.5%
50000
4
50000
30%
25000
5
4000
1.2%
2000
6
1,00,000
5%
125000
7
50000
70%
25000
8
160001
3%
100000
Suppose in case 8 Minimum value addition to be achieved fixed by CG is 60%
MKT PRICE OF
GOODS
1,00,000
40000
60000
30000
3500
135000
30000
150000
MANOJ BATRA
| 159
ANS
1. DDB allowed, because 0.5% of 2 lac i.e 1000 is more than 500, even though less than 1% of FOB.
2. DDB allowed, because 1% of 48000 i.e 480 though less than 500, but DDB allowed if it is 1% or more of
FOB.
3. DDB not allowed, because 0.5 % of 80000 i.e 400 less than 500,and also less than 1% of FOB.
4. DDB allowed will be restricted to Rs. 10000 (i.e 1/3rd of Mkt price) even though originally DDB comes to Rs
15000 ( i.e 30% of 50000). Hence DDB allowed is Rs 10000.
5. DDB not allowed as it comes to Rs 48 which is less than Rs 50
6. No DDB allowed as the export value of goods is less than vale of imported material used
7. DDB not allowed as market price is less than amount of Duty Drawback. Hence no DDB allowed.
8. DDB allowed , because as per sec 75 No DDB allowed if export value of such goods is not more than such
percentage of value of imported material used in the manufacture.
THEORETICAL QUESTIONS
CENVAT CREDIT
(8) Briefly explain any two of the following with reference to the provisions of Cenvat Credit
Rules, 2004 :
(i) Exempted goods
(ii) Final products
(iii) First stage dealer
(9) Briefly explain EA 2000 and Special Audit u/s 14A & 14AA
Central Excise Rules 2002
(10)
Que- short note on
Provisional assessment
Annual financial Information (ER-4), ER-6, ER-7
Desk Review, Risk factores, frequency of audit as per EA 2000
Large taxpayer unit
Daily stock account
Prototypes
Types of Bonds
CT-1 certificate
(11)
Briefly explain the procedure for removal of goods by a unit which is an 100% EOU for
Domestic Tariff Area.
Offences and penalties
(12)
State briefly the provisions of the Central Excise Act, 1944 relating to arrest of a person.
(13)
Residuary penalty u/r 27 of CER 2002
(14)
Describe power to summon persons under the Central Excise Act.
(15)
State the various circumstances where goods are liable for confiscation under the
Central Excise Law. Can the assessee get back the confiscated goods and if so how?
(16)
(a) Answer in brief the following questions relating to provisions made under rule 6 of
theCentral Excise (Removal of Goods at Concessional Rate of Duty for Manufacture
ofExcisable Goods) Rules, 2001:
MANOJ BATRA
| 160
(i) What will be the consequences in case the goods received at concessional rate arenot used
for the intended purpose?
(ii) Whether a manufacturer receiving the subject goods can return such goods to theoriginal
manufacturer?
(iii) When will the subject goods be deemed as not having been used for the intendedpurpose?
(2 x 3 = 6
ANS- REFER PRACTICE MODULE PAGE(17)
Short note on
(i) Provisional attachment u/s 11DDA
(ii) Unjust enrichment and when unjust enrichment not applicable.
(iii) Duty under protest
(iv) Sec 11D of CEA 1944
(v) Consumer welfare fund
Custom
Short note on
Bill of export
Import report
Entry
Prohibited goods
Goods
stores
Project import
Rules and regulation
Person-in charge
Smuggling
Adjudicating authority
residual method of valuation
first appraisement/second appraisement system
Custom area
Indian customs waters
Foreign going vessel or
aircraft
Warehouse goods,
warehouse, WH station
boat notes
Provisional assessment in custom
Inland container depot and CFS
State the requirements to be satisfied to accept ‘transaction value’ under rule 3(2) of the Customs Valuation
(Determination of Price of Imported Goods) Rules, 2007.
Discuss the provisions regarding ‘transit of goods’ and ‘transhipment of goods’ without
payment of duty under the Customs Act