Udyog Tax News Flash

November 2013

Service Tax: Date for quarterly return to be filed by SEZ specified

Services supplied to a Special Economic Zone are exempted from service tax subject to certain conditions, in terms of notification 12/2013-ST dated 1 July 2013. One of the conditions for exemption was that the SEZ must file a quarterly return with the Superintendent of Central Excise, giving the particulars of service received without payment of service tax. This condition has now been amplified by specifying that the quarterly returns must be filed by the 30th of the month following the close of the quarter. Only for the particular quarter July to September 2013 the return is to be filed by 15 December 2013. The amending notification 15/2013-ST, by which these changes have been made, can be downloaded from http://www.servicetax.gov.in/notifications/notfns-2013/st15-2013.htm

List of approved services for SEZ augmented

The service tax exemption for SEZs is available only for services approved by the approval committee for the concerned SEZ. A default list of 58 such services had been circulated by the Ministry of Commerce vide its letter dated 16 September 2013. Now two more services, namely, rent-a-cab and SEZ online services have been added, vide Instruction number 79 dated 19 November 2013 issued by the said Ministry. This instruction, which also carries the original list of 58 services as an appendix, can be seen at
http://sezindia.gov.in/writereaddata/Instructions/Instruction%20No.%2079.pd f

Service Tax: liable even if more specific entry was introduced later
Service tax was held to be payable under the category manpower supply in the case of Safe & Sure Marine Service Private limited, for supply of manpower for ships. In appeal before the CESTAT, Mumbai bench, the company argued that this activity became taxable only in 2006 as ship management service, which included engagement or providing of crew for ships. The CESTAT rejected this contention and held that the service was taxable under this heading after its introduction, as it was more specific, but this did not mean that the service was not taxable under the category of manpower supply and recruitment prior to that. The CESTAT upheld the demand of service tax and penalties, in order passed on 26 August 2013 in appeal number ST/116/2010. A narration of this case can be perused at

http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail. php3&newsid=19098

Customs: exchange rates notified

The CBEC has notified rates of exchange of various currencies for customs purposes under section 14(2) of the Customs Act 1962, effective from 22 November 2013. The US dollar converts to INR 63.30 for imported goods under this notification, and to INR 62.30 for export goods. The pound sterling converts to INR 102.25 for imported goods and INR 100.00 for export goods. The notification 112/2013-Customs (NT) dated 21 November 2013, can be seen at http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2013/csnt2013/csnt112-2013.htm

Central Excise: Tribunal cannot grant indefinite stay: Allahabad High Court
The CESTAT granted an unconditional stay on recovery of dues to DP Garg & Co, against which the department filed an appeal in the Allahabad High Court and argued that the third proviso to subsection (2A) of section 35C of the Central Excise Act would be defeated by grant of unconditional stay. The High Court admitted the appeal number 309 of 2013, and, based on the argument of the government counsel, also issued an interim order by which it directed as follows: As an interim measure we direct that since the unconditional stay would have operated only w.e.f. 8.4.2013 for a period of six months, which has since expired, the order of unconditional stay would not be operative in favor of the respondent. The respondent may persuade the Tribunal to decide the appeal expeditiously. This order in central excise appeal number 309 of 2013 of Allahabad High Court can be accessed by choosing central excise appeal in the drop down list for case type and entering the year 2013 and case number in http://elegalix.allahabadhighcourt.in/elegalix/StartWebSearch.do

Central Excise: Arrears of excise duty payable through Cenvat credit: P&H High Court
Punjab Casting Private Limited and R Ess Iron & Steel Private Limited discharged arrears of excise duty arising out of the compounded levy scheme, by debit of Cenvat credit amount available in balance. This was adjudicated as impermissible, and cash payment was demanded with

penalties. The Punjab & Haryana High Court held that when the Cenvat account of the assessees had sufficient balance and they discharged the duties through that, there was neither loss of revenue to the government nor any evasion of duties. See the website of the High Court at http://lobis.nic.in/phhc/ The case report can be downloaded by searching by case type (select CEA from the dropdown list) and entering the case number 40 and year 2012

Central excise: CESTAT clarifies scope of Rule 8(3A)

Under Rule 8(3A) of the Cenvat Credit Rules 2004, if an assessee defaults in payment of excise duty for over thirty days from the due date, he is not allowed to use Cenvat credit and must also pay duty for each consignment at the time of removal rather than after the close of the month, till he pays the outstanding amount with interest. If these conditions are not observed, all the removals are treated as removal without payment of excise duty, and all consequences including penalties follow. This provision is often interpreted in the most draconian manner by the department, to cover any mistake or point of interpretation as being a default to which the rule will apply. A case arising in this manner is narrated below. In the case of Pranav Construction Company, the assessee made a mistake in payment by using Cenvat credit that accrued on the first of the month following the month to which the duty payment pertained. The assessee rectified the mistake by making cash payment with interest after a year for the amount of Cenvat credit that had not been available during the relevant month. The amount involved was less than two lakhs of rupees. However, the department made a case of clandestine removal in respect of all the goods cleared during the year, by applying Rule 8(3A), and thereby demanded over Rs 3.86 crores! The CESTAT set aside this demand in appeal E/730/09 filed by Pranav Construction Company, observing that, The language used in the said Rule inherently implies a deliberate failure in discharge of duty liability on the part of the assessee. It does not cover a situation where there is a short payment of duty on account of error in computation of duty, or by wrong availment of Cenvat credit for payment of duty, etc. A narration of this order number A/881/13/EB/C-II dated 13 September 2013 of the Mumbai bench of CESTAT can be perused at http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail. php3&newsid=19089

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Updated and written by Radha Arun [radha.arjuni@gmail.com], Consultant to Udyog Software (India) Ltd.
Udyog Software (India) Ltd. www.udyogsoftware.com Phone: 022-67993535 Email: ca-service@udyogsoftware.com | sales@udyogsoftware.com
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