Udyog Tax News Flash

December 2013

Service tax: VCES order is appellable: HC

The Punjab & Haryana High Court has ruled that rejection of an application under the Voluntary Compliance Encouragement Scheme is appellable under the provisions of the Finance Act 1994. In a writ petition against such a rejection, filed by Barnala Builders & Property Consultants, the High Court disagreed with the clarification issued by the CBEC on 8 August 2013 to the effect, inter alia, that rejection of VCES application is not appellable. The High Court said, We are unable to accept correctness of instructions issued by the Central Board of Excise and Customs, for the simple reason that after incorporation of the Service Tax Voluntary Compliance Encouragement Scheme into the Finance Act, all other provisions of the Act except to the extent specifically excluded, apply to proceedings under the scheme. In view of this legal position, the High Court ruled that the order of the Deputy Commissioner rejecting the application under VCES would necessarily be appellable under section 86 of the Finance Act 1994. The High Court ruling in CWP 26929 can be downloaded from the website of the Punjab & Haryana High Court at http://lobis.nic.in/phhc/ by choosing casetype wise in the left bar, selecting CWP in select casetype, and entering 26929 of 2013 in the case number & year.

Service tax: CBEC issues instructions to staff on VCES

The CBEC has issued instructions to its field formations in an attempt to resolve difficulties being faced by declarants under VCES. Taking up specific issues, the CBEC has clarified that The designated authority for VCES must not ask for declarations or undertakings (for example, that there are no dues pending for any other period, etc.) other than the declaration prescribed; Payment of tax dues in lump sum is not required; the declarant can pay in instalments by the specified date; While an arithmetical check can be made, detailed investigation by the designated authority is not envisaged as regards the veracity of the declaration. Thus the designated authority is not to raise unnecessary/frivolous queries regarding the manner of calculation. It is for the Commissioner to serve notice on the declarant if he has reason to believe that the declaration is substantially false. This CBEC letter, dated 11 December 2013, is to be found under the Instructions tab in http://www.servicetax.gov.in/st-circulars-home.htm.

Service tax: Sodexho coupons taxable: CESTAT

The CESTAT has held that the company that sells Sodexho meal vouchers is providing a taxable service to its affiliates, whose goods and services can be bought in exchange for these vouchers. The CESTAT did not agree with the argument advanced by the company that the vouchers were akin to credit/debit cards and are only a payment mechanism. It ruled that the vouchers constrained the user to buy goods of the affiliates, for whose goods alone the coupons could be exchanged. Thus the coupons were a form of promotion of the business of the affiliates, and taxable as such. A narration of this Order no: A/2142-2143/13/CSTB/CI dated 30 October 2013 passed by Mumbai bench of the CESTAT in appeal number ST/156, 173/2008 filed by Sodexho Pass Services Private Limited as well as the department (appealing against dropping of a part of the demand) can be perused at http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail. php3&newsid=19240.

Customs: Changes in tariff values

The CBEC has notified fresh tariff values under section 14(2) of the Customs Act 1962 for specified commodities. Other than crude palm oil, which shows a slight decline, there is an upward revision in value of all the specified oils/oleins, and of brass scrap, poppy seeds and areca nuts. The value of gold has been reduced, while that of silver has been increased. Thus the tariff value of gold in respect of which the benefit of serial numbers 321 or 323 of notification 12/2012-Customs is availed is now USD 398 per 10 grams (from the earlier notified value of USD 405 for 10 grams); while the tariff value of silver in respect of which the benefit of serial numbers 322 or 324 of notification 12/2012-Customs is availed is now USD 643 per kilogram (from the earlier notified value of USD 642 per kilogram). The notification 130/2013-Customs (NT) dated 13 December 2013 under which these changes have been made can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2013/csnt2013/csnt-130-2013.htm.

Central excise: Modifications warehousing procedures

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Rule 19 of the Central Excise Rules 2002 permits removal of goods for export without payment of excise duty, from a factory or from a warehouse. Rule 20 ibid permits removal of goods to a warehouse without

payment of excise duty. In effect, goods can be removed from a factory and stored in a warehouse without payment of excise duty, and can be exported from the warehouse without payment of excise duty. Rule 20 empowers the central government to prescribe conditions and procedures for keeping goods in a warehouse without payment of duty. Under these powers, the CBEC had issued circular number 579/16/2001 dated 26 June 2001 and circular number 581/18/2001-CX dated 29 June 2001, to prescribe conditions and procedures for warehousing. These are now amended in some respects by issue of a fresh circular, number 976/10/2013-CX dated 12 December 2013. The changes are: The facility for warehousing goods without payment of excise duty will be available to all status holders under the Foreign Trade Policy 2009-14. (This is a change in nomenclature, to bring the wording in paragraph 2 of the 29 June 2001 circular in line with the wording currently used in the Foreign Trade Policy. Earlier the circular used the terms star trading house and super star trading house,) The conditions regarding period of warehousing in paragraph 6 of the circular of 26 June 2001 have been elaborated. Now it is specified that initial warehousing shall be for six months, which can be extended for six months at a time up to a total period of three years by the Assistant/Deputy Commissioner, subject to verification that the goods have not deteriorated in quality. If the registration of the warehouse is revoked or suspended, the excisable goods can be removed to another warehouse without payment of duty, or have to be removed for home consumption on payment of duty and interest @ 24% per annum. (The earlier circular did not directly specify that interest would be payable on removal of goods consequent to revocation or suspension of the registration of the warehouse.) For exporters and manufacturers with a clean track record, the requirement of security for the warehousing bond has been waived and substituted with a letter of undertaking for the first year of warehousing, though it will be required for any further extension of the warehousing period. The circular 976/10/2013-CX dated 12 December 2013 can be perused at http://cbec.gov.in/excise/cx-circulars/cx-circ13/976-2013cx.htm.

Refund claims in central excise, customs and service tax: CBEC instruction
The Bombay High Court had observed that original and first appellate authorities, while deciding upon refund claims, leave many issues undecided, so that remands for re-decision are made and long pendencies ensue. The court had observed that it is necessary, in the interests of justice, to deal with all aspects of the claim and all objections to it; and had directed the CBEC to issue necessary guidelines in the form of an administrative circular to ensure that assessing officers and first appellate

authorities decide all objections to refund claims. Instead of complying with this very specific direction and issuing the necessary guidelines, the CBEC has passed the buck downward by forwarding the observations of the court to its field formations for compliance: see http://cbec.gov.in/excise/cx-circulars/cx-ins-13/cx-ins-mumbaihighcourtjgmt.htm.

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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
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.