News Flash Indirect Tax

Udyog Software (India) Ltd.

29/09/2014



This document contains a brief summary of the latest updates related to Indirect Taxes

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Central excise: CBEC considers extending time-limit for Cenvat credit to one year

The annual conference Chief Commissioners under the CBEC, presided over by the Finance Minister, has, inter
alia, asked the Chief Commissioners to interact with trade bodies and make recommendations on increasing
the time limit for Cenvat credit from six months to one year. This is noted at paragraph 7 of the minutes of
the conference, at http://cbec.gov.in/deptt_offcr/cc-conf-082014-minutes.pdf.


Central excise: Market value for rebate on exports is value in export market, not India: HC

Dr Reddys Laboratories exported its patented product to its subsidiary in the USA for sale in that country. It
paid excise duty on the export and thereafter claimed rebate of the same. The department denied the refund
by, inter alia, comparing the export price to the price of a similar product in the Indian market and finding
the export product overvalued. This methodology was struck down by the Delhi High Court, which observed
that market value verification must be made with respect to the price in the export market and not the
domestic market. This judgment dated 14 August 2014 in WP(C) 818/2014 may be perused at
http://lobis.nic.in/dhc/SRB/judgement/20-08-2014/SRB14082014CW8182014.pdf .


Central excise: CBEC explains structure & functions of Audit Commissionerates

As reported earlier in these columns, the Delhi High Court had, in the case of Travelite (India)
[WP(C)3774/2013, held that there was no provision in law for departmental officers of service tax or for the
CAGs audit officers to audit the accounts of a service tax assessee. Presumably the government will take
some remedial measures in this regard; the judgment has certainly not hindered the formation of special
commissionerates for central excise and service tax audit. The CBEC has issued Circular number 985/09/2014-
CX dated 22 September 2014 to explain the structure and functions of the new Audit Commissionerates. Upon
implementation of the cadre review there will be 23 central excise zones and 4 service tax zones, each of
which will have one or more Audit Commissionerate headed by a Commissioner. The departmental audit of
central excise and service tax assessees will be carried out by these. The Commissionerate will be divided into
circles headed by Deputy / Assistant Commissioners (like central excise divisions) and groups headed by
Superintendents (like central excise range offices). Show cause notices arising out of audits conducted will
be issued by the Audit Commissionerate but adjudicated by the jurisdictional executive Commissioner.
Response to the Comptroller and Auditor Generals audit will continue to be handled by the executive
Commissioner. See http://cbec.gov.in/excise/cx-circulars/cx-circ14/985-2014cx.htm.


Central excise: Stayed demand can be adjusted from dues to assessee: HC

A waiver of pre-deposit and stay on recovery granted under section 35F of the Central Excise Act will not bar
the adjustment of the disputed amount from amounts that subsequently become due to the assessee from the
government, said the Bombay High Court in a case of Indian Steel Works. In that case the petitioner had
challenged the recovery of a stayed demand from the amount of rebate that had been sanctioned to it. The
case is reported at http://cbec.gov.in/excise/ecs-cx/cx-general/2014-2-36-hcmum.pdf.


Central excise & service tax: CESTAT clarifies regarding refunds under Cenvat Credit Rule 5

In a laudable step to bring clarity to the law as well as reduce pendency of cases, the CESTAT Bangalore bench
listed 195 cases pertaining to issues around refund of Cenvat credit under rule 5 of the Cenvat Credit Rules
2004 and laid down issue-wise guidelines as an interim order. The individual cases are now being taken up in
small batches by applying these guidelines. The interim order clarifies, inter alia, that:

Refund under rule 5 was admissible even for the period prior to issue of notification prescribing the
procedures and restrictions;
Port / airport / land customs station from where the goods are exported is the place of removal and
services used up to that point are eligible for Cenvat credit and refund thereof;
Cenvat credit can be taken by 100% EOUs after 10 September 2004;
Whether services that are actually performed in India, though for principals abroad and for payment
in foreign exchange, are considered as exported and thereby eligible under Rule 5 for refund of the
credit taken in connection with them, is to be decided in terms of CBEC Circular 111/5/2009 dated 24
February 2009;

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The certificate given by banks for inward remittance of foreign currency does not have to carry
reference of the particular invoice numbers to which the payment pertains;
The person taking Cenvat credit need not be registered with central excise or service tax;
Section 11B of the Central Excise Act governs limitation for the refund claim.

A report on this interim order number 79-152/2014 dated 18 September 2014 in the cases of Apotex Research
Private Limited & others can be perused at
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=21574.


Service tax: CBEC circular on certain issues of joint ventures

Whether the inter se transactions of JV partners are taxable has been the subject of earlier clarifications by
the CBEC. [See circular numbers 109/03/2009 dated 23 February 2009 and 148/17/2011 dated 13 December
2011.] Now the issue that has arisen for clarification is the taxation of cash calls or capital contributions
made by the partners to the JV. The CBEC points out that under section 65B(44) of the Finance Act 1944, an
unincorporated association is a different person from the members thereof. However transactions that are
merely transactions in money are not considered service and are not taxable. With these two points in mind,
each cash call has to be evaluated to determine whether it is payment for something that can be called a
service, like granting of right, reserving production capacity or providing an option on future supplies; it could
also be towards payment to be made by the JV towards services received, which may be taxable. The CBEC
also advises its officers to ascertain whether one of the members has a role in managing the cash calls and
whether payment is made for this. The CBEC wants scrutiny of all the agreements concerned to a JV, to
examine the leviability of service tax. See the circular number 179/5/2014-ST dated 24 September 2014 at
http://www.servicetax.gov.in/st-circulars-home.htm.


Customs: Exemption for pulses extended

Serial number 21 of notification 12/2012-Customs wholly exempted pulses from customs duties; and proviso
(a) after the table of exemptions restricted the operation of the exemption till the end of September 2014.
Now the central government has issued notification 29/2014-Customs dated 25 September 2014 to amend this
entry, carve another entry for chickpeas out of it, and extend the validity of the exemption for pulses till
the end of March 2015, and for chickpeas till the end of December 2015. This notification can be seen at
http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/cs-tarr2014/cs29-2014.htm.


Customs: Anti-dumping duty on flexible slabstock polyol extended

Anti-dumping duty had been levied under notification 89/2009-Customs on flexible slabstock polyol from
China, Peoples Republic of Korea, and Chinese Taipei. The DG Anti-Dumping has taken up a sunset review of
the duty and requested for its extension for a period of one year, as provided in law. Accordingly the CBEC has
issued notification 42/2014-Customs (ADD) dated 25 September 2014 extending the duty till 30 August 2015.
The notification can be downloaded from http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/cs-
add2014/csadd42-2014.htm.


Customs: CBEC emphasises the importance of passenger facilitation

The CBEC has observed that there is a need to improve the efficiency of customs officers at international
airports and their behaviour towards passengers, as it is well known that international passengers form their
opinion of the country from the way they are treated by customs officers. Training in soft skills, and setting
up of help desks at airports has been advised, in Instruction dated 19 September 2014. See
http://cbec.gov.in/customs/cs-instructions/cs-instructions-14/cs-ins-pexfacilitation.htm.


Customs: CBEC invites comments on draft circular on disposal of refrigerant gases

The CBEC has drafted a fresh set of guidelines that are proposed to supersede the earlier circular 20/2009-
Customs on the subject of disposal of seized / confiscated cylinders filled with refrigerant gases. Comments
have been invited on the same, which are placed online at http://cbec.gov.in/draft-
circ/Draft_Circular_20Aug2014.PDF.

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Content provided by:

Radha Arun
Consultants to Udyog Software (India) Ltd.
radha.arjuni@gmail.com

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