Budget 2014 -Two disputes will end finally
JULY 13, 2014
By S B Parikh
(1) CENVAT credit on foreign commission agent's service - dispute in Gujarat will end
Due to change in definition of the term ‘intermediary' vide Notification No. 14/2014-ST w.e.f. 1.10.2014, Commission Agents of goods will be covered in this definition (commission agents of services were already covered). For the services of ‘intermediary', the Place of Provision of service is the location of service provider, as per Rule 9. Therefore, services of commission agents situated abroad will not attract service tax, as the Place of provision of their service is outside taxable territory of India. Thus, Indian exporters will not be required to pay service tax on services of foreign commission agents under reverse charge mechanism.
Exporters of goods in Gujarat will be benefited by this change. Because, as per judgements of Gujarat High Court in the case of Cadila Healthcare Ltd. - 2013-TIOL-12-HC-AHM-ST followed by Astik Dyestuff Pvt. Ltd. - 2014-TIOL-237-HC-AHM-ST, Cenvat credit of service tax paid on foreign commission agent's service is being denied in Gujarat (even though CBEC Circular No. 943/04/2011-CX dated 29.4.2011 allows such credit). In view of the proposed amendment, exporters will not be required to pay service tax on foreign commission agent's services and so the question of taking Cenvat credit of the same will not arise from 1st October, 2014.
(2) 3rd time/2 nd time Cess of DTA clearances made by EOU
CESTAT has already decided this issue in favour of assessee in the cases of Sarla Performance Fibres Ltd. - 2010-TIOL-408-CESTAT-AHM and Kumar Arch Tech Pvt. Ltd. - 2013-TIOL-614-CESTAT-DEL-LB . However, department's appeal on this issue is pending with Supreme Court .
Exemption to Education Cess and S&HE Cess leviable on CVD for all goods had already given vide Nos. 13 & 14/2012-Customs dated 17.3.2012. Thereafter, the dispute remained as to whether 2 nd time Cess is payable on the DTA clearances made by EOU.
In this Budget, vide Notification No. 18/2014-CE dated 11.7.2014, entries numbered as 1A and 1B have been inserted in Notification No. 23/2003-CE so as to grant exemption to all goods from duty of excise equal to Education Cess and S&HE Cess leviable under the proviso to Section 3(1) of the Central Excise Act. Clarification in this regard given in the D.O. letter dated 10.7.2014 of Joint Secretary (TRU-I) in its Annexure II under the head ‘Miscellaneous' at serial number 8 is as under:
“Education cess and secondary & higher education cess (customs component) is being exempted on goods cleared by an EOU into the DTA.”
Though the D.O. letter talks about exemption from Cess leviable on Customs component, the Notification grants exemption from Cess payable on Central Excise duty leviable under the proviso to Section 3(1) of the CE Act. In any case, EOUs are required to calculate & pay Education Cess and S&HE Cess only once w.e.f. 11.7.2014.
(The author is a Superintendent of Central Excise and the views expressed are strictly personal.)