TIOL-DDT 2402
23.07.2014
Wednesday

THIS is a very old issue, but recently a Netizen asked us this doubt as his excise authorities were of the view that while calculating the CVD component for domestic clearances from EOUs, Central Excise exemptions issued under Section 5A are not applicable as Section 5A clearly states that unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured in an EOU and cleared to DTA.

But as per Section 3(1), the excise duty payable by the EOUs shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act , or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India.

When you allow the excise exemption for imported goods, will you not allow it for clearances from EOUs?

Some officers will not.

The Board had more than 6 years ago clarified this position.

In its clarification issued with the approval of the Member (Customs & EP), CBEC, the DGEP in F. No. DGEP/EOU/03/2007/879 dated 02.04.2008, emphatically declared:

There is no bar in applying an exemption notification issued under section 5A of the Central Excise Act for the purpose of computation of CVD to be paid by EOUs on the goods cleared into DTA. The restriction on EOUs for applying exemptions issued under section 5A of the Central Excise Act is for the purpose that EOUs should not pay excise duty only as in the case of clearances from DTA units, unless so intended. This would render section 3 of the Central Excise Act redundant which require EOUs to pay central excise duty equivalent to the aggregate of customs duties. However, as in the case of import, wherein CVD is paid equal to excise duty as applicable, exemptions of central excise duty shall also be applicable to EOUs for computation of duty on DTA clearances.

It is, thus, viewed that there is no bar under the proviso to Section 5A ibid for considering excise exemption while calculating the additional customs duty component payable by an EOU on DTA clearances.

But the Board's writ always doesn't run in the field as this case would show.

In a rare judicious order, a Commissioner allowed this claim of the assessee and dropped a mischievous Show Cause Notice issued by his office. The Commissioner rightly opined,

"I have gone through the decisions and cases relied and referred in their defence reply. I find that as per proviso to section 3(1) of the Central Excise Act, the duties of excise charged on goods sold in DTA by a 100% EOU is equal to the aggregate of the duties of Customs leviable under the Customs Act, or any other law in force, on like goods produced or manufactured outside India, if imported into the country. In other words, the duty payable shall be determined in exactly the same manner as is done in respect of imported goods. This implies that for determining the duties of excise under proviso to section 3(1) of the Central Excise Act, 1944 on the goods cleared to the DTA by the EOUs, the exemption under the relevant Customs Notifications and Excise Notifications, if any, have to be provided. Therefore, I am of the view that the assessee is liable to pay only the effective rate of Additional Duty of Customs under section 3(1) of the Customs Tariff Act on clearances of the goods into the DTA. This view is supported by the ratio of the decisions referred and relied briefly dealt as under.”

But such rare instances of wisdom and judicial thinking is not easily tolerated in the department. Higher and collective wisdom decided that such traces of right thinking have to be nipped in the bud and Revenue took the matter in appeal to the CESTAT. This was in 2009 - well after the DGEP clarification, which apparently the exalted committee was not aware of or chose to ignore.

The tribunal held that the Commissioner had followed the Law correctly and the Revenue's appeal was devoid of merit and so dismissed it. 2010-TIOL-1494-CESTAT-BANG.

Well, this is not the end of the story. Revenue officers will not allow litigation to end - they took the matter in appeal to the High Court with the following substantial questions of law for consideration:-

1. Whether the Customs, Excise and Service Tax Appellate Tribunal is right in upholding the order in original issued by the Commissioner without examining the provisions of the Act when the language of Section 5 A(1) of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) is clear and unambiguous?

2. Whether the Customs, Excise and Service Tax Appellate Tribunal is right in passing the above order, when Sections 3(1) and 5(1) of the Act are to be read together and interpreted harmoniously in order to avoid negating the specific exclusion clause provided in Section 5(1) of the Act?

This appeal lies in the Telangana and AP High Court as CEA No. 220/2011 and perhaps will come up for hearing some time in 2021 and then the respondent can raise a doubt whether this matter should rightly go to the Supreme Court and not to the High Court.

Thou shall not be tempted to appeal

THIS is not one of the commandments for the Indian Revenue as this recent case before the CESTAT would show. Read this in the Tribunal's own words in a decision delivered last week.

This is very sad state of affair in Revenue's appeal that without sending the goods (rice) for re-testing directed by ld. Commissioner (Appeals) remanding the matter to ld. Adjudicating Authority, Revenue came in appeal before Tribunal challenging such decision. In the meantime 4 years have expired from the appellate order. Neither the re-test has been done consequent upon remand nor re-adjudication order has been passed so far. In such state of affair, it is not practically possible to again remand at this stage for re-testing. Since rice is perishable commodity which cannot be kept long and also delivery of the goods has been taken back. In such exceptional circumstances, Revenue's appeal fails for which that is dismissed.

Will anyone concerned with REVENUE ever think of such actions? Do we pay these babus such fat salaries for this kind of fiasco?

How Revenue Boards will spend in 2014 -15

THE Finance Ministry has released its Demand for Grants for the year 2014-15 to be voted by Lok Sabha today.

The following table will show you some important items of expenditure for 2014-15 with the Revised Budget Estimates for 2013-14

In Crores rupees

CESTAT going to be starved for funds in 2014 -15

THE Departments priorities are clear - they spend least amounts on most important items like training and Tribunal. If you take training seriously and produce excellent officers and take care of your litigation properly, everything else will fall in place. What will DRI and DGCEI do with all the money if they don't get properly trained officers and if their cases are going to be stuck in Tribunal for ten years? All because you don't like to spend money on training and you don't like the courts anyway.

Last year the budget allocation for CESTAT was 17 crores which went up to 18.7 crores in the revised estimates and this year you give the Tribunal 24 crores, just 5 crores more and you want to start six more benches. Out of the 24 crores given to CESTAT, 17 crores go for salaries alone and what you are left with is 7 crores to run this great Tribunal. In the first two months of this year, the Tribunal is already on a deficit of 92 lakhs. Out of the 24 crores, they are to spend 4 crores in the first two months and they have spent nearly 5 crores leaving a deficit of nearly a crore of rupees. How will they manage six more benches? Where will they get money for cars, air-conditioning, telephone, postage - for all of these, the administration will have to beg the service providers.

The Finance Minister was an eminent lawyer - he should understand that CESTAT cannot and should not be run on such shoe-string budget.

Jurisprudentiol – Thursday's cases

Service Tax

Since appellant had preferred appeal against entirety of adjudication order which included imposition of penalties, revisional proceedings initiated by SCN and culminating in order in revision are in clear transgression of provisions of Section 84(4) of FA, 1994 - Appeal allowed: CESTAT

IF an issue is pending in appeal, the revisional jurisdiction under Section 84 could not be exercised. Since the appellant had preferred an appeal against the entirety of the adjudication order dated 22.2.2007 which included imposition of penalties thereunder as well and the issue regarding validity of imposition of penalty was equally the subject matter of appellate proceedings pending before the appellate Commissioner since 25.5.2007, the date on which the appeal preferred to that authority had culminated in the order dated 29.8.2007 dismissing the appeal, the initiation of revisional proceedings is unsustainable.

Income Tax

Whether interest is payable on refund of self assessment tax from date of assessment order till grant of refund - YES: HC

THE assessee, for the Assessment Year 1986-87, paid tax comprising of advance Tax, tax deducted at source and self Assessment Tax. The assessee filed its return of income declaring income. Assessing Officer passed order under Section 143(3) assessing assessee's income and determined tax payable. The Assessment Order after giving credit for taxes paid demanded the balance tax along with interest from the assessee.

THE issues before the Bench are - Whether Self-Assessment Tax has to be treated as tax paid pursuant to the order of Assessment; Whether interest is payable on refund of self-assessment tax from date of assessment order till grant of refund and Whether in exercise of powers under Article 226 of the Constitution, Court can direct the statutory authorities to grant interest as outside the statute. And the verdict goes in favour of the assessee.

Customs

EOU- De-bonding - Depreciation on value of capital goods imported but not used fully for purpose of manufacture so as to discharge export obligation - Depreciation allowed - CESTAT

THIS is a Revenue appeal. Revenue is on the point whether depreciation is admissible on the value of capital goods imported but not used fully for the purpose of manufacture so as to discharge export obligation. According to the Revenue, while respondent has target of one lakh pieces to export, it exported 300 pieces during the entire export period. Upon de-bonding of unit, the Adjudicating authority allowed depreciation on the value of capital goods imported

See our Columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice day.

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