Why exemption from excise duty for EOUs?
07.08.2014
Thursday
IN DDT 151 - 06 07 2005, I asked a question:
Why exemption from excise duty for EOUs?
Notification No. 24/2003-C.E., dated 31-3-2003
exempts all excisable goods produced or manufactured in an export oriented undertaking from whole of duty of excise leviable thereon
Provided that the exemption contained in this notification in respect of duty of excise leviable under section 3 of said Central Excise Act shall not apply to such goods if brought to any other place in India;
What is the purpose of this notification? If goods are exported from EOU, which they are expected to do in the first place, there is no duty. If they are cleared in the DTA, they are required to pay duty. Then, why this exemption? Is it for captive consumption? What are the situations under which this exemption can be availed? Is there a single unit which has availed this exemption? Or is it standing in monumental isolation without serving any purpose?
I am yet to get an answer. In the meanwhile, recently a friend of mine who is a knowledgeable Central excise Officer tells me:
EOUs are allowed CENVAT credit on inputs and input services from the year 2004 onwards in terms of CENVAT Credit Rules, 2004 as clarified in Para 4 and 5 of Circular No.54/2004-Customs dt 13.10.2004. The accumulated credit can either be utilized for payment of excise duty on DTA clearances from EOU or refund of un-utilized credit could be taken as per the provisions/Notification issued under Rule 5 of CCR,2004 read with CBEC Circular No. 828/5/2006-CX.
It may please be seen that Notification24/2003-CE dt 31.3.2003 exempts all goods manufactured in EOUs, except those cleared into DTA. In other words, if an EOU does not have DTA sales, all goods manufactured by it are exempted goods. Consequently, the inputs and input services that go into manufacture of exempted goods in EOU become ineligible for credit as Rule 6(1) of CCR,2004 restricts the availment of credit only to the dutiable goods and no credit could be taken in respect inputs used in exempted goods.
It appears to me that contents of Notification No. 24/2003-CE read with Rule 6(1) of CENVAT Credit Rules, 2004 go against the spirit of the CBEC circulars mentioned above in extending CENVAT credit benefit to EOUs.
Goods manufactured in a 100% EOU are either exported or cleared into the DTA. In both the situations, there is no problem as exports are outside the purview of Rule 6(1) and for DTA clearances, duty is paid. The goods manufactured can also be captively consumed or destroyed. In case of captive consumption, the goods are actually cleared to a 100% EOU and so is outside the purview of Rule 6(1). Maybe in the case of destruction, some proportionate credit has to be reversed.
The problem still remains - why Notification No. 24/2003 at all?
You can read an interesting case on this issue in 2005-TIOL-565-CESTAT-MUM and the issue is still pending in the Supreme Court!
No Export of Taxes
WE must all always remember that it is the avowed policy of the Government of India that taxes should not be exported - you should export goods and services. Every investigator and every adjudicator should remember that this is the ultimate goal and if any export goods suffer any taxes, they should be refunded to the exporter. If this policy is understood, a lot of litigation can be avoided.
Only yesterday in the Rajya Sabha, the Minister of Commerce & Industry, Nirmala Sitharaman, in a written reply stated:
One of the guiding principles of FTP is that the taxes should not be exported. Therefore, exporters are granted access to duty free raw material or are provided refund of duties paid in manufacture of exported products .
The policy also provides framework for duty free import of raw materials and duty free import of capital goods for enhancing manufacturing capacity for exports, after fixing export obligation on the exporters .
Taxpayer Bill of Rights
THE US Constitution has a codified list of rights of the citizens. The Bill of Rights is a collective name for the first ten amendments to the Constitution of USA. On similar lines the US Internal Revenue Service (IRS) recently released the US Taxpayer Bill of Rights. Like the Constitution, this Bill of Rights contains 10 provisions. The IRS Commissioner says, "These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before."
Taxpayer surveys have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. The Bill of Rights will help taxpayers better understand their rights in dealing with the tax system.
These are the rights:
1. The Right to Be Informed
2. The Right to Quality Service
3. The Right to Pay No More than the Correct Amount of Tax
4. The Right to Challenge the IRS's Position and Be Heard
5. The Right to Appeal an IRS Decision in an Independent Forum
6. The Right to Finality
7. The Right to Privacy
8. The Right to Confidentiality
9. The Right to Retain Representation
10. The Right to a Fair and Just Tax System
1. The Right to Be Informed: Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.
2. The Right to Quality Service: Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
3. The Right to Pay No More than the Correct Amount of Tax: Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.
4. The Right to Challenge the IRS's Position and Be Heard: Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
5. The Right to Appeal an IRS Decision in an Independent Forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals' decision. Taxpayers generally have the right to take their cases to court.
6. The Right to Finality: Taxpayers have the right to know the maximum amount of time they have to challenge the IRS's position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.
7. The Right to Privacy: Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.
8. The Right to Confidentiality: Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
9. The Right to Retain Representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
10. The Right to a Fair and Just Tax System: Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.
Shouldn't we have something like this in India? These should be enforceable rights.
FTP - bar-coding on Mono-carton as Secondary Level Packaging on export consignment of pharmaceuticals and drugs - Date of Implementation
AS per Public Notice No. 62 dated 26.06.2014, Mono cartons are to be treated as part of Secondary Level Packaging and accordingly the requirement of affixing bar-codes on Mono-carton as Secondary Level Packaging became effective from 26.06.2014. Now the effective date of affixing bar-codes on Mono-carton as Secondary Level Packaging has been deferred to 1st April, 2015.
DGFT Public Notice No. 68/(RE-2013)/2009-2014, Dated: August 6, 2014
Jurisprudentiol – Friday's cases
Service Tax
Renting of Immovable Property Service - Prima facie, Service Tax cannot be levied on 'deposit' received by applicant towards renting of immovable property - Pre-deposit waived and Stay granted: CESTAT
THE applicant is Agricultural Produce Market Committee, Sangli. They are before the CESTAT with an application for waiver of pre-deposit of Service tax dues of Rs.91,82,801/-, interest and penalty.
The demand arose because - the CCE, Kolhapur is of the view that the applicant is required to pay Service Tax on the "deposit” received in respect of shops given out on rent by them.
Income Tax
Whether when assessee has paid advance tax in certain FYs but chooses not to file returns for many years, income of the years for which no returns were filed, partakes character of undisclosed income - YES: HC
THE assessee is an individual, whose premises was searched for the preceding ten years. During block assessment, it was found that the assessees had paid advance tax for some assessment years, but did not file returns. The AO held the income for the corresponding years for which the returns were not filed partakes the character of undisclosed income and accordingly tax was levied. On appeal against the orders of AO, the Tribunal accepted the contention of the assessees that failure to file a return by the assessee, who paid the advance tax, cannot lead to a situation of treating the income as the undisclosed one.
Whether when the assessee has paid advance tax in certain financial years but chooses not to file returns for many years, the income of the years for which no returns were filed, partakes the character of undisclosed income. And the answer is YES.
Central Excise
Shocked with order of Commissioner (Appeals), Tribunal requests CDR to mark copy to Member (L&J) - Restores demand of duty on shortage of goods.
THE Tribunal held:
It is shocking to read the order passed by ld. Commissioner (Appeals) who worked hard to grant relief on pulpable grounds making suppositions and assumption with total disregard to the law and statutory records. The goods manufactured when did not find place in statutory records and incidence of manufacture being event of levy, non-accountal of the goods imputes the respondent to the charge of clandestine removal. It is not necessary for the investigation to prove its case with mathematical precision. Burden of proof was not discharged by the respondent to explain when the goods found their destination. Not only the physical verification result but also other evidence gathered by investigation as stated here in before lend credence to the case of Revenue demonstrating premeditated design of evasion of duty made by the respondent.
See our Columns Tomorrow for the judgements
Until Tomorrow with more DDT
Have a nice day.
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