TIOL-DDT 2720
06 11 2015
Friday

IN a recent case of  SRF Ltd  -  2015-TIOL-74-SC-CUS , the Supreme Court had allowed the benefit of exemption in CVD on imported goods, based on excise exemptions. In an effort to undo the Supreme Court Judgement, the Government had issued a set of confusing notifications followed by a CBEC circular. DDT 2647 23 07 2015 commented,

Trying  to deny exemption to imported goods, the Board ended up denying the benefit to domestic manufacturers and hastily amended the notifications and issued a clarification that the domestically manufactured goods covered under these notifications / entries continue to be exempt from excise duty or subject to concessional rate of excise duty, as the case may be as they were prior to 17th July, 2015.

But will the notifications deny the benefit to the imported goods? The notifications are so badly drafted that they will only strengthen the claim of the imported goods for exemption.

We also covered the issue in DDT 2646 22 07 2015 and DDT 2645 21 07 2015 apart from our articles:

1. Confusion, damage control and now, more confusion

2. Interpreting section 3 of CEA - Who wins and who loses

Recently three importers challenged the Notifications Nos.34/2015-CE and 37/2015 dated 17.07.2015 and 21.07.2015 respectively, in the Madras High Court. Our distinguished contributor of the first of the above articles, appeared for one of the parties.

The Notifications were challenged on the grounds that:

1. under Section 3 of the Customs Tariff Act, 1975, the imported goods can be made to suffer an additional duty of Customs, commonly known as CVD, equivalent only to the duty of Excise leviable on goods manufactured domestically and that therefore if the domestically manufactured goods are exempt from payment of duty of Excise, no additional duty of Customs can be levied on the importers;

2. the impugned amending Notifications have been issued to overreach the decisions of the Supreme Court in Aidek Tourism Private Limited and S.R.F.Limited and hence they are contrary to law;?

3. when for the application of Section 3 of the Customs Tariff Act, 1975, an importer should be imagined to be a domestic manufacturer, the importer should also be taken to be a person who has fulfilled all the conditions precedent that a domestic manufacturer would have complied with before the completion of the manufacturing process and hence the importer cannot be put to any disadvantageous position on the basis of a condition which is impossible of being complied with by him.

But the High Court was not impressed.

The High Court held that the notifications were not ultra vires as:

1. they were issued in exercise of the power conferred by Section 5A. Section 5A(1) itself empowers the Central Government to grant exemption either absolutely or subject to such conditions as they may stipulate. If the Central Government has the power to grant exemption subject to certain conditions, they have the power even to modify the conditions.

2. The amendments are not ultra vires Section 3 since the importers are not placed in a more disadvantageous position than that of the domestic manufacturers.

3. If the domestic manufacturers themselves are classified into two categories depending upon the nature of the conditions imposed, the classification is reasonable and it has a nexus with the object sought to be achieved by the notification.

Impossible conditions? When it is impossible for an importer to fulfill the conditions prescribed in the Central Excise exemption, how can he avail of CVD exemption? He cannot! The High Court observed,

In respect of the exemption notifications that are absolute and unconditional, all domestic manufacturers will be entitled to the benefit of the exemption notification. Therefore, the importers will also be entitled. But, insofar as exemption notifications that are conditional in nature, the respondents will have to see whether all domestic manufacturers will automatically get exemption or some of them may not get exemption due to non fulfillment of the conditions prescribed in the notification. If some of them are not entitled, due to non fulfillment of the conditions, the importers, for whom it is impossible of complying with those conditions, are also not entitled to the benefit. It is this position that is sought to be clarified by the impugned amendment notifications dated 17.7.2015 and 21.7.2015

We bring you this case today. Please see Breaking News.

India - Myanmar Border Trade - No more Barter System

IN Circular No.8 dated May 17, 1997 read with Circular No. 17 dated October 16, 2000, it has been stipulated that the border trade between Myanmar and India may be settled through barter system. Further, in terms of Regulation 3 and 5 of the Notification No. FEMA 14/2000-RB dated May 3, 2000, the trade transactions with Myanmar may be settled in any permitted currency in addition to the Asian Clearing Union mechanism.

Barter trade was initially permitted to facilitate exchange of locally produced commodities along the Indo-Myanmar border. As such, these transactions were not captured in the banking system or reflected in the trade statistics. However, over a period of time the trade basket has diversified and adequate banking presence is in place to support normal trade with Myanmar.

RBI has therefore decided, in consultation with Government of India, to do away with the barter system of trade at the Indo-Myanmar border and switch over completely to normal trade with effect from December 1, 2015. Hence instructions contained in Circular No. 17 dated October 16, 2000, stand withdrawn.

Accordingly, all trade transactions with Myanmar, including those at the Indo-Myanmar border with effect from December 1, 2015 would be settled in any permitted currency in addition to the Asian Clearing Union mechanism.

AP (DIR Series) Circular No. 26/RBI., Dated: November 05, 2015

Customs - New Exchange Rates from Today

CBEC has notified new exchange rates for Imported Goods and for Export Goods with effect from 06th November 2015. The USD is at 66.20 Rupees for imports and 65.15 Rupees for exports.

Notification No. 106/2015-Customs (NT)., Dated: November 05, 2015

Software Export - Filing of bulk SOFTEX-further liberalization

A software exporter, whose annual turnover is at least Rs.1000 crore or who files at least 600 SOFTEX forms annually on an All India basis, is eligible to declare all the off-site software exports in bulk in the form of a statement in excel format, to the competent authority for certification on monthly basis.

In order to provide benefits to small exporters also, it has been decided to extend this facility to all software exporters. Accordingly, all software exporters can now file single as well as bulk SOFTEX form in excel format to the competent authority for certification.

As hitherto, the software exporters can generate SOFTEX form number (single as well as bulk) for use in off-site software exports from the website www.rbi.org.in.

The Foreign Exchange Management Act (FEMA), 1999 requires exporters to complete the SOFTEX form using the number so allotted and submit it first to the competent authority for certification and then to the AD for further necessary action, as hitherto.

AP (DIR Series) Circular No. 27/RBI., Dated: November 05, 2015

Adhere to the Law - Delhi High Court to Taxmen

IN GKN Driveshafts (India) Ltd Vs ITO - 2002-TIOL-634-SC-IT the Supreme Court had observed,

we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years.

In a recent case - CIT v. Multiplex Trading & Industrial Co. Ltd - 2015-TIOL-2324-HC-DEL-IT, the Delhi High Court had observed,

Although the AO is required to provide reasons, receive objections and pass a speaking order thereon, only after the notice under Section 148 of the Act has been issued; these requirements are an integral part of the safeguards which have been inbuilt for ensuring that the assessments are reopened only for lawful reasons and in a transparent manner. If the said safeguards are flouted, it would invalidate the exercise of jurisdiction under Section 147 and 148 of the Act .

Last month, the High Court yet again came across such a case. Though the court did not impose heavy costs as it would have been inclined to, it directed the Revenue through the Principal Chief Commissioner of Income Tax (Pr CIT) to issue instructions to the AOs to strictly adhere to the law explained in various decisions of the Supreme Court and the High Court in regard to Sections 147/148 of the Act and make it mandatory for them to ensure that an order for reopening of an assessment clearly records the compliance with each of the legal requirements. Secondly, the AOs must be directed to strictly comply with the law explained by the Supreme Court in GKN Driveshafts (India) Ltd v. Income Tax Officer 2002-TIOL-634-SC-IT as regards the disposal of the objections raised by the Assessee to the reopening of the assessment.

It is easy to make the assessee follow the law:

It is not easy to make the Assessment Officer follow the law.

Until Monday with more DDT

Have a nice weekend.

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