TIOL-DDT 2731
24 11 2015
Tuesday

IN a recent meeting of the Regional Advisory Committee of Pune Central Excise Zone, several issues were raised and the learned officers gave clever replies. Have a look at some of them:

1. Issue - Coating of tools for customer - whether subject to service tax: ‘The Company' is engaged in providing services of coating of the used tools of the customers of the Company. The tools are capital goods for the customers. The customers clear such tools to the Company under Rule 4(5) (a) of CENVAT Credit Rules,2004. The Company pays Service tax on such services. However, the Company, during the PGC meeting held at Faridabad Commissionerate of Central Excise and Service Tax, is advised not to pay Service Tax on such services.

Clarification sought: Whether the Company has taken the correct position by discharging Service Tax in relation to tools used as capital goods by the customers or the exemption is applicable as mentioned in the minutes of the PGC meeting held at the Faridabad Commissionerate.

Reply: If the process undertaken does not amount to manufacture or production of goods and the same is not covered under clause 30 of the Notification No. 25/2012-S.T dated 20.6.2012, as amended, the same is liable for payment of Service Tax. Even if the same is exempted from payment of Service Tax and if the service provider chooses to pay service tax on such services, CENVAT credit on such service tax paid cannot be denied as it is not mandatory on the part of service provider to avail such exemption.

However, contrary view has been taken by the Faridabad Central Excise and Service Tax Commissionerate in their PGC meeting held on 26.03.2015. Hence, it was decided to refer the matter to Faridabad Commissionerate for following uniform practice.

DDT: What will the assessees do till the two Commissioners settle their difference? And if you are interested in ease of doing business, what is your problem in giving credit when tax is paid. There are any number of decisions that the authorities at the credit taking end cannot decide taxability. Will the Board give a clarification?

1. Issue: Admissibility of Service Tax credit on services extended to the assessee's own rented premises at a different location than manufacturing premises (Unit)

An assessee "A' is having registered premises at "Bhosari" where he avails CENVAT/ ST benefit. As the premises at Bhosari are inadequate to accommodate the entire manufacturing operations, he has taken a shed at a different location say "Pimpri", where he undertakes processing operations on CENVAT materials received from Bhosari under Rule 4(5)(a) of CENVAT Credit Rules, 2004. Service Tax credit on the services provided to the rental premises at Pimpri are availed at Bhosari as the invoices are consigned to Bhosari (HO) and that receiver of Service is the registered unit at Bhosari.

The Audit has pointed out that Service Tax credit availed at Bhosari is inadmissible on the grounds that the said rental premises at Pimpri are at a different place than manufacturing premises / HO and as such credit is not eligible for which reliance is placed on Rule 2(l) (ii) of CENVAT Credit Rules, 2004.

Reply: Rule 2(l) of CCR,2004 defines input service as (i) service used by provider of output service for providing an output service or (ii) service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal.

A plain reading of the said Rule reveals that the premises for input services used in or in relation to the manufacture of the final products is limited only to the registered manufacturing premises and clearance of the final product up to the place of removal. It does not include the rental premises, which is altogether a separate premise. Hence, services used by rental premises are not admissible for availing CENVAT Credit. However,it has been decided to discuss and examine the matter in the Audit meeting of respective audit Commissionerate.

DDT: Perhaps the decision in the case of Nitcon Industries Pvt. Ltd. - 2013-TIOL-493-CESTAT-MUM would have helped both sides.

What is your problem in allowing credit? Will the Board give a clarification?

3. Issue: UT-1 Undertaking insisted to be given on Rs.100/- Stamp Paper: Notification 42/2001-CENT dated 26.6.2001 stipulates that the manufacturer exporter may furnish a letter of undertaking in the Form specified in Annexure-II in lieu of a bond for exports without payment of duty. The notification does not specify that a "letter of undertaking" is required to be given on Rs.100/- stamp paper but field formations are insisting for the same and further asking person signing UT-1 to sign it before a Notary or before a Central Excise officer creating entire process unnecessarily cumbersome.

Reply: As per para 3.1 of Chapter 14 of CBEC's Excise Manual of Supplementary instructions, the Bond should be executed on non judicial stamp paper of appropriate value. Since LUT is in lieu of bond, the requirement of furnishing Letter of Undertaking on non-judicial stamp paper of appropriate value also applies to LUT. In the State Budget of 2015, the Government of Maharashtra amended the Stamp Act No. 20 of 2015 to increase the stamp duty for Customs/Excise bonds from Rs. 100/ to Rs. 500/-. However, the RAC members felt that the Stamp Act is applicable to bonds and not to LUT. In view of the divergent opinions, it has been decided to refer the matter to the legal Section of the CBEC for issuing necessary clarification .

DDT: When will the Board give the clarification? The LUT was prescribed to avoid the hassles of a bond; why do you bring back some of them. After all it's a letter, why do you need a stamp paper. In any case, you don't demand duty based on a LUT. The LUT is one area of corruption in the Department - the Board should think of doing away with it or ensure that it is filed online and acknowledged online. If you want, you charge a fee of a thousand rupees online for this. Will the Board react?

4. Issue: Payment of Rebate Claim Amount directly to Exporters Bank Account: At present payment of Sanctioned Rebate Claim Refund Claims/ Refund under Rule 5 of CENVAT Credit Rules is made by Account Payee Cheque. The present process of preparation & sending cheque by Registered Post or Hand Delivery is lengthy and involves lot of paper work. On some occasions due to incomplete address or changed address or typographical errors / clerical errors cheques are returned back. All these may lead to delay in realisation of the claim amount to claimants.

Reply: At present A/c payee cheques are being issued by jurisdictional AC/DC to the beneficiaries for payment of sanctioned Refund/Rebate Claims. The officers representing Pay &Accounts Office, Pune appraised the Committee that they have not received any instructions/programme from the Principal CCA in this regard. Further, they also stressed upon the need to obtain the services of NIC for implementing e payments of refund. The Chairman assured the members that as an interim measure, the Commissionerates are being advised to ascertain the practice being followed by Raigad Commissionerate to ensure feasibility in implementation of the same in their respective Commissionerates. Further, it has been decided to organize a meeting with the officials of NIC for implementation of e-payment.

DDT: While rebate claim disposal at Raigad Commissionerate is a different ball game altogether and where the practice of e-payment has been in vogue for the past many years, it is strange that in 2015, the Pune Commissionerate express difficulties in making payment to the assessee's account! CBDT is doing it for every assessee. When e-payment is mandatory, why not e-refund? Will the Board react?

5. Issue: Acceptance of UT·1 within 24 hours of submission: At present Exporters submitting UT-1 undertaking for renewal are asked to submit it along with Annexure 63 containing Details of exports made during past one year and Renewal is issued only after verification of Annexure-63 by Range Office which further delays acceptance /renewal of UT-1.

Reply: As per provisions of Rule 19 of CER, 2002 read with Notification No. 42/2001 C.E.(N.T.), dated 26-6-2001 and supplementary instructions, a manufacturer exporter who is an assessee under CER, 2002 is allowed to remove excisable goods for export without payment of duty by furnishing a letter of undertaking in lieu of a Bond. Hence, Board's instructions for expeditious acceptance of Bond are squarely applicable for accepting UT-1 also. However, the Commissioners expressed the view that before accepting the UT-1, pendency of proof of exports is required to be verified for which minimum seven days' period is essential. Accordingly, it was decided to refer the matter to the Board.

DDT: Will anyone clarify what this Annexure-63 is. Can't this renewal be made once in three years and the verification delinked from LUT? The Assessee should also learn to submit the verification particulars in time in their own interest.

6. Issue: - information regarding e-mail address and mobile number: As per Central Excise Notification, existing registrants who have not submitted information regarding e­mail address and mobile number shall submit an amendment application provided in the website www.aces.gov.in within three months from the date of publication of this notification. As per Service Tax order wherever it is provided that email and mobile number are mandatory and the applicant shall quote the email address and mobile number in the requisite column of the application form for communication with the department. Existing registrants who have not submitted this information were required to file an amendment application by 30-4-2015,.

In one case the Service tax inspector asked for the mobile bills as supporting to mobile numbers shown in the amendment application.

Reply: As per the provisions of Notfn. No. 7/2015-(NT) dtd. 1.3.2015 and ORDER No. 1/2015- ST. dtd 28.2.2015, applicant applying for registration shall mandatorily mention his e-mail address and mobile No in the requisite column of the application form for communication with the Deptt. The application should contain all the details of the directors / partners whose names are appearing in the application which is a statutory requirement and hence cannot be relaxed at this level.

DDT: It looks fair that your mobile numbers are intimated to the Department, though that Inspector may not allow pre-paid phones!

7. Issue - Calling of extensive information from Auditee: The Assessees are receiving notices for conducting EA-2000 audit and various information is called for as mentioned in the letter. This includes, CENVAT Registers, Returns, Tax Audit Reports, Vat Audit Reports, Cost Audit Reports, Revenue figures, trial balance etc. In addition to this, the authorities are demanding for entire system backup for financial years for last 5 years. Such requirement is not mentioned in the letter but asked orally when the information is submitted by the assessee.

Question: You will appreciate that giving an entire system back up for 5 years is not possible and also it is not the requirement of any audit. The assessees are facing difficulties in this respect. The authorities can verify the data viz. trial balance, other reports etc. and ask for only information to the assessee during conducting the actual audit in the premises of the assessee. The confidentiality of the data also needs to be maintained. Hence, whatever data is mentioned in the letter should only be asked by the authorities for audit. Appropriate guidelines may be issued in this respect.

Reply: Assessee is required to produce before the departmental officer including auditor, all financial records including trial balance or its equivalent - and

(a) the records maintained or prepared by him in terms of sub-rule (2) of rule 22 of the said Rules;

(b) the cost audit reports, if any, under section 233B of the Companies Act, 1956 (1 of 1956), and

(c) the Income tax audit report, if any, under section 44AB of Income-tax Act, 1961 (43 of 1961),

Further, as per Chapter 6 - Part III of Supplementary Instructions, it shall be incumbent upon a person (who maintains electronic records, returns, documents etc.) to produce, on demand, the relevant records, returns or documents, in hard-copy and/or in the form tapes or floppies or cartridges or compact disk or any other media.

There is a legal backing for requisitioning copy of entire data which is a part of the business system of the assessee.

DDT: Do you have a system to prevent any misuse of the system?…

We will bring the other issues raised in the RAC meeting shortly.

CBEC - Many Clarifications Due from you - Ease of Doing Business? Year of Taxpayer?

THE Board instructs the Chief Commissioners on high moral subjects like ease of doing business and year of the taxpayer , but is so imperiously silent on vital issues.

1. What to do with the balance of CENVAT credit of education cess? What is your problem in clarifying this issue?

2. The problems raised by the Pune RAC:

a. Credit of Service Tax paid when the taxability is doubtful

b. Credit of tax for services used in another premises.

c. LUT on Stamp Paper.

d. E-Refund to bank account.

e. Renewal of LUT without verifying past exports.

f. Bills for mobile numbers.

g. System Back-up.

Government Sets Up Implementation Cell for Seventh Pay Commission Report

ADMIDST widespread discontent, the Government has set up an Implementation Cell in the Department of Expenditure for processing and implementing the accepted recommendations of the Seventh Pay Commission. This Cell will work for a period of one year.

The Seventh Pay Commission Report is based on the assumption that the Dearness Allowance (DA) for the government service will be 125% as on 1.1.2016. If it is not 125%, all the calculations and fitment formula will change.

MoF, Department of Expenditure Office Memorandum dated November 20, 2015.

Tomorrow is a Holiday - Guru Nanak Birthday

Until Thursday with more DDT

Have a nice day.

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