JANUARY 29, 2016

by A Netizen

Excise

1. Deleting erstwhile provisions from the notifications - In Ultratech Cement Ltd. vs. CCE (2015-TIOL-2110-CESTAT) the Dept. had refused to extend the benefit of notification No.67/95-CE dated 16.3.1995 holding that the benefit applies to FTZ and not to SEZ. However the CESTAT has held that after enactment of SEZ Act, FTZs have become redundant and when Govt. has issued notification converting various FTZs into SEZs, benefit of this notification cannot be denied.

The Dept. also raised the objection that if the manufacturer is complying with the requirement of present CENVAT Credit Rules'2004 he cannot avail the benefit as the proviso (vi) of the notification requires discharging the obligations under the Cenvat Credit Rules'2001.

When Cenvat Credit Rule'2001 does not exist today how a person can meet the requirement of said Rules.

There are many such notifications where the assessee has to satisfy the requirement of erstwhile law. How it is possible? It is now right time for CBEC to do some combing activity to clean such redundant provisions. This would be a way forward to reduce the unwanted litigations.

2. Notification No.19/2004-CE (NT) requires amendment- Notification No.19/2004-CE (NT) dated 6.9.2004 and notification No.21/2004-CE (NT) dated 6.9.2004 have been issued under rule 18 of the Central Excise Rules'2002 for claiming rebate of various duties. However, notification 19/2004-CE (NT) does not allow rebate of additional duty leviable under section 3 of the Customs Tariff Act'1975, although notification 21/2004-CE (NT) allows the rebate of said duty. This disparity can be removed by amending notification No.19/2004-CE (NT) i.e. allowing rebate of additional duty levied u/s 3 of the Customs Tariff Act.

3. Amendment to sub-rule (8) of rule 11 of the Central Excise Rules '2002 -A hard copy of the digitally signed invoice can be used for transportation of goods. What is the necessity of self-attestation of the said invoice by the manufacturer? This creates problem at the time of credit availment in the digital mode particularly when the defective invoice requires correction. Hence the self-attestation requirement should be removed from this sub-rule.

4. Centralized registration for LTU assesses -A large tax payer files monthly return for each of the registered premises. For a big company the return filing number exceeds 150 a year. There are also lots of other compliances when goods move from one factory to another. As an assessee friendly measure, Govt. should give option to these large tax payers under LTU for centralized registration similar to service tax. This will no doubt save lots of unproductive paper work.

5. Complete exemption to goods supplied against International Competitive Bidding (ICB)- Goods supplied against ICB is exempt (Sl-336 of the notification No.12/2012-CE) from excise duty specified under First Schedule to the Excise Tariff Act. However in few cases additional duties have been levied under the Finance Act. For example, additional duty has been levied on petrol and diesel under the Finance Act'1998 and 1999 respectively. When these goods are supplied against ICB, the manufacturer does not get the exemption. Being a pass through tax ultimately the Project gets the burden.

Projects receiving goods against ICB are of national importance. Govt. is also saving precious forex as the project gets domestic goods. Therefore, all taxes levied for this type of project should get complete exemption.

Service Tax

1. POT in case of new levy- Swachh Bharat Cess (SBC) has been levied on all services @0.5% as provided u/s 119 of the Finance Act'2015 w.e.f.15.11.2015. The provisions of Chapter-V of the Finance Act'1994 and Rules made thereunder have been made applicable for collection, refund and exemption of SBC. Since it is a new levy no tax can be collected on the services performed prior to 15.11.2015. Payment for such services whether received or not prior to 15.11.2015 is not a relevant factor. On the other hand, rule-5 of the POT Rules cannot apply to SBC as the said rule applies to a service when taxed for the first time. Govt. should clear this ambiguity without further delay.

2. Recipient should discharge full service tax in case of works contract service -The present system of discharging 50% tax by service recipient brings lots of inconvenience. Like other services as mentioned in the notification No.30/2012-ST, recipient should be made solely responsible for payment of full tax liability in this category.

3. Clarity in declared services vs. deemed sales -Software sale, works contract, hiring of equipment/vehicles whether would fall under declared service or under deemed sale is a perennial dispute area. Both the Central and State Authorities are demanding tax on the very same transaction. Even the valuation under each law is overlapping the other. As a result, the tax payer is paying more tax. Clarity is required on taxability and value aspect of these transactions.

Cenvat Credit

1. Utilization of education cess and SHE cess -Education Cess and SHE Cess were abolished on excise duty from 1.3.2015 and from service tax w.e.f.1.6.2015. Govt. has subsequently issued notifications [12/2015-CE (NT) and 22/2015-CE (NT)] allowing utilization of credit of education cess and SHE cess in specified circumstances. However Govt. should clarify utilization of such credits in the following circumstances:

•  Utilization of accumulation of balance credit as on 28.2.2015/31.5.2015.

•  Inputs and capital goods received before 1.3.2015 but credit availed after 1.3.2015 due to some compelling reasons.

•  Input Service Distribution credit involving services received prior to 1.3.2015 but credit of which will be distributed after 1.3.2015.

•  Credit reversed u/r 4 (5) of the Cenvat Credit Rules in the previous year, re-credit of which will be taken this year.

•  Credit reversed in terms of 2 nd proviso to rule 4 (7) of the Cenavt Credit Rules, re-credit of which will be taken this year.

2. Rule-6 (3A) (c) (iii) of CCR requires amendment -Where a manufacturer or provider of output service maintains separate accounts u/r 6 (2) for receipt and use of inputs or input services he is entitled to take credit only on that quantity of common input/input services used in the manufacture dutiable final products/taxable output services. But when he is not maintaining separate accounts he has to forgo the amount attributable to input services used in relation to manufacture of exempted goods/services considering the total credit taken on input services during the financial year. Ideally in the formula given under sub-rule (3A) (c) (iii), P should have been worded in the following manner.

"credit taken on common input services during the financial year"

3. Cenvat credit in respect of hiring of motor vehicle and services used primarily for personal consumption of employees -Services like hiring of bus for employees commuting to work place, hiring of transport vehicle for movement of goods, hiring of car for official work are not in true sense personal use of employees. These services are essentially required for running the business effectively. When service tax credit is allowed on GTA service there is no rationality to deny credit on motor vehicle hired monthly/fixed tenure for transportation of goods. Service tax on these charges is the stranded cost for business and has huge cascading effect. For the sake of revenue augmentation, genuine benefits should not be denied to the tax payers.

4. Manner of distribution of credit by Input Service Distributor (ISD)- As per extant rule 7 (d) of the CCR, credit of service tax attributable to service used by more than one Unit is being distributed pro rata on the basis of the turnover of such Units during the relevant period to the total turnover of all its Units which are operational in the current year. Even if a Unit does not receive/use the input service still then credit will be distributed to that Unit. This is not fair. Ideally credit of service tax attributable to service used by more than one Unit should get distrusted pro rata on the basis of the turnover of all Units where service is received /used.

Customs

1. Amendment to notification No.12/2012-Cus dated 17.3.2012 - Sl-145 of the said notification provides exemption/concession to electrical energy when transferred from SEZ to DTA by using coal and gas. Although benefit has been given when imported coal is used as fuel however similar benefit is not provided when imported gas is used as fuel. This disparity needs to be corrected.

2. Concessional duty @2.5% on LNG- Concessional duty @ 2.5% has been given to Propane (tariff sub-heading-2711 12 00) and Butane (tariff sub-heading 2711 13 00). Even though LNG (tariff item 2711 11 00) is a key industrial input like propane and butane still it attracts 5% customs duty (Sl-138 of the notification). Since LNG is very critical for city transportation system and domestic cooking the rate of duty should be made at par with propane and butane.

3. Concession to research institutions and laboratories -Presently 5% customs duty is being levied on specified equipment, instrument, apparatus and prototypes imported by these institutions. Since the success rates are very unpredictable in research work, Govt. should provide more incentive and should make the customs duty zero in all such cases.