JANUARY 31, 2016

By Ramesh Chandra Jena, M.A (Eco)., D.M.M., LL.B.

1. Rescind Board Circulars Contrary to the highest Judicial Pronouncements: In view of Board Circular No.1006/13/2015-CX, dated 21.09.2015, clarifying that judgments delivered by the constitutional Bench of the Hon'ble Supreme Court, are binding nature to decide the identical issues and Board Circulars contrary to the judgments of the Hon'ble Supreme Court become non-est in law and should not be followed. It is also clarified that the same principle would also apply to the judgments of Hon'ble High Court. Thereby, it is the prime responsibility of the Government to rescind board circulars, which are contrary to the judgments of Supreme Court / High Courts so that field formations should not face any problem to decide an issue with identical litigation, which is further instructed by the Board to withdraw of appeals in CESTAT & High Courts vide instruction F.No.390/Misc/67-2014-JC dated 18.12.2015.

2. Expedite Action plan to Reduce Litigation: In terms of instruction Board vide Circular F. No.1080/09/DLA/Misc/15/757 dated 21/12/2015 necessary action to be taken by department to withdraw of appeals filed by Department below the threshold limit prescribed by the Board in CESTAT & High Courts as per Board instruction F.No.390/Misc/163-2010-JC dated 17.12.2015.

3. Judicial discipline be made mandatory in adjudication proceedings : There is laid down procedure / Board circular that field officers and adjudicating officers are bound by the precedent judgment and higher appellate orders in similar litigation but it is often observed that field officers and lower adjudicating authorities are not following the precedent judgment or orders of the higher appellate authorities while deciding the similar issues and violating the principle of judicial discipline in adjudication proceedings. Therefore, it is requested to the Government to bring suitable legislative amendment in the tax laws so that judicial discipline can be made mandatory in the adjudication proceedings.

4. Legislative amendment required for the definition of manufacture: The product in order to be excisable and chargeable to excise duty should - (1) that the product has come into existence by process which amounts to manufacture within meaning of Section 2(f) of the Central Excise Act and (2) such product is marketable. But the field formations are still under confusion and raising demand on by-products considering as excisable goods. Consequently, litigation is increasing day by day due to the mis-interpretation of the provisions. It is requested to the Government to bring an amendment in the definition of excisable goods and keep by-products outside the purview of manufacture / excisable goods so that litigation can be controlled.

5. Introduction of dispute resolution scheme for indirect taxation: To reduce the pendency in the appellate Tribunal the government should come out with a dispute resolution scheme so that implementation of GST regime proceeds smoothly.

6. Single rate of duty: The current system of multiple duty rate structure needs to be rationalized by implementation of single rate of duty Structure so that the adverse effects of large disparity of rate of duty structures both for domestic and imported goods can be avoided. It will facilitate both for manufacturer / importers to avail Cenvat Credit uniformly to neutralize the cascading effects of tax at various stages. This will pave the way to GST regime with single rate of duty structure in the coming days.

7. Single Excise Return: When the Government is moving towards implementation of GST regime with single duty rate structure, there is need of single return for all purposes in place of multiple returns namely ER1, ER2, ER3, ER4, ER5, ER6 and ER7 etc. It is suggested that the Government prescribes a single return for all assessees so that quality information can be furnished to the department.

8. Mandatory pre-deposit requirement needs to be amended: The provisions of mandatory fixed pre-deposit of duty at various appellate stages needs to be amended as the said provisions result in great financial hardship for the assessee while filing appeal against genuinely favourable issues or frivolous cases booked by the field formations for harassment or taking revenge against truthful assessee. It is requested to the Government to restore the earlier provisions about pre-deposit.

9. Make Provision to allow Cenvat Credit on Clean Energy Cess / Swachh Bharat Cess paid: The provision of Cenvat Credit Rules by keeping these Cesses out of Cenvat Credit scheme and putting restriction on availment of Credit is unreasonable / arbitrary provision. In order to avoid cascading effects of taxes, the Government should have to re-look into these issues and bring legislative amendment in Cenvat Credit Rules, 2004 to allow availing Cenvat Credit on Clean Energy Cess and Swachh Bharat Cess paid by the manufacturer and service providers respectively.

10. Cenvat Credit of Service Tax paid on freight for transportation upto Customer's premises : There are number of Court decisions in the favour of assesses as well as against assesses with regard to availment of Cenvat Credit on service tax paid on outward freight i.e. freight paid on transportation of finished goods upto customer's premises. Due to conflicting judicial pronouncements of various High Courts / appellate authorities on availment of Cenvat Credit on Service Tax paid on outward GTA services. Consequently, there are number of litigations are increasing day by day. It is requested to the Government to bring amendment in Cenvat Credit Rules to enable assesses to avail Cenvat Credit on service Tax paid on freight incurred for outward transportation of finished goods upto Customer's premises to neutralize the cascading effects of Taxes.

11. Cenvat Credit on Structural items: Litigation is increasing day by day across the country with regard to availment of Cenvat Credit on structural items. There is need of suitable amendment of Cenvat provisions to enable structural items to qualify the scope of eligibility of Cenvat Credit Rules, 2004 either as capital goods or as inputs.

12. Refund of Cenvat Credit due to closure of the factory: There is no provision under Cenvat Credit Rules, 2004 for refund of Cenvat Credit in cash due to closure of the factory due to unforeseen circumstances and when there is no chance to re-start of the factory. Therefore, it is requested to the Government to bring amendment in the provision of Cenvat Credit Rules and enable the manufacturer to get Refund of Cenvat Credit under rule 5 of CENVAT Credit Rules, 2004, which are lying unutilized / accumulated Cenvat Credit for the export of goods and services due to closure of the factory.

13. 100% availment of Cenvat Credit on Capital Goods in the first instance : Rule 4 of Cenvat Credit Rules, 2004 read with sub-rule 2 (a) allow taking only 50% of credit on Capital goods in a given financial year and balance 50% credit in the subsequent financial year. The said restriction needs to be amended for taking credit 100% in the same financial year as the Country is moving towards (GST) comprehensive tax regime in the coming days. Consequently, 100% Cenvat Credit facility helps to the assessee for mobilization of block of funds for capital goods and give relief to the manufacturer from the financial crunch.

14. Need of Enhancement of threshold limit of service tax registration: The threshold limit of Service tax payment / registration needs to be enhanced from Rs.10 lacs to Rs.25 lacs. This enhancement of threshold limit of Service Tax registration will pave the way to GST regime, it will be easier to adopt threshold limit of registration of GST and switch over to GST regime in the coming days.

15. Rule 4A of Service Tax Rules, 1994 needs to be amended: The Government has brought amendment in Rule 9(1) of CENVAT Credit Rules, 2004, which enables photocopy of RRs along with STTG Certificate as one the document for taking Cenvat Credit of Service Tax collected by Indian railways. But the said amendment of Cenvat Credit Rules, 2004 does not serve the problem of all service recipients of railways unless simultaneous amendment is incorporated in Rule 4A of Service Tax Rules, 1994 prescribing documents for Service Tax purpose, which needs to be amended to that extent. This amendment would enable RRs along with STTG certificate as one of the documents for Service Tax refund purpose.

16. Single rate of Interest on delayed of payment Service Tax: The rates of interest prescribed on delayed payment service tax needs to be amended as the rates are arbitrary without considering the genuine problem of the Service Providers in the country. Therefore, interest rate for the delayed payment of service tax is required to be re-looked by the Government; it should be single rate in place of existing three rates.

17. Provisions of Service Tax needs more Transparency: The complexity and confusion of Service Tax provisions are still continuing from the introduction of Negative List of Services, Mega exemptions, Declared Services, Reverse Charge Mechanism, Point of Taxation Rules & Place of provision of Services Rules, etc. In view of GST implementation in the country, these service Tax provisions needs to be understandable and transparent to the taxpayers and tax collectors in the country.

18. Restore Rebate provisions to 100% EOUs: The Government's recent amendment makes clearances from DTA to EOU as not being eligible for rebate benefit but the same benefit is available to Clearances made from DTA to SEZ units. Therefore, like earlier, the clearances from DTA to EOU should be considered as “Deemed Exports “and the benefit of rebate on inputs of goods supplies from DTA to SEZ Units be allowed.

19. Waiver of payment of Cost recovery Charge benefit to be extended to 100% EOUs / SEZ Units: Recently, the Government has made procedure to grant waiver of cost recovery charge to ICDs/CFSs, Seaports, Air Cargo Complexes, Courier Terminals, Diamond Plazas, etc. It is requested to the Government to extend the said benefit in respect of officers engaged in SEZ Units and 100% EOUs Units, because such officers are also being deployed from the department of Customs / Central Excise to supervise export / import activities on cost recovery charge payment basis.

20. Blanket Service Tax payment exemption to SEZ Units: The taxable services provided to SEZ Units for its authorized operations are exempted as provided under section 26(1) (e) of the SEZ Act, 2005 and Rule 31 of the SEZ Rules, 2006 but this exemption has been provided by way of Refund mechanism. However, the Refund mechanism suffers from various lacunas by which SEZ Units are facing problems to get service Tax refund in time and litigations are increasing day by day. Hence, it is requested to the Government to make provision of blanket exemption from payment of Service Tax on the specified services provided to SEZ Units for its authorized operation.

21. Provision for Refund of Excess Customs duty paid by SEZ Units: The Customs duty refund arises on account of final assessment of Bill of Entry, which are filed provisionally by the SEZ Units. The excess Customs duty paid needs to be refunded to SEZ Units after final assessment. Since there is no provision of Refund of Excess Customs duty in SEZ Act / SEZ Rules, so SEZ Units are facing problem to get Refund of Excess Customs duty from the department of Revenue or department of Commerce. It is requested to the Government to make provision in SEZ Acts / SEZ Rules for refund of excess customs duty similar to that as provided under Section 11B of Central Excise Act, 1944 and Section 27 of Customs Act, 1962.

(The author is Sr.Manager - Indirect Taxation, KSK Energy Ventures Ltd. and the views expressed are strictly personal.)