FEBRUARY 23, 2016

By Ajith kumar M

I. AMENDMENT in Notification No.8/2003 CE dated 01.03.2003.

Explanation G to Notification reads as under:

(G) "clearances for home consumption", wherever referred to in this notification, shall include clearances for export to Bhutan and Nepal

At present export to Nepal is considered at par with other exports, the explanation needs amendment to the effect that the "clearance for Home consumption" shall not include exports to Nepal.

II. Notification No.19/2004 CE(NT) dated 06.09.2004

As per Notification No. 19/2004-CX(NT) dated 06.09.2004, rebate of duty paid on the goods exported is admissible to the exporter.  Moreover, as per Section 11B(1) of Central Excise Act, 1944, any person claiming refund of duty is mandatorily required to make an application to the Assistant/Deputy Commissioner before the expiry of one year from the relevant date. 

As per Explanation (B)(a) to Section 11B of the Act, ibid, relevant date means

(B) "relevant date" means, -

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, -

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

Therefore, from the above, it is clear that the person who is claiming the rebate of duty paid on the goods exported is mandatorily required to file an application before the expiry of one year from the relevant date as per Section 11B.  However, Notification No. 19/2004-CX(NT) does not prescribe any time limit for preferring the rebate claim.  In absence of the requirement of filing the rebate claim before the expiry of one year in the Notification, the appellate authorities are allowing the appeals filed by the parties, which appears to be against the intention of legislation as is evident from the explanation to Section 11B.  Therefore, notification No. 119/2004-CX(NT) needs amendment to incorporate the requirement of filing the rebate claim as stipulated in Section 11B of Central Excise Act, 1944.

III. Section 35FF of Central Excise Act, 1944 needs amendment:

As per Section 35F of Central Excise Act, 1944 provides for deposit, pending of appeal, of duty demanded or penalty levied, as ordered by the appellate authorities. Further, Section 35FF provides that where an amount deposited by the appellant under the first proviso the Section 35F is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, unless the operation of such order is stayed by a superior court or tribunal, then interest at the rate specified in Section 11BB after the expiry of three months from the date of communication of the order of the appellate authority, till the date of refund of such amount.

However, it is pertinent to take note of the amendment made to Section 11B of Central Excise Act, 1944, with effect from 11.05.2007, by Section 117 of Finance Act, 2007 vide which sub-clause (ec) was inserted in clause B of Explanation to Section 11B of Central Excise Act, 1944.  Consequent to the said amendment, even in case of refund arising as a consequence of judgment, decree, order or direction of appellate authority, appellate tribunal or any court, a refund application is required to be filed with the Assistant/Deputy Commissioner before the expiry of one year from the relevant date (the relevant date being the date of such judgment, decree, order or direction). The consequence of such an amendment is that, even if the applicant is eligible for refund as a consequence of judgment and fails to make an application within one year from the date of such judgment, the person concerned would not be eligible for refund. 

Therefore, the provisions contained in Section 35FF of Central Excise Act, 1944 is not in consonance with the provisions contained in Section 11B of Central Excise Act, 1944.  It is suggested that necessary amendment is made in Section 35FF of Central Excise Act, 1944 so as to remove the lacuna.

III. Eligibility of cenvat credit on input services:

The eligibility of cenvat credit on input services has always remained a contentious issue.  However, with the Tribunal and the Courts extending the benefit of CENVAT credit on a multitude of services and which decisions have been accepted by the department on merit, the said services can now be specifically included in the definition of input services so that litigation on the said count is avoided. 

IV. Rule 12 of Central Excise Rules, 2002:

In the last budget, Notification No.8/2015 CE(NT) w.e.f 01.03.2015 was issued whereby sub-rule 6 was inserted in Rule 12 of Central Excise Rules, 2002 in line with the provisions contained in Rule 7C of Service Tax Rules, 1994. 

As per the newly inserted sub-rule, every assessee is required to pay an amount of rupees one hundred per day for the delay in furnishing the returns specified.  There is no enabling provision under the newly inserted sub-rule to waive the penalty payable if the central excise duty payable is nil for the month to which delay had occurred, or there was sufficient reason for not filing the return in time.  Therefore, it is felt that there is need for improvement in Rule 12 of Central Excise Rules, 2002 in line with the proviso contained in Rule 7C of Service Tax Rules, 1994, which reads as - "Provided also that where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty."

V. Rule 6 of Cenvat Credit Rules, 2004:

As per Cenvat Credit Rules, 2004, if the cenvat credit is availed on common inputs and input services used in the manufacture of both dutiable and exempted goods, then the manufacturer is required to pay an amount of 6% of the value of the exempted goods or observe the other options available under Rule 6(3) of Cenvat Credit Rules, 2004.  Sub-rule (6) of Rule 6 has provided exceptions to certain categories wherein the provisions of sub-rule (1), (2), (3) and (4) would not be applicable in case the excisable goods are removed without payment of duty under the various categories mentioned at 6(i) to 6(viii). 

However, the trade as well as the field formations is always finding it difficult to judge the applicability of Rule 6(3) of CCR, 2004 in case the goods are cleared at nil rate of duty under some notifications, which is creating legal disputes for a long time ultimately to be decided by various appellate forums.  Therefore, it is suggested that the sub-rule (6) of Rule 6 of CCR, 2004 should be amended to incorporate the specific references of the Notification and corresponding serial numbers wherein the liability to pay 6% of the value of the goods would arise so that there would not be any ambiguity in the mind of the trade as well as the field formations.

VI. Timely clarifications on the amendments being made.

Recently an amendment is made in Rule 2(l) of CCR, 2004 by Notification No.2/2016 CE(NT) dated 03.02.2016 which reads -

"Explanation.- For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.".

There is a need for specific clarification to the effect that the benefit of the explanation is available with retrospective effect.  This would be a welcome move by manufacturers who are facing litigation at various levels.

It is also suggested that whenever any amendment is made in any rules or sections, the objective of making such an amendment should be specifically mentioned so that there is no scope for any confusion either in the minds of the departmental offices or the assessee.  

(The author is a Superintendent of Central Excise & the views expressed are strictly personal.)