TIOL-DDT 2869
16 06 2016
Thursday

"WE need to look at the whole administrative system in the country, not just the IAS or the Revenue Service or any other service. We need to re-relate the system, each service in a particular manner according to our priorities. The priorities in hierarchy need not be priorities in emoluments and salaries. Certain technical areas will need to be looked at with special attention. We need to see that frustration does not develop in any service because they cannot rise above a particular point. This is a very big task."

That was Rajiv Gandhi addressing the All India Income Tax Commissioners Conference on 4th June 1987 - that was the last time around when a Prime Minister addressed the Taxmen's conference, but Rajiv Gandhi was also Finance Minister at that time and he addressed the conference in his capacity as the Finance Minister. So, Modi is not really the first Prime Minister to address the tax officers' conference.

Prime Minister Modi is meeting his Principal Commissioners (and above rank officers) today. The Prime Minister is scheduled to spend about 100 minutes with the senior taxmen. It is his private meeting with his officers and so Press Reporters are not allowed. After the PM leaves, the Finance Minister is to interact with the Press.

Notification 67/95-CE; Clearances to SEZ Eligible for Exemption - CBEC Sets right a long pending wrong

FROM TIOL-DDT 2697-05 10 2015

Notification No. 67/95-CE dated 16.03.1995 as amended provides exemption from payment of whole of the Central Excise duty on the specified inputs manufactured in a factory and captively consumed within the factory of production in or in relation to the manufacture of specified final products provided the final products are cleared on payment of duty. This means, duty is payable on the inputs/intermediate goods, which are captively consumed in the manufacture of final products, which are fully exempted from payment of duty or chargeable to 'Nil' rate of duty.

However, in the notification, exception is given to those goods, which are cleared:

(i) to a unit in Free Trade Zone, or

(ii) to a Hundred Percent Export Oriented Undertaking, or

(iii) to a unit in a Electronic Hardware Technology Park, or

(iv) to a unit in a Software Technology Park, or

(v) under Notification No. 108/95-CE dt. 28.08.1995, or

(vi) by the manufacturer of dutiable and exempted final products after discharging obligation prescribed in Rule 6 of Cenvat Credit Rules, 2004

The DG, Audit of the Department noticed that an assessee cleared certain quantities of Cement at "Nil" rate of duty to  SEZ units. The clearances to a unit in SEZ is not notified as exception under the Notification No. 67/95-CE dated 16.03.1995 and hence it appears that the assessees are liable to pay central excise duty on the intermediate goods viz., "Clinker" used in the manufacture of cement, cleared to SEZ units without payment of duty.

A simple application of mind by the officers in the field would have saved the time and money of both department and the assessee. It is strange to know that the officers holding highest position in the department are not aware that the clearances to SEZ are neither 'exempted' nor chargeable to 'Nil' rate, but are 'exports' allowed to be cleared without payment of duty. Such clearances to SEZ are even eligible for sanction of rebate on par with exports. The exemption under captive consumption notification is not available only in cases where final products are 'exempted' or 'chargeable to Nil rate' and clearances to SEZ do not fall under these categories.

The word FTZ  is being continued in the notification No. 67/95-CE as a vestige of the past horrors, as there are no FTZs functioning in the country after enactment of SEZ Act.

But, who can put these simple facts into the minds of adjudication officers, when they have decided not to apply mind at the time of issuance of demands. All these notices are routinely confirmed for fear of review.

We had suggested in 2012 that references to "free trade zone" have to be removed and 'Special Economic Zones' inserted in all statutes, but Board allows such confusion in the statute to continue and then allows the Commissioners to create havoc in the field. Can you imagine several Commissioners actually held that the exception in Notification 67/95 is applicable for the non-existing FTZ and not the existing SEZ? Where has reason fled? Gurudev Tagore did not visualize IRS officers when he wrote about the clear stream of reason.

Recently the Chennai Bench of the CESTAT emphatically held that the assessees are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty.

This was one of the issues discussed in the Central Excise Tariff Conference organised by the CBEC on 28th and 29th October, 2015.

The Conference recommended to the Board that notification no 67/95-C.E. should be amended to avoid litigation on the issue.

And it took the Board eight months to implement this. Now they have amended notification no 67/95-C.E to substitute "Special Economic Zone" for "Free Trade Zone". Though we suggested this four years ago, we are gratified that it has finally happened - just before the meeting with the PM.

A similar amendment is also made in Notification No. 214/86-CE (the job work exemption notification)

Notification No 24/2016-Central Excise, Dated: June 14, 2016

Notification No 25/2016-Central Excise, Dated: June 14, 2016

Customs - Imports - Applicability of CE Exemption Notification for CVD

THE Madras High Court has recently delivered a landmark judgement which will have serious impact on the subject. The judgement virtually overrules the Supreme Court decision on the subject.

The High Court held:

(i) In cases where the exemption Notifications are absolute and they do not make the benefit available only upon the fulfillment of any condition, even the importer would be entitled to the benefit of exemption.

(ii) In cases where the Notifications for exemption stipulate only one condition namely that the inputs used in the manufacture of the exempted goods should have suffered a duty, then the benefit of the Notification will not be available to any of the importers, since he could have never paid any duty of excise on the inputs used in their manufacture by the foreign manufacturer. This proposition is based upon the premise that the object of such Notifications is only to grant exemption to those final products, on which, some duty has been paid (in India) at the stage of inputs. In other words, Notifications of this nature, are not merely conditional, but also restrictive in nature, as they confer benefit not upon all manufacturers of exempted goods, even if they are domestic manufacturers, but only upon those, who use inputs that had suffered duty.

(iii) In cases where the exemption Notification stipulates only one condition namely that no CENVAT credit ought to have been availed on the inputs, the benefit of the Notification will be available only to those, who satisfy two conditions namely that the inputs used by them suffered a duty and that they did not seek CENVAT credit. Since an importer can never satisfy the first condition, the second condition becomes inapplicable to him and he cannot be heard to contend that the inapplicability of the condition by itself would make him eligible for the grant of the benefit.

(iv) In cases where the exemption Notification stipulates two conditions, namely that the inputs should have suffered duty and that no CENVAT credit should have been availed, then the benefit of the Notification will be available only if both conditions are satisfied. An importer will never be able to satisfy both these conditions and hence, he cannot claim the benefit.

Please see Breaking News for more details

Customs -Merger of Accredited Client Programme (ACP) and Authorized Economic Operator (AEO) programme - Board issues Draft Guidelines

CBEC has decided to merge the two facilitation schemes namely Accredited Client Programme (ACP) and Authorized Economic Operator (AEO) into a combined three-tier AEO programme, and also enhance the scope of these programmes so as to provide further benefits to the entities who have demonstrated strong internal control system and willingness to comply with the laws administered by the Central Board of Excise and Customs. The prominent features of the new programme are:

i. Inclusion of Direct Port Delivery of imports to ensure just-in-time inventory management by manufacturers - clearance from wharf to warehouse

ii. Inclusion of Direct Port Entry for factory stuffed containers meant for export by manufacturers or star trading houses recognized by Commerce Ministry

iii. Special focus on small and medium scale entities - any entity handling 25 import or export documents annually can become part of this programme

iv. Provision of Deferred Payment of duties - delinking duty payment and Customs clearance

v. Extension of facilitation to exports in addition to imports

vi. Faster disbursal of drawback amount

vii. Fast tracking of refunds and adjudications

viii. Self-certified copies of FTA/PTA origin related or any other certificates required for clearance would be accepted

ix. Request based on-site inspection/examination

x. Paperless declarations with no supporting documents

xi. Recognition by Partner Government Agencies and other Stakeholders as part of this programme

xii. Mutual Recognition Agreements with other Customs Administrations.

Board has issued a draft Circular and has asked for suggestions

CBEC Draft Circular

Increase in Tariff Values of Gold within a day

IT was only yesterday that DDT reported the revised tariff value rates by Notification No. 86/2016-CUSTOMS (N.T.), dated 14th June 2016 and the Government revised the rates again yesterday.

Gold sees a small hike while Silver has a 31 dollar hike. All the oils except crude soyabean will now have reduced tariff values and so will brass scrap. There is a small hike in arecanuts while poppy seeds remain static.

Notification No. 86/2016-CUSTOMS (N.T.)., Dated: June 15, 2016

Until Tomorrow with more DDT

Have a nice day.

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