AS per Rule 2(a) of the CENVAT Credit Rules,

(A) the following goods, namely:-

all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;

++ pollution control equipment;

++ components, spares and accessories of the goods specified at (i) and (ii);

++ moulds and dies, jigs and fixtures;

++ refractories and refractory materials;

++ tubes and pipes and fittings thereof; and

++ storage tank,

used-

in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or

for providing output service;

(B) motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;

Explanation 2 to Rule 2(k), reads,

Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;

The Commissioner of Central Excise, Bhubaneswar has requested the Board to review the Rule and the explanation – because a number of new industries especially in the metal sector are availing Cenvat Credit under the category of 'capital goods' on structural items and even on cement. These units receive items like MS bars/plates/sheets/angles/channels/TMT/CTD bars/beams etc and take Cenvat Credit. These goods are used for fabrication of structures and towers and also in the foundation laid for installation of machineries etc. These industries have claimed that these material are used for manufacture of capital goods, which is further used for production of goods, therefore, it is eligible for Cenvat Credit as per Explanation 2 to Rule 2(k).

Therefore, it has been requested that suitable legal changes may be made in order to specifically disallow the credit on such materials which are not used directly in the manufacture of capital goods but for other purposes.

So now the Board wants information from the Chief Commissioners on similar cases in their jurisdiction.Board also wants Chief Commissioners to give their considered opinion on whether

CENVAT Credit should be allowed on these items or not.

any amendment is required to be carried out in the law

Incidentally this very issue was decided in assessee’s favour by the Mumbai Bench of CESTAT in Bhushan Steel & Strips vs. CCE [2007-TIOL-2306-CESTAT-MUM]. But the Delhi Bench differed with the views of the Mumbai Bench in Vandana Global Ltd vs. CCE, Raipur [2008-TIOL-2327-CESTAT-DEL] and the matter was referred to a Larger Bench. Recently, the Larger Bench rejected a preliminary objection raised by the Revenue that coordinate bench of CESTAT cannot refer issues to Larger Bench at stay stage and this was reported by TIOL in 2009-TIOL-882-CESTAT-DEL-LB.

If CBEC and the officers in its field formations understand the concept that CENVAT Credit is allowed to avoid the cascading effect of taxation, such issues would never be discussed. What is wrong in allowing credit on the structures? Why can’t the Board be a little benevolent and think of ways to help the assessees who work hard so that our bureaucrats can be paid a decent salary?

That apart, in any case, the issue is before the Larger Bench and CBEC can request the CDR to move an application for an early hearing of this matter by the LB. The other option before the Revenue is to press the Chief Commissioners to give their views quickly and consolidate them and put them before the LB through the CDR.

CBEC Letter in F. No. 267/30/2008 – CX.8 Dated 19th April, 2009

Appointment of DG (Safeguard) and DG (Specific safeguard)

The Government of India has appointed Ms. Praveen Mahajan as DG (Safeguard) and DG (Specific Safeguard) by exercising its powers in terms of sub-rule (1) of Rule 3 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 and sub-rule (1) of Rule 3 of the Customs Tariff (Transitional Product Specific Safeguard Duty) Rules, 2002 respectively.

It sounds a bit confusing isn’t it? In fact in DDT-560-dated-27.02.2007 we explained in detail the reasons appointing DG (Safeguard) and DG (Specific safeguard) under the two different Rules by the Government of India. A brief recap of the duties of the DG (Safeguard) and DG (Specific Safeguard) is given below for the benefit of netizens:

Duties of the DG

Under Safeguard	Under specific Safeguard
to investigate the existence of “serious injury” or “threat of serious injury” to domestic industry as a consequence of increased import of an article into India	to investigate the existence of “market disruption” or “threat of market disruption” to domestic industry as a consequence of increased import of an article into India;
to identify the article liable for safeguard duty	to identify the article liable for safeguard duty under section 8C of the Act;
to submit his findings, provisional or otherwise to the Central Government as to the “serious injury” or “threat of serious injury” to domestic industry consequent upon increased import of an article from the specified country	to submit his findings, provisional or otherwise to the Central Government as to the existence of “market disruption” or “threat of market disruption” to the domestic industry consequent upon increased import of an article from the People’s Republic of China;
to recommend,	to recommend,
1. the amount of duty which if levied would be adequate to remove the injury or threat of injury to the domestic industry;	2. the duration of levy of safeguard duty and where the period recommended is more than a year, to recommend progressive liberalisation adequate to facilitate positive adjustment to recommend,
1. the amount of duty which if levied would be adequate to remove the “market disruption” or “threat of market disruption” to the domestic industry;	2. the duration of levy of safeguard duty under section 8C of the Act

Customs Notification Nos.64/2009-Cus (N.T.) and 65/2009-Cus(N.T.) both Dated: 15.06.2009

Amendment to the List of Agencies issuing Certificate of Origin – Non-Preferential

In terms of Para 2.4 of Foreign Trade Policy 2004-09, the DGFT made an amendment in Appendix 4-C of HBP (Vol.I) which pertains to List of Agencies authorized to issue Certificate of Origin-Non-Preferential. Maharashtra is changed as follows:

DGFT PUBLIC NOTICE No. 186/( RE: 2008)/2004-2009, Dated: June 12, 2009

Jurisprudentiol–Wednesday's cases

Service Tax

Exploration work carried out by PSU for the Ministry of Mines, Government of India for which only Grant-in-Aid is received – whether chargeable to Service Tax – Appellant, a Public Sector Undertaking and totally owned by the Government of India, Ministry of Mines has a good prima facie case in their favour and also balance of convenience was lying in their favour – Waiver of pre-deposit of tax, penalties and interest granted and stay ordered by CESTAT

THE Govt. of India, Ministry of Mines provides grant-in-aid for exploration work of various minerals to the applicant. The exploration work carried out by the applicant is termed as promotional work. The applicant is also registered with Service Tax department under the category of “Scientific and Technical Consultancy Services”. The applicant is also doing exploration work, as promotional work for the Ministry of Mines, Government of India, in the field of Mineral exploration. The funding for promotional work to the applicant is done by way of promotional grant provided by Government of India i.e. Department of Mines every year in their Budget.

Customs

Imported goods lying in bonded warehouse damaged and unable to use to be regarded as goods destroyed, remission of duty under Section 23 of Customs Act available – Wider interpretation to be given to the words ‘lost’ or ‘destroyed’ – In terms of Section 68, when there is relinquishment of title to the goods imported before their clearance, no duty can be demanded – Impugned order not sustainable – CESTAT

IT was observed that no one in his senses would voluntarily or willingly damage his own goods after spending considerable foreign exchange for import of such goods. Further, the goods were also certified as unusable as networking equipment by the experts. It was held that a wide interpretation has to be given to the words ‘lost’ or ‘destroyed’ employed in the statute and goods which are damaged beyond any capability of being put to use have to be regarded as goods ‘lost’ or ‘destroyed’ only. It was further observed that in terms of s. 68 of the Act, when title to the goods has been relinquished before their clearance, duty cannot be demanded.

Income Tax

Transfer Pricing - ALP is price which is charged by unrelated parties for similar transaction in similar circumstances as are prevailing between related parties carrying international transaction; Depreciation - It is nowhere provided that deduction of depreciation is a must – ITAT

THE taxpayer showed before the revenue authorities that profit shown by the taxpayer satisfies arm's length requirement on ratio of cash profit to sales if uniformly applied. As the deduction of depreciation is leading to wide differences, the same should be excluded. The only reason given for rejecting taxpayer's analysis and for making adjustment is that use of ratio of cash profit without depreciation is not permitted under the law.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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