Indirect Tax (old) Nov 2010-discussion on some questions

Q. 6 (c) - Refund of Import duty - Sec 26A of Customs Act II CUSTOMS A. Amendments in the Customs Act, 1962 1. Refund of import duty in certain cases - new section 26A inserted after section 26 Section 26 of the Customs Act, 1962 contains the provisions for refund of the export duty. Section 26A inserted after section 26 provides for refund of the import duty. The section reads as follows:— Conditions for claiming the refund of duty Where on the importation of any goods capable of being easily identified as such imported goods, any duty has been paid on clearance of such goods for home consumption, such duty shall be refunded to the person by whom or on whose behalf it was paid, subject to the fulfillment of the following conditions:- (a) Goods are defective/not as per specifications The goods are found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods: Provided that the goods have not been worked, repaired or used after importation except where such use was indispensable to discover the defects or non-conformity with the specifications; (b) Goods identified as imported goods The goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported; (c) No drawback claimed The importer does not claim drawback under any other provisions of this Act; and (d) Importer exports the goods/relinquishes title to goods and abandons them/destroys or renders them commercially valueless (i) The goods are exported; or (ii) the importer relinquishes his title to the goods and abandons them to customs; or (iii) such goods are destroyed or rendered commercially valueless in the presence of the proper officer, in such manner as may be prescribed and within a period not exceeding 30 days from the date on which the proper officer makes an order for the clearance of imported goods for home consumption under section 47. However, the period of 30 days may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding three months. Moreover, nothing contained in this section shall apply to the goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force. Application for refund of import duty An application for refund of duty shall be made before the expiry of 6 months from the relevant date in such form and in such manner as may be prescribed. Meaning of relevant date For the purposes of this sub-section:- S.No. In cases where relevant date means the date 1. the goods are exported out of India on which the proper officer makes an order permitting clearance and loading of goods for exportation under section 51 2. where the title to the goods is relinquished of such relinquishment 3. the goods are destroyed or rendered commercially valueless of such destruction or rendering of goods commercially valueless No refund shall be allowed in respect of perishable goods and goods which have exceeded their shelf life or their recommended storage-before-use period. The Board may, by notification in the Official Gazette, specify any other condition subject to which the refund may be allowed. (Effective from 19.08.2009)

Q. 6 (a) Cool & Kool - "Air Conditioner" - FEDDERS LLYOD CORPORATION LTD– 2008 - SC [221 ELT 3] Facts: Assessee had two branches, one in Delhi and another in Mumbai. DELHI BRANCH manufactured condensing units which were cleared to Mumbai branch on payment of appropriate excise duty. MUMBAI BRANCH manufactured cooling units locally and combined the same with condensing units. After conducting quality control tests and affixing the brand name, the Mumbai branch cleared the complete units along with pipe kits, electrical cord, remote control, etc. The department contended that the process being carried out (i.e., ASSEMBLY) by Mumbai Branch amounted to manufacture. Issue: Whether the process carried out by Mumbai branch amounts to manufacture? Held: YES “Neither the condensing unit nor the cooling unit, by itself, was a complete air conditioner. It was only when these two are put together, the complete unit of air conditioner fit for use came into existence. The air conditioner, so cleared by the Mumbai branch, was a commercially new article. Hence, the process amounted to manufacture.

Q. 7 (a) (ii) - Fund- 1.8.8 "Fund" means the Consumer Welfare Fund established under section 12C; (Sec 2(ee))

Q. 7 (a) (i) - power to arrest - 8.4.3 Arrest Provisions for arrest are contained in sections 13 and 18 of Central Excise Act, 1944. These provisions provide for power to arrest, searches and arrests how to be made, disposal of persons arrested, procedure to be followed. Any Central Excise Officer not below the rank of Inspector of Central Excise with the prior approval of Commissioner of Central Excise can arrest any person under Section 13 whom he has reason to believe that he is liable to punishment under the Central Excise Act. In normal circumstances, prior approval of Commissioner will be taken before arresting a person. The arrested person shall be produced before the Jurisdictional Magistrate or the Chief Judicial Magistrate, as the case may be, within twenty-four hours of the arrest. Power to grant bail is normally to be exercised by a Jurisdictional Magistrate.

Q. 7 (b) - Warehousing - 12.3 PROCEDURE FOR WAREHOUSING OF EXCISABLE GOODS REMOVED FROM A FACTORY OR A WAREHOUSE 1. The consignor (i.e. the manufacturer or the registered person of the warehouse) shall prepare an application for removal of goods from a factory or a warehouse to another warehouse in quadruplicate in the specified Form. 2. The consignor shall also prepare an invoice in the manner specified in Rule 11 of the said Rules in respect of the goods proposed to be removed from his factory or warehouse. 3. The consignor shall send the original, duplicate and triplicate application and duplicate invoice along with the goods to the warehouse of destination. 4. The consignor shall send quadruplicate copy of the application to the Superintendent–in-charge of his factory or warehouse within twenty-four hours of removal of the consignment. 5. On arrival of the goods at the warehouse of destination, the consignee (i.e. the registered person of the warehouse who receives the excisable goods from the factory or a warehouse) shall, within twenty-four hours of the arrival of goods, verify the same with all the three copies of the application. The consignee shall send the original application to the Superintendent-in-charge of his warehouse, duplicate to the consignor and retain the triplicate for his record. 6. The Superintendent-in-charge of the consignee shall countersign the application received by him and send it to the Superintendent-in-charge of the consignor. 7. The consignor shall retain the duplicate application duly endorsed by the consignee for his record.

Q. 7 (c) (1) - Commissioner of Appeals - However, an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order. Further, where the Commissioner (Appeals) is of opinion that any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time-limit specified in section 11A to show cause against the proposed order.

Q.7 (c) (2) - pure agent - service tax - “Pure agent” means a person who– (a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; (b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service; (c) does not use such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services.

Q.1(d) - Classification of Services - 2.3 CLASSIFICATION OF TAXABLE SERVICES [SECTION 65A] Section 65A provides that classification of taxable services shall be determined according to the terms of the sub-clauses of clause (105) of section 65. When for any reason, a taxable service is, prima facie, classifiable under two or more subclauses of clause (105) of section 65, classification shall be effected as follows: (a) the sub-clause which provides the most specific descripttion shall be preferred to subclauses providing a more general descripttion; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the subclauses which equally merit consideration.

Q.1(e) - service tax payment through internet banking - Quantum of service tax reduced for e-payment from Rs. 50 lakh to Rs. 10 lakh Proviso to rule 6(2) has been amended to provide that an assessee shall deposit the service tax electronically through internet banking if he has paid the total service tax of Rs. 10 lakh or more (including the amount of service tax paid by utilisation of CENVAT credit) in the preceding financial year. The said amendment is effective from 1st April, 2010. Further, the procedure for electronic payment of service tax has been detailed in Circular No. 919 / 09 / 2010 – CX dated 23.03.2010.

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Q 3 (a) - excise duty payable - Raw material cenvat on only 80,000/- for the balance 20000 in the month of receipt of invoice storage tak @ 50% in year 1 and balance in next year Tubes & Pipes - not sure - may not be allowed Air conditioner - not allowed each entry has a background of Case Law.

Q.3 (c) - Resident person eligible to file Advance Rulling - - Section 28E - (c) “applicant” means a - (i) (a) a non-resident setting up a joint venture in India in collaboration with a non-resident or a resident; or (b) a resident setting up a joint venture in India in collaboration with a nonresident; or (c) a wholly owned subsidiary Indian company, of which the holding company is a foreign company, who or which, as the case may be, proposes to undertake any business activity in India; (ii) a joint venture in India; or (iii) a resident falling within any such class or category of persons, as the Central Government may, by notification in the Official Gazette, specify in this behalf, and which or who, as the case may be, makes application for advance ruling under sub-section (1) of section 28H. Here, “joint venture in India” means a contractual arrangement whereby two or more persons undertake an economic activity which is subject to joint control and one or more of the participants or partners or equity holders is a non-resident having substantial interest in such arrangement. Thus, now in case of joint venture an application for advance ruling can be made only when one of the partners is non-resident. The collaboration would mean either technical or financial collaboration. Joint venture would mean participation by both persons. Residents in the country having joint venture with other residents are not given the benefit.

Q.3(b) - provisions relating to effective date of notifications issued under Sec 25 of Customs Act 1962- 2.4.5 Exemption from customs duty [Section 25]: Effective date: Section 25 of the Act provides that the date of effect of the notification will be the date of its issue. It also provides for statutory obligation on the part of the Department to publish and sell the notifications to the public through Directorate of Publicity and Public Relations on or before the date on which the notification will be effective. The following issues need to be kept in mind in case of general exemption. (i) Where the exemption notification does not mention the date of its effect, the notification comes into effect from the date of its issue by the Central Government for publication in the Official Gazette. It shall be published and also offered for sale on the date of its issue. (ii) At times, the exemption notification may also come into force from a date later tahn the date of issue. In such a case the notification shall be published and offered for sale on or before the date from which it comes into force. (iii) Where the exemption is through a special order, the above rules do not apply. Special orders are issued separately for each case and communicated to the beneficiary directly by the Government. The beneficiary can claim refund for the period reckoned from the date of its issue. Sub-section 2A empowers the Government to issue clarifications to the notifications within one year from the issue of the notification and such clarifications will have retrospective effect.

Q. 3 (d) - Computation of value of taxable servide 1) Royalty - 5% of Rs. 20 Lac 2) Not to be considered 3) Royalty under brand.... full value of Rs. 15 Lac