Customs Complications - Board solutions?
RECENTLY Member (Cus & EP) of CBEC, SK Goel, chaired a meeting of the Customs Consultative Group in Mumbai. We bring you some of the queries raised and the Member's crisp replies.
Offsetting of fuel costs to retain competitive edge for Exports: The Government of India has recently de-controlled petrol prices which will now be market to market driven and diesel prices which will be subjected to review every 20 days. The de-control would result in escalation of input costs in general and cost of fuel in particular. Moreover, CENVAT Credit Rules 2004 do no allow CENVAT Credit on High Speed Diesel (HSD) and Light Diesel Oil (LDO). In other words, High Speed Diesel and Light Diesel Oil, although, are inputs as these are used in or in relation to manufacture of dutiable goods, the facility of CENVAT credit is denied to the manufacturer. In industry, HSD and LDO is widely used as fuel for the purpose of generation of electricity and the electricity so generated is in turn used in or in relation to manufacture of dutiable final product.
It is, suggested that CENVAT Credit may also be allowed on HSD & LDO as there appears no logic in excluding such essential inputs from the purview of Cenvatable input.
A. It was mentioned that HSD and LDO are not covered under the definition of “input” under the Rule 2(k) of the CENVAT Credit Rules, 2004. Not allowing credit on these items is a conscious decision of the Government. Hence, the suggestion of allowing credit on these items, even for exporters cannot be accepted.
Availment of CENVAT Credit of Input Stage Duty on export goods: Hitherto exporters of non-dutiable goods are making clearances as per procedure prescribed in Notification No. dated 26.6.2001 and availing CENVAT Credit benefit of input stage duty. With the latest amendment issued vide Notification No. dated 26.6.2010, it appears that exporters may now not be able to avail this facility. If so, exporters will be deprived of a convenient option available to them to disburden the duty incidence of inputs as well as the service tax on the input services. This would put them in disadvantageous position and would affect the exports also. This issue may be clarified in the interest of exports. It is suggested that a special Drawback rate for exempted category of export products may be introduced so that the input credit on the books can be offset by this higher Drawback Rate.
A. Though, vide Notification No. 24/2010-CE, facility of export under bond for exporters of non-dutiable goods has been disallowed, but they can follow the procedure prescribed in Notification No. 21/2004-CE whereby duty on input stage is rebated, based on scrutiny of input-output ratio, likely wastage, manufacturing process etc. This does not put them in any disadvantageous position.
Further, Drawback scheme can also be availed for exempt goods. In fact all major items of export under the DBK scheme i.e. textile, leather goods/products, handicrafts etc. are exempt/outside the CENVAT chain.
MOT demands by Central Excise Authorities for Services rendered during Office Hours on working days: It has been reported that Central Excise authorities like Vapi, Daman and Baroda are demanding MOT Charges of last 4-5 years of exports for factory stuffing under Central Excise supervision during office hours and on working days only. MOT should be payable only when the services of Central Excise Officers are required for beyond office hours or on Sundays, Saturdays or Public Holidays and where there is no specific posting of officers in shifts by any Office Order. Such demands for MOT appear to be arbitrary and it would increase exporters transaction cost.
Suitable clarification/ instructions may be issued at the earliest with a view to provide relief to the exporters.
A. It was explained that, prescribed MOT charges are being collected as per Regulation 2 (c) and (d) and Regulation 3 of Customs (Fees For Rendering Services By Customs Officers) Regulations, 1998 [Notification No. 69/98-Cus. (NT) dt. 04.09.1998].
As per Section 36 of the Customs Act, 1962 read with the above Regulations, if the services are rendered by a Customs Officer at a place beyond the Customs area, prescribed over-time charges are levied even if the service is rendered during normal working hours and on working days too.
We will bring you more light and wisdom from the meeting in the next few days.