TIOL-DDT 2019 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 2019 </font><br>
08.01.2013 <br>
Tuesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification 67/95-CE; Clearances to SEZ not Eligible for Exemption? Strange Interpretation By CE Officers </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> have been highlighting in these columns the harassment meted out to Indian Industry through frivolous Show Cause Notices and non-application of mind in confirmation of demands. The other day, we received a frenetic phone call from an assessee, seeking a clarification from us as to whether he was eligible for exemption under Notification No. 67/95-CE for intermediate products used in captive consumption for manufacture of final products cleared to SEZ. We replied with an emphatic ‘Yes', but the assessee confronted us with a notice demanding Rs. 3 Cr. of duty issued to a Cement Industry in the zone denying exemption under Notification No. 67/95 -CE for the clinker used in the manufacture of cement cleared to SEZ. We came to know that this is also the view shared by the departmental audit officers of the zone. It may appear strange, but this is how the department sought to interpret the said exemption notification: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">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 duly or chargeable to ‘Nil' rate of duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in the notification, exception is given to those goods, which are cleared: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) to a unit in <strong>Free Trade Zone</strong>, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) to a Hundred Percent Export Oriented Undertaking, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) to a unit in a Electronic Hardware Technology Park, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) to a unit in a Software Technology Park, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) under Notification No. 108/95-CE dt. 28.08.1995, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) by the manufacturer of dutiable and exempted final products after discharging obligation prescribed in Rule 6 of Cenvat Credit Rules, 2004 </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The raw materials used in the manufacture of Cement are Limestone, Bauxite, Gypsum etc. During the course of manufacture of cement, “Clinker” emerges as an intermediate product, which is an excisable product. Clinker is either consumed captively in the manufacture of final product “Cement” or cleared on payment of duty. Clinker merits classification under CHSH 23231000 of the schedule to the Central Excise Tariff Act 1985. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the course of audit, it was observed that M/s xxxxx have cleared certain quantities of Cement at “Nil” rate of duty to <strong>SEZ</strong> 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. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">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 nether ‘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. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The word <strong>FTZ</strong> 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. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">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, and we have a recent CBEC circular to initiate coercive measures to realize dues, without even giving one opportunity for the assessee to be heard by the appellate forums. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We do not know if the field officers in other parts of the country also hold similar view, with regard to SEZ clearances;we hope CBEC would take stock of these frivolous demand notices issued and save industry from this kind of harassment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In our Budget Run-up, last year, former Commissioner, Somesh Arora had suggested for <em>removal of reference to (Free Trade Zone) in all old but existing Customs and Excise Notification and mention of ‘Special Economic Zone' through appropriate amendment.</em> But ‘free trade zone' has a free run in the statutes. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2009/2009-TIOL-53-CESTAT-MUM.htm" target="_blank">2009-TIOL-53-CESTAT-MUM </a></font></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Safeguard Duty on Hot Rolled Stainless Steel </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has imposed safeguard duty on Hot Rolled Flat Products of Stainless Steel - 304 grade (upto a maximum width of 1605 mm), and encompassing all austenitic grades having minimum Nickel (Ni) content of 6 percent., compulsorily containing Chromium with or without the presence of other alloying elements like Molybdenum, Titanium etc., when imported into India, from the People's Republic of China, at the rate of 20 percent ad-valorem. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The safeguard duty imposed under this notification shall be effective for a period of 200 days unless revoked, superseded or amended earlier. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=338&filename=notification/custom/2013/ctariffsg13_001.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 1/2013-Cus.,(SG), Dated: January 04, 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">External Commercial Borrowings (ECB) Policy - Non-Banking Financial Company - Infrastructure Finance Companies (NBFC-IFCs) </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NON</strong>-Banking Finance Companies (NBFCs) categorized as Infrastructure Finance Companies (IFCs) by the Reserve Bank and complying with the norms prescribed are permitted to avail of ECBs, including the outstanding ECBs, up to 50 per cent of their owned funds under the automatic route. ECBs by IFCs above 50 per cent of their owned funds are being considered under the approval route. The permitted end-use should be for on-lending to the infrastructure sector, as defined under the ECB policy. IFCs should also hedge their currency risk in full. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a review, it has been decided to enhance the ECB limit for NBFC-IFCs under the automatic route from 50% of their owned funds to 75% of their owned funds, including the outstanding ECBs. NBFC-IFCs desirous of availing ECBs beyond 75% of their owned funds would require the approval of the Reserve Bank and will, therefore, be considered under the approval route. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has also been decided to reduce the hedging requirement for currency risk from 100 per cent of their exposure to 75 per cent of their exposure. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir069.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI A.P. (DIR Series) Circular No. 69 Dated: January 07, 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tale of two Customs Commissioners adjudicating a single SCN </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GETTING </strong>a DRI case adjudicated is not an easy job and the CBEC has to assign it by way of a notification or an order. Here is a classic case of the left hand not knowing what the right hand does. In the present case, two adjudicating authorities were appointed a year apart to decide the “same case” and surprisingly both the Commissioners decided it. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Read further...</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In exercise of the powers conferred by sub-section (1) of section 4 of the Customs Act, 1962 (52 of 1962), the Board appointed the Commissioner of Customs (Adjudication), Mumbai; Commissioner of Customs (Adjudication), Chennai; Commissioner of Customs (Adjudication), Delhi; and Commissioner of Customs (Adjudication), Kolkata, as Commissioners of Customs, each having jurisdiction over the whole of India, for the purposes of adjudicating the cases as assigned to them by the Board. This was notification No. 37/2003-Cus(NT) dated 3rd June, 2003. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The case covered by Show Cause Notice No. DRI/SRU/INV-13/2003 dated 29/11/2004, was assigned by the CBEC for adjudication to Shri K. Shyamsundar, Commissioner of Customs (Adjudication), Mumbai. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More than two years later, in exercise of the powers conferred by sub-section (1) of section 4 of the Customs Act, 1962, the CBEC appointed the officers specified in column (5) of the Table below to act in respect of the matters specified in the corresponding entries in columns (2) and (3) of the said Table as officers specified in corresponding entry in column (4) of the said Table for the purpose of adjudication and investigation of such matters. This was vide Notification 112/2005-Cus (NT) dated 28.12.2005. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TABLE </strong></font></p>
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<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sl. No. </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Show Cause Notice </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Name of the party </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Designation of Officer </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Designation of Officer </font></strong></p></td>
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<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(5) </font></strong></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DRI/SRU/INV-13/2003, dated 29th November, 2004 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">M/s. Tirupati Exports </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Commissioner of Customs (Export Promotion), New Custom House, Mumbai; <br>
(ii) Commissioner of Customs (Import), Jawahar Customs House, Nhava Sheva; </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner of Customs (Import), Jawahar Customs House, NhavaSheva. </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a></a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Noticed something strange - yes, <font color="#FF0000">the very case that was assigned by the Board to the Commissioner of Customs (Adjudication) was assigned to the Commissioner of Customs (Import), JNCH, Nhava Sheva.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But strangely enough, both the adjudicating authorities were operating in tandem inasmuch as whereas the Commissioner of Customs (Adjudication), Mumbai heard the appellants and passed an order-in-original on 31/12/2007, the other adjudicating authority without even issuing any notice for personal hearing decided the very same SCN vide order-in-original dated 18/03/2008. This information, the noticees & who are the present appellants before the CESTAT, obtained by employing the RTI Act, 2005.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the one hand, SCNs lie unattended everywhere in the department and here is a classic case of two different adjudicating authorities deciding the very same SCN. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants are before the CESTAT against this order dated 18/03/2008 and submitted that the CC(Imports), Nhava Sheva had no jurisdiction to pass the order as the SCN had already been adjudicated by Commissioner of Customs (Adjudication), Mumbai on 31/12/2007 and hence the impugned SCN had attained finality; that there was no adjudication remaining to be done. The result of the RTI application was also brought to the notice of the Bench and it was submitted that the matter be remanded for fresh adjudication. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On this occasion, the Revenue representative was armed with more “information”. He submitted that the CESTAT had vide its order dated 04/09/2009 dealt with the multiple proceedings and arrived at the conclusion that the Commissioner of Customs (Adjudication), Mumbai had no jurisdiction to adjudicate the matter and had accordingly set aside the order dated 31/12/2007. And in this scheme of things, the present adjudicating authority viz. Commissioner of Customs (Imports), Nhava Sheva had attained jurisdiction to adjudicate and had rightly adjudicated the case and hence there is no need to set aside the order dated 18/03/2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench observed - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><font color="#663399">“5. On a careful consideration of the rival submissions, first we find that, in this case, the principles of natural justice has been violated as the information sought by the appellant under RTI Act shows that there is no record of notice for personal hearing sent to the appellants. Further, we do agree with the argument advanced by the learned counsel that the show cause notice merged with the order of the Commissioner of Customs (Adjudication), Mumbai dated 31/12/2007 and attained finality. We further find that the order passed by Commissioner of Customs (Adjudication), Mumbai has been set aside by this Tribunal on 04/09/2009. Therefore, Commissioner of Customs (Imports), Nhava Sheva has the jurisdiction to adjudicate the show cause notice. </font></em></font></p>
<p align="justify"><font color="#663399"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. In these circumstances, we set aside the impugned order and remand the matter back to the Commissioner of Customs (Imports), Nhava Sheva to adjudicate afresh after giving a reasonable opportunity to the appellants to present their case, keeping all the issues open.” </font></em></font></p>
</blockquote>
<p align="justify"><em><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Case by the premier investigating agency DRI - Eight years and still counting... </font></strong></em></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(See </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=28&filename=legal/cestat/2013/2013-TIOL-50-CESTAT-MUM.htm" target="_blank">2013-TIOL-50-CESTAT-MUM</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">)</font></strong></p>
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<td bgcolor="#F0F0F0"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"><font color="#0000CC" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>The smuggler...is a person who, though no doubt highly blamable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen had not the laws of his country made that a crime which nature never meant to be so. </em></strong></font></font></p>
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<td bgcolor="#FFFFFF"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFFFF" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An inquiry in to the Nature and Causes of the Wealth of Nations – Adam Smith </font></font></p> </td>
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<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> - Wednesday's cases</font></strong></font></strong></font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Applicant, job worker, receiving compensation on termination of contract with principal - since applicant were paying CE duty at same price at which principal was selling goods, it cannot be said that ‘termination proceeds' is an additional consideration - Pre-deposit waived and Stay granted: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant is undertaking job-work of M/s Dystar India Pvt. Ltd. So as not to have any problems on the valuation front, the applicant was paying duty at the same price at which M/s Dystar India was selling the goods. But if you are destined to receive a demand, you will receive one. Upon termination of the contract, the applicant received an amount of Rs.2.20 Crores from M/s Dystar India. Revenue was of the opinion that this termination proceeds is a new modus operandi of undervaluing the goods - So, a demand was raised alleging that this amount is an "additional consideration" and the same has to be included in the assessable value of the goods cleared. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether while computing exemption u/s 10B, loss arising from non-eligible unit can be adjusted against profits arising on eligible unit - NO: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong>, a partnership firm, is engaged in manufacture and export of ready-made garments. Assessee had three units. Unit-I was not entitled to any exemption. Unit II and Unit III were 100% EOU eligible for exemption u/s 10B. Assessee set off losses of eligible units (Unit-II and III) against the profits of Unit-I. AO held that income of eligible units that were entitled to exemption u/s 10-B would not form part of the total income under Chapter-III and therefore they would not enter the computation of total income at all and therefore the set off of income of non-eligible unit against the loss of the eligible unit could not be allowed. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Club or Association Service - Applicant charging one-time registration fee and also recovering annual subscriptions from members for providing services of general guidance on business matters and representation of members problems at local/state and Central government level etc. - Since they themselves are paying service tax on club or association service w.e.f. 1.4.2009 there is no prima facie case in their favour - Pre-deposit ordered of Rs.5 lakhs: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant has relied on the decision of the Jharkhand High Court in the case of Ranchi Club Ltd. , The High Court has held that service tax is not liable on the members of the club as the club is giving service to its member and club is formed on the principle of mutuality and, therefore, any transaction by the club with its member is not a transaction between two parties. In a Member's Club when club is disbanded, the members of the club have rights on the assets of the club. The applicant has not been able to give any evidence to prove that applicant is a Member's club and there is mutuality between club and the members. Therefore, in the absence of any such evidence the ratio of the Ranchi Club Ltd. case cannot be applied in the present case. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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