Domestic Clearances under SFIS scheme - Galore of confusion
WE received this from a Netizen:
The Foreign Trade Policy was amended on 18th April, 2013 in order to permit clearances of domestically manufactured goods against the debit in the duty credit scrip like Served from India Scheme (SFIS) etc.
In order to encourage export of services, especially in the tourism sector, the government has allowed use of SFIS scrip for import or domestic procurement of motor cars, SUVs, all purpose vehicles for hotel, travel agents, tour operators, companies owning/operating golf resorts for tourist purposes. However, users will be required to submit proof of registration for tourism purposes within 6 months and these vehicles will not be allowed to be imported under EPCG scheme. The vehicles procured under this scheme should not be sold for a period of 3 years.
CBEC was kind enough to issue an amendment by Notification No.15/2013-CE dt.18.04.2013 to the notification No.34/2006-CE dt.14.06.2006 which details the procedure for exemption from Central Excise duty when manufactured goods are cleared against the SFIS scrip, to incorporate these changes made in the FTP by way of annual supplement.
However no attempt was made to effect parallel changes in the monthly return in ER-1 format to reflect these clearances by the manufacturers. The situation continues even today and assesses have resorted to declaring such clearances under the remarks column in order to get over the draconian provision of ‘suppression of facts'. The ACES help desk is also clueless about it as it is the experience of this netizen when contacted the help desk that he was directed to contact his jurisdictional range officer.
Once the clearances were made under the above said scheme, the range officers have issued demand notices for payment of 6% on the value of clearances treating these clearances as exempted clearances in the hands of the manufacturers. The reason being cited by the jurisdictional authorities is that the Circular No.973/07/2013-CX dt.04.09.2013 does not include the notification No.34/2006-CE dt.14.06.2006 as amended. When the duty is fully collected by the Government in the form of debit in the duty credit scrip of the end user and the balance from the manufacturer, there is no way the clearance can be treated as exempted clearances. However since there is a possibility for misunderstanding at the field level, the trade made a representation to the Board to issue the necessary clarification. Accordingly, this Circular is issued in response to trade representation exempting the reversal under Rule 6(3) of CCR, 2004 for all the schemes notified under Chapter 3 of the Foreign Trade Policy 2009-14 except SFIS. Is this omission intentional or accidental is not going to be interpreted by the jurisdictional authorities and hence it is the turn of the hapless assessee to fight his case all the way to Supreme Court to get a solution. Can the CBEC come out with a clarification to settle the issue or do they want to watch the turn of events at all legal forums to issue clarification once the dust is settled down. Is it not time for CBEC to emulate the good practice of adding the intention behind the notification/circular/instruction in the form of foot note as is being practiced by RBI or DGFT?