TIOL-DDT 478 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<html>
<head>
<meta http-equiv=Content-Type content="text/html; charset=windows-1252">
<title>Taxindiaonline's DDT 402</title>
</head>
<body>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font><font size="2">
<p><font face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
478</font><br>
27 10 2006<br>
Friday</b></font></p>
</font>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DEPB
vs Cenvat – what about customs duty? Is drawback available?</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/guest/kumar_vijay_eic.jpg" width="60" height="75" border="1" align="left">The
controversy about CVD paid through debit in scrips like DEPB seems to be almost
settled with the Board clarifying that cenvat credit should be allowed even
if the CVD is paid through debit in the certificate. But now a new controversy
seems to have emerged. CVD can be claimed as cenvat credit or drawback but what
about customs duty? Well, this is the original controversy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has clarified that CVD paid in DEPBscrips can be claimed as drawback but there
is no clarification with regard to customs duty. In fact there is a clarification
that it should not be allowed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By
Circular No. 3/99-Customs, dated 3-2-1999, Board clarified, </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">To
dispel all doubts in the field it needs to be reiterated that Brand rate of
drawback is admissible only against cash payment of duties, as is already
laid down under proviso (ii) of Rule 3 of the Customs & Central Excise
Duties Drawback Rules, 1995. A debit of duties payable under DEPB Scheme/Pass
Book Scheme on import of goods is in effect availment of exemption of duty
under the Customs Act. Being operated through an Exemption Notification, such
debit does not constitute payment of duties. Therefore no drawback is admissible
against debit of duties made in a DEPB Book or in a Pass Book issued under
the erstwhile Pass Book Scheme.</span></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However
by<strong> </strong>Circular No. 41/2005-Cus., dated 28-10-2005, CBEC had modified
the 1999 circular and clarified that </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
matter has been examined by the Board. Hitherto, the additional customs duty
paid in cash only was adjusted as CENVAT credit or duty drawback while the
same paid through debit under DEPB was not allowed as duty drawback. In the
Foreign Trade Policy 2004-2009, which came into force w.e.f. 1-9-2004, it
has been provided under Paragraph 4.3.5 that the additional customs duty/excise
duty paid in cash or through debit under DEPB shall be adjusted as CENVAT
credit or Duty Drawback as per the rules framed by the Department of Revenue.
Taking note of this change, it has been decided that the additional customs
duty paid through debit under DEPB shall also be allowed as brand rate of
duty drawback.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly,
the instructions contained in Circular No. 3/99-Cus., dated 3-2-1999 stand
modified.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
is being interpreted in the field to mean that while Board has clarified that
CVD can be claimed as drawback, there is no such clarification about basic customs
duty, and so no drawback can be allowed of basic customs duty debited in the
DEPBscrips.<strong> DDT</strong> spoke to several officers in different Custom
Houses and they were not aware of the Board circulars but expressed the opinion
that there is absolutely no doubt that drawback of basic customs duty can be
allowed. But we are informed that some commissioners have issued notices proposing
to reject drawback claims of customs duty debited in DEPB certificates.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the Board
clarify?</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pan
masala – lot of masala?</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A netizen just
sent me this by mail.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S.No.
20 of the Notification No. 2/06 NT specifies that pan masala and pan masala
containing tobacco classifiable under CHSH No. 2106 90 20 and 2403 of CETA 1985
are assessable under Section 4A of Central Excise Act 1944 and the abatement
given for arriving at the assessable value based on the RSP is 50%. Similarly
S.No. 28 of this Notification notifies all goods falling under 2403 99 10, 2403
99 20 and 2403 99 30 as assessable under Section 4A of CEA ’44 with an abatement
of 50% of the RSP. This Notification No. 2/06 CE (NT) is issued by the Government
of India in terms of Section 4A (1) of CEA ’44.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
Further Notification No. 3/06 CE (NT) dated 01.03.2006 superseding Notification
No. 16/98 CE (NT) dated 02.06.1998, issued under Section 3(2) of the CEA ’44
fixes tariff value for goods falling under CHSH No. 2106 90 20 or 2403 of CETA
’85 (description annexed below the main text of the notification refers to pan
masala in retail packages) based on net quantity of the goods in the retail
packs and if RSP is declared then the tariff value is 50% of the RSP. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
It may be noted that the goods falling under CHSH No. 2106 90 20 and 2403 of
the CETA ’85 are liable for assessment under two different sections of the CEA
’44. However the basis of arriving at the value is more or less through a single
source viz., RSP i.e. retail sale price. However Section 4A (2) of CEA ’44 states
that “where the goods specified under sub-section (1) are excisable goods and
are chargeable to duty of excise with reference to value, then, notwithstanding
anything contained in Section 4, such value shall be deemed to be the retail
sale price declared on such goods less such amount of abatement, if any, from
such retail sale price as the Central Government may allow by notification in
the official gazette”. Section 3 (2) of CEA ’44 states that “the Central Government
may, by notification in the official gazette, fix, for the purpose of levying
the said duties, tariff values of any articles enumerated, either specifically
or under general headings, in the First Schedule and Second Schedule to the
CETA 1985 as chargeable with duty advalorem and may alter any tariff values
for the time being in force”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
It is clear that the non-obstante clause of Section 4A as reproduced above refers
only to Section 4 of CEA ‘44 but not Section 3(2) there under thereby putting
the valuation of the goods classifiable under CHSH No. 2106 90 20 under jeopardy.
Moreover the Central Government is empowered to fix tariff values for certain
categories of articles under CETA ’85. By virtue of this it has fixed tariff
values for goods classifiable under 2106 90 20 and 2403 (pan masala with or
without tobacco) and the basis for fixing the tariff value is incidentally the
RSP printed on such packs. When the provisions of Section 4A (2) and Section
3 (2) of CEA ’44 are read together it can be inferred that the tariff value
fixed under Section 3 (2) of CEA ’44 (i.e. 50% of RSP) shall be deemed to be
the retail sale price for the purpose of Section 4A (2) and the abatement given
under the notification for that product shall be on this RSP. To put this in
simple terms with an illustration if a 10gm pack of pan masala has an RSP of
Rs. 10/- then its tariff value is Rs. 5/- [in terms of Section 3 (2) read with
Notification No. 3/06 CE (NT)] and for the purpose of Section 4A assessment
of this product this Rs. 5/- shall be deemed to be the RSP. Therefore by virtue
of Section 3(2) read with Section 4A (2) read with Notification Nos. 2/06 and
3/06 CE (NT) as amended, for the above illustration the assessable value for
the purpose of paying excise duty shall be Rs. 2.50ps.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
But is this the real intention of the Government of India is a question which
only the Babus who have drafted these legislations and subordinates can answer.
For the moment the pan masala industry can rejoice at such a huge bonanza doled
out by the Ministry of Finance. Is CAG watching these columns of this portal?
After all the Hon’ble President of India while inaugurating the new CAG office
suggested them to go for online auditing. But before that let them get hooked
to some interesting online information.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Resin
bonded bamboomat board exempted</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Resin
bonded bamboo mat board<strong>,</strong> with or without veneer in between
is exempted. Notification No. 43/2006 is suitably amended.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/etariff06_043.htm">NOTIFICATION
No.43/2006-Central Excise, Dated: October 25, 2006</a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Muscles
of iron and nerves of steel for policemen</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“The
nation will watch you with great hopes and great expectations. Swami Vivekananda
once said he looked forward to the day when our young men and women would be
possessed of “muscles of iron and nerves of steel and a mind made of such stuff
of which thunder bolts are made”. I hope the Academy has been able to impart
this quality in each one of you.<u1:p></u1:p></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Go
boldly into your careers. Work for justice through just means. Defeat may sometimes
test you; it need not stop you. <b><font color="#663399">The greatest mistake
lies in giving up</font>.</b> Wishes alone will not bring success, but planning,
persistence and burning desire will. Success is an attitude and I am very confident
that each one of you will make it a personal enterprise to realize the dreams
of the founding fathers of our Republic.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">-
<i>Dr. Manmohan Singh addressing the Probationers of SardarVallabhbhai Patel
National Police Academy in Hyderabad yesterday,</i></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Monday with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice week end. </font></p>
<p align="justify"><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">vijaywrite@taxindiaonline.com</a></span></font></p>
</body>
</html>