Indirect tax Digest – May 9, 2016

Indirect tax Digest – May 9, 2016

“Sanskrit word ‘Akshaya’ means one that never diminishes. May this day of Akshaya Tritiya bring you good luck and success which never diminishes.”

·           If the services provided outside India and the consideration is actually received in the convertible foreign exchange, benefit of export of services cannot be denied even if the contract contains the amount of consideration in Indian currency.

Commissioner of Service Tax Vs. Balaji Telefilms Ltd. [(2016) 68 taxmann.com 301 (Mumbai – CESTAT)]

·           Claim of refund cannot be denied by applying the principle of unjust enrichment just because the amount of tax has been shown as written off in the Profit & Loss account as expenditure unless it is proved by the Department that the burden of tax has been passed on to others.

Balaji Pressure Vessels Ltd. Vs. Commissioner of Central Excise [(2016) 68 taxmann.com 315 (Hyderabad-CESTAT )]

·           SEZ turnover should also be included in the export turnover in the numerator and also, in the total turnover in the denominator, while computing the refund of unutilized Cenvat credit on Inputs and Input Services pertaining to export of services.

Cognizant Technology Solutions Vs. Commissioner of Central Excise & Service Tax (LTU), Chennai [(2016) 68 taxmann.com 302 (Chennai – CESTAT)]

·           If the assessee pays the amount of tax along with interest before issuance of show cause notice and the matter does not involve fraud, suppression etc., then the Department cannot issue show cause notice to the assessee in terms of Section 73(3) of the Finance Act, 1994.

K.R.S. Enterprises (P.) Ltd. Vs. Commissioner of Service Tax, Bangalore [(2016) 68 taxmann.com 279 (Bangalore – CESTAT)]

·           If the Partnership firm has been penalised by the Department, then partners of the firm cannot be penalised by imposing separate penalty on them.

Sharp Engineers Vs. Commissioner of Central Excise, Ahmedabad [(2016) 68 taxmann.com 362 (Ahmedabad – CESTAT)]

·           When the assessee is showing the availment of Cenvat credit in the statutory records like in register RG23A (Part II), TR-6 challan and ER-1 return, then it cannot be alleged by the Department that the assessee has suppressed facts from the Department, hence the extended period for issuance of show cause notice cannot be invoked.

R.R. Paints (P.) Ltd. Vs. Commissioner of Central Excise, Mumbai-III [(2016) 68 taxmann.com 361 (Mumbai – CESTAT)]

·            When the assessee has reversed the Cenvat credit after removal of exempted goods and comply with the conditions given in the Rule 6(3)(ii), read with Rule 6(3A) of the Cenvat Credit Rule, 2004 (“the Credit Rules”), then, the Department cannot insist the assessee to follow the particular option of Rule 6 given in the Credit Rules for calculating reversal of Cenvat credit and further, demand under Rule 6(3) of the Credit Rules for an amount equal to a percentage of exempted goods.

Mahindra & Mahindra Ltd. Vs. Commissioner of Central Excise, Jaipur-I [(2016) 68 taxmann.com 252 (New Delhi – CESTAT)]

·           The Hon’ble Punjab & Haryana High Court set aside the ex-parte order passed by the Tribunal in favour of revenue, since the assessee did not receive the notice for hearing, further the condonation for delay in filing application for recalling the ex-parte order is also allowed.

Mittal Construction Co. Vs. Commissioner of Central Excise, Ludhiana [(2016) 68 taxmann.com 251 (Punjab & Haryana)]

·           Amendments made in Notification No. 1/2011-CE dated March 1, 2011 which prescribes the effective rate of duty at the rate of 2% without Cenvat credit and Notification No. 2/2011–CEdated March 1, 2011 which gives option to pay at 6% on certain goods with Cenvat credit:

Specific entries relating to Wireless data modem cards with PCMCIA or USB or PCI has been omitted from the list of specified goods under both the Notifications.

Notification No.20/2016 – Central Excise dated May 5, 2016

Notification No.21/2016 – Central Excise dated May 5, 2016

·            Amendment made in Notification No. 12/2012-CE dated March 17, 2012 which prescribes the effective rate of Excise duty on goods falling under Chapter 1 to 96:-

Amendment made in the existing entries and new entries inserted relating to goods like Populated printed circuit board of- Lithium-ion battery other than battery for mobile handset, Broadband Modem, Router, Set-top box for gaining access to internet, Digital Video Recorder (DVR)/Network Video Recorder, (NVR), CCTV Camera/IP Camera etc.

Notification No.22/2016 – Central Excise dated May 5, 2016

·            Amendments made in below mentioned Export/ Rebate  Notifications by including the reference of Infrastructure Cess, as levied w.e.f March 1, 2016, under the meaning of the term ‘Duty’ prescribed therein:

a)        Notification No.42/2001-CE(NT) dated June 26, 2001

b)       Notification No.43/2001-CE(NT) dated June 26, 2001

c)        Notification No.19/2004-CE(NT) dated September 6, 2004

d)        Notification No. 21/2004-CE(NT) dated September 6, 2004

Notification No. 26/2016 – Central Excise (N.T) dated May 5, 2016

·            “Routers” with an abatement rate of 20% on retail sale price specified by amendment made in the Notification No. 49/2008-CE (N.T.) dated December 24, 2008.

Notification No. 25/2016 – Central Excise (N.T) dated May 5, 2016

·           Even if assessee paid the amount under protest, but not appealed against the adjudication of demand by the assessing authority regarding the said amount, then demand will continue to be in force and the assessee cannot claim refund of the said amount.

a)        There is immediate unconditional release of goods in favour of assessee from whom goods have been seized and after such release, it is still open to the Department to proceed under Section 124 of the Customs Act and complete the proceeding for which there is no specified time limit;

b)        Assessee can avail provisional release of goods under Section 110A of the Customs Act and the Department may issue notice under Section 110 of the Act.

a)      Section 92 (Entry of Coastal Goods);

b)      Section 93 (Custom goods not to be loaded until bill relating thereto is passed, etc.);

c)      Section 94 (Clearance of coastal goods at destination);

d)      Section 95 (Master of a coastal vessel to carry an advice book)etc.

Amending the existing entries and also by inserting  new entries relating to goods like Preform of silica for use in the manufacture of telecommunication grade optical fibres or optical fibre cables, Charger or adapter, battery, wired headsets for use in manufacture of mobile handsets including cellular phones etc.

Notification No. 31/2016-Customs (N.T.) dated May 5, 2016

Notification No. 32/2016-Customs (N.T.) dated May 5, 2016

·           Amendment made in Para 3.20(b) of Foreign Trade Policy 2015-2020, relating to criteria for recognition as Status Holder (except Gems and Jewellery sectors) with effect from April 1, 2016. Earlier the applicant had to achieve export performance during current and previous two financial years, which is now increased to current and previous three financial years.

·           Form ANF 3C (Application for on line filing of grant of Status Certificate of Appendices and Aayat Niryat Form of FTP 2015-20) is notified to include the current and previous three years to give effect to the above amendment.

Public Notice No. 05/2015-2020 dated May 3, 2016

Further Appendix 3E shall not be applicable for EPCG scheme, which relates to list of services where payment has been received in Indian rupees, treated as receipt in Deemed Foreign Exchange as per guidelines of Reserve Bank of India.

Earlier these 2787 lines required submission of proof of landing as reward was not available for all markets, hence after making addition in the said table, Landing Certificate shall not be required under MEIS on these markets also.

Public Notice No. 08/2015-2020 dated May 6, 2016

·           Changes in Cenvat Credit Rules, 2004:

a)        Rule 6(3)(i) of the Credit Rules has been amended to restrict the reversal of 6% on exempted goods and 7% on exempted services to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period.

b)        In Rule 7B(1) of the Credit Rules, for the words and figures “invoices, issued in terms of the provisions of the Central Excise Rules, 2002,” the words and figure “documents specified under Rule 9,” has been substituted.

c)        The Cenvat credit of Service tax paid in a financial year, on the one time charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Government, Local authority, or any other person, shall be evenly spread over a period of three years, which was earlier over the period of right to use. Further, in case of further assignment of such rights to another person against consideration, then the balanced Cenvat credit shall be allowed in the same financial year maximum upto the Service tax payable on the consideration charged by him for further assignment. [Notification no. 24/2016-C.E.(N.T.) dated April 13, 2016.]

·           Additional Commissioner of Delhi VAT has no power to reject the application submitted by the assessee to seek the immunity under Amnesty Scheme (“the Scheme”), since only the Commissioner is authorised to reject the application as per clause 8 of the Scheme, even though the Additional commissioner is authorised to act on behalf of Commissioner under DVAT Act, 2004 (“the DVAT Act”) and DVAT Rules, 2005 (“the DVAT Rules”).

Further the registered dealers who intend to shift to new composite scheme are not eligible for claiming input tax credit on closing stock held by them on March 31, 2016.

Further, the dealers filling returns through digital signature need not file hard copy of return/ Form DVAT-56 (Return Verification Form).

·           RSS does not want government to pass GST bill: Congress

·           GST important reform that could further strengthen India’s economy: 2016 ESCAP survey

·           Kerala will gain from GST, says official

·           Venkaiah Naidu seeks support for passage of Bills

·           More Collateral Damage for GST Bill, Will Miss another Deadline

·           GST, land reforms key to boost India’s economic growth: IMF

·           GST to help reorient states towards export promotion: Parliamentary panel

·           Chopper deal debate: Bankruptcy, GST bills immediate casualty in Rajya Sabha

·           As BJP, Congress Wage War on Augusta, Arun Jaitley Talks of Peace On GST

Amended rule 7 of Point of Taxation Rules, 2011 (“the POTR”) provide for Point of Taxation where there is change in the liability or extent of liability of Service tax to be paid by Service Receiver under Reverse Charge because of changes in abatement rate, composition rate, change in rate of Service tax, applicability of any new levy like Krishi Kalyan Cess w.e.f June 1, 2016 etc.

 For detailed discussion please watch at: https://www.youtube.com/watch?v=NU5_2iAMy3g

·           ‘Any services’ provided by Government or Local authority to a Business Entity chargeable to ST under Reverse Charge w.e.f. April 1, 2016

The words ‘support services’ have been substituted by the words ‘any service’ effective from April 1, 2016, thereby, the liability to pay Service tax on any service provided by Government or a Local Authority to Business Entities is on the service recipient under Reverse Charge. Now, the question arises whether the Service tax applicable on every service provided by the Government like Visa, Driving licence, ROC fees, Death Certificate etc.

For detailed discussion please watch at: https://www.youtube.com/watch?v=AB0LpVkuoUY

·           Rate of interest on delayed payment & increase in period of limitation for non-fraud cases under ST, Excise & Customs

Rate of interest has been changed on the delayed payment, now the question arises whether these changes applicable on the liability relating to past period also. Also, there is change in period of limitation for non-fraud cases under Service Tax, Excise and Customs, now whether the changed limitation period could be applied by the Department while issuing the Show Cause Notice on cases relating to past period.

For detailed discussion please watch at: https://www.youtube.com/watch?v=pWBMo4v54cc

·           Changes in Cenvat Credit Rules, 2004 vide Union Budget 2016

Many important amendments have been made in the Credit Rules like the extent/ availment/ utilization of Cenvat credit and reversal required in terms of Rule 6 of the Credit Rules. Further, the ‘exempted services’ as defined in Rule 2(e) of the Credit Rules now shall include an activity, which is not a ‘service’ as defined in Section 65B(44) of the Finance Act, 1994, which again going to opening up a Pandora box for litigation.

For detailed discussion please watch at: https://www.youtube.com/watch?v=8AfMeePYm-M

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