TaxTMI 
TaxTMI 
Minutes of Tariff Conference held on 28th and 29th October, 2015
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith trade would be necessary by the Board. The entire minutes has been circulated to the departmental officers. Annexure B of the minutes constitutes substantive decisions taken and accordingly it has been decided to bring the same to the notice of trade as well. 3. This Annexure containing technical issues and decisions taken by the Conference is expected to be beneficial to the trade as well as departmental officers. Please find enclosed Annexure B of the Minutes of the Tariff Conference consisting of 53 issues. The issues covered have been classified in following groups for ease of reference. Index of Annexure B Sl. No. Heading Point Numbers of Annexure B 1 Assessment and Valuation B1 to B4 2 Classification B5 to B9 3 Scope of Exemption B10 to B17 4 Cenvat Credit B17 to B32 5 Central Excise Rules and Procedures B33 to B41 6 Implementation and other related issues B42 to B52 7 Audit Manual B53 4. The clarifications as brought out in the minutes of the tariff conference are expected to bring clarity of understanding and uniformity in practice of assessment. Difficulty experienced, if any, in implement....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Exemption-Duty Rate applicable to 'Mobile Handsets' in terms of Notification No. 12/2012-CE Dated 17.03.2012 Scope of Exemption-Parts of wind-mill Scope of Exemption-Manufacture under Central Excise Clearances to Nepal with reference to Exemption Notification no 8/2003-CE CENVAT Credit-Amendment to Notification No.67/95-CE dated 16.03.1995 [Exemption for captive consumption] Meerut 15 Vadodara 15-16 Vishakhapatnam 16-17 Chennai 17-18 B19 CENVAT Credit-Reversal of Credit on Common Input Services Chennai 18-20 B20 CENVAT Credit- Rule9(1)(a) of cenvat Credit rule, 2004 Chennai 20-21 B21 Hyderabad 21 B22 B23 B24 B25 CENVAT Credit-Balance of Education cess and secondary and Higher Education cess lying in the Cenvat Credit account Refund of Cenvat Credit under Rule 5 of CCR, 2004, in respect of raw material used in respect of goods supplied duty free against ICB to mega power/ultra mega power projects CENVAT Credit Applicability of Section 11D of Central Excise Act, 1944 and amendment thereof where the amount of 6% is charged from the buyer but not deposite....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Central Excise Rules, 2002 Central Excise Rules & Procedures -e-payment of Excise Duty against Incorrect Assessee Code Rectification Regarding Bhopal 34-36 Chennai, Coimbatore Coimbatore 36 36-37 B40 Central Excise Rules& Procedures -Penalty for default under Rule 8(3A) of Central Excise Rules, 2002 Kolkata 37-38 B41 Central Excise Rules & Procedures -No penalty for non-filing of NIL return Vishakhapatnam 38 B42 Lucknow 38-39 Implementation & Other Related Issues- Non availability of any expert facility for determining the speed of FFS machine under Compounded Levy Scheme B43 B44 Implementation & Other Related Issues- Mismatch in UQC with regards to Matches Implementation & Other Related Issues- Matches - Inverted Duty Structure Chennai 39 Chennai 39-40 B45 B46 Implementation & Other Related Issues- Redrafting of CBEC's Supplementary Instructions Implementation & Other Related Issues-Section 35A of Central Excise Act-Monetary limit for filing appeal before Commissioner (Appeals) Chennai 40 Chennai 40-41 B47 B48 B49 B50 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k or cause or permit to be pre-packed any commodity for sale, distribution or delivery unless the package in which the commodity is pre-packed bears thereon or on a label securely affixed thereto, such declarations as are required to be made under these rules". However, explanation to Rule 4 of Legal Metrology (Packaged Commodities) Rules, 2011 states that the existence of packages without the declaration of the retail sale price in the manufacturer's premises shall not be construed as violation of these rules and it shall be ensured that all the packages leaving the premises of manufacturer for their destination shall have declaration of retail sale price on them. Discussion & Decision It was brought to the notice of the conference that the issue had been agitated before the appellate forum by some of the Commissionerates. After discussion conference concluded that depot is a place of removal of the manufacturer under section 4(3)(c)(iii) of the Central Excise Act, 1944 from where cement is sold to the institutional/industrial buyers who are not covered under Rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011. It was also not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anufacturer collects and retains a percentage of sales tax amount as subsidy. Zone was of the view that the as a percentage of tax (max.55%) collected from the customer is retained by the manufacturer, it shall be includable in the transaction value as per the provisions ofsection 4 of the Central Excise Act, 1944. Discussion & Decision Board's circulars/instructions were discussed by the conference. Instruction issued videF.No. 6/8/2014-CX.1 dated 17.09.2014 wasdiscussed. The said instruction was issued consequent upon the judgment of Hon'ble Supreme Court in the case of M/s Super Synotex India Limited, which clarified that Sales tax, collected from the customers but not paid to the Government under Sales tax incentive scheme, has the character of the consideration paid for transfer of title of goods from the manufacturer to the third party. Therefore, the same was required to be included in the assessable value. Circular no. 983/7/2014-CX dated 10.07.2014 was discussed which clarifies that fertilizer subsidy paid by the Government to a manufacturer as a result of public policy is not includible in the assessable value. It was noted that s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the transaction value under Section 4 instead of under Section 4A of said Act (MRP based assessment). The sponsoring zone was of the view that the said products are liable for assessment under Section 4A (MRP based assessment) in view of Serial no. 40 of notification no. 49/2008 (N.T) dated 24.12.2008 which prescribes abetment for assessment under section 4A read with the third schedule of the CEA,44. Discussion & Decision The conference noted that for assessment of any commodity under Section 4A, one of the conditions to be satisfied is that Central Government should have specified it in a notification issued under Section 4A. [para 2 of Jayanti Food Processing (P) Ltd, 2007 (215) ELT 327 refers]. In the present case, goods under discussion are covered in the third schedule of the 4 Central Excise Tariff Act, 1985 but are not covered in the notification no. 49/2008 (N.T) dated 24.12.2008 issued under Section 4A. The scope of entry in the third schedule appeared to be larger than that of the entry in the notification and therefore assessment under Section 4A may not be possible for items not covered under the notification no. 49/2008 (N....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... governed by the notification as they exist, they should be decided on the basis of the formula prescribed in the notification. UT à®® B.5 Ranchi Zone - Classification - Classification of Silica Ramming Mass under Chapter Heading 3816 of CETA, 1985. Issue: A large number of units situated in the jurisdiction of the zone are engaged in the process of crushing, screening, grinding and mixing of quartz / quartzite mineral stones (in boulder form) to convert them into quartz/ quartzite grains and powder, which is known in trade parlance as Silica Ramming Mass or Ramming Mass. The quartz/ quartzite mineral contain more than 95% of silica (up to 99.9%), hence the name. The quartz and quartzite minerals are not mixed with each other, since quartz mineral has higher silica content as compared to quartzite mineral. The assessees classify the aforesaid goods under chapter heading 2506 of CETA, whereas the zone is of the preliminary view that goods are more appropriately classifiable under Chapter heading 3816 of CETA in view of Chapter Note 1 of Chapter 25. Discussion & Decision The issue was deliberated in the Conference where, two head....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Chapter 33 covers Cosmetics including Hair Oil. The dispute with regard to classification of the product i.e. Coconut Oil arose after the Board's clarification vide Circular no. 145/56/1995-CX dated 12.10.1995, wherein the Board clarified that the Coconut Oil being marketed in small containers could not be a basis for classifying the product as Hair Oil. For classification under Chapter Heading 3305, product should be suitable for use on hair and the product should be put up in a packing of a kind sold in retail for such use. Further, the Central Board of Excise and Customs, New Delhi vide Circular no. 890/10/2009-CX, dated 3/6/2009 issued under Sec. 37 B clarified that the Coconut Oil packed in small containers up to 200 ml shall be classified under Chapter Heading No. 3305 by treating it as Hair Oil. Discussion & Decision The conference noted that the issue has been resolved by the Board by issue of Circular no. 1007/14/2015-CX dated 12.10.2015. The circular takes note of the judgments in case of In case of Raj Oil Mills Ltd. vs. Commissioner, Central Excise [2014 (314) ELT 541/2013-TIOL- 1609-CESTAT], where Hon'ble Tribunal held that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and cutting circles out of it and pressing them in the deep drawing double action power press giving it a deep shape and folding corner edges for convenience and safety. The local Commissionerate is of the view that the said goods are better classified under tariff item 73239410 as “Ghamellas†on the grounds that the party has mentioned the product on its website as "Tasla a.k.a Ghamella ". The local Commissionerate also relied on Rule 3(a) of the General Rules for the Interpretation of the Schedule to the Central Excise Tariff Act 1985 and the fact that the assessee sells their product at factory gate to the customers mainly situated in the city area. The end use of the product is in miscellaneous work and thus the claim of the party that their product is a tool for agricultural, horticultural or forestry use in field in not correct. The effective rate of duty in case of tariff item 73239410 is 12.5%. In view of the difference in rate of duty, the correct classification of the item needs to be decided. Discussion & Decision The conference discussed the issue after the details of the nature of the product and manufacturing proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in mind the use of the product in question, and taking into consideration the HSN Explanatory Notes, the view taken by the Asstt. Collector as well as by the Commissioner (Appeals) classifying the product (shallow pans) under Heading No. 82.01 of the Tariff cannot be said in any manner erroneous so as to call for any interference in the appeal before us.' " The conference accordingly concluded that the ghamella/tasla of the kind described by the zone is correctly classified under tariff item 8201. - - Classification - B.9 Vadodara Zone · Classification of “Milking Machines and Dairy Machines"- Whether Classifiable Under Tariff Item 84.18 or 84.19: Issue: The Bulk Milk Cooler is described as an insulated tank made up of SS 304 stainless steel sheets with evaporators, direct expansion condensing unit and smooth agitation, which is installed at village unions of dairy co-operative societies and in the farms. This equipment is defined by the international standard ISO 5708 which require: to cool down the temperature of milk from 35 degree C to 4 degree C in less than 3 hours with an ambient temperature upto 38 deg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts were under consideration amongst other equipments for classification and classification under 84.34 rejected. - As far as classification under CETH 8418 is concerned, HSN notes for the heading provides that "The refrigerators and refrigerating equipment of this heading are in the main machines or assemblies of apparatus for production, in a continuous cycle of operations, of low temperatures (in the region of 0 degree centigrade or less) at the active cooling element, by the absorption of the latent heat of evaporation of liquefied gases (e.g. ammonia, halogenated hydrocarbons), of volatile liquids or, in case of certain marine types, of water." In case of M/s Praj Industries [2009(242) ELT 430], Hon'ble Tribunal decided classification of Bulk Milk Cooling Tank having following items viz. (i) Milk Vessel (ii) Ice Water Vessel, (iii) Cooling Coil, (iv) Condensing Unit etc. relying on the HSN notes decided the classification of goods under CETH 8418. Hon'ble Tribunal recorded the following argument as justification for classification of the equipment under the heading 8418 - "as 10 10 per the explanatory note to CH. 8418, the temp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the manufacture of stainless steel hot rolled patties and pattas and stainless steel cold rolled patties and pattas falling under chapter 72. They have cleared the annealed hot rolled patta and patti by availing exemption from payment of Central Excise duty under Sr. No. 203 of notification no 12/2012-CE dated 17.03.2012. There are certain intermediate processes between hot rolling and cold rolling. Hot-rolled pattas/patties are subjected to process like pickling and annealing to make them suitable for cold-rolling process. The zone was of the view that the exemption was intended for processes that are performed on the hot rolled pattas/patties such as pickling and annealing. The exemption was not available for hot rolling of Stainless Steel (SS) flats into pattas and patties as the raw material for hot rolling process is not patta/patti, but SS flats. Pattas/patties emerge only after hot rolling process. The zone also 11 referred to the relevant part of the letter of J.S (TRU-I) vide F.No. B/31/8/94-TRU dated 4-5- 1994 which is reproduced below - "Thus, all stages prior to the stage of cold rolling have been exempted from excise duty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nable for Customs exemption and not for Central Excise notification. In this connection, reference was invited by the zone to CESTAT Order in the case of AUDCO India Ltd. [2013 (297) ELT (Tri Chennai)]. Relevant portion of the order is reproduced below: 12 "The present dispute has arising basically because of the fact that the Excise duty exemption has been provided with reference to exemption for Customs Duty and the condition that are appearing in the Customs notification has not been adopted to suit claiming excise duty exemption. There is necessity for making changes if the exemption from excise duty is to be meaningful. In the first place, there is no importer involved when goods are manufactured in India or supplied in India. Similarly, customs assessment and duty payment are before clearance of the goods whereas for excise levy the system is of self-assessment and duty payment at the end of the month, though the requirement for producing the certificate also needed suitable change. Similarly, Customs notification is applicable to a contractor or a sub-contractor when they import goods. So confusion arises as to who has to satisfy the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide also. B12 - Coimbatore Zone - Scope of SSI Exemption- When there is a Deed of Assignment of Brand Name Within the Hindu Undivided Family (HUF): Issue: The sponsoring zone explained that in a case noticed in the zone, a HUF owned a particular brand. Each of the members of the HUF was allotted different areas of operations by virtue of a deed of assignment. Each member was manufacturing and clearing excisable goods, using the same brand name, within his allotted area, with each of them separately availing the threshold SSI exemption. The Hon'ble Supreme Court has stated in this case i.e. where a Brand Name has been assigned to members of HUF that the trademark would remain vested with all the members and that all of them are separately eligible for SSI exemption. The sponsoring zone was of the view that the provision is prone to misuse and there was a need for amendment in the SSI notification no 8/2003-CE dated 01.03.2003. Discussion & Decision The conference noted that the issue has been decided by the Apex Court in the case of M/s Kali Aerated Water Works [2015 (320) E.L.T. 692(S.C.)] where joint family business dissolved by Deed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CE, dated 30.03.2003 was issued to convert various FTZs into SEZS. Further, as per the Notes explaining clauses of the Finance Bill, 2007 (clause 106), after enactment of SEZ Act, FTZS have become redundant and hence it sought to amend sub- section (1) of Section 3 of the Central Excise Act. By virtue of the above amendment, the word FTZ was omitted and substituted with the word SEZ in section 3 of the Central Excise Act, 1944. Consequently, tribunal concluded that now the expression FTZ in the notification no. 67/95-C.E. needs to be read as SEZ and the benefit of exemption extended to the intermediate goods when final goods are supplied to SEZ. Conference accepted this view and concluded that benefit of exemption should be extended to the intermediate goods when final goods are supplied to SEZ. Conference also recommended to the Board that notification no 67/95-C.E. should be amended to avoid litigation on the issue. B14- Chennai Zone - Scope of exemption- under the Central Excise Notifications should be appended to the notifications: Issue: Amendments made to Rules and Notifications are notified with only the text or entry which amends....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prescribed therein and noted that the language of the exemption notification is quite clear. Duty rate applicable for manufacture of 'Mobile Handsets' in terms of sl. no. 263A to the notification no. 12/2012-CE dated 17.03.2012 is 1% subject to condition that no credit under Rule 3 or Rule 13 of the Cenvat Credit Rules, 2004 has been taken in respect of inputs or capital goods used in the manufacture. So long as the conditions in the notification are satisfied, the benefit of the concessional rate is available. An exemption notification is required to be implemented by the field formations without going into the policy intent behind it, if the language used in the notification is clear. For example, it is not relevant for the field formation to examine whether the effective duty rate of 1% is appropriate or whether any credit of input services is available to be taken or not. Once the condition of not availing credit in respect of inputs and capital goods as prescribed is fulfilled, the effective duty rate consequent upon exemption is only required to be paid giving full effect to the exemption notification. B.16 -Vadodara Zone- Scope of E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-CX dated 26.03.2012, has clarified that, in respect of Nepal, even if the export proceeds are received under Indian rupees, the clearances are still eligible for rebate or refund as the case may be. In such a case, it is not known why the export clearances to Nepal are still being considered as home clearances with reference to the limit of exemption available to an SSI under the notification referred. The condition in the notification is restricting the benefit to the Small Scale Manufacturers to the extent of clearances made to Nepal. Clarification is needed in view of the change in the treatment given to Exports to Nepal w.e.f. 01.03.2012. Discussion & Decision The conference agreed that it was a valid suggestion and there was a need to amend notification no. 8/2003 - CE dated 01.03.2003 to bring parity in the exports to Nepal under 17 various notifications. The conference recommended that Board may examine the same However, it was also agreed that till the necessary amendments in SSI exemption are made, the present dispensation of treating exports to Nepal as domestic consumption shall continue to apply. B.18 - Chennai Zone - Cen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed for manufacture of ethyl alcohol, a non-excisable product, by reversing negligible portion of Cenvat credit taken. While it is necessary to grant exemption 18 to intermediate products used for manufacture of specified final product as mentioned under Sl.no. (i) to (v), there is no justification for extending the exemption by prescribing reversal of proportionate credit. This proviso not only results in revenue loss but also leads to disputes. It is, therefore, suggested that either of the following suggestion may be considered:- a) Sl.No.(vi) of the proviso to Notification No.67/95-CE can be omitted so that the manufacturer can pay duty on the intermediate product on comparable value, if available or on the value arrived at as per CAS-4 method or b) The words & figures “Rule 6 of Cenvat Credit Rule, 2001", may be substituted by Rule 6 (3)(i) of Cenvat Credit Rules, 2004 so as to prescribe payment of 6% of the value of exempted final products. Discussion & Decision The alternative mechanisms prescribed in Rule 6 of the Cenvat Credit Rules, 2004 was intended to offset the Cenvat credit taken in proportion to the exempted goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gory of input services may be used for exempted as well as dutiable / taxable category viz. "C". In terms of Rule 6(1) and (2) of CCR, 2004, Cenvat credit shall not be allowed on such quantity of inputs or input services used for the manufacture of exempted goods or provision of exempted service's. It is clear from the above that Cenvat credit can be taken on input services covered under category "A" and Cenvat credit cannot be taken on input services used in category "B". Therefore, for arriving at the quantum of credit liable to be reversed, common input services referred in category "C" alone should be taken into account while applying the formula prescribed. However, it may be seen that the expression “P†in the formula specifically reads as ‘total cenvat credit taken on input services during the financial year'. Hence, the same is interpreted by some field officers as total of Cenvat credit on the input services used exclusively in manufacture of dutiable goods and for provision of output services [+] Cenvat credit taken in respect of inputs used exclusively in exempted category [+] Cenvat credit taken on common input se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and input services have been presumed to be going uniformly in the manufacture of the dutiable and exempted goods. This may lead to situations where some industry may be required to reverse lesser credit than actual usage in exempted goods whereas some other industries may be required to reverse credit more than the actual usage in the exempted goods. As this alternative comes in operation when separate accounts are not maintained, the formula can only be based on ratios of values which is how the formula in the rule is. Conference also noted that the rule is quite clear in terms of language used and has stabilized after a long period of time. Therefore, it was concluded that there was no need to amend or clarify Rule 6 as it exists and should be implemented in terms of clear provisions of the rule as it exists. B.20 - Chennai Zone - Cenvat Credit Issue: - Rule 9(1)(a) of Cenvat Credit Rules, 2004: The said Rule provides for taking credit on the basis of an invoice issued by a manufacturer for clearance of inputs or capital goods as such. Apart from a manufacturer, service providers can also clear inputs and capital goods as such. How....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated credit of the past. It is suggested that an amendment to sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004 may be made to allow the utilization of balance CENVAT Credit of Education Cess and Secondary & Higher Education Cess towards payment of either duty of excise or Service Tax. Discussion & Decision The conference after discussion and briefing from the officers from the Board noted that it was Government's conscious policy decision to withdraw the Education Cess and Secondary & Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past. The rule and notifications as they exist need to be followed and do not need any amendment. B.22 Coimbatore Zone - - Cenvat Credit – Refund of Cenvat Credit under Rule 5 of CCR, 2004, in respect of raw material used in respect of goods supplied duty free against ICB to mega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessees who recover such amounts are unjustly enriching themselves. It is suggested that suitable amendments may be made to Section 11 D of Central Excise Act, 1944 so that such amounts can be recovered. Discussion & Decision The conference after discussion concluded that neither the assessee can be prevented from charging the amount of 6%/7% in lieu of amount paid under Rule 6 of the Cenvat Credit Rules, 2004, nor can the said amount could be made part of value, as it was being separately mentioned in the invoice over and above the cost of the goods/services. Further, no credit of this amount is available to the buyer of the goods. The transaction is essentially a commercial one between the buyer and seller and no amount is recovered by seller 23 23 representing or showing it as Central Excise duty. Therefore, department cannot be said to be aggrieved by the transaction. No amendment in section 11D of the Central Excise Act, 1944, to recover such amount is warranted, even if this additional amount is charged from the customer and not deposited with the department. B.24 Hyderabad Zone - CENVAT Credit - Whether the benefit of Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he rules removing confusion and ambiguity. With reference to SEZ, it was noted that SEZ Act, 2005, has an overriding application over other Acts including the Customs Act and therefore benefit of refund of accumulated credit is available for supplies 24 24 of goods to SEZ. The present policy is to not allow the benefit of refund of accumulated credit for supplies to EOU. B.25 - Hyderabad Zone - CENVAT Credit – Insertion of a rider under Rule 5 of the CENVAT Credit Rules 2004 restricting the Credit to be refunded to actual usage: Issue: Rule 5 of the CENVAT Credit Rules, 2004, w.e.f 01.04.2012, (replaced vide Notification No. 18/2012-CE (NT), dated 17.03.2012) provides that a manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of Cenvat credit as determined by the specified formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board. The specified formula may give undue/uni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inputs/capital goods, should also be reversed at the time of clearance of inputs/capital goods as such from the factory of the manufacturer. The present Rule 3(5) of the Cenvat Credit Rules, 2004 does not mention 'Input Services' amongst the credits required to be reversed and therefore it is not possible to demand reversal of credit of input services. There is need to amend the rules so that reversal of credit taken on input services can also be achieved. Discussion & Decision The conference noted that Rule 3(5) of the CENVAT Credit Rules, 2004 does not provide for reversal in respect of input services for a reason. Input services are consumed once the inputs and capital goods are received in the factory. Thus on receipt of inputs and capital goods, the associated input services have to be considered as consumed within the factory and become a cost to the business. Demand for reversal of the input services credit, when such input services cannot be reused, unlike inputs and capital goods which are available for reuse would not be fair to the trade. Therefore, the conference concluded that the present rule represents the correct provision i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from the first date of month succeeding the month in which the duty ought to have been paid under the Act. Applying this ratio, the tribunal concluded that interest is liable to be paid after the expiry of the period of 180 days from the date of issue of capital goods to the job worker. The same principle would apply in case of inputs sent to the job worker. B.28 Meerut Zone Cenvat Credit Electrodes Used for Repairing Work. Issue: - Availment of Credit of Duty Paid on Welding Credit of duty paid on welding electrodes used for repairing work in factory has been in dispute since 1996. Several hundreds of Show Cause Notices are pending on account of contradictory judgments. Hon'ble Allahabad High Court, in the case of Upper Ganga Sugar & Industries Ltd.in CEA No. 135/2005, has held that Welding Electrodes used in repairing and maintenance are not eligible for Cenvat Credit .Hon'ble Rajasthan High Court in the case of Hindustan Zinc Ltd. [2008 (228) ELT 517 (Raj.)] on the other hand has allowed Cenvat Credit of duty paid on Welding Electrodes used for repairing of Capital goods. In view of the contrary judgments the Board may like to i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d). However, rule 6(1) of the Cenvat Credit Rules, 2004 has been amended vide notification no. 6/2015-C.E (N.T) dated 1.3.2015, providing that for the purposes of Rule 6 of the CENVAT Credit Rules, 2004, non-excisable goods shall be considered as exempted goods. Therefore, input and input services credit relatable to manufacture of such non- excisable goods would need to be reversed by the assessee in the same way it is required to be reversed for the exempted goods. Treatment of non-excisable goods and exempted goods are required to be same w.e.f. 1.3.2015 under Rule 6 of the CENVAT Credit Rules, 2004. B.30 - Meerut Zone - Cenvat Credit - Admissibility of Cenvat Credit on Service Tax Paid on Sales Agency Commission Service: Issue: CBEC vide its Circular No. 943/4/2011-CX dated 29.04.2011 at point No.5 has clarified that credit of service tax paid on sales commission services (Business auxiliary services) used in 28 relation to manufacture/sale of finished goods is admissible under Cenvat Credit Rules, 2004. However, there are conflicting judgments of Hon'ble High Courts in this regard. Hon'ble High Court of Gujarat in case of Cadila ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee can bring goods (his own finished goods or other goods on which duty has been paid) into his factory for being re- made, refined, re-conditioned or for any other reason and can take credit of such duty treating those goods as inputs under Cenvat Credit Rules, 2004 and utilise this credit according to the said rules. Whereas, in terms of proviso 5 of sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004, the manufacturer shall not take Cenvat credit after one year of the date of issue of any of the documents specified in sub rule(1) of Rule 9 of Cenvat Credit Rules, 29 29 2004. It may be clarified as to whether the restriction of one year of the date of issue of input invoices can be made applicable to the documents based on which duty paid goods are being received into the factory for repairs/re-conditioning under Rule 16 of Central Excise Rules, 2002. Discussion & Decision The conference discussed the issue and noted that board had issued Circular no. 990/14/2014-CX-8, dated 19.11.2014 explaining the intent behind the amendment made in sub-rule (7) of Rule 4 of the CENVAT Credit Rules, 2004. The circular clarified that the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at a price higher than the purchase price, the manufacturer should reverse the credit taken initially from the Cenvat account and pay duty on the differential value from the account current. Rule 3(5) of the CENVAT Credit Rules, 2004 provide for payment of an amount of credit availed in respect of inputs or capital goods removed as such. The position was however different prior to 1.03.2003 before issuance of notification no. 13/2003-CE (NT) dated 01.03.2003, when on removal of inputs or capital goods as such, a manufacturer was required to pay an amount equal to the duty of excise leviable on such goods at the rate applicable on the date of such removal and on the value determined under section 4 or Section 4A of the Central Excise Act 1944, as the case may be. The view of the audit is that provisions of rule 3(5) of the CENVAT Credit Rules, 2004 can be misused and are being misused. The intention of audit is to bring this to the notice of the Government for the remedial action by amendment in the rules. Discussion & Decision The conference concluded after discussion that the audit paras raised by CAG are not acceptable both on the grou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urer of the subject goods, along with interest and the provisions of section 11A and section 11AA of the Central Excise Act, 1944 (1 of 1944) shall apply mutatis mutandis for effecting such recoveries :......... Rule 8 of Cus. Concessional Duty Rules Recovery of duty in certain cases. - The Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise shall ensure that the goods imported are used by the manufacturer for the intended purpose or are re-exported in terms of Rule 7A and in case they are not so used take action to recover the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of importation, along with interest, at the rate fixed by notification issued under Section 28AB of the Customs Act, 1962, for the period starting from the date of importation of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay. (iii). It appears from the aforesaid provisions that despite the apparent difference in the wordings of the provisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ferrites Ltd also it was held that the appropriate section to demand duty would be section 28 of the Customs Act. The conference therefore concluded that the Assistant/Deputy Commissioner of Central Excise having jurisdiction over the actual user factory, when appointed as proper officer of Customs, would be the appropriate authority to demand differential duty under section 28 of the Customs Act, 1961. B.34-Mumbai-II Zone - Central Excise Rules & Procedures - Amendment in the Provisions of Rule 16(1) of Central Excise Rules 2002 Issue The provisions of Rule 16(1) of Central Excise Rules 2002 provide that "where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, reconditioning or for any other reason the assessee shall be entitled to take credit of such duty as if such goods are received as inputs under the Cenvat Credit Rules and utilize the credit according to the said rules." Further sub-rule (2) of he said Rule 16 stipulates that, "if the process to which the said goods are subjected, does not amount to manufacture, then the assessee shall pay an amount equal to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure. Hence, as a significant measure to improve ease of doing business, the current process of rebate sanction needs to be reviewed and it would be appropriate to grant rebate by the Customs on the basis of shipping bills and credit the rebate directly to the bank account of the exporter. Procedures similar to sanction of drawback which is disbursed commodity-wise on the basis of All Industry Rate [weighted average] may be devised for excise rebate also. Hence, a committee may be constituted to review the current system and suggest commodity-wise standardization of rebate, which will vastly reduce the transaction costs and time for exporters. Discussions & Decision Conference after discussion concluded that there is a need to simplify export procedures and sanction of export benefits on Central Excise side. It was decided that a committee may be constituted to be headed by the Chief Commissioner of Central Excise, Chennai Zone to recommend new export procedures (including the procedure for sanctioning of export benefits such as rebate). One officer from the policy wing of the Board at the Director level was decided to be a member of the Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her declare that we shall not claim any drawback (Central Excise Component) on export of the consignment covered under this application" so as to enable such exporters to avail both the benefits. Discussion & Decision : The Conference noted that declaration (d) of ARE-2 was meant to ensure that benefit of duty rebate and drawback was not taken simultaneously for the same element of tax i.e. Customs portion or the Central Excise portion. It was decided by the conference that the issue needs to be referred to the Drawback section with appropriate inputs from central Excise wing. Further, the conference decided that the declaration (d) of ARE-2 needs to be amended. B.37 - Bhopal Zone - Central Excise Rules & Procedures - Doubt regarding Computation of Penalty under Rule 8(3A) of Central Excise Rules, 2002, When Period of Delay Involves Part of a Month: Issue: 35 Rule 8(3A) of the Central Excise Rules, 2002 provides that "If the assessee fails to pay the duty declared as payable by him in the return within a period of one month from the due date, then the assessee is liable to pay the penalty at the rate of one percent on such amoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty—which is penal in character." It is in this background that courts have directed that 36 interest should be charged only for actual no of days of delay as revenue is entitled for compensation for actual number of days of delay only. However, penalty has a different character. Once it is prescribed in law, the quantum cannot be changed as it is penal in nature and is considered mandatory penalty. Therefore, even for default of a part of a month, penalty for the full month shall be recovered. - Central Excise Rules & Procedures B.38 Chennai Zone and Coimbatore Zone Amendment of Rule 12 of Central Excise Rules, 2002: Issue: At present filing of Central Excise returns by all assessees are being done through ACES. Errors and omissions after the filing of periodical returns such as ER1, ER2, ER3, ER8 etc. cannot be rectified because there is no provision in the Rules for such correction. Whereas Rule 7B o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be followed while keeping track of such type of cases by the Commissioners. The avowed policy of the Government is to promote ease of doing business. Therefore, keeping in consonance with the above policy it is felt that a uniform procedure to rectify the mistake committed by an assessee may be formulated by the Board and provided in automation mode. Discussion & Decision The conference after due deliberations concluded that this is a long standing problem with the assessee and needs to be addressed. It was decided that Coimbatore zone should make a reference to the Board with complete set of correspondence made with Pr. CCA on the issue for further examination and issuance of necessary instructions/circular in this regard in consultation with Pr CCA. B.40 - Kolkata Zone - Central Excise Rules & Procedures - Penalty for default under Rule 8(3A) of Central Excise Rules, 2002: Issue: There is no stipulation of the period in the rule for which the default or failure to pay duty can continue after which coercive action for recovery can be taken. Rule 8(4) of the said rules provide for applicability of the provisions of section 11 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filing NIL return may be considered. Discussion & Decision Conference after discussion referred to the different nature of assessee in Central Excise and Service tax. A Central Excise assessee has better set-up for compliance and therefore it is expected that returns including NIL return would be filed in time. Therefore, it was decided that the Central Excise provision need not be amended as it was working well. B42 - Lucknow Zone-Implementation & Other Related Issues-Non availability of any expert facility for determining the speed of FFS machine under Compounded Levy Scheme: Issue: Sponsoring Zone explained that presently there are more than 2 slabs of duty on pan masala, gutkha and chewing tobacco based on the number of pouches packed per minute on the FFS machines. It is seen that most of the assessees declare their packing speed at 500 to 600 pouches per minutes. In view of this, the duty slabs may be reduced from three slabs at present to two viz one for packing speed up to 500 pouches per minute and another for more than 500 pouches per minute as no expert facility for determining maximum speed of FFS machine is available with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cide if there was any need to change the UQC. B.44- Chennai Zone- Implementation & Other Related Issues -Matches - Inverted Duty Structure in matches: Issue: The sponsoring zone explained that most of the manufacturers of matches are availing CENVAT credit in respect of the following inputs at the given rates: (i) Pottasium Chlorate 12% (ii) Wax 14% (iii) Paper Boards 6% and 12 % as the case may be (iv) Wrapper 6% and 12 % as the case may be, etc Whereas the rate of duty for matches manufactured by semi mechanized sector is @6% .This leads toinverted duty structure and consequently payment of duty in cash is negligible. The cash component of the duty has also fallen over the years on account of the gradual inclusion of various processes associated with manufacturing getting included for availing credit while the scope of concessional rate of duty has expanded. Discussion & Decision 40 40 The conference noted that there are different rates of duty for matches manufactured by manual process, semi-automatic process and automatic process. These rates have a certain ratio and have been fixed after studying the industry in de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounts. In order 41 to reduce small cases at the level of Commissioner (Appeals), a proviso may be inserted in Section 35A of the Central Excise Act, 1944, prescribing a monetary limit of Rs.1 Lakh for filing of appeal before the Commissioner (appeal). With reference to the Tribunal, similar provision exists in the second proviso to Section 35B which prescribes monetary limit of Rs.2 Lakhs for CESTAT. Discussion & Decision It was concluded in the conference that there may be cases of small amounts where confirmation of demand could be unfair. Assessee should not be deprived of his right to appeal at the first stage on adjudications by DC/AC/Supdt. If the idea was to decrease the number of appeals before Commissioner (Appeal), then it can also be achieved by addressing the quality of adjudication orders. However, it was decided to suggest that Board examine the proposal of fixing monetary limit with regard to appeals filed by the department. B.47 - Hyderabad Zone-Implementation & Other Related Issues-Period of Condonation of Delay in Payment of Pre-deposit; Sec.35F of Central Excise Act, 1944: Issue: As per the provisions of new S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and it was noted that the minimum penalty under the provision 11AC(1)(a) is only rupees five thousand. Assessee has the option of not paying even this small penalty by repaying the excess refund any time before the issuance of show cause notice or within thirty days of issue of SCN. A wrong payment of refund cannot arise unless a wrong claim or exaggerated claim for refund has been filed by the assessee. Even if such wrong claim is made inadvertently, a small penalty for contravention of rule/procedure etc can be imposed as it is a civil offence. It is only for offences entailing criminal liability that mens-rea is required to be proved. Therefore, it was concluded in the conference that no change in the present law is needed. B.49 - Mumbai II Zone- Implementation & Other Related Issues-Introduction of Time Limit for Compliance of Provisions of Notification No. 43/2001-CE (NT) dated 26.06.2001: Issue: Notification no. 43/2001-CE (NT) provides for procurement of inputs (goods) without payment of duty for the purpose of use in the manufacture or processing of export goods. The said notification specifies the conditions, safeguards and procedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ise also had no such stipulation and no time limit for use of the goods procured was specified. The issue of is regarding recoveries required to be made after the lapse of limitation period specified in section 11A. The conference discussed the issue and after discussion concluded that in such cases of non-fulfillment of the condition in the notification, duty can be demanded without any period of limitation. As provided in rule 6, Section 11A applies to the case "mutatis mutandis†i.e. with such changes as are necessary for affecting such recovery. In the present case, the change required to be read in Section 11A would be regarding the period of limitation prescribed. The period of limitation would not apply. It was also noted that the issue is well settled judicially also in case of Bombay Hospital Trust Vs Commissioner of Customs, Sahar, Mumbai [2005 (188) E.L.T. 374 (Tri. - LB)] wherein it has been held that in case of demand of duty under an exemption notification which casts continuous obligation, limitation under Section 28 of Customs Act, 1962 is not applicable. The tribunal had noted that in such cases the duty demand does not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....practice such assessee may also be issued a show cause notice which is unfair situation for the business of the assessee. The Conference was requested to discuss this situation and suggest appropriate course of action in this regard. Discussion & Decision The conference discussed the issue in detail and noted that change in assessment practice which changes a long standing assessment practice which has prevailed across various zones should be strictly avoided. Any such proposal for a change should have approval of the higher officers of the zone say Commissioner or Chief Commissioner. Before making such change it would also be desirable for the zone to consult other zones regarding assessment practice. If the zone after due consultation is of the view that the long standing assessment 45 45 practice across the country is erroneous, due information on assessment practice and justification should be collected from various zones and a detailed reference made to the Board in this regard. Conference also suggested that Board should dispose off such references expeditiously and where needed issue a circular. B.52 - Implementation & Other....