TaxTMI 
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TaxTMI 
Minutes of Tariff Conference held on 28th and 29th October, 2015
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....ulated 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 implementing any of the decision may be brought to the notice of the Board. Hindi version will follow. (Santosh Kumar Mishra) Under Secr....
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....ed 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 deposited with the department in non-compliance of Rule 6(1) and 6(2) of the Cenvat Credit Rules, 2004 CENVAT Credit - Whether the benefit of Rule 5 of Cenvat Credit Rules, 2004, can be extended to clearances made to 100% EOUS (deemed exports) Coimbatore 21-22 Coimbatore 22-23 Hyderabad 23-24 B26 B27 CENVAT Credit - Insertion of a Rider under Rule 5 of the CENVAT Credit Rules 2004, Restricting the Credit to be Re....
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.... 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 Implementation & Other Related Issues-Period of Condonation of Delay in Payment of Pre- deposit; Sec.35F of Central Excise Act, 1944 Implementation & Other Related Issues- Amendment in Section 11 AC - Penalty in Cases Concerning Erroneous Refund Implementation & Other Related Issues- Introduction of Time Limit for Compliance of Provisions of Notification No 43/2001-CE (NT) dated 26.06.2001 Implementation & Other Related Issues- Reassignment of Cases for Adjudication by Chief Commissioner and Reassignment of Cases for Adjudication by Commissioner Hyderabad 41 Hyderabad 42 Mumbai II 42-43 Conference 44 B51 Implementation & Other Related Issues-Change in the practice of assessment Confer....
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.... 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 noted that definition of 'Industrial Consumer' and 'Institutional consumer' has been substituted by Legal Metrology (Packaged Commodities) (Amendment) Rules, 2015 in terms of notification dated 14.05.2015, issued by the Ministry of Consumer Affairs, Food & Public Distribution. The revised definition includes the consumer who buys packaged commodities directly from the manufacturer or from an importer or from whole sale 2 dealer. The conference was of the view that the valuation of goods in respect of clearances to industrial consumers even from the depot will be made under Section 4 of the Central Excise Act, 1944 and not under Section 4A of the Act ibid. The conclusion was reached in view of the fact that in case of institutional buyers purchasing goods, depot is only an extended arm of the manufacturer, being a place of removal. The i....
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....n 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 such subsidy is directly paid by the Government to the manufacturer. The conference concluded that any VAT, if retained would be added to the assessable value even if it is retained through the mechanism of adjustment against a subsidy payable under the scheme. Section 4 provides for abatement of taxes actually paid. Taxes can be considered to be paid for the purposes of granting abatement under Section 4 only if they are deposited with the exchequer. It was also notedthat the issue in circular dated 10.7.2014 was relating to addition of additional consideration whereas the present issue relates to allowing abatement of taxes actually paid. Therefore, the circular dated 10.7.2014 has no application to the present case. Further, fertilizer subsidy is directly paid by the Government to the manufacturer which is not the case presently at hand as the present scheme works by mechanism of adjustment of subsidy against taxes. ....
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....ger 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.T) dated 24.12.2008. Concerned zone may take final decision in light of the facts of the case and the case law cited. - B4 - Kolkata Zone Assessment and Valuation - Fixation of special rate representing the actual value addition under Area based Exemption Scheme : Issue: It was explained by the sponsoring zone that an assessee was engaged in the manufacture of various food products and cosmetic products under chapter 21 and chapter 33 and availing area based exemption notification no 20/2008-CE dated 27.03.2008 and 38/2008-CE dated 10.06.2008. The assessee had applied for fixation of special rate for the F.Y 2011-12. The Joint Director (Cost) Kolkata initially worked out the percentage of value addition based on the Value Addition Formula prescribed in the notification no 20/2008-CE dated 27.03.2008. But a re-working of actual value addition in respect of these products was carried out by the Joint Director adopting the formula prescribed in Cost Audit Report Rules, 2011 and taking into account two m....
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....n & Decision The issue was deliberated in the Conference where, two heads of classification viz., CETH 2506 and 3816 were discussed in case of the product Ramming Mass of the kind obtained by crushing/grinding and mixing of quartz and quartzite minerals of different sizes and where no external binders are added to such mixture. It was noted that explanatory notes to the HSN of Heading 3816 covers certain preparations (e.g. for furnace linings)..., with an added refractory binder .... Many of the products of this heading also contain non-refractory binders such as hydraulic binding agents, therefore, to qualify for classification under heading 3816, refractory binder is required to be added to such powdered/grained quartz/quartzite mixture. Since no refractory binder is added to the impugned product, the same is not covered under heading 3816. This view is reinforced by the Tribunal in the case of M/s Mayur Chemicals Industries [2001 (136) ELT 1389] upheld by the Hon'ble Supreme Court. Chapter Note 1 of Chapter 25 is also relevant to this issue. Hon'ble CESTAT, in the matter of M/s 20 Microns Ltd. [2012-TIOL-1467-CESTAT-AHM] has held that specific heading has to be pr....
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.... Oil in retail packing of 200 ml or less is classifiable under Chapter 15 covering Animal or Vegetable Fats and Oils and not under Chapter 33 covering Cosmetics and Toilet Preparation. Similar view was taken by Tribunal in case of Capital Technologies Ltd. & Ors Vs CCE, Tirupati reported in [2015 (321) ELT 479/2011-TIOL-775-CESTAT]. The issue of classification can now be decided by the field taking into consideration the facts of the case read with the judicial pronouncements. For further details the circular may be referred. B.7 - Kolkata Zone - Classification - Description of Goods under Tariff Item No 22029020 being "Fruit-Pulp or Fruit Juice Based Drinks" Issue: The sponsoring zone pointed out that tariff item 22029020 provides description of goods as “fruit-Pulp or fruit Juice based drinks" but this description of goods seems incomplete as no percentage of fruit juice is mentioned. The rate of duty under this tariff item is lower than 7 most of other tariff items of this chapter. This may lead to some assessees taking advantage and classifying goods of other headings into this heading. It is suggested that a percentage of fruit juice be mentioned against ....
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....e of articles which are tableware and kitchenware and other household articles. In HSN these products are explained to include – Articles for kitchen use, Articles for table use and other household articles. 8 On the other hand tariff item 8201 applies to hand tools and other tools of a kind used in agriculture or forestry. Thus it is quite clear that for classification in tariff item 7323 the size and use of the product is relevant. From the description of the product as explained by the zone, it does not fit the description namely table, kitchen or other household articles of iron and steel. Specific heading of 73239410 meant for Ghamellas in the tariff would apply only to articles which qualify to be classified under tariff head 7323 and fits the description "Table, Kitchen or other household articles of iron and steel". The quality of steel or iron is also a relevant consideration as goods need to be safe for use as kitchenware. In the present case these criteria are not satisfied. Classification of goods solely on the basis of description as Ghamella on website for sale is not a relevant consideration. Rule 3(a) of the rules of interpretation has no applic....
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....roduct under tariff item 84342000 prior to 2011. However, after objection by the audit, accepting the suggestion to classify the goods under tariff item 84198990 instead of 84342000, the assessee started to classify "Bulk Milk Cooler" under tariff item 84198990 which attract duty @ 12.5%. References have been received from the Trade that in respect of the said product there is no uniformity of practice. Different classifications under contention in different zones are under the headings 8418, 8419 and 8434. Sponsoring zone requested that the scope of these headings and classification of the product may be decided. Discussion & Decision The issue was discussed in the conference with respect to scope of the three headings. It was noted that in the context of the goods under discussion heading 8418 applies to refrigerators, freezers and other refrigerating or freezing equipment; tariff item 8419 applies to machinery, plant for treatment of material by a process involving a change of temperature whereas tariff item 8434 applies to Milking machines and dairy machinery. Note 2 of chapter 84 interalia provides that a machine or appliance which answers to a description of on....
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....e laws were examined. In case of M/s Universal Heat Exchangers [2000 (122) ELT 770], Hon'ble Tribunal noted that Ammonia condenser, used by appellant in chilling of water is able to achieve cooling only up to 8°C and not freezing temperature which is around zero or sub-zero degree, hence it is not classifiable as refrigerating equipment [8418]. In case of Pan Asia Corporation [1999 (107) ELT 306] the distinction between the two headings 8418 and 8419 was explained by the tribunal to say that - A distinction is to be made between Tariff Heading 84.18 and 84.19. Cooling is no doubt affected by machineries and appliances falling under Tariff Heading 84.18 but the cooling should be of the range which a refrigerator or refrigerating machines achieves i.e. around zero or sub-zero temperatures. In the present case it is not disputed that the cooling effect is from 45ºC to 6ºC. Further it is also clear that it is not based on the refrigerating system. The lower appellate authority's finding that the goods would be rightly classifiable under Tariff Heading 84.19 is correct.†The conference noted that the Bulk Milk Cooler under discussion apparently achieves a co....
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....ussion & Decision The conference examined the tariff heading involved, exemption notification and the clarification issued by TRU and concluded that clarification was clearly worded with no room for doubt. All processes prior to cold rolling are eligible for exemption from duty under sr. no. 203 of notification no. 12/2012-CE dated 17.03.2012. It appeared that the view of the zone was premised on the interpretation that the expression patties and pattas do not include stainless steel flats. There is no reason for such interpretation as the expression patties and pattas have to be understood in terms of general trade parlance and would include stainless steel flats. Benefit of exemption was available to the process of hot rolling of SS flats. It was also observed by the Member(CX) that field officers are bound by the clarifications and letters issued by the Board and where they have a contrary view, it should be referred to the Board. It was expected that the Chief Commissioners would take steps to ensure that the clarification issued by the Board are implemented in right earnest. - - B11 Chennai Zone Scope of Exemption Notification No.12/2012-CE dated 17.3.12 (Sl.N....
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....supplied to such contractors or sub-contractors which has not been prescribed in the Excise notification. Now the option before us is to hold that Excise Duty exemption under such notification will not be applicable at all to any clearances by a strict interpretation of the condition as canvas by revenue or to hold that the excise duty exemption is to be made available subject to necessary changes read into the conditions prescribed under Customs notification. The former interpretation is not justified because to our mind it is implied that the condition prescribed in Customs Notification is to be read mutatis mutandis for excise exemption. Once the later proposition is agreed to, we are of the view that correct interpretation is that the goods should have been supplied to the contractor or sub- contractor who has used the goods in oil exploration activity, the exemption should be available. In the present case, such condition has been satisfied in the case of supplies to M/s. Reliance Industries Ltd though after clearance." Sponsoring zone suggested that in order to avoid this kind of dispute, the conditions prescribed under Customs notification may be incorporated u....
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.... - Scope of exemption- admissibility to intermediate goods used in the manufacture of cement supplied to SEZ units: Issue: Notification No. 67/95-CE dated 16-03-1995 provides duty exemption to captively consumed inputs in the manufacture of dutiable final products. Exception to this notification is that this duty exemption is not applicable, if the final products are exempted from duty payment or attract nil rate of duty. An exception to this exception is when clearance of final products is made to a unit in Free Trade Zone (FTZ), a 100 % EOU and a unit in Hardware Technology Park or Software Technology Park. Thus, when final products are supplied to FTZ, EOU etc intermediate products continue to be exempted. Now, FTZ scheme does not exist and existing EPZ/FTZ have been notified as SEZ. The issue is whether 14 the benefit of exemption to the intermediate product is available when final products are supplied to the SEZ. The issue has been discussed in the past tariff conference also but no final view was taken. Show Cause Notices have been issued in the zone on the subject. Discussion & Decision The conference after discussion noted that the issue has been decided by....
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....t in the rule is quite clear. 15 B15 - Meerut Zone -Scope of Exemption-Duty Rate applicable to 'Mobile Handsets' in terms of Notification No. 12/2012-CE Dated 17.03.2012: Issue: Central Excise duty @ 1% is applicable for manufacture of 'Mobile Handsets' in terms of Sr. No. 263A to the notification no. 12/2012-CE dated 17.03.2012 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. Units manufacturing Mobile Handsets are Sourcing inputs required to manufacture Mobile Handsets at 'NIL' rate of duty in terms of S.No. 431 of the notification no. 12/2012-Cus dated 17.3.2012 subject to the condition that the importer follows the procedure set out under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The duty foregone on such imports ranges from 17.5% to 28.5% (approx.). However, if Cenvat Credit is availed on the inputs used for the manufacture of Mobile Handsets, the applicable rate of Central Excise Duty is @12.5%. It appears that the prescribed duty rate of 1% is very low compared to the duty fo....
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....had ruled that entry "Wind Operated Electricity Generator" covers the generator per-se and it is not intended to include equipments which are deployed with the generator for production of electricity. The sponsoring zone was of the view that the towers and others parts, which are not directly related to generation of electricity would not be eligible for exemption. In view of the sponsoring zone, it would be desirable that the list of equipments/parts/components eligible for exemption may be spelt out in the Exemption Notification. Discussion & Decision It was noted in the conference that a clarification has already been issued on 20.10.2015 vide Circular No. 1008/18/2015-CX by the Board wherein details of parts on which exemption is available is specified. Ministry of New and Renewable Energy had clarified to CBEC that tower, nacelle, rotor, turbine controller are parts of wind turbine and accordingly the circular has been issued clarifying that exemption is available to these parts. For details, the above noted circular may be referred. B.17 - Vishakhapatnam Zone - Scope of Exemption- Manufacture under Central Excise - Clearances to Nepal with reference to Exemptio....
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....d :- (i) to a unit in a Free Trade Zone, or (ii) to a hundred per cent Export Oriented Undertaking, or (iii) (iv) to a unit in a Software Technology Park, or (v) (vi) to a unit in an Electronic Hardware Technology Park, or under notification No. 108/95-Central Excise, dated the 28th August, 1995, or by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in [rule 6 of the CENVAT Credit Rules, 2001.]" By virtue of the exception as mentioned in sl. no. (vi) of the above proviso, a manufacturer, producing dutiable and exempted products, would be eligible for exemption on captively consumed goods, if he discharges the obligation prescribed under Rule 6 of the Cenvat Credit Rules. The above condition was justifiable and reasonable when the erstwhile provisions of Rule 6 stipulated payment of an amount @10% or 8% of the value of exempted final product. w.e.f. 01.04.2008, Rule 6 of Cenvat Credit Rules provides for two options viz. Rule 6(3)(i) - payment of 6% value of the exempted goods or Rule 6(3)(ii) - reversal of proportionate credit as per the formula prescribed. In view of the above changes made in 2008, if a manuf....
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....ed in rule 6. B.19 - Chennai Zone - Cenvat Credit - Reversal of Credit on Common Input Services: Issue: In terms of Rule 6(3) of Cenvat Credit Rules, 2004 [CCR], a manufacturer of goods or the provider of output service, opting not to maintain separate accounts for the receipt and use of input services used in the manufacture of dutiable final goods and exempted goods, or for providing output and exempted services, shall pay an amount equal to 6% of the value of exempted goods or 7% of the value of exempted goods and exempted services or pay an amount as determined under Sub-rule 3A of Rule 6 of CCR 2004. The above sub rule prescribes a formula for arriving at the amount attributable to input services used for manufacture of exempted goods or providing exempted service. Doubts have been raised 19 by the field formations about the expression "Total cenvat credit taken" used in the formula prescribed in the rule. 2. A manufacturer of goods or provider of output services may use various input services in or in relation to the manufacture of dutiable and exempted final products and for the provision of output and exempted services. Certain input services may be used exc....
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....the case of ShakarRaju - 2011 (271) E.L.T. 492 (S.C.) REFERS. In the present case, it is a fact that the total CENVAT credit taken on common input services is only Rs.2.07 Crore (approximately) whereas, if we apply the formula, the amount of credit required to be reversed works out to Rs.8.62 Crore" 4. It may be seen that the Hon'ble CESTAT has noticed in the aforesaid order, an anomalous situation, where an assessee would be required to reverse more than the 20 20 amount of Cenvat credit taken on common input services, if "P" is to mean total Cenvat credit taken on all the input services by the assessee instead of Cenvat credit taken on 'common input services'. These are prima facie observations made by the Tribunal in the stay order and the final order is yet to be passed. It was suggested that the intention of the Government is to consider 'credit taken on common input services' only, as this amount is only sought to be divided into the two categories viz. used for dutiable and exempted categories. Clarification was sought by the zone to avoid disputes on the issue and the divergent practices followed. Discussion & Decision The conference noted that the languag....
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..... Conference also noted that even without the amendment in the rules, CENVAT credit is available on the basis of an invoice issued by a service provider removing inputs and capital goods as such in view of provisions of rule 3(5) and 3(6) of CCR, 2004. Conference was of the view that various provisions of the rules need to be read harmoniously to make the rule operational for the purpose for which it is intended. B.21 - Hyderabad, Coimbatore, Vadodara, Vishakhapatnam, Delhi Zone-Cenvat Credit - Balance of Education Cess and Secondary & Higher Education Cess lying in the CENVAT Credit Account: Issue: Exemption from levy of Education Cess and Secondary & Higher Education Cess has been provided w.e.f. 01.03.2015 vide notification no. 14/2015-CE & 15/2015-CE both dated 01.03.2015, Sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004, specifies that CENVAT credit of specified duties shall be utilized for payment of those specified duties only. CENVAT Credit of Education Cess and Secondary & Higher Education Cess can be utilized only for payment of Education Cess and Secondary & Higher Education Cess, respectively. Consequent upon grant of exemption there is issue of util....
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....fit of refund of accumulated credit under rule 5. Under the present policy, it would not be possible to allow refund of accumulated credit on supplies to ICB. B.23 - Coimbatore Zone - 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 deposited with the department. Issue: Board circular no. 870/8/2008-CX dated 16.05.2008 clarifies that the amount paid under Rule 6(3) of the Cenvat Credit Rules, 2004 can be recovered by the manufacturer from the buyers. If the assessee is allowed to recover the amount from the buyers, then the very purpose of payment of 6% under, the Cenvat Credit Rules, 2004, is defeated. Since the final product is exempted, it is logical to consider that the assessee availed the credit of input taxes embedded in inputs and is recovering the same from the buyer, when he charges this amount separately on the invoice. It is thus akin to recovery of duty. The present Section 11D of Central Excise Act, 1944, does not provide for recovery of such amounts, so it is felt that the assessees who recover such amounts are unjustly enriching themselves. It is su....
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....on of the definition, was interpreted in several judicial pronouncements to include deemed exports. In a similar situation in respect of SEZs, Board vide Circular 1001/8/2015-CX.8 dated 28.04.2015 has clarified that all supplies to SEZ should be treated as exports. However, the said circular did not cover the supplies to EOU. Clarification is needed regarding benefit under Rule 5 of the Cenvat Credit Rules, 2004 for supplies to EOUS. Discussion & Decision The issue is identical to the issue of extending benefit of refund under rule 5 of the Cenvat Credit Rules, 2004, for supplies made under International Competitive Bidding discussed in the foregoing paragraphs. The conference noted that the benefit of refund of accumulated credit under rule 5 of CCR, 2004 is not admissible for supplies to EOUS. Even prior to the amendment to the Rule, EOUs were not eligible for such benefit though it was extended in some of the cases by Hon'ble courts. The definition of export goods has now been incorporated in the 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 an....
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....ease of doing business†by simplification of business processes. B.26 Meerut Zone - CENVAT Credit - Reversal of Cenvat Credit in respect of Service tax paid on Input Services: Issue: Rule 3(5) of the Cenvat Credit Rules, 2004 provides as under: 25 25 "when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9" An audit objection has been raised that Cenvat credit taken in respect of service tax paid on input services like Customs Brokers charges, Clearing and Forwarding Agencies Services (C&F), GTA etc used for procurement/transportation of 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 rever....
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....nd not received within the stipulated period of 180 days and if yes, what should be the period for which interest should be charged, i.e. period starting from the date of clearance from the factory or for the period starting after 180 days of clearance of such inputs and capital goods. Discussion & Decision The conference noted that when the rule provides for a time-frame within which the goods cleared for job-work are required to be returned and the infringement of the same would invite action as provided for under the recovery provisions of the Cenvat Credit Rules 2004. The conference noted that Hon'ble Tribunal in case of General Motors India Ltd [2010 (260) ELT 81] has ruled that Section 11AB of the Central Excise Act, is the provision under which interest is to be demanded which provides that interest is liable 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 work....
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....puts on which Cenvat credit has been availed as 'deemed manufactured products' so that appropriate duty/credit may be recovered from the assessee and litigations avoided. Discussion & Decision The conference noted that Hon'ble Supreme Court in the case of M/s DSCL Sugar Limited (supra) has held that Sections 2(d) and 2(f) of the Central Excise Act, 1944 have to be satisfied conjunctively for imposition of Excise duty under Section 3 of the Act. The period involved in the case was subsequent to 10th May, 2008, i.e. the date when an explanation was added to Section 2(d) of Central Excise Act, 1944. Therefore, goods which are not manufactured would not be chargeable to Central Excise duty even after amendment in Section 2(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 ....
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....rects that input service credit would be available when there is a element of sales promotion as sales promotion is a service. Thus, the conflict between the judgment and the circular is not as large as is perceived. Both the Board circular and case laws on the subject allow credit of input services, when the activity of the sales commission agent involves an element of sales promotion. B.31 -Vishakhapatnam Zone - Cenvat Credit - Whether Restriction of One Year Applicable When Duty Paid Goods are Being Received into Factory Beyond One Year after Repairs/Reconditioning etc: Issue: In terms of Rule 16 of Central Excise Rules, 2002, the 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....
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....venue on clearance of inputs as such and has suggested amendment in rules on following grounds. Inputs removed as such are not used in the manufacture of final products therefore input credit is not admissible under the Cenvat Credit Rules 2004. However for reversal following changes in rules are suggested - (a) In case of removal of inputs as such, at a price lower than the one at which it was received, a manufacturer should reverse Cenvat credit taken on the inputs at the time of receipt on the factory. 30 (b) In case inputs removal as such 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 ....
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....ses The said Assistant Commissioner or Deputy Commissioner shall ensure that the goods received are used by the manufacturer for the intended purpose and where the subject goods are not used by the manufacturer for the intended purpose, the manufacturer shall be liable to pay 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 removal from the factory of the manufacturer 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....
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....of the tribunal and found that a Central Excise Officer not appointed as a Customs officer is not the competent authority to issue the show cause notice in such cases. Tribunal further held that the appropriate section for demanding differential duty in the case was section 28 of the Customs Act, 1962 and not section 11A of the Central Excise Act, 1944. In case of Cosmo 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 entitle....
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....ous documents like ARE1s, invoices, shipping bills, bill of lading, mate's receipt, packing list, etc. This is highly time-consuming and leads to delay. Further, rebate is sanctioned by passing an Order-in-Original and subjected to audit and review, which is again a needless procedure. 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 Commissi....
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....tory for claiming of any drawback, may be modified from “We further declare that we shall not claim any drawback on export of the consignment covered under this application" to 'We further 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 b....
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....Interest is compensatory in character and is imposed on an assessee who has withheld payment of any 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....
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....es 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 the Central Excise Act, 1944 b....
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....n 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 the field officers. Discussion & Decision It was informed by the sponsoring zone that software inbuilt in the FFS mac....
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....one 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 detail. Therefore, it would not be desirable to change the rates without a detailed study of various inputs, processes and proper calculation of duty inversion, if any. It was decided that the sponsoring zone would provi....
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....nal, 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 Sec. 35F of CEA, 1944, which came into effect from 06.08.2014 (inserted vide Sec. 105 of Finance Act, 2014), the Tribunal or Commissioner (Appeals) as the case may be, "shall not entertain" any appeal unless the appellant deposits seven and half percent (7.5%) of the duty and penalty. The appellant has to pay ten pe....
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....een 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 procedures for procurement of duty free inputs for the intended purpose. The said notification inter alia vide condition no (ii) stipulates that provisions of the Central Excise (Removal of Goods at Concessional rate of duty for manufacture of Excisable goods) Rules 2001 shall be followed mutatis mutandis. It is observed that the said Central Excise (Removal of Goods at Concessional rate of duty for manufacture ....
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...."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 relate to short levy or non-levy at the time of initial assessment on importation, but arises subsequently on account of failure to fulfill the post-importation conditions and therefore limitation prescribed in Section 28 has no application. The conference noted that demand of duty is made in such cases in terms of the bond executed to avail of the exemption and for this reason also the limitation prescribed in section 11A would not apply. It was accordingly concluded that there is no nee....
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....ner 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 Related Issues-Ex-parte Adjudication of Show Cause Notices under Specified Circumstances. Issue: The issue of procedure for adjudication where a CERA objection is closed was discussed. Discussion & Decision – The conference discussed that audit of a Central Excise or Service tax assessee by CERA results in Local Audit Paragraphs (LAR). Many of these LARS are closed and not converted to Statement of Facts (SOF) as the reply given by the department is accepted by the AG's office. This process may take time and during this process protective in many cases show cause notices are issued t....