Latest Updates in Indirect Tax Law – Upto 30.04.

2014

Latest Updates in Indirect Tax Law

A. Central Excise
Nature Provision
Levy
(a) In interpreting a taxing statute, equitable considerations are entirely out of place nor can taxing
statutes be interpreted on any presumptions or assumptions.
(b) A Taxing Statute must be interpreted in light of what is clearly expressed and nothing can be
Interpretation of
implied which is not expressed. No one can be taxed by implication. A Charging Section has to
levy / charging
be construed strictly. If a person has not been brought within ambit of charging section by clear
section
words, he cannot be taxed at all.
(c) A legislature can make a law retrospectively or prospectively subject to justifiability and
acceptability within Constitutional parameters. [State of Rajasthan vs Basant Agrotech
(India) Ltd (SC) 41 Taxmann 93]
Valuation of Excisable Goods
Facts: Under the Sales Tax New Incentive Scheme for Industries, 1989, the Assessee was entitled to
retain 75% of the Sales Tax collected and pay only 25% to the Government.
Decision: The Supreme Court held as under:
• As per Rule 4, the Sales Tax actually paid to the Government can be reduced from the price to
Exclusions from
determine transaction value. Hence, if the Sales Tax is not actually paid, no benefit of reduction
Transaction Value
under the concept of “Transaction Value”.
– Sales Tax
actually paid • 25% of the Sales Tax collected has been paid to the State Exchequer by way of deposit. The
rest of the amount has been retained by the Assessee. That has to be treated as the Price of the
goods under the basic fundamental concept of “Transaction Value”.
• Therefore, the Assessee is bound to pay the Excise Duty on 75% Sales Tax also, as it forms part
of the Price collected. [Super Synotex (India) Ltd 2014–TIOL–19–SC dt 28.02.14)
If the whole or part of the excisable goods is used for consumption by him or on his behalf in the
Rule 8 – Captive production or manufacture of other articles, the value of such goods that are consumed shall be
Consumption 110% of the cost of production or manufacture of such goods.
Note: Earlier, Rule 8 was applied only in a situation where entire goods are captively consumed.
Rule 9 – Earlier Rule 9 was applicable only when the excisable goods are sold exclusively to Related Persons.
Clearances to However, w.e.f. 22.11.2013, the above Rule 9 is applicable, even if the whole or part of the goods is
Related Persons sold to Related Persons. (Notification No.14/2013 dt. 22.11.2013)
Rule 10 – Earlier Rule 10 was applicable only when the excisable goods are sold exclusively to Inter–Connected
Clearances to Undertakings(ICU’s). However, w.e.f. 22.11.2013, the above Rule 9 is applicable, even if the whole
ICUs or part of the goods is sold to ICU’s. (Notification No.14/2013 dt. 22.11.2013)
1. Situations for Valuation below Cost: The Supreme Court has cited that in the following
cases, a Manufacturer may sell goods at a price lower than the cost of manufacture and profit
and yet the declared value can be considered as Normal Price:
(a) The Company wants to switch over its business
(b) If a Manufacturer has goods which could not be sold within a reasonable time.

Hence, mere sale of goods below the manufacturing cost and profit cannot be taken as the sole
basis for rejecting the Transaction Value.

Valuation of 2. Period of application of the decision in Fiat India decision:

Goods below Cost (a) In the FIAT judgment, sale of cars at an abnormally lower price to penetrate the market
and Profit – Rule 6 has been considered by the Supreme Court as constituting extra–commercial
consideration, even when there was no additional consideration of money value flowing
directly or indirectly from the buyer to the seller.
(b) For the period prior to the date of the judgment, extended period of limitation is not
acceptable. In such cases, only the normal period of limitation will apply.
(c) For the period from 29.8.2012 onwards, if there is a sale in the circumstances similar to the
case of M/s FIAT, and yet Transaction Value of goods is declared as the correct assessable
value, then such declaration would amount to wilful mis–statement of the Assessable
Value. [Circular No.979/03/2014–CX dt. 15.01.2014]

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Nature Provision
• Transaction Value of excisable goods shall be valued independently for every clearance.
• Example: If an Assessee clears his first removal to an independent buyer, some goods are
captively consumed, second removal is to a Related Person covered under Rule 9, and third
Independent
removal is to a person covered under Rule 10, then the first removal should assessed u/s 4,
Valuation of each
captively consumed goods should be assessed under Rule 8, second removal should be assessed
clearance
under Rule 9, and third removal should be assessed under Rule 10.
• Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are not
required to be followed sequentially. [Circular No.975/09/2013–CX dt 25.11.13]
Departmental Communication
• Any clarification issued by the Board is binding upon the Central Excise Officers who are duty–
Whether a bound to observe and follow such Circulars. Whether Sec. 37B is referred to in such circular or
Circular not, is not relevant.
necessarily needs • When other Central Excise Authorities of equal and higher rank have followed and acted as per
to be issued u/s the clarifications, the Commissioner (in the instant case), could not have taken a contrary view
37B, to bind the on the assumption that the clarifications are only letters and not orders u/s 37B.
Department • Central Excise is a central levy and, therefore, such a levy has to be collected uniformly from all
similarly situated manufacturers located all throughout the country. [Darshan Boardlam Ltd
vs UOI 2013 (287) E.L.T. 401 (Guj.)
SSI
Facts: The Assessee was engaged in the manufacture and sale of cookies from branded retail outlets
of “Cookie Man”. The Assessee had acquired this brand name from M/s Cookie Man Pvt. Ltd, Australia
(which in turn acquired it from M/s Auto–Bake Pvt. Ltd, Australia). The Assessee was selling some of
these cookies in plastic pouches/containers on which the brand name described above was printed.

No brand name was affixed or inscribed on the Cookies. Excise Duty was duly paid, on the cookies
sold in the said pouches/containers. However, on the Cookies sold loosely from the counter of the
same retail outlet, with plain plates and tissue paper, duty was not paid. The Assessee contended
that SSI exemption would be available on cookies sold loosely, as they did not bear the brand name.

Decision: The Supreme Court made the following significant observations:

• Physical manifestation of the brand name on goods is not a compulsory requirement, as such an
interpretation would lead to absurd results in case of goods, which are incapable of physically
Removal under bearing brand names, viz, liquids, soft drinks, milk, dairy products, powders, etc. Such goods
Brand Name and would continue to be branded good.
SSI Exemption
• The test of whether the goods is branded or unbranded, must not be the physical presence of
the brand, but whether it is used in relation to such specified goods for the purpose of indicating
a connection in the course of trade between such specified goods and some person using such
name with or without any indication of the identity of the person.
• Once it is established that a specified good is a branded good, whether it is sold without any
trade name on it, or by another Manufacturer, it does not cease to be a branded good of the
first Manufacturer. Therefore, Soft Drinks of a certain company continue to be branded goods of
that Company, even if they are served in plain glasses, without any indication of the Company,
in a Private Restaurant.
• It is not necessary for goods to be stamped with a trade or brand name to be considered as
branded goods for SSI exemption. The most important of these factors being the specific
outlet from which the goods is sold. Hence, in the given case, the products would be
considered as branded.
[CCEx vs Australian Foods India (P) Ltd 2013 (287) ELT 385 (SC)]
Other Procedures
An Importer who issues Invoice on which CENVAT Credit can be taken, must be registered under the
Registration
Central Excise Act and its Rules. [Notification No.6/2014–C.E.(N.T.) dt 26.02.2014]
W.e.f. 01.01.2014, E–payment is compulsory, if the total ED paid in the Previous Financial Year ` 1,00,000
E–Payment
or more. Note: Earlier, the limit was ` 10,00,000. (Notification No.15/2013 dt. 22.11.13)

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B. Service Tax
Nature Provision
Levy of Service Tax
ST for Services Foreign Banks are recovering certain charges for processing of import/export documents regarding
from Foreign remittance of Foreign Currency. The Banks in India would be treated as Recipient of Service, and
Banks therefore required to pay Service Tax. (Trade Notice No.20/13 dated 10.02.2014)
Negative List and Exemptions
(a) Income is applied for charitable purposes, only if it is known that major portion of income goes
into charity, i.e. free medical services.
(b) Had medical services been offered free to a majority of patients rather than a minority of
patients, then, the conclusion could have been reached that buildings are principally used for
Charitable charitable purposes.
Purpose (c) Only those buildings utilized for providing free medical aid can be said to be used principally for
charitable purpose and, therefore, all buildings of hospital cannot be exempted on the ground
that overall object of hospital is charity although it is being pre–dominantly run on a chargeable
basis.
[S.H. Medical Centre Hospital vs State of Kerala (SC) 41 Taxmann 483]
Facts: The Assessee is an Association of Chit Funds. and it did not pay the Service Tax, treating the
activity of Chit Fund as non–taxable.
Principle: The Delhi High Court held that –
(a) Services of Chit Fund were transaction in money, and hence not liable to Service Tax.
(b) There was no question of exempting whole or any part thereof.
Chit Fund and its (c) Exclusion of “activity which constitutes transaction merely in money” implies exclusion of
taxability “service rendered in connection with activity which constitutes merely a transaction in money”
and, therefore, Chit Funds (including Business Chit Funds), which are “transactions in money”
are not liable to Service Tax.
(d) Providing partial exemption/abatement in relation to Chit Fund Business is not valid, as the
entire activity itself is not a service. [Union of India vs Delhi Chit Fund Association 32
Taxmann 332 (Del.)]
Facts: The Assessee was running guest houses for pilgrims. The Department issued Show Cause
Notice stating that the assessee was liable to get Service Tax Registration under “short term
accommodation service” and liable to pay Service Tax. The Assessee, on the other hand, submitted
Accommodation that it was a religious and charitable institution, and was running guest houses without any profit
Service for motive.
Pilgrims Decision: The High Court held that since the Petitioner was running Guest Houses by whatever
name called, whether it was a shelter for pilgrims or any other name, it was providing the taxable
services and was thus liable to pay Service Tax. [Tirumala Tirupati Devasthanams vs
Superintendent (30) S.T.R. 27 (A.P.)]

Facts: The Petitioner, Mayo College, was a society running internationally renowned schools. It
allowed other schools to use the name ‘Mayoor School’, its logo and motto, and as a consideration
thereof received Collaboration Fees from such school, which comprised of a non–refundable amount
and annual fee. The schools were required to observe certain obligations/terms and unimpeachable
Franchise confidentiality.
Services
Decision: The High Court held that when the Petitioner permitted other schools to use their name,
logo as also motto, it clearly tantamounted to providing “Franchise Service” to the said schools. If
the petitioner collected/earned the “Franchise” or “Collaboration Fees” from the Franchise Schools,
the Petitioner was duty bound to pay Service Tax thereon. [Mayo College General Council vs
CCEx. (Appeals) (28) STR 225 (Raj)]
(a) Loading, Packing, Transportation and Warehousing of Rice and Milling of Paddy into Rice on Job
Work Basis is exempt.
Agriculture, etc.
(b) Services provided by Cord Blood Banks by way of preservation of stem cells or any other service
in relation to such preservation is exempt. (Notification No.5/2014 dt. 24.02.2014)

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Nature Provision

Services provided by an Authorised Person or Sub–Broker, to the Member of a Recognized

Sub Broker
Association or a Registered Association, in relation to a Forward Contract, is exempted from service
services
tax. (Notification No.3/2014 dt. 03.02.2014)

Exemption is provided for the sponsorship of sporting events organized by a National Sports
Sponsorship
Federation or its affiliated federations, where the participating teams or individuals represent any
Service
District / State / Zone / Country. (Notification No.1/2014 dt. 10.01.2014)

(a) Government Authority means an Authority / Board / State Legislature set by an Act of
Parliament / State Legislature or established by the Government.
Government
(b) Government holds atleast 90% or more participation by way of equity or control.
Authority
(c) Its objective is to carry out any function entrusted to a Municipality under Article 243W of the
Constitution.

The SEZ Unit or the Developer shall furnish to the Jurisdictional Superintendent of Central Excise, a
Returns to be quarterly statement, in Form A–3, furnishing the details of specified services received by it without
given by SEZ payment of service tax, by 30th of the month following the particular quarter. (Notification
No.15/2013 dt. 21.11.2013)

Others

• As per VCES, a declaration shall become conclusive only upon issuance of acknowledgement of
Discharge discharge. Further, the acknowledgement of discharge in Form VCES–3 shall be issued within 7
Certificate under working days from the date of furnishing of details of payment of tax dues in full along with
VCES (Voluntary interest, if any, by the Declarant.
Compliance
Encouragement • Upon payment of the tax dues in full, along with interest, if any, Chief Commissioners are also
Scheme) advised that they should ensure that the discharge Certificate is issued promptly, and not later
than the stipulated period of 7 days. [Circular No.176/2/2014–ST dt. 20.01.2014]

The Designated Authority should not ask for any other undertaking or declaration beyond what has
been prescribed in the Scheme. Declarant would pay a minimum 50% of the tax dues by
31.12.2013. Rest of the payment may be made by 30.6.2014, without any interest, and any amount
Role of remaining unpaid on 30.6.2014 shall be paid by 31.12.2014, with interest for the period of delay
Designated beyond 30.6.2014. There is no bar to pay these amounts in installments. The Scheme does not
Authority under envisage investigation by the Designated Authority into the veracity of declaration.
VCES
Only if the Commissioner has reason to believe that the declaration filed by the Declarant is
substantially false, he may, serve notice on the declarant requiring him to show cause why he
should not pay, the tax dues not paid or short–paid. (Instruction No. B1/19/2013 dt. 11.12.13)

W.e.f. 01.01.2014, E–payment is compulsory if the total Service Tax paid in the Previous Financial Year is
E–Payment
` 1,00,000 or more. Note: Earlier, the limit was ` 10,00,000. (Notification No.16/2013 dt. 22.11.13)

Service Tax on Resident Welfare Association (RWA)

Circular No. 175/01/2014–ST, dated 10–1–2014

Issue Clarification

In a Residential Complex, monthly contribution collected

from Members, is used by the RWA for the purpose of
making payments to the third parties, for commonly used Such contributions (meant for sourcing of goods/ services
services or goods. Example.for providing security service, from third party for common use of members) would be
1.
maintenance or upkeep of common area and common liable for service tax subject to a monetary ceiling of `
facilities like lift, water sump, health and fitness centre, 5,000 p.m. per Member.
swimming pool, payment of Electricity Bill for the common
area and lift, etc.]. Is Service Tax leviable?

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Issue Clarification

If the monthly contribution per any or some of the

members exceeds ` 5,000, the entire contribution of those
If the contribution of a member/s of a RWA exceeds ` 5,000 members whose per month contribution exceeds ` 5,000
2.
p.m. how should the Service Tax liability be calculated? would be ineligible for the exemption. Service Tax would
then be leviable on the aggregate amount of monthly
contribution of such Members.

Is the Small Service Provider exemption of `10,00,000 The Exemption of `10,00,000 is available for the
3.
eligible for RWA? aggregate value of services provided by RWA.

Does “Aggregate Value” for the purpose of threshold Aggregate Value does not include the value of services
4.
exemption, include the value of exempt service? which are exempt from Service Tax.

If a RWA provides certain services such as payment of Expenditure or Costs incurred by a RWA as a Pure agent
electricity or water bill issued by third person, in the name of of the Member, shall be excluded from the value of
5.
its members, acting as a “Pure Agent” of its members, is taxable service, subject to the conditions specified in the
exclusion from value of taxable service? Rule.

RWA may avail cenvat credit and use the same for
6. Is CENVAT Credit available to RWA for payment of Service Tax?
payment of Service Tax, as per the CENVAT Credit Rules.

Procedure for Cancellation of Service Tax Registration

(Trade Notice No.18/2013–ST dt. 19.12.2013)

1. Reasons for Surrender / Cancellation:

(a) Assessee's Turnover is below the threshold limit.
(b) Change in the constitution of Assessee, e.g. from Partnership to Company or Amalgamation, etc.
(c) Death of Proprietor.
(d) Assessee closing down his taxable service business.
(e) Assessee has centralized registration and hence wants to surrender his other multiple registrations of branches.
(f) Assessee has shifted its office from the jurisdiction of one Division/Commissionerate to another, and instead of
requesting for change in the Location Code and Premises Code of the Assessee, a fresh registration has been taken
at the new address.

2. Procedure: All the Assessees who wish to surrender their Registration Certificates, shall file their application on–line
using the ACES module on www.aces.gov.in. The Assessee shall submit signed copy of print out of the application
generated by the ACES System to the Jurisdictional Superintendent of “Centralized Surrender Cell” in the concerned
Division Office along with the following documents:
(a) Application Form & Undertaking for Surrender of Service Tax Registration.
(b) Copies of ST–3 Returns from the date of taking registration till the date of surrender (maximum 6 returns only)
(c) In case the Assessee has not filed ST–3 Returns for the period mentioned above, then it is not necessary for him to
file the fresh return for surrender purpose, if his Taxable Turnover is below the exemption limit. He can apply for
waiver of penalty under Rule 7C of STR for non–filing of returns. The fact of non–filing of return should be dearly
mentioned in the Undertaking.
(d) Copies of Profit & Loss Account and Balance Sheet from the date of taking registration to the date of surrender but
for a maximum of last 3 financial years only. However, if Balance Sheet, Profit & Loss statement has not been
prepared, the Applicant may submit copies of Income Tax Return for the said period. If said Return has also not
been filed, then, the applicant should provide some evidence like Bank Statement to satisfy the office about the
correctness of reason for surrender.
(e) Details of Show Cause Notice, pending adjudication, details of confirmed demands, details of cases, audit, etc.
(f) Other relevant proofs must be given based on the reason for change.

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C. Customs
Nature Provision
Facts: Certain goods of the Assessee were seized on account of mis–declaration of particulars of
baggage. The passenger in his statement admitted the offence and showed his readiness to pay duty on
Whether seized goods or re–shipment of the said goods. The Adjudicating authority determined Total Value of
smuggled seized goods; ordered confiscation of seized goods u/s 111 of the Customs Act, 1962; imposed penalty on
goods can be the Assessee; confirmed and ordered for recovery of Customs Duty on the goods with interest, and gave
re–exported an option to pay Redemption Fine. On appeal by the Assessee, the Appellate Authority allowed re–export
from the of the confiscated goods. Against this order, the Department filed a revision application before the
Customs Revisionary Authority u/s 129DD of the Customs Act, 1962.
Area without
being Decision: The Government noted that the Passenger had grossly mis–declared the goods with intention
released to evade duty and to smuggle the goods into India. As per sec. 80, when the baggage of the passenger
from contains article which is dutiable or prohibited and in respect of which the declaration is made u/s 77, the
confiscation? Proper Officer on request of passenger can detain such article for the purpose of being returned to him on
his leaving India. Since the passenger neither made true declaration nor requested for detention of goods
for re–export, before the Customs Authorities at the time of his arrival at airport, the re–export of said
goods could not be allowed u/s 80 of the Customs Act. [Hemal K. Shah 2012 (275) ELT 266 (GOI)]

D. CENVAT Credit Rules, 2004

Topic Subject / Reference
Definitions
Facts of the case: The Assessee had two divisions namely, Textile Division and Plastic Division,
situated adjacent to each other on a common ground and surrounded by a common boundary wall.
Both the units had separate Central Excise Registrations, but the Assessee, a single entity, had a
common PAN under the Income–Tax Act. In order to receive continuous and uninterrupted supply of
electricity, the Assessee installed DG Sets/Electricity Generation Plant to be used in the factory of the
Treatment of 2 Textile Division, and it used Furnace Oil as Fuel in the generation of electricity and claimed CENVAT
units Credit on the same.
surrounded by
common When the Assessee's other unit required electricity, the Assessee supplied part of the electricity so
boundary for generated to its other unit. The contention of the Revenue was that the Assessee ought to reverse the
CENVAT credit taken on Furnace Oil used in the generation of electricity and supplied to the other unit.

Decision of the case: The High Court held that credit could be availed on eligible inputs utilized in the
generation of electricity only to the extent the same were used to produce electricity within the factory
registered for that purpose (Textile Division). However, credit on inputs utilized to produce electricity
which was supplied to a Factory registered as a different unit (Plastic Division) would not be allowed.
[Sintex Industries Ltd vs CCEx 2013 (287) ELT 261 (Guj.)]
Facts:
• The Assessee was engaged in the manufacture of medicaments. Since, the medicament could be
manufactured only upon approval of the Regulatory Authority after the product undergoes technical
testing and analysis, the Assessee availed the services of various technical testing and analysis
agencies for testing of clinical samples prior to commencement of commercial production. These
samples were manufactured in small trial batches and removed after payment of excise duty.
Input Service • The assessee availed CENVAT Credit of Service Tax paid by it on such testing services, and also on
the Commission paid to Foreign Agents for the sale of such medicaments.
• However, the Department alleged that unless goods reached the commercial production stage,
CENVAT Credit was not admissible. However, the Department contended that there was a clear
distinction between sales promotion and sale, and a Commission Agent is directly concerned with
sales rather than sales promotion.
• Therefore, Service provided by Commission Agent would not fall within the purview of the main or
inclusive part of the definition of Input Service.

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Topic Subject / Reference

Decision:
• The activity of testing and analysis of the trial batches was in relation to the manufacture of final
product as unless such trial batches were tested and approval from the regulatory authority was
obtained, the final product could not be manufactured. Hence, such Testing Services are
considered as Input Services.
• As regards the Commission paid to Foreign Agents, the High Court observed that there was nothing
on record to indicate that the Foreign Agents were actually involved in any sales promotion
activities like advertising which was covered in inclusive part of definition of Input Service. Hence,
not covered as Input Service.
[CCEx vs Cadila Healthcare Ltd 2013 (30) S.T.R. 3 (Guj.)]
First Stage Dealer includes an Importer who sells goods imported by him under the cover of an Invoice
on which CENVAT Credit may be taken, and such Invoice shall include an Invoice issued from his Depot
or the Premises of his Consignment Agent.
First Stage
Dealer
Note: Earlier, the Dealer who purchases from the Importer was considered as First Stage Dealer.
However, w.e.f. above amendment, such Dealers are excluded from the definition of First Stage
Dealers. (Notification No.18/2013 dt. 31.12.13)
Reversal of Credit
Due Date of Payment: The amount payable under sub–rules (5), (5A), (5B) and (5C), unless
specified otherwise, shall be paid by the Manufacturer of goods or the Provider of Output Service, by
debiting the CENVAT Credit or otherwise, on or before the 5th day of the following month except for the
month of March, where such payment shall be made on or before the 31st day of the month of March.
Reversal of
Credit – Rule 3
Recovery: If the Manufacturer of goods or the Provider of Output Service fails to pay the amount
payable under sub –rules (5), (5A), (5B) and (5C), it shall be recovered, in the manner as provided in
Rule 14, for recovery of CENVAT Credit wrongly taken and utilised. [Notification No. 01/2014–CX
(NT), dated 08.01.2014]
Where on any goods manufactured or produced by an Assessee, the payment of duty is ordered to be
Reversal of remitted under Rule 21 of the Central Excise Rules, 2002, the CENVAT Credit taken on the inputs or
Input Service Input Services used in or in relation to the manufacture or production of said goods shall be reversed.
Credit in case
of Remission of Impact: Earlier Rule 3(5C) required only reversal of Input Credit. However, pursuant to the above,
Duty even Input Service Credit shall be reversed. [Notification No. 01/2014–CX (NT), dated
08.01.2014]
Input Service Distributor
Rule 7 Clause (d) has been amended to provide that the credit of service tax attributable to service
Input Service used by more than one unit shall be distributed pro–rata, on the basis of the turnover of such units
Distributor during the relevant period to the total turnover of all its units, which are operational in the current
year, during the said period [Notification No 05/2014 – CX., (N.T.), dated 24.02.2014]
For the purpose of Rule 7, “Relevant period” has been defined as follows –
(a) If the Assessee has Turnover in the Financial Year preceding to the year during which credit is to
Definition of be distributed for month or quarter, as the case may be, the said financial year, or
“Relevant (b) If the Assessee does not have Turnover for some or all the units in the preceding financial year, the
Period” last quarter for which details of Turnover of all the units are available, previous to the month or
quarter for which credit is to be distributed. [Notification No 05/2014 – CX., (N.T.), dated
24.02.2014]
Records and Returns
Rule 9 has been amended to provide that Registered Importers shall also be required to file periodic
returns as may be specified by the Board. [Notification No 9/2014 – CE (NT), dated
28.02.2014]
Returns u/r 9
Note: The Board has notified the same form as applicable for First Stage and Second Stage Dealers
shall also be filed by Registered Importers on a quarterly basis [Notification No. 11/2014 CE (NT)
dated 28.02.2014]

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Topic Subject / Reference

CENTRAL GOVERNMENT’s POWERS

CG’s Powers: The Central Government may specify the nature of restrictions including restrictions on
CG’s Power to
utilization of CENVAT Credit and suspension of registration in case of a dealer and type of facilities to be
impose
withdrawn and procedure for issue of such order by the Chief Commissioner of Central Excise.
restrictions
Restrictions shall be on a manufacturer, first stage and second stage dealer or an exporter.
(Rule 12CCC of
CER, 2002) Situation: In case of misuse of CENVAT Credit, evasion of duty or any offences [Notification
No.14/2014–CE (NT), dated 21.03.2014]

Rule 5B – Procedures for Refund – Partial Reverse Charge Situation

[Notification No.12/2014–C.E.(N.T.), dated 03.03.2014]

1. Applicability: Refund of the Unutilized CENVAT Credit shall be claimed, if it used for following Output Services
(hereinafter referred to as “Partial Reverse Charge Services”)
(a) Renting of a Motor Vehicle designed to carry passengers on non–abated value, to any person who is not engaged
in a similar business,
(b) Supply of manpower for any purpose or security services, or
(c) Service portion in the execution of a works contract.

2. Refund: Unutilised CENVAT Credit taken on Inputs and Input Services during the half year for Partial Reverse Charge
= A – B, where,

CENVAT Credit taken on Turnover of Output Service under Partial Re verse Ch arg e during the half year
A = Inputs and Input Services × Total Turnover of Goods and Services in that half year
during the half year

B = Service Tax paid by the Service Provider for such Partial Reverse Charge Services during the half year.

3. Conditions and Safeguards:

(a) Refund ≤ ST Liability paid or payable by the Service Receiver w.r.t. partial reverse charge.
(b) The refund amount claimed shall be debited by the Claimant from his CENVAT Credit account.
(c) If amount sanctioned is less than the amount of refund claimed, then the Claimant may take back the credit of the
difference between the amount claimed and amount sanctioned.
(d) Only one refund shall be claimed for every 6 months under this Notification.
(e) The Refund claimed shall be filed after filing the Service Tax Return.
(f) No refund shall be admissible for the CENVAT Credit taken on Input or Input Services received before 01.07.2012.

4. Procedure for filing the Refund Claim:

(a) The Output service provider shall submit an application in Form A along with all the specified documents to the
Jurisdictional AC / DC, before the expiry of 1 year from the due date of filing of return for the half year.
Note: The last date of filing of application in Form A, for the period starting from 1st July 2012 to 30th September
2012, shall be 30th June 2014.
(b) In case of more than one return, time limit for of one year shall be calculated from the due date of filing of the
Return for the later period.
(c) Copies of the Return (s) filed for the half year for which the refund is claimed shall also be submitted while claiming
the refund.
(d) AC / DC shall satisfy himself of the correctness / completeness of the refund claim. He may call for any document,
in case he has reason to believe that information provided is incorrect / insufficient, and further enquiry needs to
be caused before the sanction of refund.

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 Latest Updates in Indirect Tax Law – Upto 30.04.2014

Prohibited Activities under CE Rules, & Consequences

[Notification No.16/2014–C.E.(N.T.), dated 21.03.2014]

1. Applicability: Only in cases where the duty of Excise or CENVAT Credit alleged to be involved exceeds ` 10 Lakhs –

2. Offences: If a Manufacturer, First Stage or Second Stage Dealer, or an Exporter including a Merchant Exporter, is
prima facie found to be knowingly involved in any of the following –
(a) removal of goods without the cover of an Invoice and without payment of duty,
(b) removal of goods without declaring the correct value for payment of duty, where a portion of Sale Price, in excess
of Invoice Price, is received by him or on his behalf but not accounted for in the books of account,
(c) taking of CENVAT Credit without the receipt of goods specified in the document based on which the said credit has
been taken,
(d) issuing Duty of Excise Invoice without delivery of goods specified in the said Invoice (Note: The Chief Commissioner of
Central Excise may order suspension of the registration granted for First Stage or Second Stage Dealer.)
(e) claiming of refund or rebate based on the duty of excise paid or taking of CENVAT Credit on Invoice or other
documents which a person has reason to believe as not genuine, (Note: The Chief Commissioner of Central Excise
may order withdrawal of the self sealing facility for export consignment, and each export consignment shall be
examined and sealed by the Jurisdictional Central Excise Officer.)
(f) removal of inputs as such on which Cenvat credit has been taken, without paying an amount equal to credit availed
on such inputs as per the CENVAT Credit Rules, 2004.

3. Withdrawal of Facilities: The Chief Commissioner of Central Excise may order for withdrawal of facilities or impose
the restrictions, namely–
(a) Payment of ED for each consignment at the time of removal of goods instead of monthly payment.
(b) Payment of ED without utilizing the CENVAT Credit
(c) Maintenance of movements of the principal inputs on which CENVAT Credit has not been taken.
(d) Intimation to the Superintendent regarding the receipt of principal inputs in the factory and making it available for
verification upto the period specified in the order,
(e) Every removal of goods from factory may be ordered to be under an Invoice which shall be countersigned by the
Inspector or Superintendent of Central Excise, before the said goods are removed from the Factory or Warehouse,
provided that the person is found to be knowingly involved in committing any of the offences.

Notes:
(a) The person against whom the order has been passed, may continue to take CENVAT credit, however he would not
be able to utilize the credit.
(b) If the Assessee commits offences for the first time, the restrictions shall apply for a period not more than 6 months
and for subsequent offences, restriction shall apply for a period not more than 1 year.
(c) During the period of suspension, the said Dealer shall not issue any Central Excise Invoice.

E. Common Topics
Section Provision
Demand, Recovery, Refund, Drawback
Decision: As recorded by the Adjudicating Authority, the incidence of duty had not been passed over
to the purchaser of finished goods. Such finding of the Adjudicating Authority had attained finality, as
nobody challenged the said order. Due efforts were made to find out whether amount of duty had
Refund – been passed over to purchasers, who are either government Companies or Corporations controlled by
Doctrine of Government.
unjust
enrichment Even Purchasers had admitted fact that amount of duty paid by Assessee had not been passed over to
said purchasers. In other words, the amount of duty had not been recovered from the purchasers.
Hence, refund was allowable. [International Conveyors Ltd vs Commissioner of Central
Excise & Customs [2014] 43 taxmann.com 75 (SC)]

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Padhuka’s Students’ Referencer on Indirect Taxes – For CA Final

Section Provision
Fact: In a case where the Assessee voluntarily pays the duty short paid, recovery of which has
Is Assessee become time–barred, can he be required to pay interest on the duty so paid?
required to pay
Observations: The High Court observed that in case the recovery of the unpaid or short paid duty
interest in case
has become time–barred, if the Manufacturer does not pay it voluntarily, it would not be possible for
of voluntary
the Department to recover the same. Thus, if he does it voluntarily despite completion of period of
payment of
limitation, he should not, further be saddled with the liability to pay statutory interest.
time–barred
duty? Decision: The High Court held that the Assessee was not required to pay interest in case of voluntary
payment of time–barred duty. [Gujarat Narmada Fertilizers Co. Ltd 2012 (285) E.L.T. 336 (Guj.)]
Facts: The Assessee imported Furnace Oil and supplied the same to sister unit for generation of
electricity, and the sister unit supplied electricity to the Assessee. The Assessee also claimed
exemption on import of Furnace Oil under the same Notification as was claimed by its sister unit. As
the Assessee was procuring Furnace Oil for captive Power Plant of another unit, it sought a clarification
from the Development Commissioner seeking as to whether import of furnace oil and receipt of
electricity would be liable to duty. The Development Commissioner replied in favour of the Assessee,
Extended period and the Assessee claimed the exemption. However, in spite of the clarification from the Development
where Assessee Commissioner, a Show Cause Notice demanding duty was issued on the Assessee more than six
had sought months after he had imported furnace oil on behalf of it sister unit. The contention of the Revenue
clarification was that the entitlement of duty free import of fuel for its captive power plant lies with the Owner of
from wrong the captive power plant, and not the consumer of electricity generated from that power plant.
authority
Decision: For invoking extended period of limitation, the intention to deliberately default is a
mandatory pre–requisite. The assessee had shown bona fide conduct by seeking clarification from the
Development Commissioner and in a sense had offered its activities to assessment. Only on receiving a
satisfactory reply from the Development Commissioner did the Assessee claim the exemption. Hence,
there was no deliberate default, and extended period is not invokable.
[Uniworth Textiles Ltd vs CCEx. 2013 (288) ELT 161 (SC)]
Facts: The Adjudicating Authority had disallowed the Refund Claim filed by the Assessee and called
for certain additional documents, although similar refund claims filed by the Assessee for the earlier
periods had been allowed by the Adjudicating Authority without these additional documents. The
Is non–filing of
Assessee failed to furnish the additional documents despite being given several opportunities to
documents
produce the same. The Adjudicating Authority passed an order rejecting the refund claim but failed to
despite several
record any reason as to why it differed with the earlier decisions.
opportunities, a
sufficient
Decision: If the assessee had failed to furnish additional information, it is obligatory on the part of
ground for
the Adjudicating Authority to record a finding as to why the documents furnished by the Assessee
passing a non–
were not sufficient to allow his claim, and why additional documents were necessary, especially
speaking order?
when on the basis of similar documents furnished by the Assessee in the past, the claims had been
allowed. Thus, the order of the Adjudicating Authority is liable to be set aside. [DBOI Global
Service Pvt. Ltd vs UOI 2013 (29) S.T.R. 117 (Bom.)]
Appeals and Revision
Explanation: If an appeal has not been filed by the Department following instructions issued for not
filing appeal below the monetary limit, no person, being a party in appeal, shall contend that the
Res Judicata –
Department has acquiesced in the decision on the disputed issue by not filing appeal. The
Not applicable
decisions/judgments accepted for reasons of monetary limit do not have precedent value.
INSTRUCTION [F.NO.390/MISC./163/2010–JC], DATED 12–12–2013
Facts: Penalty u/s 11AC was imposed on the Assessee. The Assessee paid the duty sought to be
evaded and interest payable thereon, before the passing of the adjudication order. However, the
Can the Assessee did not pay 25% of the penalty imposed u/s 11AC within 30 days from the date of the
Assessee pay communication of the order. Instead of paying 25% of the penalty within the stipulated time, the
reduced penalty Assessee chose to file an appeal against imposition of penalty u/s 11AC.
of 25% beyond
the time Point of dispute: The Revenue contended that Tribunal could not permit the Assessee to pay
prescribed reduced penalty of 25% beyond the time prescribed u/s 11AC.
under section
11AC? Observations of the Court: The High Court elucidated that when the 25% penalty was required to
be paid within 30 days, it would not be open to the Appellate Authority or the Court to direct the
assessee to pay 25% penalty beyond the stipulated time period.

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Section Provision

Decision: The High Court held that Tribunal could not permit the Assessee to pay 25% penalty
beyond the time prescribed under the first and second proviso to erstwhile section 11AC [now
Sec.11AC(1)(c)]. CCEx. vs Castrol India Ltd 2012 (286) E.L.T. 194 (Bom.)
Where stay orders have been issued by CESTAT, and the appeal itself not decided within 365 days of
Pendency of
such stay order, in terms of Sec.35C(2A) of the Central Excise Act, 1944, such stay orders stand
Appeal –
vacated after 365 days, even if the delay due the department [J.P. Transformers – [2013 TIOL
Vacation of Stay
1152 HC ALL (ST)]
Search and Seizure
In a case where the Assessee has been issued a Show Cause Notice regarding
confiscation, is it necessary that only when such SCN is adjudicated, can the SCN for
demand of Excise Duty and Penalty be issued?
Confiscation of
Goods and Observations: The High Court observed that since the subsequent Show Cause Notice only formed
Demand of prima facie view in regard to allegations, it could not be said to be issued after pre–judging the
Excise Duty question involved in the matter. Further, it was held that there was no legal provision requiring
authorities to first adjudicate the notice issued regarding confiscation and, only thereafter, issue SCN
for recovery of dues and penalty. Hence, the Adjudicating Authority could not be restrained from
proceeding further with the SCN. [Jay Kumar Lohani vs CCEx 2012 (28) S.T.R. 350 (M.P.)]
Facts: Assessee removed liquor without payment of State Excise Duty, and hence the relevant vehicle
was confiscated.

Decision: Transportation of any intoxicant in contravention of provisions of the Act or of any Rule or
Confiscation of
order made or notification issued or any licence, permit or pass, is punishable and any vehicle used for
Vehicle and
carrying same, is liable for confiscation.
release thereof
Where anything liable for confiscation is seized or detained, the same shall be produced before the
Deputy Commissioner who may order confiscation. No Court shall have jurisdiction to make any order
with regard to property used in committing any offence and seized under this Act. [State (NCT of
Delhi) vs Narender 42 Taxmann 47 (SC)]
Offences, Penalties and Prosecution
Facts: At the time, when the Appellant started rendering services, there was no Service Tax levy on
Rent–a–Cab service. However, Service Tax was imposed on Rent–a–Cab Service subsequently. A Show
Cause Notice was issued on the Appellants, proposing to recover Service Tax with applicable penalty
and interest, which the Assessee paid and the Assessee had also subsequently paid ST promply.

The issue was only in relation to the imposition of penalty. The Appellant contended that they did not
Penalty – where pay Service Tax at the relevant point of time as it being a new levy; they were unaware of legal
Assessee acted provisions. Also, there were divergent views of different Benches of Tribunal, which had added to the
bona fide and confusion, and the issue was debatable.
conflicting court
decisions
Decision: The High Court held that even if the appellants were aware of the levy of service tax and
were not paying the amount on the ground of dispute with its Clients regarding liability to pay ST,
there could be no justification in levying the penalty in absence of any fraud, misrepresentation,
collusion or wilful mis–statement or suppression. Moreover, when the entire issue for levying of the tax
was debatable, that also would surely provide legitimate ground not to impose the penalty.
[Ankleshwar Taluka ONGC Land Loosers Travellers Co. OP. vs C.C.E., Surat–II 2013 (29)
STR 352 (Guj.)]

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Padhuka’s Students’ Referencer on Indirect Taxes – For CA Final

Students’ Notes

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