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A2Z TAXCORP LLP Tax and Law Practitioners Page 1
This bulletin brings to you the highlights of recent updates and important judgments in the field of indirect taxation along with key inputs from other fields to keep you abreast of all the latest happenings.
A2Z TAXCORP LLP NEW DELHI, INDIA
Indirect Tax and Other Laws Communique 2thFebruary, 2015
A2Z TAXCORP LLP Tax and Law Practitioners Page 2
CONTENTS Page No
Service Tax
Case laws Services of maintenance of equipment on behalf of foreign
clients to Indian buyers and identifying prospective customers in India qualify as export of services
03
Input Service Distributor need not be a ‘manufacturer’ or ‘output service provider’ for availing Cenvat credit 05
Once the Assessee has filed an appeal by paying the mandatory pre-deposit amount of 7.5%, their bank account cannot be freeze
06
No Service tax leviable under ‘Club or Association’ service in respect of the services provided by clubs to their members in view of the principle of mutuality
07
Central Excise
Notifications and Circulars New method provided for the calculation of Basic Excise Duty
on Branded High Speed Diesel 08
Case laws
In case of inter-unit 'stock transfer' of intermediate goods, doctrine of unjust enrichment would not apply 08
Cenvat Credit cannot be denied on erection and installation of machines by the Manufacturer as part of Input service and activities relating to business of the manufacturer
10
Availment and distribution of Cenvat credit by the Head Office registered as ISD cannot be denied on the ground that the invoices are in the name of Branch Office
11
Customs
Notifications and Circulars
No Anti-Dumping Duty can be collected on Acrylonitrile Butadiene beyond the validity period 12
Revision in Rate of Exchange for valuation of exported and imported goods 12
Revision in Tariff value of specified imported goods 12
A2Z TAXCORP LLP Tax and Law Practitioners Page 3
Case Laws Declared value of Imported goods cannot be enhanced merely
on the basis of NIDB data 12
Distribution fees paid to non-resident for rights to distribute a service has nothing to do with the Imported Goods, therefore enhancement of Assessable Value of Imported Goods to the extent of remittance of distribution fees is untenable
14
Where the duty is mistakenly paid in excess, the Assessee is entitled to refund - No need to challenge the assessment of the Bill of Entry
15
Benefit of the ‘Served from India Scheme’ cannot be denied only on the ground that the companies were subsidiaries of foreign companies
16
Foreign Trade Policy
Notifications and Circulars
Applications for online IEC effective from February 1, 2015 17
News Flash 18
A2Z TAXCORP LLP Tax and Law Practitioners Page 4
SERVICE TAX
RECENT CASE LAWS
Services of maintenance of equipment on
behalf of foreign clients to Indian buyers
and identifying prospective customers in
India qualify as export of services
Samsung India Electronics Pvt. Ltd Vs.
CCE. Noida [2015 (1) TMI 1098 - CESTAT
NEW DELHI]
Samsung India Electronics Pvt. Ltd. (“the
Appellant”) was rendering Customer care
services to the customers of CDMA mobile
phone in India on behalf of Samsung
Electronics Company Ltd., Korea
(“Samsung Korea”). The Appellant was
also engaged in identifying new
prospective customers and effectively
communicating to them the features of
CDMA products of Samsung Korea. In
return, the Appellant was receiving a
commission from Samsung Korea in
foreign exchange during the period
August 2003-December 2003, May 2005-
December 2005 and April 2007-March
2012.
The Department demanded Service tax on
the amount so received and the demand
made against the Appellant was
confirmed along with interest and
penalties.
Being aggrieved, the Appellant preferred
an appeal before the Hon’ble CESTAT,
Delhi. The Appellant relying upon the
decisions in the case of Blue Star Ltd. Vs.
Commissioner of Service Tax [2014-TIOL-
2257-Cestat-Mum] (“Blue Star case”) and
Simpra Agencies Ltd. Vs. C.C.E. [2014
TIOL-687-Cestat-Del] submitted that the
activities undertaken by the Appellant on
behalf of Samsung Korea are in the nature
of export of services in terms of Rule 3(3)
of the erstwhile Export of Services Rules,
2005 (“the Export Rules”) and hence not
exigible to Service tax. As regards the
period prior to introduction of the Export
Rules, the Appellant submitted that they
are covered under the Circular No.
56/5/2003/ST dated April 25, 2003.
The Hon’ble CESTAT, Delhi relying upon
the decision in the Blue Star case and in
the case of Paul Merchants Ltd. Vs. CCE
Chandigarh [2012-TIOL-1877-CESTAT-
DEL], held that the Appellant has provided
the service of procuring purchase orders
for their foreign clients and providing
maintenance service to the Indian buyers
during the warranty period on behalf of
their foreign clients on the instructions of
foreign clients, which are covered by Rule
3(3) of Export Rules. Therefore, the
Appellant was not required to pay Service
tax and accordingly are entitled for
refund.
Our Comments: The Hon’ble CESTAT,
Delhi in the case of Microsoft Corporation
(I) (P) Ltd. Vs. Commissioner of Service,
New Delhi [2014- TIOL-1964-CESTAT-DEL]
set aside the demand of Rs. 256 Crores by
holding that the services provided to
foreign principals for marketing their
products in India qualify as an export of
service under the Export Rules and hence
A2Z TAXCORP LLP Tax and Law Practitioners Page 5
not exigible to Service tax.
However, it would not be out of place
here to highlight the recent change in the
definition of ‘intermediary’ given under
Rule 2(f) of the Place of Provision of
Services Rules, 2012 (“the POP Rules”) to
include intermediary in respect of goods
also in its scope w.e.f. October 1, 2014.
Accordingly, an intermediary of goods,
such as a commission agent or
consignment agent shall be covered under
Rule 9(c) of the POP Rules (Location of
service provider) instead of Rule 3 of the
POP Rules (Location of service recipient).
We are reproducing here under the
amended definition of ‘intermediary’ as
effective from October 1, 2014 for the
ease of your reference:
“(f) “intermediary" means a broker, an
agent or any other person, by whatever
name called, who arranges or facilitates a
provision of a service (hereinafter called
the 'main' service) or a supply of goods,
between two or more persons, but does
not include a person who provides the
main service or supplies the goods on his
account;”
Hence, this change in the definition of
‘intermediary’ has brought intermediary
for goods at par with intermediary for
services effective from October 1, 2014
and chargeable to Service tax on the basis
of Location of service provider.
Input Service Distributor need not be a
‘manufacturer’ or ‘output service
provider’ for availing Cenvat credit
Moser Baer India Ltd. Vs. Commissioner
of Central Excise, Noida [2015 (1) TMI
1093 - CESTAT NEW DELHI]
Moser Baer India Ltd. (“the Appellant”) is
the manufacturer of CDR, CD Rom, DVDR
and DVD Rom, falling under Chapter
Heading 85 of the Central Excise Tariff Act,
1985, at their factory situated at Noida.
The Head Office of the Appellant, located
at Okhla, Delhi is registered as an Input
Service Distributer (“ISD”) in terms of Rule
2(m) of the Cenvat Credit Rules, 2004
(“the Credit Rules”). The Head Office was
discharging Service tax liability under
Reverse Charge for the various services
received by them from foreign country.
The Service tax so paid by them was
distributed by the Head Office to the
Appellant’s factory at Noida, which was
utilized by the Appellant in their factory
located at Noida.
The Department contended that in as
much as the Service tax was being paid by
the Head Office, which was neither
engaged in the manufacture of any
excisable goods nor providing any output
services, they were not entitled to avail
the said credit and in turn not entitled to
pass on the said credit to the Appellant’s
factory located at Noida.
Being aggrieved, the Appellant preferred
an appeal before the Hon’ble CESTAT,
Delhi.
The Hon’ble CESTAT, Delhi after analysing
Rule 2(m) and Rule 7 of the Credit Rules
held that:
A2Z TAXCORP LLP Tax and Law Practitioners Page 6
In the light of Rule 7 of the Credit Rules
which provides the manner of
distribution of Cenvat credit by ISD, the
basic requisite condition for the
distribution of the said credit is that the
ISD receives the invoices towards
purchase of input services and pays the
Service tax. There is nothing in the said
Rule to suggest that the Head Office or
the office of the manufacturer should
be himself in a position to provide any
output service or to manufacture any
excisable goods;
Further, Cenvat credit on the input
services is not dependent upon the
actual receipt of the services in the
factory unlike the Cenvat credit of the
duty paid on the inputs, which is
dependent upon the actual receipt of
the inputs or the capital goods in the
factory. As such, when the services
were first received by the Head Office
and then transferred to the factory for
further utilization, it cannot be made a
ground for denial of Cenvat credit;
The Tribunal in number of cases has
held that where the documents are in
the name of Head Office, Cenvat credit
can be availed in the factory belonging
to the same manufacturer - Modern
Petrofils Vs. CCE, Vadodara [2010 (20)
S.T.R. 627 (Tri. - Ahmd.)] and CCE, Vapi
Vs. DNH Spinners [2009 (244) E.L.T. 65
(Tri. - Ahmd.)].
Therefore, the Hon’ble Tribunal allowed
the Cenvat credit to the Appellant
transferred from their Head Office.
Once the Assessee has filed an appeal by
paying the mandatory pre-deposit
amount of 7.5%, their bank account
cannot be freeze
Kala Mines and Minerals Vs.
Commissioner of Customs, Central Excise
& Service Tax, Goa [2015-TIOL-193-
CESTAT-MUM]
In the instant case, an Order was passed
by the Ld. Commissioner, Goa confirming
Service tax liability on Kala Mines and
Minerals (“the Appellant”). Being
aggrieved by the said Order, the Appellant
preferred an appeal before the Hon’ble
CESTAT, Mumbai by making a pre-deposit
of 7.5% of the Service tax demand
confirmed in terms of Section 35F of the
Central Excise Act, 1944 (“the Excise
Act”).
Despite of such compliance, the Deputy
Director, DGCEI, Goa has written a letter
to Appellant’s bankers namely HDFC, SBI
and Corporation Bank to remit the
amounts lying balance in the account of
the Appellant in order to credit the same
with the Government exchequer against
the dues. Pursuant to the said
communication, the banks froze the
accounts and were not allowing the
Appellant to operate the accounts for
their day-to-day activities/ functioning.
Being aggrieved, the Appellant made a
plea before the Hon’ble Tribunal.
On listing of the matter before the
Hon’ble Tribunal on January 19, 2015, the
Hon’ble Tribunal held that once statutorily
A2Z TAXCORP LLP Tax and Law Practitioners Page 7
mandatory deposit of 7.5% has been
made, there is no reason for recovery of
any further amount from the Appellant
and the action of the Deputy Director,
DGCEI seems to be beyond the scope of
law. Hence, there is no need to freeze the
account of the Appellant as long as the
appeal is pending before the CESTAT.
Accordingly, the Hon’ble Tribunal directed
the lower authorities, especially the
Deputy Director, DGCEI, Goa to defreeze
the account forthwith by issuing
appropriate instructions to the Appellant's
bankers.
Our Comments: The Central Board of
Excise & Customs vide Circular No.
984/08/2014-CX dated September 16,
2014 clarified that no coercive measures
for the recovery of balance amount i.e.,
the amount in excess of 7.5% or 10%
deposited in terms of Section 35F of the
Excise Act or Section 129E of the Customs
Act, 1962 shall be taken during the
pendency of appeal where the Assessee
shows to the Jurisdictional Authorities:
(i) Proof of payment of stipulated amount
as pre-deposit of 7.5% / 10%, subject to a
limit of Rs. 10 crores , as the case may be;
and
(ii) Copy of appeal memo filed with the
Appellate Authority.
It was further provided that recovery
action, if any, can be initiated only after
the disposal of the case by the
Commissioner (Appeals)/ Tribunal in
favour of the Department unless the order
of the Tribunal is stayed by the High
Court/ Supreme Court.
The recovery, in such cases, would include
the interest, at the specified rate, from
the date duty became payable, till the
date of payment.
No Service tax leviable under ‘Club or
Association’ service in respect of the
services provided by clubs to their
members in view of the principle of
mutuality
Matunga Gymkhana, Tahnee Heights Co-
Op Housing Society Ltd. And Mittal Tower
Premises Co-Operative Society Vs.
Commissioner of Service Tax, Mumbai
[2015 (1) TMI 1146 - CESTAT MUMBAI]
In the instant case, the three Appellants
namely Matunga Gymkhana, Tahnee
Heights Co-Op Housing Society Ltd. and
Mittal Tower Premises Co-Operative
Society (“the Appellants”) were running a
club for their members. The activities
carried out by the Appellants for their
members included Sports, Yoga etc.
The Department confirmed the demand of
Service tax on the Appellants based on the
premise that the Appellants had provided
taxable service namely 'Club or
Association' service specified in erstwhile
Section 65(105)(zzze) of the Finance Act,
1994 (“the Finance Act”) read with
Section 65(25a) thereof. Being aggrieved,
the Appellants preferred their respective
appeals before the Hon’ble CESTAT,
Mumbai.
A2Z TAXCORP LLP Tax and Law Practitioners Page 8
The Hon’ble CESTAT, Mumbai held as
under:
The Hon’ble High Court of Jharkhand in
the case of Ranchi Club Vs. Chief
Commr. Of C. Exc. & ST, Ranchi [2012
(26) STR 401 (Jhar)], has held that in
view of the mutuality and the activities
of the club, if club provides any service
to its members may be in any form
including as mandap keeper, then it is
not a service by one to another as
foundational facts of existence of two
legal entities in such transaction is
missing;
Subsequently, the Hon’ble High Court
of Gujarat in the case of Sports Club of
Gujarat Vs. Union of India [2013-TIOL-
528-HC-AHM-ST] has declared Section
65(25a), Section 65(105)(zzze) and
Section 66 of the Finance Act as
incorporated/ amended by the Finance
Act, 2005 to the extent that the said
provisions purport to levy Service tax in
respect of services provided by club to
its members, as ultra vires;
The afore stated judgments were also
considered by the Principal Bench of
the Hon’ble CESTAT, Delhi in the case
of Federation of Indian Chambers of
Commerce & Industry Vs.
Commissioner of Service Tax, Delhi
[2014-TIOL-701-CESTAT-DEL], wherein
it was held that on application of the
principle of mutuality, services
provided by clubs to their respective
members would not fall within the
ambit of the taxable ‘Club or
Association’ service nor the
consideration whether by way of
subscription/ fee or otherwise received
therefore be exigible to Service tax.
Therefore, the Hon’ble Tribunal after
holding that the matter is no longer res-
integra, decided the matter in favour of
the Appellants.
Our Comments: The concept of principle
of mutuality in respect of clubs and their
members needs to be tested legally post
facto July 1, 2012 (Negative List Regime of
Service tax) whereby the definition of
‘Service’ provided first time under Section
65B(44) of the Finance Act, which
interalia, provides that any activity carried
out by a person for another for
consideration is a ‘Service’.
However, Explanation 3 to Section
65B(44) of the Finance Act has carved out
an exceptions to the General Rule that
Service tax leviable only when services
provided by a person to another. In terms
of Explanation 3(a) thereof, an
unincorporated association or a body of
persons, as the case may be, and a
member thereof shall be treated as
distinct persons.
Thus effective from July 1, 2012, services
provided by clubs even to their members
may be exigible to Service tax.
CENTRAL EXCISE
NOTIFICATIONS/CIRCULARS
A2Z TAXCORP LLP Tax and Law Practitioners Page 9
New method provided for the calculation
of Basic Excise Duty on Branded High
Speed Diesel
In the exercise of the power conferred
under Section 5A (1) of the Central Excise
Act, 1944, the Central Government under
vide Notification No. 04/2015-CE dated
January 30, 2015 has provided the new
method of imposition of Basic Excise Duty
on Branded High Speed Diesel as follows:
a) 14% ad valorem plus Rs. 5.00
per litre or
b) Rs. 10.25 per litre, whichever is lower
The said Notification is effective from
January 30, 2015.
RECENT CASE LAWS
In case of inter-unit 'stock transfer' of
intermediate goods, doctrine of unjust
enrichment would not apply
Bhansali Engg. Polymers Ltd. Vs.
Commissioner of Central Excise & Service
Tax, Bhopal [(2015) 53 taxmann.com 264
(New Delhi - CESTAT)]
Bhansali Engg. Polymers Ltd. (“the
Appellant”) manufactured Acrylonitrile
Butadiene Styrene Polymers (“Final
Product”) at its two unit located at
Satnoor, Madhya Pradesh (“Satnoor
unit”) and Abu Road, Rajasthan (“Abu
Road unit”). In course of manufacture of
Final Product, two intermediate products
namely HRG Powder and E-SAN Powder
(“Intermediate Products”) arose which
were captively used.
During the month of November 2011,
there was some break down in Abu Road
unit, as a result of which Intermediate
Products could not be manufactured
there. Therefore, during November 2011,
Abu Road unit received Intermediate
Products from Satnoor Unit on stock
transfer basis on payment of Excise duty
under invoices. This transaction was
assessed provisionally as the assessable
value was to be determined in terms of
Rule 8 of the Central Excise Valuation
Rules, 2000 on the basis of the cost of
production and it was not possible to
determine the cost of production exactly
at that time.
Later, in the final assessment it was
ascertained that the duty finally assessed
was less than the duty paid on provisional
basis, therefore the Appellant filed six
refund claims which were allowed by the
Deputy Commissioner with the finding
that unjust enrichment was not involved.
Being aggrieved the Revenue preferred an
appeal before the Hon’ble Commissioner
(Appeals) wherein the refund claims were
rejected. Aggrieved by the order of the
Commissioner (Appeals), the Appellant
preferred an appeal before the Hon’ble
CESTAT, Delhi.
The Hon’ble CESTAT, Delhi after observing
that the Abu Road unit had reversed the
Cenvat credit taken to the extent of
refund filed, held that although Satnoor
unit had cleared Intermediate Products on
payment of Excise duty, wherein the price
of Intermediate Products and the duty
had been separately mentioned in
A2Z TAXCORP LLP Tax and Law Practitioners Page 10
invoices, but such clearances were on
stock transfer basis and not on sale. When
the clearances were not on sale but were
purely on stock transfer basis, there is no
question of Satnoor unit having recovered
the incidence of duty from Abu Road unit
and, as such, the bar of unjust enrichment
would not apply.
It was further held that it is neither the
Department’s claim nor any evidence
produced to show that during November
2011, the price charged by Abu Road unit
for Final Product was higher. Hence, the
doctrine of unjust enrichment is not
applicable in the instant case.
Cenvat Credit cannot be denied on
erection and installation of machines by
the Manufacturer as part of Input service
and activities relating to business of the
manufacturer
Hercules Hoists Ltd. Vs. CCE, Mumbai-III
[2015 (1) TMI 1089 - CESTAT MUMBAI]
Hercules Hoists Ltd. (“the Appellant”) was
a manufacturer of machinery and parts
thereof which were cleared on payment
of Excise duty. The Appellant had also
taken the responsibility of installing the
machinery at the customer's premises. For
the installation charges, the Appellant had
claimed Cenvat credit of the installation
charges so paid.
The Department alleged that the
installation charges had been paid beyond
the place of removal as the Appellant had
cleared the machinery from the premises
and these charges were not included in
the assessable value, therefore, the
Appellant was not entitled for Cenvat
credit of the installation charges.
Whereas the Appellant submitted that
these services of erection and
commissioning of machinery was a part of
their business activity as they are
manufacturing the machinery and
installing the same at the customer's site.
They are not charging any amount over
and above the invoice price of the
machinery for erection and installation
charges from their customers. Therefore,
whatever charges for erection and
installation have been borne by them is
Input service under Rule 2(l) of the Cenvat
Credit Rules, 2004 (“the Credit Rules”).
Further the Department also denied the
benefit of the Exemption Notification No.
22/2003-CX dated March 31, 2003 (“the
Exemption Notification”) in respect of the
goods cleared to the 100% EOU on
production of CT-3 certificate as the
Appellant was unable to produce the re-
warehousing certificate within 90 days.
Both the lower Authorities confirmed the
demand of duty and further imposed
interest and penalty. Being aggrieved the
Appellant preferred an appeal before the
Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai relying
upon the judgment of the Hon'ble High
Court in the case of Commissioner of C.
Ex., Nagpur Vs. Ultra Tech Cement Ltd.
[2010 (260) ELT 369 (Bom)], wherein it
was held that an assessee who is a
manufacturer of excisable goods is
A2Z TAXCORP LLP Tax and Law Practitioners Page 11
entitled for Cenvat credit of the Input
services availed by him in the course of
their business, held that since the
machinery was inoperative in the absence
of erection and installation, the services
availed by the Appellant for the erection
and installation of machineries are part of
the business and the Appellants was
entitled for availing Cenvat credit on the
same.
Further, in respect of denial of benefit of
the Exemption Notification, the Hon’ble
Tribunal held that although the Appellant
was required to submit the re-
warehousing certificate within 90 days
which they failed to do, but at the same
time the Department had not taken
further steps to verify whether the re-
warehousing certificate has been obtained
or not to deny the benefit of the
Exemption Notification.
Furthermore, since the facts were in the
knowledge of the Department during the
audit, the demand was set aside on the
ground of being time barred.
Availment and distribution of Cenvat
credit by the Head Office registered as
ISD cannot be denied on the ground that
the invoices are in the name of Branch
Office
Mahindra and Mahindra Ltd. Vs.
Commissioner of Central Excise, Mumbai
–V [2015 (1) TMI 1086 - CESTAT
MUMBAI]
Mahindra and Mahindra Ltd. (“the
Appellant”) was engaged in the
manufacture of motor vehicle parts falling
under Chapter Headings 84 and 87 of the
Central Excise Tariff Act, 1985. The
Appellant availed Cenvat credit on inputs
as well as input services used in or in
relation to the manufacture of their final
products.
A Show Cause Notice dated June 22, 2012
was issued to the Appellant alleging that
the head office of the Appellant located at
Worli, Mumbai, which is registered as an
Input Service Distributor (“ISD”), has
distributed inadmissible input service
credit under the ISD invoices/ challans
which have been utilized towards
payment of duty. It was further alleged
that in many cases, the ISD office has
taken Cenvat credit of Service tax paid on
input services on the basis of invoices
issued by service providers on the address
of the branch offices and other offices of
the Appellant not registered as ISD. Also,
the payments for such services, including
Service tax, have been made by the
respective branch offices to the service
providers.
Thereafter, the Adjudicating Authority
vide Order-in-Original dated February 5,
2013 confirmed the demand of duty along
with interest and penalty which was
further upheld by the Ld. Commissioner
(Appeals). Being aggrieved, the Appellant
filed an appeal before the Hon’ble
CESTAT, Mumbai.
The Appellant placed reliance on the
judgment of the Hon’ble Tribunal in the
case of Manipal Advertising Services Pvt.
Ltd. Vs. CCE, Mangalore [2010 (19) STR
506 (Tri.-Bang.)] wherein it has been held
A2Z TAXCORP LLP Tax and Law Practitioners Page 12
that if a person is discharging Service tax
liability from his premises having
centralised registration, the benefit of
Cenvat credit cannot be denied on the
ground that the invoices are in the name
of branch office.
The Hon’ble CESTAT, Mumbai after
observing that the branch offices have no
separate accounting system and their
accounts form part of the Head Office
accounts, which is registered as an ISD,
held that the Appellant had rightly availed
Cenvat credit in respect of the services
received at the branch office/ regional
office and consequently, their distribution
in the manufacturing unit is also proper.
It was further held by the Hon’ble Tribunal
that the Revenue has erred in disallowing
the credit on misconception of the fact
that the invoices are not in the name of
the Appellant. In the facts and
circumstances, the invoices are found to
be in the name of the Appellant issued to
the branch offices. The payments are
accounted at the head office which is
registered as an ISD. The availment of
Cenvat credit and the distribution by the
head office are legal and proper.
CUSTOMS
NOTIFICATIONS/CIRCULARS
No Anti-Dumping Duty can be collected
on Acrylonitrile Butadiene beyond the
validity period
In exercise of the power conferred under
Section 9A of the Customs Tariff Act, 1975
(“the Customs Tariff Act”), the Central
Government vide Notification No.
100/2005-Customs dated November 29,
2005 (“Notification No. 100”) had levied
Anti-Dumping Duty on “Acrylonitrile
Butadiene” for a period of five years from
the date of its initial imposition and
provided that the said levy can be further
extended to one year if the Directorate
General of Anti-Dumping and Allied Duties
(“the DGAD”) initiate the sunset review in
the matter of levy of Anti-Dumping Duty
before the expiry of aforesaid five years.
However, reportedly Anti-Dumping Duty
was being demanded and levied under
Notification No. 100 by various Customs
Authorities on Acrylonitrile Butadiene at
the time of its clearance despite the fact
that the DGAD had not initiated sunset
review in the matter of levy of Anti-
Dumping Duty on Acrylonitrile Butadiene
before the expiry of Notification No. 100,
in terms of Section 9A (5) of the Customs
Tariff Act which reads as under:
“Provided further that where a review
initiated before the expiry of the aforesaid
period of five years has not come to
conclusion before such expiry, the anti-
dumping duty may continue to remain in
force pending the outcome of such a
review for a further period not exceeding
one year.”
Now, the Central Government vide
Circular No. 05/2015-Customs dated
January 28, 2015, has clarified that since
the sunset review has not been initiated
by the DGAD in respect of extension of
imposition of Anti-Dumping Duty on
A2Z TAXCORP LLP Tax and Law Practitioners Page 13
Acrylonitrile Butadiene, hence Anti-
Dumping Duty cannot be levied and
collected on the same after the lapse of
five years from the date of its imposition.
Revision in Rate of Exchange for valuation
of exported and imported goods
In the exercise of the power conferred
under Section 14 of the Customs Act,
1962, the Central Government vide
Notification No. 16/2015-Customs (NT)
dated January 30, 2015 has revised the
Rate of Exchange for “Canadian Dollar”
and “Swiss Franc”, applicable with effect
from January 31, 2015 to determine the
Assessable Value in respect of imported
and exported goods.
Revision in Rate of Exchange for valuation
of exported and imported goods
In the exercise of the power conferred
under Section 14 of the Customs Act,
1962, the Central Government vide
Notification No. 13/2015-Customs (NT)
dated January 27, 2015 has revised the
Rate of Exchange for “Danish Kroner”
and “EURO”, applicable with effect from
January 28, 2015 to determine the
Assessable Value in respect of imported
and exported goods.
Revision in Tariff value of specified
imported goods
In exercise of the powers conferred under
Section 14 of the Customs Act, 1962, the
Central Board of Excise and Customs vide
Notification No. 15/2015-Customs (NT)
dated January 30, 2015 has revised tariff
value in respect of imported goods such
Palm Oil, RBD Oil, Soya bean Oil, Gold and
Silver etc. applicable with immediate
effect.
RECENT CASE LAWS
Declared value of Imported goods cannot
be enhanced merely on the basis of NIDB
data
Topsia Estates Pvt. Ltd. Vs. Commissioner
of Customs, Chennai [(2015) 53
taxmann.com 345 (Chennai - CESTAT)]
Topsia Estates (“the Appellant” or “the
Company”) imported PU Coated Fabrics
(“impugned goods”) of various
thicknesses from China and filed 24 Bills of
Entry during the period from November,
2012 to July, 2013. The Assessing Officer
enhanced the declared value of impugned
goods based on National Import Data Base
(“NIDB”) data under Rule 9 of the
Customs Valuation Rules, 2007 (“the
Valuation Rules”). The Appellant paid
duty under-protest. On appeal being filed
to the Ld. Commissioner (Appeals), the
same was rejected. Being aggrieved, the
Appellant preferred an appeal before the
Hon’ble CESTAT, Chennai. Before the
Hon’ble CESTAT, Chennai, the Appellant
submitted as under:
The Company have been importing
impugned goods from various ports
such as Chennai, Kolkata etc., and the
value of impugned goods depends on
the country of origin, quality, size,
quantity etc;
In another case, the Company
A2Z TAXCORP LLP Tax and Law Practitioners Page 14
imported impugned goods from
Kolkata Port for which the Adjudicating
Authority enhanced the declared value
and when the Commissioner (Appeals)
set aside the Adjudication Order, no
appeal was filed by the Department.
Even the Company have also got the
refund;
In present case, the Adjudicating
Authority has wrongly enhanced the
value of the impugned goods as it is
well-settled by the Hon’ble Supreme
Court and the Tribunal that the
Transaction value cannot be rejected
merely on the basis of NIDB data and
Rule 9 of Valuation Rules cannot be
invoked.
On the other hand, the Revenue
contented that the value of PU Coated
Fabrics is a contentious issue for a long
time. The declared value of impugned
goods is on the lower side in comparison
to NIDB data relating to the goods of same
description, same country of origin and
similar quality.
The Hon’ble CESTAT, Chennai relying upon
the decision of the Hon’ble Supreme
Court in case of Eicher Tractors Ltd. Vs.
Commissioner of Customs [2000
taxmann.com 53 (SC)] which was
followed by the Tribunal in various
decisions, held that since there was no
evidence of higher value of
contemporaneous import from same
sources and no allegation of mis-
declaration of impugned goods, declared
value cannot be enhanced merely on the
basis of NIDB data. In the present case,
Rule 9 of the Valuation Rules cannot be
invoked.
Distribution fees paid to non-resident for
rights to distribute a service has nothing
to do with the Imported Goods,
therefore enhancement of Assessable
Value of Imported Goods to the extent of
remittance of distribution fees is
untenable
Multi Screen Media Pvt. Ltd. Vs.
Commissioner of Customs, Mumbai
[2015-TIOL-191-CESTAT-MUM]
Multi Screen Media Pvt. Ltd., Mumbai
(“the Appellant”) imported 72
consignments of Digi beta tapes/ beta
tapes/ video tapes (“Imported Goods”) by
courier through CSI Airport, Mumbai,
during June to December, 2007 on
payment of Customs duty.
During the Departmental investigations, it
was found that the Appellant had entered
into the Service Agreement namely
“Programme Acquisition and Service
Agreement” and the Distribution
Agreement with MSM Satellite Singapore
Pvt. Ltd. (“Foreign Entity”). Foreign Entity
was engaged in broadcasting of channels
from Singapore and they regularly sent
foreign movies, programmes and other
contents acquired by them to the
Appellant for the purpose of distribution
to channels, for which the Appellant
remitted Rs. 19.76 Crores to Foreign Entity
towards their share of distribution fees.
The Revenue contended that such
distribution fees will be included in the
Assessable value of Imported Goods in
A2Z TAXCORP LLP Tax and Law Practitioners Page 15
terms of Rule 10(1)(c) of the Customs
Valuation Rules, 2007 (“the Valuation
Rules”) as distribution fee is a condition of
sale of Imported Goods. Therefore a Show
Cause Notice was issued, which was
adjudicated by the Commissioner of
Customs, CSI, Mumbai (“the
Commissioner”). The Commissioner
ordered for re-assessment of Imported
Goods resulting in enhancement of value
of Imported Goods to the extent of
remittance of distribution fees and
confirmed the demand of differential
Customs duty of Rs. 4.83 Crores along
with interest, penalty and also held that
the Imported Goods are liable for
confiscation. Being aggrieved, the
Appellant preferred an Appeal before the
Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai held as
under:
The payment of distribution fees was
for acquiring non-exclusive rights for
satellite delivered, advertiser
supported, and television service.
Hence, payment made was for the
rights to distribute a service and has
nothing to do with Imported Goods;
The letter dated December 28, 2007
addressed to the Standard Chartered
Bank reveals that the Appellant
remitted Rs. 19.76 Crores towards
distribution fees in terms of the
Distribution Agreement and this factual
position was confirmed by the
Chartered Accountant's Certificate
dated December 28, 2007 for
remittance under Section 195 of the
Income Tax Act, 1961. Hence, no
evidence was adduced to support the
Department’s contention;
The Appellant was registered under the
taxable category of ‘Broadcasting
Services’ and distribution fees collected
has been declared for payment of
Service tax in their Service Tax Returns
filed;
The Commissioner mis-directed himself
in including the value of a taxable
service rendered in India in the value of
the Imported Goods. The television
programmes have been aired from
Singapore and the tapes were not
required for broadcasting the
programmes. The requirement of the
tapes was for the limited purpose of
obtaining certification from Central
Board of Film Certification and
technical quality checks and has
nothing to do with the distribution
activity. Therefore, there are no
records to show that the remittance
made to Foreign Entity had anything to
do with the Imported Goods.
Hence, the Order enhancing the value of
the Imported Goods to the extent of
remittance of distribution fees and
demanding Customs duty thereon under
the Valuation Rules was set aside by the
Hon’ble Tribunal as being unsustainable in
law.
Where the duty is mistakenly paid in
excess, the Assessee is entitled to refund
- No need to challenge the assessment of
the Bill of Entry
A2Z TAXCORP LLP Tax and Law Practitioners Page 16
Cipla Ltd. Vs. Commissioner of Customs
(ACC & IMPORT), Mumbai [2015-TIOL-
201-CESTAT-MUM]
Cipla Ltd. (“the Appellant”) imported
Fermoterol Fumarate and filed a Bill of
Entry dated March 31, 2010 for home
consumption. The Appellant paid excess
CVD at 10% instead of effective rate of 4%
in terms of unconditional exemption
Notification No. 4/2006-CE dated March
1, 2006 (“the Notification”) and therefore
filed a refund claim Rs. 1,33,779/- towards
the excess paid duty.
The Assistant Commissioner of Customs
relying on the ratio of the judgement in
the case of CCE Vs. Flock India [2000 (120)
ELT 285 (SC] and Priya Blue Industries Ltd.
[2004 (192) ELT 145 (SC)] rejected the
refund claims on the ground that the
Appellant has not challenged the
assessment of Bill of entry. On appeal
being filed, the Ld. Commissioner
(Appeals) upheld the order of the
Assistant Commissioner. Being aggrieved,
the Appellant preferred an appeal before
the Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai relying on
the Aman Medical products Ltd. Vs. CC,
[2009-TIOL-566-HC-DEL-CUS] (“Aman
Medical Case”) held as under:
In the present case, there is no dispute
that at the material time of import the
effective rate of CVD was 4% by the
Notification and the Appellant has paid
excess duty of 10% by oversight.
Further, the judgments relied upon by
the lower Appellate Authority have
been distinguished by the Hon’ble Apex
Court in Aman Medical Case;
In light of the judgement of the Hon'ble
Delhi High Court in the Aman Medical
Case, it is settled that where the duty
was mistakenly paid in excess, there is
no need to challenge the assessment of
the Bill of Entry. The refund of excess
paid duty is admissible;
Although the Revenue in the instant
case contended that the judgement in
Aman Medical Case has been
challenged before the Hon'ble
Supreme Court, but it is observed that
though the Revenue has filed appeal
before the Supreme Court, the Apex
Court has not granted the stay of
operation of the order of the Hon'ble
High Court of Delhi. Therefore, the
judgement of the Delhi High Court in
case of Aman Medical Case is binding.
Therefore, the Hon’ble Tribunal allowed
the refund of excess paid CVD to the
Appellant with an instruction that the
sanctioning Authority must verify the
aspect of unjust enrichment before
sanctioning the refund.
Benefit of the ‘Served from India Scheme’
cannot be denied only on the ground that
the companies were subsidiaries of
foreign companies
Yum Restaurants (I) Pvt. Ltd. & Anr,
Nokia Solutions And Networks India Pvt.
Ltd. & Anr & EI DuPont India Pvt. Ltd &
Anr Vs. Union Of India & Ors [2015 (1)
TMI 1127 - DELHI HIGH COURT]
A2Z TAXCORP LLP Tax and Law Practitioners Page 17
Yum Restaurants (I) Pvt. Ltd. & Anr (“the
Petitioners”) are companies incorporated
under the erstwhile Companies Act, 1956
and have their registered office situated in
India. The Petitioners applied for license
(Duty Credit Scrips) in terms of the ‘Served
from India Scheme’ (“SFIS”) as framed
under the Foreign Trade Policy (“FTP”)
2004-09 (effective upto August 26, 2009)
and FTP 2009-14 (effective from August
26, 2009) which were duly accepted.
However, later on the Policy
Interpretation Committee (“PIC”) and
Director General of Foreign Trade
(“DGFT”) denied the benefit of SFIS, as
framed under the FTP to the Petitioners
and separate communications were sent
to the Petitioners withdrawing/ recalling
the said benefits on the ground that they
were subsidiaries of foreign companies.
Hence the objective of SFIS to accelerate
growth in export of services from India
which creates a powerful and unique
served from India brand is not achieved.
Being aggrieved, the Petitioners filed Writ
Petition before the Hon’ble High Court of
Delhi.
The Hon’ble High Court of Delhi allowed
the benefit of SFIS to the Petitioners and
held the following:
It cannot be disputed that DGFT is
empowered to interpret the FTP but
such powers can be exercised only
when the plain language of the policy
presents an ambiguity. It would not be
open for DGFT to introduce new
conditions and criteria under the guise
of interpreting the policy as that would
amount to amending the provision of
the FTP;
The words used in Paragraph 3.12.2 of
FTP 2009-14 (“Para 3.12.2”) are “Indian
Service Providers”. There is no scope to
read into these words that for service
provider to be Indian, its shareholders
must also be Indian. As this would
amount to introducing an additional
eligibility condition, which is
extraneous to the eligibility criteria as
spelt out in Para 3.12.2;
The conclusion of DGFT that Indian
companies having foreign equity
cannot be considered as Indian,
militates against well-established
canons of the Company Law;
The Petitioners are companies
incorporated under the erstwhile
Companies Act, 1956 having registered
offices in India and are governed by the
provisions of the statute and hence are
Indian Companies. Insofar as the
domicile of the Petitioners is
concerned, no distinction can be drawn
between the Petitioners and other
companies incorporated under the said
Act;
Therefore, the decision of DGFT/ PIC
denying the benefit of the SFIS to the
Petitioners by withdrawing/recalling the
said benefits was set aside.
FOREIGN TRADE POLICY
NOTIFICATIONS/CIRCULARS
A2Z TAXCORP LLP Tax and Law Practitioners Page 18
Applications for online IEC effective from
February 1, 2015
The operationalization of the mandatory
system of online applications for Import
Export Code (“IEC”) with effect from
January 1, 2015 was notified vide Public
Notice 76 dated November 27, 2014. This
was, however, kept in abeyance vide
Public Notice No. 80 dated January 6,
2015.
Now, the Director General of Foreign
Trade (“the DGFT”) vide Public Notice.
83/(RE-2013)/2009-2014 dated January
30, 2015 has notified the
operationalization of the new system of
online applications for IEC with effect
from February 1, 2015. Applicants having
access to net-banking facility with banks
such as HDFC Bank, ICICI Bank, Bank of
India, State Bank of India etc., can apply
online in the format Notified vide Public
Notice No. 76 (RE-2013) dated November
27, 2014.
However, those applicants who do not
have access to net banking facility with
the notified banks can use the facility of
submission of application in manual
mode, until further notice.
NEWS FLASH
Industry waits for tax cuts, GST this fiscal
year
With slogans like Make in India and talk of
investment doing the rounds, the industry
is nursing high hopes from this budget.
Apart from this, the industry wants import
duty to be scrapped to take on
competition from Sri Lanka, Bangladesh
and China. It is worthwhile concern that in
our country there is an import duty of
18.9%, while there is no import duty in
Bangladesh. Bank interest rates in
neighboring countries are cheaper. The
highest rate is 9% and in our country the
rate of interest starts at 12%. This needs to
be reduced to save the industry and help
them counter international competition.
Vasundhara Raje: GST to be implemented
with full preparation in Rajasthan
Rajasthan Chief Minister
Vasundhara Raje said that the State will
go ahead with the Goods and Services
Tax (GST) with full preparation in public
interests once it is implemented at the
Centre’s level.
Referring to the Empowered Committee
headed by Union Finance Minister which
she attended recently, Raje told
State level advisory committee called to
discuss next Fiscal Year 2015-16 budget
in the State that the GST would be taken
up with full preparations whenever
Central Government started it.
A seminar to bring awareness on GST
would be organized with the support of
Tax and Trade Association, and problem
of match-mismatch (input credit) would
be resolved by organizing camps, and the
concept of governance was changed and
replaced by good governance instead of
regulatory governance, she said.
Rise in tax rate under GST to increase
cost of telecom service: COAI
A2Z TAXCORP LLP Tax and Law Practitioners Page 19
The GSM industry body has warned that
any increase in rate of indirect tax from
current 12% Service tax to a higher rate
under Goods & Services Tax (GST) would
increase the cost of telecom service,
which is an essential service for common
man. In its pre-budget recommendations
to Finance Ministry, the Cellular
Operators Association of India (COAI)
said that a consultation process with
trade and industry bodies should be
initiated for GST, and a platform for such
consultation should be formed. "Since
place of supply rules for telecom services
are distinct in almost all the overseas
jurisdictions, India would also need
distinct place of supply rules for telecom
services under the GST regime," it
said. COAI has also proposed that the
telecom goods manufactured in Special
Economic Zones should be exempted
from basic Customs duty. It said that
such an exemption would lower the cost
of telecom network while at the same
time, supporting the 'Digital India'
project. In last year's budget, exemption
from payment of customs duty was
withdrawn on import of specified
telecom products without mentioning
the specific name or description of the
products.
The body has also raised its concerns over
taxability of interconnect usage charges,
saying that the judiciary in India has
unequivocally held that these are standard
services and hence, fee for same cannot
be taxed as royalty under Indian tax laws.
Government considering Swachh Bharat
Cess on all services
In a bid to mop up revenues for the
Swacch Bharat Abhiyan, the Government
is planning to impose a cess on all services
which come under the Service Tax regime.
Earlier, there were reports that a cess may
be imposed on telecom services but now
sources tell that all services might come
under the ambit. An announcement is
expected in the Budget. The Ministry of
Sanitation has sought Rs 1 lakh crore for a
period of 5 years to fund Swachh Bharat
Mission for this purpose.
While Corporate Social Responsibility (CSR)
contributions are being made by corporate
India, the Government is realizing that it
needs to create a specific flow of funds
which is likely to be achieved by way of
Swachh Bharat Cess. According to the
proposal mooted by the Finance Ministry
Swachh Bharat Cess could be anywhere in
the range of 0.02 to 0.05 percent. This is
likely to be introduced by way of an
amendment to the Service Tax Act which
will be a part of the Finance Act. In the
Budget session itself the cess will be
collected for a specific purpose primarily
funding of infrastructure for sanitation and
for other sort of machinery for cleanliness
purpose.
Steel Ministry seeks increase in basic
Customs duty to deter cheap imports
The Steel Ministry is set to seek a sharp
increase in peak rate of basic customs duty
on steel products to 25% from 10%, a
measure that it wants to be announced in
the Budget next month to help stem the
tide of cheap imports from China and,
more recently, Russia. The Ministry also
A2Z TAXCORP LLP Tax and Law Practitioners Page 20
wants sops to make exports of Goa's low-
grade iron ore feasible. It has already
asked the Finance Ministry for an
immediate increase in duty to 10% from
7.5% for flat products and to double it to
10% for long steel.
"Increasing peak rate will allow the
Government to change duty to meet
market demands without going to
Parliament," said a ministry official,
requesting not to be named. The Centre
can easily meet this demand, the official
said, pointing out that the World Trade
Organization's peak import duty for steel is
40%, in the interest of domestic
steelmakers. A simultaneous waiver of the
2.5% import duty on raw material for steel
such as coking coal, dolomite, limestone
and scrap and nickel used in stainless steel
is also being sought, according to industry
executives.
FM asked the CBEC officials to maintain
certain level of civility with Assessees
Ahead of the Budget, Finance
Minister Arun Jaitley underlined the need
for tax reforms and quick decision-making
to ensure stability in policy regime. The
Minister also asked the Central Board of
Excise and Customs (CBEC) officials to
maintain a certain level of civility with
assessees but to take to task evaders and
avoiders.
The Union Finance Minister said that there
is a need for change both in attitude and
mind-set towards investors' and assessees.
We need to have a non-adversarial tax
administration which is both investors' and
assessee’s friendly. The second major
concern has been globally expressed at all
forums. Principal concern that (was)
repeatedly expressed is the strapped
structure of India and its administration
(perceived being) highly adversarial.
Government is looking at archaic labour
laws, easy credit to boost manufacturing:
Niramala Sitharaman
The Government said it is looking at the
archaic labour laws and working towards
ensuring easy credit to entrepreneurs with
a view to boost manufacturing as part of
‘Make in India’ campaign.
“Labour law is the area where the
Government has to spend a lot of time.
Government is definitely looking at it
carefully to ensure that labour’s rights and
their interest are well protected but at the
same time hindrance of law. Archaic rules
may all be looked into and some kind of
resolution brought in,” Commerce and
Industry Minister Nirmala Sitharaman said.
The Minister said that States like Rajasthan
have already announced ways to relax
labour laws. On the issue of credit
availability, she said that cost of capital is
an important issue. Sitharaman said the
recent cut in interest rates by the RBI is a
positive signal and an “indicator that
things are moving in the right direction”.
‘Make in India’ is an ambitious programme
of Prime Minister Narendra Modi which
aims at attracting domestic and foreign
investments and boost manufacturing
sector growth.
A2Z TAXCORP LLP Tax and Law Practitioners Page 21
“GST (Goods and Service Tax) is going to
make a big reform in the way taxes are
collected. Smart cities are being proposed
and MoUs being signed to develop these
cities. We are building smart cities with
international technologies,” she added.
Government puts reforms on fast track to
boost confidence among foreign
investors
The Government of India is quick on its
reform measures since it came into power
in May 2014. The prime focus is to make
the environment cordial for doing business
in the country. Right from increase in the
FDI limit in various industries, deregulation
of the diesel prices, reform in the food
subsidy and Government’s stand in the
distribution. Besides, it has also been quick
in clearing the regulatory approvals for
auctioning the coal blocks that have been
de-allocated by the Supreme Court, and
auctioning of the telecom spectrums in
various bands. The Government is also
moving fast in the implementation of
Goods and Services Tax (GST). It is pushing
hard on reviving the infrastructure
development and in this direction it has
approved the new land acquisition bill
which will act in favour to revive the
stalled infrastructure projects.
The Government has also encouraged
banks to finance infrastructure projects
which are in need of funds. Understanding
the amount of capital required for
developing infrastructure like road, ports
and railway infrastructure - the
Government has also hiked the FDI limits
in some sector and also opened the door
for FDI in closed sector.
The reform in the food subsidy and
distribution includes decentralizing grain
procurement, a process for disposing of
excess food grains, delivering food, and
fertilizer subsidies via direct cash transfers,
and reducing food subsidy coverage as
mandated by the National Food Security
Act to 40 per cent of the population from
67 per cent.
'Corporates must partner civil societies
for CSR activities'
With the eligible corporates mandated
under the new Companies Act to spend
two percent of their net profit for
corporate social responsibility (CSR)
activities, experts pitched for partnerships
with civil society for effective
implementation of corporate sponsored
peripheral development work at the
ground level.
"The companies should outsource
the CSR activities to civil society sector
instead of creating an army of people for
carrying out the CSR activities. They should
allow not for profit companies to actually
execute the programme at the ground
level," said Bhaskar Chatterjee, Director
General and CEO, Indian Institute of
Corporate Affairs at a multi-stakeholder
dialogue on corporate social responsibility
(CSR), here, jointly organized by Indian
Institute of Corporate Affairs (IICA) under
Union ministry of Corporate Affairs, Centre
for Youth and Social Development (CYSD)
and National Foundation for India in
collaboration with Unicef.
A2Z TAXCORP LLP Tax and Law Practitioners Page 22
ABOUT US
A2Z TAXCORP LLP having professionals from Multi disciplines which provides services under
the Indirect Tax Laws, DGFT, Foreign Trade Policy, SEZ, EOU, Export – Import Laws, Free
Trade Policy, Accounting, Auditing, Law, Company Laws, etc.
Executive Consultant:
Bimal Jain FCA, FCS, LLB, B.Com (Hons.)
CONTACT
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A2Z Taxcorp LLP Editorial Team: Isha Bansal, ACS Niraj Kumar, ACA ImpreetKaur, ACS