November 2014 ISSUE 14 Latest on CENTRAL EXCISE Circulars / Instructions The place of removal needs to be ascertained in term of provisions of Central Excise Act, 1944 read with provisions of the Sale of Goods Act, 1930. Payment of transport, inclusion of transport charges in value, payment of insurance or who bears the risk are not the relevant considerations to ascertain the place of removal, the place where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal. [Circular No. 988/12/2014-CX dt.20.10.2014] CENVAT Credit of Service Tax paid on outward transport - Delivery of goods at buyer's premises - Credit is not admissible of freight charges as they are not integral part of price of goods. [2014-TIOL-1720-HC-CHHATISGARH-CX] MODVAT or CENVAT credit taken on basis of certificate issued by Directorate of Revenue Intelligence (DRI) valid. [2014-TIOL-1784-HC-ALL-CX] Refund of unutilized credit is only permissible in case of export of goods and not for any other reason - Refund in cases of closure of factory is not provided under the statute. [2014-TIOL-1981-CESTAT-MUM] Segregating defective Inputs and valuing them at lower rate for purpose of stock valuation is not equivalent to writing off value of inputs in books of account - no cause for reversal of credit. [2014-TIOL-2003-CESTAT-MUM] Short supply of goods - As the appellant failed to supply the specified quantity during a specified period, therefore, the payments were deducted by the customer - whatever amount they have received less from the buyer, they are entitled to take refund of the duty component involved in the deducted amount. [2014 (10) TMI 378 - CESTAT MUMBAI] Export warehousing facility now at Bhuj Taluka in Kutch District in the state of Gujarat. [Circular No.987/11/2014-CX dt.15.10.2014] extended Central Excise is empowered to conduct audit based on the statutory backing under Rule 22 of CER, 2002 which flows from clause (x) of section 37(2) and the general rule making powers under section 37(1) of the Central Excise Act, 1944. [Circular No. 986/ 10/ 2014-CX dt.09.10.2014] Issues and Views XYZ (Manufacturer) had stock transferred the excisable goods to its excise registered depot. Now from depot it will be delivered to a customer in Nepal. If the depot issues an excise invoice in the name of the customer in Nepal, can the Nepal customer get the excise duty benefit? Now the manufacturer is allowed to clear the goods without payment of duty under UT-1 or on payment of duty under claim for rebate to Nepal. Therefore, there is no question of getting any excise duty benefit by the customer in Nepal. XYZ is generating and supplying electricity to PQR Company. In their invoice, they are neither charging excise duty nor service tax. Is it correct? Electricity is goods and hence its supply or trading cannot be subject to service tax. There is no excise duty on electricity though it is goods. XYZ is selling the goods below the cost of production. Rule 6 of the valuation rules has been amended w.e.f.11.07.2014 to take care of such situation. However, legally can the department demand duty for the period prior to 11.07.2014 based on Fiat judgment? Even prior to 11-7-2014, Fiat judgment had no universal applicability. Even earlier CBE&C had clarified that Fiat judgment applies only if there are circumstances similar to Fiat case otherwise even earlier, cost of production was not relevant unless there is some other indirect consideration. “Death, taxes and childbirth! There's never any convenient time for any of them.” November 2014 ISSUE 14 Flash News on Service Tax Circulars Levy of service tax on activities involved in relation to inward remittances from abroad to beneficiaries in India through MTSOs. [Circular No.180/06/2014 – ST dt.14.10.2014] Issues and Views ST - On reimbursements of Courier, fax and electricity charges, service tax is payable along with interest as these charges have been incurred as part of C&F agency function. [2014-TIOL-1948-CESTAT-MUM] ST - Microsoft case - Service provided to Principal situated in Singapore to market products in India is an Export of Service and not liable to Service Tax. [2014-TIOL-1964-CESTAT-DEL] ST - Delay in payment of tax - Merely, because CENVAT credit is available in books of accounts, it does not mean that tax has been paid - demand of interest upheld - Revenue appeal allowed. [2014-TIOL-2020-CESTAT-MUM] Cross utilisation of credit for the payment of service tax whereas availed in relation to manufacturing activity not permissible. [2014 (10) TMI 206 - CESTAT MUMBAI] Dismantling/handling and transportation of unusable material used for renovation and repair of factory machinery - Services covered by definition of ‘Input Service’ under Rule 2(l) of CENVAT Credit Rules, 2004 as activity in relation to manufacture. [2014 (33) S.T.R. 71 (Tri. - Del.)] XYZ is an automobile dealer and provide infrastructure facilities to general insurance companies and collect insurance premium at their place on behalf of the insurance companies. In return, the Insurance companies pay them the Infrastructure Expenses. Is XYZ liable to pay service tax on it and if yes under which accounting code? Yes, XYZ is liable to pay service tax on it under the category of ‘Business Support Service’. In case software imported by way of E-delivery /direct download, is service tax payable on it? It will not fall under Rule 9 of Place of Provision of Service Rules since it is not online data access service. Therefore by default it will fall under Rule 3 and service tax will be payable on it as Import of Service. XYZ Ltd. Had given a contract for Gas Changing in Air compressor to an Individual for a composite value of Rs.11000/- & No separate value in respect of gas & refilling charges is available then, How company should discharge its liability under RCM? XYZ to pay service tax under partial reverse charge mechanism under the category of Works Contract Service. The value to be considered for the same will be 70% of the total value and on that Service Tax @ 12.36%. Once service tax amount is arrived, 50% of the same to be paid by XYZ. XYZ is a CA Firm providing accounting services to a Limited company situated at London. The service is provided from India. The service is performed by employee of CA firm in India. 1) Whether it is export of service and exempted from service tax? It is export of service as per Rule 3 of Place of Provision of Service Rules and therefore no service tax. “Death, taxes and childbirth! There's never any convenient time for any of them.” November 2014 ISSUE 14 Amendments under Customs / FTP Circulars Clarification regarding testing of samples Pesticides. [Circular No. 10/2014 Cus. dt.17.10.2014] of import of Issues on Baggage Question: An Indian Resident visiting Germany brought following goods while returning to India. (a) Personal effects like Cloths etc. Valued at Rs.25000/-. (b) Two Liter of Liquor of Rs.1600/-. (c) New Camera of Rs.39800/-. What is the Customs duty payable? Undervaluation - Import of aluminium scrap through various ports. Evidence produced by Department to show undervaluation and basis of enhancement of transaction value not sustainable - Printout generated from computer seized not admissible for nonfulfilment of statutory conditions of Section 138C of Customs Act, 1962. [2014 (299) E.L.T. 83 (Tri. - Mumbai)] Refund claim - Unjust enrichment applicable to refund of Customs duty paid on capital goods - Hence, importer has to produce documents to discharge onus of proof that duty burden has not been passed on - Section 27 of Customs Act, 1962. [2014 (299) E.L.T. 153 (Mad.)] Answer: (a) There is no duty on personal effects. (b) Liquor up to 2 Liter of Rs.1600/- can be accommodated in General Free Allowance. (c) The total General Free Allowance [GFA] is Rs.25000/-. Total dutiable goods imported are Rs.41400/[Rs.39800/- + Rs.1600/-]. After deducting GFA of Rs.25000/-, passenger has to pay duty on Rs.16400/- [Rs.41400/- minus Rs.25000/-] (d) The duty payable is 35% plus Education Cess @ 2% and SHEC @ 1% of duty. (e) Hence, duty payable is Rs.5740/-, Education Cess of Rs.114.80 and SHEC Rs.57.40. Issues and Views Whether a copy of the statement recorded by the concern officer of the customs under section 108 of the customs act 1962 be obtained from the department? If department issues SCN on basis of that statement, the department is bound to give it, otherwise no. Office: 503, Shree Sadan, Ghantali Devi Mandir Road, Ghantali, Thane - West (400602). Cell: 9869004521. Phone: 25437981 Correspondence: 103, Aishwarya Laxmi, Maharshi Karve Road, Opp. Namdeo Wadi Hall, Naupada, Thane-West (400602) Email: karandikarassociates@gmail.com Website: www.karandikarassociates.com excise@karandikarassociates.com www.centralexciseconsultants.com