covers december 2014 - bizsolindia.com being at the root. recently in ferguson ... that a sadhu is...

Bizsol UPDATE December - 2014

1

President Obama has started his work on the

legacy that he is going to leave behind. After the

drubbing the Democrats received in the biennial

elections to the Senate and the Congress with about

two years to go before he demits office, he seems to

have decided not to be a premature lame duck

President. With the legislative bodies filibustering his

initiatives repeatedly on immigration reforms he

decided to implement his proposals by exercising his

executive authority as the President. The measures

announced by Obama would bring out number

immigrants from the shadows to the mainstream

America. Predictably the Republicans are crying foul.

Other than theiropposition to the President's move to

permit illegal immigrants to stay in the country legally

subject to some conditions, they are also cut up with

their President for being authoritarian in his approach

and for bypassing the Legislature. For people from

outside like us it may look a little strange that the

nation of immigrants sparring over who should stay

in and who should be kept out. I am reminded of our

own mind set when we undertake our train journeys.

When you are on the platform and want to board a

train you fight fiercely like a Communist to get into a

compartment. Once inside you would become a

Socialist displaying the best of manners requesting

the seated passengers to adjust a bit so that you can

also be seated along with them. Come the next station

you will realise that you have already become a

Capitalist enjoying the fruits of your labour and would

instruct those near the door to the compartment to

lockit so that no more can get in. Come to think of it,

the only ones who can legitimately object to

regularising the illegal immigrants' status in the US

are the Native Americans! Where are they?

Even as the President was unveiling the modalities of

regularising the illegal status of the immigrants in the

US, across the Atlantic David Cameron, the British

Prime Minister was at pains to explain his party's

FROM THE DESK OF THE CHAIRMAN

immigration policy to his countrymen. He came down

hard, albeit indirectly on the so called freeloaders from

other countries of the European Union who live on

the doles of the British government as per the various

treaties which hold the EU nations together. Though

Cameron spelt out some measures restricting

immigration from other countries, his focus primarily

was on those who come in from the EU block. In one

way the British PM has turned the EU unity on its head,

for free and reciprocal movement of people and

materials within the EU block is central to the very

existence of the Union. Cameron was hardly subtle

about his intentions to make this an election issue

and what is more, a willingness to walk out of the EU

on this issue, if required. That is news with far

reaching consequences. Britain's commitment to the

EU for some reason has always been ambivalent.

Things might come to a head if the Conservatives

get elected. Watch this space.

The United States is a divided country, racial

prejudices being at the root. Recently in Ferguson

County in the State of Missouri widespread riots broke

out when a Grand Jury came to the conclusion that

the police officer who shot and killed a black unarmed

man should not be charged with murder. The Grand

Jury in the American judicial system decides whether

there is a prima facie case exists to try anyone for a

crime. Once the case goes to trial the Trial Jury

deliberates on the culpability of an accused. Riots

broke out in many parts of the country and even the

President had to come on the TV to appeal for calm.

So much is the mistrust and anger among the African

American citizens with the law enforcing agencies that

even an appeal by an elected President who happens

to be black and the plea of the victim's parents fell on

deaf years. America is on edge. One has to accept

violence and vitriolic as part of day to day life in the

name of race and caste - you either deal with them or

be prepared to live with them.


2

Here is one brilliant lesson in strategy that you will

not find in any management text books. These days,

after the Ukrainian adventures by Russia, Vladimir

Putin has become a persona non grata on the world

stage. On the last day of the recent APEC Summit

meeting in Beijing there was a display of fireworks in

the open.The participating heads of state and

governments with their partnerswatched the

spectacular show on a chilly night. Even as the host

Xi Jingping was chatting with Obama, Putin wrapped

a shawl around the shoulders of Peng Liyuan, the

Chinese President's wife. The latter acknowledged

the chivalrous gesture on the part of Putin much to

the embarrassment of the Chinese. The Chinese

media promptly erased the footage for obvious

reasons. Putin is the heartthrob of many including

some Chinese women for his macho, muscular and

man-of-action image. The lesson - you may not be

welcome on stage but you can still upstage them

behind the stage.

The so-called master stroke played by Sharad Pawar

came unstuck a wee bit quickly. By offering

unconditional support the NCP wanted obviously to

curry favour with the ruling party in the event the BJP

decided to spring clean the Augean stable called the

state of Maharashtra. The strategy may have worked

for the BJP to put the Shiv Sena in its place but it did

not help matters for the NCP. Overnight the party

became an untouchable going by popular sentiments

as reflected in the media. First of all there were no

takers for the reasons given by NCP to support BJP

based on lofty ideals. It sounded phony at best. People

were unanimous in their view that it went against the

spirit of the people's mandate. In order to justify this

stand spokesperson after spokesperson went to great

lengths to emphasise the point that NCP is actually

corrupt. Had Pawar not taken this route perhaps NCP

would have gone down quietly, downplaying the image

of corruption, like the Congress and wait to fight

another day. That is not to be. As the admen would

put it, the top of the mind recall for the acronym NCP

is definitely not what the party men would claim to be

the party's name. Master strokes, after all, have a

contextual reference. End of the day in the Assembly

the BJP won the vote and lost the trust; the NCP lost

both, both inside and outside the Assembly.

Two months back I had compared in these columns

Narendra Modi to Tayyip Erdogan the charismatic

President of Turkey. Recently I happened to see a

column written Amitav Ghosh, the author and

columnist comparing these two personalities, their

backgrounds and the countries they come from.The

comparison was strikingly and eerily similar - too

similar to be true. Both of them emerged victorious

by dethroning entrenched secular nationalistic elite.

Both come from humble backgrounds. The countries

they rule are multi-ethnic and multi-religious. Ghosh

concludes that both Erdogan and Modi came to power

by riding a wave of neo-liberal globalisation and their

rise is proof that an economic ideology when wrapped

in a packaging of religious symbols and gestures can

have tremendous electoral allure. That is saying

something. Erdogan came to power a decade ago.

According to the author if one were to extend the

parallels and similarities and project Modi into the

future with protests particularly in the north of India,

Modi could become more authoritarian and

repressive, if he takes a leaf out of Erdogan's book.

Some food for thought for all those who are elevating

Modi to a cult figure.

While on the subject of comparisons and

contradictions I will need to add one more. In these

columns I had written about the sartorial tastes of

Pandit Nehru and Narendra Modi some time back.

The similarities between the two end there. Nehru

conquered whatever was there to conquer including

the hearts and minds of the people of India. Today

the biggest question is whether Nehru can indeed

survive Modi. The Congress in their enthusiasm to

garner the Nehru legacy willy nilly pushed Patel from

the national stage only to be usurped by Modi for his

own use. Now in its eagerness to belittle the legal

heirs of Nehru the BJP is on a trip to erase the

contributions made by Nehru. In as much as the

deification of Nehru by the present day Congress party

is not warranted the rejection of the legacy of Nehru

by the ruling party is also unwarranted. To look at the

contribution of Nehru through the prism of today's

India would be doing a disservice to Nehru. Nehru for

all his faults was perhaps more nationalistic than the

present day BJP leaders are. If what the BJP is doing

to Nehru's legacy is cheap, what the Congress is

doing to perpetrate his legacy is petty - imagine not

inviting the PM when celebrating the 125th birth


3

anniversary of Nehru. Nehru, the statesman, clearly

has no chance whatsoever to redeem himself before

the politicians of today, the Congress included. At this

rate the BJP need not do anything to obliterate the

legacy of Nehru; the Congress will do it for them. It

has already brought down the image of a PM to that

of a mere party leader.

For the world outside, India is a land of sadhus and

snake charmers. I do not know about snake charmers;

but am certain about India being the land of the

sadhus. In today's India the sadhus and sadhvis wield

such enormous power, spiritual or otherwise, that they

deserve to be considered a force to reckon with. A

Baba in Hisar, Haryana takes on the might of the state

with his own private army. A sadhvi from Uttar Pradesh

successfully stops the working of the Parliament of

the country deploying only her abusive tongue,

demonstrating at the same time that an agent of God

can speak such gutter - language with such felicity as

an uncouth slum dweller. If you think that that is all

that a sadhu is capable of, think again. A baba from

Jalandhar who died some ten months back with his

body kept in an ice box is holding the entire police

force in Punjab to ransom. As of going to press the

police in Jalandhar are pleading with the spirit of the

baba to take his own mortal remains so that ordinary

mortals in the neighbourhood can live in peace.

Justice V R Krishna Iyer passed away at the ripe old

age of 100. We take this opportunity to pay tributes

to this extraordinary man. He was an intellectual

among jurists and a champion of the proletariat at

the same time. He lived many lives in one life span

unlike many as the title of his autobiography itself says

- "Wandering in Many Worlds". He served as a jurist

with distinction in the Supreme Court and was a

Minister in a Left Government in Kerala. For him law

was not a tool to punish but an instrument of change.

He will be remembered above all for humanising law.

Rest in peace Justice Iyer and be assured that we

are richer for your contributions. Amen.

Now that the much awaited Goods and Services Tax

(GST) is likely to be a reality soon, industry has

something to cheer about. Barring any last mile

hiccups, this session of the Parliament should take

up the most significant economic reform the country

has seen since independence. GST should bring

about a qualitative change in the tax system by

redistributing the burden of taxation between

manufacturing and services. The economists are

unanimous, for a change, in their view that if

implemented properly it could help the GDP to grow

by about 2%. That is no small change. Everyone is

waiting with bated breath and fingers crossed. In a

federal system and with a highly polarised polity

economic reforms become the first casualty in the

name of nonexistent ideology. Once the government

succeeds in getting the necessary legislations passed

the focus will shift to the industry. It is time to get back

to the classrooms with the drawing boards and equip

ourselves to not only comply with the requirements

under the new regime but also to strategically position

ourselves to take full advantage the new taxation

system could provide. We at Bizsol, as always, have

once again taken the lead to provide all the services

which our clients will require tomorrow. With this in

mind we have revived our section "GST Corner"

which will have useful inputs to the industry with

articles, opinions, compliance related issues, et al.

The first article giving an overview of what has been

and what we can expect vis-à-vis GST written by Mr.

A B Nawal appears elsewhere in this issue. You can

expect similar inputs on this subject in the future issues

of Update.

Thank you.

Venkat R. Venkitachalam


4

GST CORNERBy CMA Ashok B. Nawal

Hon. Finance Minister Shri. Arun Jaitely has

expressed that he will be introducing the bill for GST

in current winter session and likely to chair state FMs

meet on GST Constitutional Amendment Bill on

December 11. The Centre, which proposes Cabinet

nod for the bill after the meet, plans to table it the

current session of Parliament. The Centre proposes

subsuming entry tax into GST and a 'nil rate' on

petroleum. It also proposes to separate GST

compensation legislation. Tax rates, exemptions,

threshold to be decided by GST council. States are

yet to receive the latest draft of Constitutional

Amendment Bill. It may be recalled that the revenue

department had proposed Rs 16,000 crore as first

the tranche of CST compensation. However, the

current fiscal position may delay part CST payment

in the Winter Session.

Let us review the progress so far made

Progress Sequential Eventof GST

2000 Empowered Committee was set upon GST

2002-04 Recommendation of unification of allstate and Central Taxes by TaskForce under the Chairmanship of ShriVijay Kelkar

April 2007 CST Phase out started

May 2007 Joint Working Committee formed bySC

Nov. 2007 Report of Joint Working Committeehas been submitted

Feb. 2008 First Announcement of Introductionof GST w.e.f. 01.04.2010

April 2008 Finalization of views of expertcommittee

July 2009 Commitment to implement GST w.e.f.01.04.2010

Nov. 2009 First discussion paper released

Dec. 2009 Task Force Constituted by FCreleased the report

Feb 2010 Then Fin. Minister Pranab Mukherjeeannounced in the Budget Speech tointroduce GST w.e.f. 01.04.2011

March 2011 115th Constitution amendmentintroduced in Parliament for levy ofGST on Goods & Services except thespecified groups.

March 2012 Model legislation of Centre and StateGST in connect with State - draftingin progress.

2013 Core Committees were constitutedby Empowered Group to deal withvarious aspects of work relating to theintroduction of GST

The entre had decided to drop thedeclared goods list from the Bill,thereby, accommodating the States'demand to continue to allow Statesto levy taxes on the products

Till date Hon. Finance Minister Shri ArunJaitely committed to introduce GSTw.e.f. 01.04.2016

Looking back, the Constitution Amendment Bill, 2011,

tabled on 22nd March 2011, proposed the following

amendments:

• Provisions dealing with a body to be set up as

GST Council, its composition, powers and

functions

• Powers of the Parliament to establish a GST

Dispute Settlement Authority, in order to

adjudicate disputes between the Centre and

States

• Set out the GST net, while excluding certain

petroleum products and alcoholic liquor.

But, many States were not agreeable on various

aspects, some of which were:

• The compensation mechanism for Central Sales

Tax (CST) was not being enshrined in the

Constitution

• The design of the Dispute Settlement mechanism

threatened to supplant the States' fiscal

autonomy


5

• The subsuming of local levies within the GST net

and associated revenue loss fears.

The Bill, though referred to the Parliamentary Standing

Committee which made its recommendations after two

years, met a fatal end, with it lapsing.

Based on information from various quarters (Centre,

Empowered Committed of State Finance Ministers,

etc.), the following may be the features of the

redrafted Bill:

• Floor rate with a bandwidth within which the

States can levy taxes

• The Revenue Neutral Rate (RNR) be fixed at 11%

for the Centre and 12% for States totalling to an

effective 23%

• Central GST at the rate of 12.77 per cent & State

GST of 13.91 per cent proposed by GST Sub-

Committee

• Petrol and petroleum products are likely to be

brought under the GST net at a nil rate of duty,

thereby, giving flexibility to both the Centre and

States to impose duties over and above GST

• A new voting pattern for the GST Council is

proposed in the redrafted Bill under which the

Centre will get a 1/3rd share in the voting rights.

This will evidence the supremacy of the Centre

as no decision will be arrived at without the

concurrence of the Centre. The proposed pattern

will also mandate a quorum of 3/4th of the

members of the Council.

Last year, the Centre had decided to drop the declared

goods list from the Bill, thereby, accommodating the

States' demand to continue to allow States to levy

taxes on the products. However, there does not

appear to be any recent development on this front.

It is understood that the Finance Ministry is in the

process of preparing a Cabinet note on the Bill, and

once the same is completed it will put to rest any

speculation on this subject matter. In the backdrop of

these developments the eagerness and determination

to usher in this game-changing reform is a message

the Government is strongly projecting and acting

upon, even though there was a recent back and forth

between Centre and States on the issue of threshold

of annual turnover for levying GST; it seems that

barring a few, most States are aligned with the

Centre's proposal to set an annual threshold turnover

at Rs. 25 lakh.

Industry and businesses must gear up and begin

planning activities in order to brace themselves and

prepare for GST.

Even before a debate began on how exclusion of

petroleum products and a high revenue neutral rate

(RNR) among other regressive proposals could sully

the image of the proposed Goods and Services Tax

(GST), several major states had already impaired the

structure of its precursor, the Value Added Tax. While

experts vouch for the principles that must guide the

GST/VAT design, namely levy at every transaction of

businesses above a threshold and input tax credit for

every buyer except the final consumer, these state

governments have over the past few years violated

them, almost recklessly.

The state VAT launched about a decade ago has been

deprived of its ability to produce incremental economic

growth. The states' policies that run contrary to the

tenets of the VAT system began as they hiked tax

rates by a quarter post-2009 when the Centre was

still to withdraw a fiscal stimulus.

The stimulus was meant to prevent a drastic fall in

growth on the heels of the global economic crisis.

West Bengal Govt. has already raised major concern

of the states regarding the goods and services tax

(GST) rollout is "revenue loss" and the same is to be

addressed.

Major challenge of the GST is the constitutions

amendments and acceptability of various states

considering their political agenda.

However, there will be no growth until GST is

introduced. Let's hope GST is introduced w.e.f. 1st

April 2016 and then only there will be a real growth in

manufacturing and service sector.


6

CUSTOMS

Notifications:

Tariff

• Bunker fuels for use in ships or vessels, namely:

(i) IFO 180 CST; (ii) IFO 380 CST falling under

the chapter heading 27 can be imported with Nil

rate of BCD and SAD till 11.05.2014. The benefit

is subject to fulfillment of condition no 101.

[Notification No 31/2014 -Customs dated 11

November-2014]

• BCD and SAD is exempted on the goods

mentioned in the below table, subject to the

condition specified in the notification and such

exemption is valid till 01.10.2015

mentioned in Notification.

Some of the items has been inserted. The

hitherto residuary rate of 1% (composite) and

0.3% (Customs) is changed to 1% (composite)

and 0.15% (Customs). Further existing residuary

rates of 1.3% and 1.7%, have been increased to

1.4% and 1.9%, respectively, with some

exceptions. [Notification No.110/2014-

Customs (N.T), Dated -17 November-2014]

and [Circular No. 13/2014-Customs dated 18-

November 2014]

• Tariff Value of Imported goods have been further

amended as given below:

[Notification No 32/2014 -Customs dated 21

November-2014]

Non-Tariff

• Limitation of 3 months has been restricted only

in cases where drawback is claimed under rule

3 and rule 4 of the said rules.[Notification

No.109/2014-Customs (N.T), Dated -17

November-2014].

• New drawback rate has been introduced w.e.f.

22.11.2014 subject to notes and conditions

Sr.No.

Chapter/ heading/sub-heading/tariff

item

Description of goodsTariff value US$ (Per Metric

Tonne)

1 1511 10 00 Crude Palm Oil 710

2 1511 90 10 RBD Palm Oil 740

3 1511 90 90 Others - Palm Oil 725

4 1511 10 00 Crude Palmolein 747

5 1511 90 20 RBD Palmolein 750

6 1511 90 90 Others - Palmolein 749

7 1507 10 00 Crude Soyabean Oil 836

8 7404 00 22 Brass Scrap (all grades) 3749

9 1207 91 00 Poppy seeds 3747

Gold, in any form, in respectof which the benefit of en-tries at serial number 321and 323 of the NotificationNo. 12/2012-Customs dated17.03.2012 is availed

71 or 9810 388 per10 grams(US $)

Silver, in any form, in re-spect of which the benefitof entries at serial number322 and 324 of the Notifica-tion No. 12/2012-Customsdated 17.03.2012 is availed

71 or 9811 540 per kilo-gram (US $)

Areca nuts08028012 2239 (US $ PerMetric Tons )

[Notification No.112/2014-Customs (N.T),Dated 28-November-2014].

Sr.No.

Category. Description of Goods

(3)(2)(1)

1. Bivalent Rapid DiagnosticTest Kit (Pf and Pv specific)

2. Long Lasting Insecticidal Nets(LLIN)

Diagnostics andMedical Prod-ucts

2

1. Artemisinin based Combina-tion Therapy(ACT) for adultsand pediatric use (Artemether20mg + Lumefantrine 120 mgco-formulated tablet)

2. Artesunate Injection Kit (Inject-able Artemisinin Derivatives)

A n t i - M a l a r i a ldrugs

1


7

Safeguards:

• No New Notifications

Anti-Dumping Duty:

• Anti-dumping duty on "Diclofenac Sodium",

falling under tariff 2942, has been imposed on

imports into India for period of 5 years (unless

revoked, suspended or amended earlier ) in the

following cases

(a) goods originating from People's Republic of

China and exported from People's Republic

of China or any other country than People's

Republic of China and

(b) originating from any other country and

exported from People's Republic of China

or any other country than People's Republic

of China

[Notification No. 44/2014-Customs (ADD)

Dated 21-November-2014]

• Anti-dumping duty on "Digital Versatile Discs-

Recordable (DVD-R and DVD-RW)", falling under

tariff 8523, has been imposed on imports into

India for period of 5 years (unless revoked,

suspended or amended earlier ) in the following

cases

(c) goods originating from People's Republic of

China and exported from People's Republic

of China or any other country than People's

Republic of China and

(d) originating from any other country and

exported from People's Republic of China

(e) goods originating from Hong Kong and

exported from Hong Kong or any other

country than Hong Kong and

(f) originating from any other country and

exported from Hong Kong

(g) goods originating from Chinese Taipei and

exported from Chinese Taipei or any other

country than Chinese Taipei and

(h) originating from any other country and

exported from Chinese Taipei

[Notification No. 45/2014-Customs (ADD)

Dated 21-November-2014]

Circulars:

• It is clarified that in the case of imports of carbon

black against Advance Authorisation, the

applicable Safeguard (SG) duty levied under

section 8C of the CTA, 1975 vide notification

No.4/2012 - Customs (SG) dated 05.10.2012 will

be calculated as under -

a. On import of carbon black from China, Anti

Dumping duty (ADD) leviable @ USD 0.423

per kg vide notification No.9/2013-Customs

(ADD) dated 26.04.2013. Though on imports

of carbon black against Advance

Authorisation there is a conditional

exemption from ADD vide notification No.96/

2009-Customs, dated 11.09.2009, the ADD

payable is USD 0.423 per kg but for the

exemption.

b. Accordingly, SG duty leviable under section

8C of the CTA, 1975 will be 30% minus ADD

payable, but for the exemption at the time

of import i.e. 30% less USD 0.423 per kg. In

a case where the SG duty payable is

negative, the same shall be treated as Nil.

[Circular No. 11/2014-Customs dated 14-

November 2014]

• In order to bring in uniformity, transparency and

consistency in assessment of export of Iron Ore,

fines and pellets, it has been decided that the

procedure has been notified which will be

common across for all the ports. [Circular No.

12/2014-Customs dated 17- November 2014]

Instructions:

• No New Instructions

CENTRAL EXCISE

Notifications

Tariff

• Bunker Fuel used in ships or vessels described

in following table are exempted from excise duty

as well as change in exemption rates for items

'Motor spirit commonly known as petrol' and 'High

speed diesel (HSD)' as under, and accordingly

amended the exemption Notification 12/2012-CE

dated 27.03.2012.


8

22.11.1999 (issued from F. No. 103/6/98-CX.3)

clarifying 'Odoriferous Compound' used in

manufacture of 'Agarbattis' are not capable of

being bought and sold in the market in normal

course of trade so not excisable products. But

due to misuse of this Circular Specific cases have

been detected, where masala mix intermediate

has been found to be actually bought and sold.

Therefore Board has clarified that this circular

will be applicable only to such intermediate

compound or odoriferous compounds as are not

capable of being bought and sold. In cases where

on the basis of evidence it is established that

such intermediate compounds are capable of

being marketed, the same will be excisable,

irrespective of whether the compound is actually

marketed or not. [Circular No. 989/13/2014-CX.3

dated 07th Nov 2014]

• Restriction of availing cenvat credit within 6

months from the date of invoice will not be

applicable when credit is taken first time within 6

months and thereafter the condition of 6 months

will not be applicable for re-credit in case of

reversal of such credit. Re-credit may be

applicable in the following cases:

i) If the payment of value of input service and

service tax payable is not made within three

months of date of invoice, bill or challan, then

the CENVAT Credit availed is required to

be paid back by the manufacturer or service

provider. Subsequently, when such payment

Sr.No.

Chapter or headingor sub-heading ortariff item of theFirst Schedule

ExistingRate

Description of excisable goodsRevised

RateRemarks

65A 27 –The following bunker fuels for use in ships orvessels, namely:-

(i) IFO 180 CST;

(ii) IFO 380 CST

NIL Item newly addedin exemption listsubject to Condi-tions No. 52 of An-nexure

70 2710 6.35 per litre7.50 per litre

Motor spirit commonly known as petrol,-

(i) intended for sale without a brand name;

(ii) other than those specified at (i)

2.70 per litre3.85 per litre

Increase in rate ofexemption

71 2710 19 30C Nil

3.75 per litre

High speed diesel (HSD),-

(i) intended for sale without a brand name;

(ii) other than those specified at (i)

2.96 per litre5.25 per litre

Decrease in rate ofexemption

• Exemption from excise duty has been granted

to the following goods which are required for the

Intensified Malaria Control Project (IMCP)-II

under the National Vector Borne Disease Control

Programme (NVBDCP), funded by Global Fund

to fight AIDS, TB and Malaria (GFATM), subject

to receipt of a Certificate from an officer not below

the rank of Deputy Secretary to the Government

of India in the Ministry of Health and Family

Welfare.

[Notification No.21/2014-CE dated 11th Nov 2014 & Notification No.22/2014-CE dated 12th Nov 2014]

Sr.No.

Category. Description of Goods

1. Bivalent Rapid Diagnostic TestKit (Pf and Pv specific)

2. Long Lasting Insecticidal Nets(LLIN)

Diagnostics andMedical Prod-ucts

2

1. Artemisinin based Combina-tion Therapy(ACT) for adultsand pediatric use (Artemether20mg + Lumefantrine 120 mgco-formulated tablet)

2. Artesunate Injection Kit (Inject-able Artemisinin Derivatives )

A n t i - M a l a r i a ldrugs

1

[Notification No.23/2014-CE dated 21st Nov

2014]

Non-Tariff


Circulars

• The Board Circular No. 495/61/99-CX.3 dated


9

of value of input service and service tax is

made, the amount so paid back can be re-

credited.

ii) If the value of any input or capital goods

before being put to use on which CENVAT

Credit has been taken, is written off or such

provisions made in Books of Account, the

manufacturer or service provider is required

to pay an amount equal to Credit so taken.

However, when the inputs or capital goods

are subsequently used, the amount so paid

can be re-credited in the account.

iii) In case inputs sent to job worker are not

received back within 180 days, the

manufacturer or service provider is required

to pay an amount equal to credit taken on

such inputs in the first instance. However,

when the inputs are subsequently received

back from job worker, the amount so paid

can be re-credited in the account.

[Circular No. 990/14/2014-CX.8 dated 19th Nov

2014]

Instructions

• It has been clarified that towers and PFB are in

the nature of immovable goods and are non-

marketable and non-excisable, therefore towers

and parts thereof are neither capital goods under

Rule 2(a) nor inputs under Rule 2(k) of the Cenvat

Credit Rules, 2004 and hence CENVAT credit of

the duty paid thereon was not admissible in view

of judgment of the Hon'ble Bombay High Court

in case of M/s Bharti Airtel Ltd. vs The

Commissioner of Central Excise, Pune III in

Central Excise Appeal No. 73 of 2012 and 119

of 2012 (reported as 2014-TIOL-1452-HC-

MUM-ST). [Instruction F. No. 267/60/2014-

CX.8 dated 11th Nov 2014]

• In view of the judgment of the Larger Bench of

Tribunal in the case of M/s Hindalco Industries

Ltd Vs Commissioner of Central Excise, Belapur,

Mumbai - III and Nagpur [2014- TIOL-1762-

CESTAT-Mum-LB], it has been clarified that

"Aluminium dross and skimmings and similar

non-ferrous metal dross and skimmings which

arise as a by-product in the process of

manufacture of aluminium / non-ferrous metal

products are manufactured goods and hence

excisable w.e.f. 10.05.2008 in view of the

explanation added to Section 2(d) of the Central

Excise Act, 1944." [Instruction F. No. 17/02/

2009-CX.1 (Pt) dated 12th Nov 2014]

• It has been clarified that, the SEZ units applying

for Service Tax Refund / Exemptions, such SEZ

units and developer may, if they so desire, route

their applications for issuance of authorization

by department through the specified officer of

SEZ instead of submitting directly to the

department. Similarly they may also route

quarterly statement in Form A-3 through the

specified officer in the SEZ. Notification No. 12/

2013 dated 01.07.2013 as amended does not

put any restriction in this regard. [Instruction F.

No. B1/6/2013-TRU dated 25th Nov 2014]

Trade Notice

• No New Notice

SERVICE TAX

Notifications• No New Notifications

Circulars / Instructions

• No New Circular / Instructions!!

FOREIGN TRADE POLICY

Notifications:• Government of Andhra Pardesh and Directorate

of Revenue Intelligence (DRI) are allowed further

time till 30th April, 2015 for finalising the

modalities, including allocation of quantities of

Red Sanders Wood. [Notification No. 96 (RE-

2013)/2009-2014 dated 05/11/2014]

• The Import Policy of 'Natural Sands' is revised

and import of sand will be now subject to Plant

Quarantine (Regulation of Import into India)

Order, 2003.[Notification No. 97 (RE-2013)/

2009-2014 dated 07/11/2014]

• The notification makes it mandatory for the

importers of chemicals listed at Category 1A, 1B

& 1C of Appendix 3 (SCOMET list) to Schedule

2 of ITC (HS) Classification of Export and Import


10

Items to notify the details of such imports to

DGFT, NACWC and Department of Chemicals

and Petrochemicals within 30 days from the date

of their importation.[Notification No. 98 (RE-

2013)/2009-2014 dated 19/11/2014]

• Import policy of Rough Marble and Travertine

blocks for the year 2014-15 has been notified

with a quota of 8 lakh MT and an MIP of US$

325 per MT subject to certain conditions.

[Notification No. 99 (RE-2013)/2009-2014

dated 19/11/2014]

Public Notices:• It operationalises the provisions of Memorandum

of Understanding dated 23.10.2010 between

India and Bangladesh and facilitates border trade

between the two countries through a new border

Haat at Srinagar, Tripura (India). [Public Notice

No. 72/2009-2014 (RE-2013) dated 07/11/2014]

• Procedure for export of Certified Organic

Products has been notified stating that product

for export shall require Transaction Certificate

issued by a Certification Body accredited by

National Accreditation Body (NAB) standards laid

down in the document "National Programme for

Organic Production (NPOP)", available on the

website of APEDA. This supersedes the earlier

Public Notice dated 21.07.2004. [Public Notice

No. 73/2009-2014 (RE-2013) dated 18/11/2014]

• As per the Indo-US bilateral understanding, Crime

Control (CC) Items and Regional Security (RS)

items will be governed as per the paras added

in the Handbook of Procedures i.e. 2.11(d),

2.11(e) & 2.11(f) and for items listed in Appendix

31(iia) & (iib). This will not be applicable for import

from any other country. [Public Notice No. 74/

2009-2014 (RE-2013) dated 19/11/2014]

• Description of the import item under SIONs A-

1475 and SIONs A-1839, A-1841 and A-1842

has been modified as under:

(i) SION A-1475

Existing Import Item Modified Import ItemDescription Description

Catalyst T 8P PTA purification catalyst(Import item at Sl. No.3) (0.50% palladium on carbon)

(Import item at Sl. No.3)

(ii) SIONs A-1839, A-1841 and A-1842

Existing Import Item Modified Import Item

Description Description

Heat Transfer Fluid (Dowtherm/ Heat Transfer Fluid (Dowtherm /

Santotherm 66/Terminal VP 1) Santotherm 66/Therminol VP 1)

The number of inputs, their description & quantity

permitted remains the same. [Public Notice No.

75/2009-2014 (RE-2013) dated 20/11/2014]

• The existing form ANF 2A, is being replaced by

another format, online filing of which along with

all requisite documents will be mandatory w.e.f

01.01.2015, and decision regarding grant or

refusal of IEC will be conveyed within two working

days by the concerned jurisdictional RA. Facility

of filing online application for IEC will also be

available on the e-biz portal of DIPP, after its

integration with DGFT's system. [Public Notice

No. 76/2009-2014 (RE-2013) dated 27/11/2014]

• Procedure for export of Certified Organic

Products notified vide Public Notice No. 73 (RE-

2013)/2009-2014 dated 18.11.2014 would come

into effect from 18/12/2014. [Public Notice No.

77/2009-2014 (RE-2013) dated 01/12/2014]

Special Economic Zone

• It is reiterate that directions issued vide instruction

No. 79 dated 19.11.2013 may be followed and

Development Commissioners should not insist

on fresh application for authorized services

already approved by UAC. In other words 60

services are considered as approved service by

default, fresh application only needed if it is for

other than those 60 services. [Instruction No.

83 dated 21st November, 2014]

INCOME TAX

Notification:• The time limit within which the Commissioner

shall pass an order either granting the approval

or rejecting the application of any trust or

institution shall not exceed six months from the

end of the month in which such application was

made. [Notification 61/2014 dated 10th Nov.

2014]

• The maximum amount which an assessee can


11

invest as per Bank Term Deposit Scheme, 2006

in the term deposits of a scheduled bank has

been raised to Rs.1,50,000/- against the previous

limit of Rs.1,00,000/-. [Notification 63/2014

dated 13th Nov. 2014]

Circular:

• In relation to Income Tax Settlement

Commission, the assessment shall be deemed

to have been completed on the date on which

the assessment order is passed rather than on

the date on which the assessment order is

serviced to the applicant. [Circular 16/2014

dated 17th Nov. 2014]

Orders

• The due date for furnishing return of income in

case of assesses in the State of Jammu and

Kashmir has been extended from Nov. 30, 2014

to March 31st, 2015. [F. No. 225/268/2014/ITA.II

dated 28th Nov 2014]

MVAT

Notification:• No New Notifications

Circular

• The circular exempting dealers from filing of CST

returns if they had no inter-state sales in any

return period has been re-examined and fresh

guidelines on the same has been issued. From

1st Oct. 2014, a dealer who is claiming deduction

u/s 8(1) of the MVAT Act or deduction u/s 6A

(Branch Transfers) of the CST Act , shall be

required to file a return under the CST Act. [Trade

Circular No.20 T of 2014 dated 25th Nov.,

2014]

COMPANY LAWCompanies (Amendment) Bill, 2014 has been

approved by Loksabha on 2nd December 2014 to

make certain amendments in eth Companies Act

2013.

The Companies Act, 2013 (Act) was notified on

29.8.2013. Out of 470 sections in the Act, 283 sections

and 22 sets of Rules corresponding to such sections

have so far been brought into force. In order to

address some issues raised by stakeholders such as

Chartered Accountants and professionals, following

amendments in the Act have been proposed:

1. Omitting requirement for minimum paid up share

capital, and consequential changes. (For ease

of doing business)

2. Making common seal optional, and consequential

changes for authorization for execution of

documents. (For ease of doing business)

3. Prescribing specific punishment for deposits

accepted under the new Act. This was left out in

the Act inadvertently. (To remove an omission)

4. Prohibiting public inspection of Board resolutions

filed in the Registry. (To meet corporate demand)

5. Including provision for writing off past losses/

depreciation before declaring dividend for the

year. This was missed in the Act but included in

the Rules.

6. Rectifying the requirement of transferring equity

shares for which unclaimed/unpaid dividend has

been transferred to the IEPF even though

subsequent dividend(s) has been claimed. (To

meet corporate demand)

7. Enabling provisions to prescribe thresholds

beyond which fraud shall be reported to the

Central Government (below the threshold, it will

be reported to the Audit Committee). Disclosures

for the latter category also to be made in the

Board's Report. (Demand of auditors)

8. Exemption u/s 185 (Loans to Directors) provided

for loans to wholly owned subsidiaries and

Guarantees / securities on loans taken from

banks by subsidiaries. (This was provided under

the Rules but being included in the Act as a matter

of abundant caution).

9. Empowering Audit Committee to give omnibus

approvals for related party transactions on annual

basis. (Align with SEBI policy and increase ease

of doing business)

10. Replacing 'special resolution' with 'ordinary

resolution' for approval of related party

transactions by nonrelated shareholders. (Meet

problems faced by large stakeholders who are

related parties)


12

11. Exempt related party transactions between

holding companies and wholly owned

subsidiaries from the requirement of approval of

nonrelated shareholders. (corporate demand)

12. Bail restrictions to apply only for offence relating

to fraud u/s 447. (Though earlier provision is

mitigated, concession is made to Law Ministry &

ED)

13. Winding Up cases to be heard by 2 member

Bench instead of a 3 member Bench. (Removal

of an inadvertent error)

14. Special Courts to try only offences carrying

imprisonment of two years or more. (To let

magistrate try minor violations).

Notifications


Circulars:

• Since Form CRA-2 for Appointment of Cost

Auditor is still not available on the MCA website,

therefore it has been clarified that, the date for

filing of said form for Appointment of Cost Auditor

for F. Y. 2014-15 has been extended to 31st

January 2015 without any additional fees /

penalty. Further the companies who have already

filed old Form 23C for appointment of Cost

Auditor for F. Y. 2014-15, such companies need

not to file for CRA-2 again for the FY 2014-15.

[General Circular No.42/2014 dated 12th Nov

2014]

• It has been clarified that the provisions related

to issuance of PROSPECTUS AND ALLOTMENT

OF SECURITIES stated in Chapter III of

Companies Act, 2013 will not be applicable to

the issue of Foreign Currency Convertible Bonds

(FCCBS) and Foreign Currency Bonds (FCBs)

by Indian companies exclusively to persons

resident outside India in accordance with

applicable sectoral regulatory provisions unless

otherwise provided in Issue of Foreign Currency

Convertible Bonds and Ordinary Shares

(Through Depository Receipts Mechanism)

Scheme, 1993 and directions of Reserve Bank

of India through its Various directions/regulations.

[General Circular No.43/2014 dated 13th Nov

2014]

• The Company Law Settlement Scheme 2014 for

filing of pending Annual Returns and Financial

by defaulting companies with concessional

penalties only at 25% has been extended up to

31st Dec. 2014. [General Circular No.44/2014

dated 14th Nov 2014].

• Due to unprecedented floods in the State of

Jammu & Kashmir, the ROC of Jammu &

Kashmir has directed to exercise the powers

conferred on them under the third proviso to

section 96(1) of the Companies Act, 2013 to grant

extension of time up to 31.12.2014 to those

companies who could not hold their AGM'S (other

than first AGM) for the financial year 2013-14

within the stipulated time. So these companies

are allowed extension of time up to 31.12.2014

to hold AGM for FY 2013-14. [General Circular

No.45/2014 dated 18th Nov 2014].

FEMA (Important Circulars)• As per circular No 42 A.P. (DIR Series) Circular

No.25 dated August 14, 2013 the RBI had

modified the guidelines for import of gold by the

introduction of the 20:80 scheme, where,

nominated banks / agencies / entities importing

Gold had to commit 20% of its weight value

towards exports.

It has now been decided by the Government of

India to withdraw the 20:80 scheme and the

restrictions placed on import of gold. The above

mentioned scheme stands withdrawn with

immediate effect. [RBI/2014-15/329 A. P. (DIR

Series) Circular No.42 28th November 2014]

• As per circular No 37 A.P. (DIR Series) Circular

No. 108 dated June 11, 2013 regarding

extending the enhanced period for realization and

repatriation of export receivables to India, of the

amount representing the full value of exports,

from six months to twelve months from the date

of export for the units located in SEZs, Status

Holder Exporters, EOUs, Units in EHTPs, STPs

& BTPs.

The issue has been reviewed and it has been

decided that the period for realization and

repatriation of export proceeds shall be NINE

months from the date of export for all exporters


13

including Units in SEZs, Status Holder Exporters,

EOUs, Units in EHTPs, STPs & BTPs until further

notice.

In other words period has been reduced from

12 months to 9 months.

The provisions in regard to the period of

realization and repatriation to India of the full

exports made to warehouses established outside

India remain unchanged. [RBI/2014-15/306 A.P.

(DIR Series) Circular No. 37 20th November

2014]

• As per Circular No 39 A.P. (DIR Series) Circular

No. 52 dated November 23, 2011, eligible ECB

borrowers bringing ECB proceeds for Rupee

expenditure in India towards permitted end uses

such as, local sourcing of capital goods, on-

lending to Self-Help Groups or for micro credit,

payment for spectrum allocation, etc., had to

credit the same into Rupee accounts immediately

in banks in India.

Now, the RBI has decided to permit to allow

eligible ECB borrowers to park ECB proceeds

(both under the automatic and approval routes)

in term deposits with banks in India for a

maximum period of six months pending utilization

for permitted end uses with the following

conditions:

i. The applicable guidelines on eligible

borrower, recognized lender, average

maturity period, all-in-cost guideline,

permitted end uses, etc. should be complied

with.

ii. No charge in any form should be created

on such term deposits i.e. the deposit

should be kept unencumbered or without

lien.

iii. The deposits should be exclusively in the

name of the borrower

iv. The deposits can be liquidated as and when

required.

The amended ECB policy will come into force

with immediate effect.[RBI/2014-15/309 A.P.

(DIR Series) Circular No. 39 21st November

2014]

• As per Circular No 41 RBI/2014-15/316 A.P. (DIR

Series) dated 25th November 2014, the RBI

states that it has noticed that Indian companies

are accessing overseas market for debt funds

through overseas holding / associate / subsidiary

/ group companies and that such borrowings are

raised at rates exceeding the ceiling applicable

in terms of existing FEMA regulations and that

the funds raised are routed to the Indian

companies which are sole/major operations of

the group.

On a review of the matter in accordance with the

existing regulatory framework, the RBI now

clarifies that:

i. Indian companies or their AD-I banks are

not allowed to issue any direct or indirect

guarantee or create any contingent liability

or offer any security in any form for such

borrowings by their overseas holding /

associate / subsidiary / group companies

except for the purposes explicitly permitted

in the relevant Regulations.

ii. The funds raised abroad by overseas

holding / associate / subsidiary / group

companies of Indian companies with

support of the Indian companies or their AD-

I banks cannot be used in India unless it

conforms to the general or specific

permission granted under the relevant

Regulations.

iii. Indian companies or their AD Category - I

banks using or establishing structures which

contravene the above shall render

themselves liable for penal action.

[RBI/2014-15/316 A.P. (DIR Series) Circular No.

41 25th November 2014]


14

CBEC Notified Exchange Rate for Conversion of Foreign Currency w. e. f. 05th

December 2014 [Notification No.113/2014-Customs (N.T) Dated 04th December-2014]

SCHEDULE - I

S.No. Foreign Currency

Rate of exchange of one unit of foreign currency

equivalent to Indian rupees

(For Imported Goods) (For Export Goods)

1. Australian Dollar 52.65 51.35

2. Bahrain Dinar 169.15 159.90

3. Canadian Dollar 55.20 53.95

4. Danish Kroner 10.40 10.10

5. EURO 77.20 75.35

6. Hong Kong Dollar 8.05 7.95

7. Kuwait Dinar 218.75 206.25

8. New Zealand Dollar 48.75 47.35

9. Norwegian Kroner 8.95 8.70

10. Pound Sterling 98.30 96.10

11. Singapore Dollar 47.70 46.70

12. South African Rand 5.70 5.35

13. Saudi Arabian Riyal 17.00 16.05

14. Swedish Kroner 8.35 8.15

15. Swiss Franc 64.25 62.60

16. UAE Dirham 17.35 16.40

17. US Dollar 62.50 61.50

S.No. Foreign Currency

Rate of exchange of 100 units of foreign currency

equivalent to Indian rupees

(For Imported Goods) (For Export Goods)

1. Japanese Yen 52.30 51.10

2. Kenya Shilling 70.80 66.75

SCHEDULE-II


15

AUDIT OF SERVICE TAX - SAY NO

TO DEPARTMENTBy CMA Ashok B. Nawal

Whether Audit of Accounts can be conducted under

the Finance Act 1994 by the Departmental Officers.

Whether CERA / CAG Audit can be conducted at the

premises of the assessee w.r.t. Service tax?

The controversy has been arisen after the judgment

of Hon. High Court in the case of TRAVELITE (INDIA)

Vs. UOI 2014-TIOL-1304-HC-DEL-ST. In view of the

same, it is interesting to understand the provisions of

the Act / Rules:

Audit under Service tax by Departmental Officers

Audit Provision for Service Tax

The provision of conducting an audit is incorporated

in Rule 5A of Service Tax Rules, 1994.

Rule 5A. Access to a registered premise

(1) An officer authorized by the Commissioner in this

behalf shall have access to any premises

registered under these rules for the purpose of

carrying out any scrutiny, verification and checks

as may be necessary to safeguard the interest of

revenue.

(2) Every assessee shall, on demand, make available

to the officer authorized under sub-rule (1) or the

audit party deputed by the Commissioner or the

Comptroller and Auditor General of India within a

reasonable time reasonable time not exceeding

fifteen working days from the day when such

demand is made, or such further period as may

be allowed by such officer or the audit party, as

the case may be,-

(i) the records as mentioned in sub-rule (2) of

rule 5;

(ii) trial balance or its equivalent; and

(iii) the income-tax audit report, if any, under

section 44AB of the Income-tax Act, 1961 (43

of 1961), for the scrutiny of the officer or audit

party, as the case may be.]

The service Tax Rules are enacted by the Central

Government under power given in section 94 of

Finance Act. The preamble of the rules is as under

In exercise of the powers conferred by sub-section

(1) read with sub-section (2) of section 94 of the

Finance Act, 1994 (32 of 1994), the Central

Government hereby makes the following rules for the

purpose of the assessment and collection of Service

Tax,

The section 94 of finance act delegates the power

to the Central Government to make rules on the

following subjects;

94. Power to make rules

(1) The Central Government may, by notification in

the Official Gazette, make rules for carrying out

the provisions of this Chapter.

(a) collection and recovery of service tax under

sections 66 and 68;

(aa) the determination of amount and value of taxable

service under section 67;]

(b) the time and manner and the form in which

application for registration shall be made 2[under

sub-sections (1) and (2) of section 69;]

(c) the form, manner and frequency of the returns

to be furnished under sub-sections (1) and (2)

[and the late fee for delayed furnishing of return

under sub-section (1) of section 70;]

(cc) the manner of provisional attachment of property

under sub-section (1) of section 73C;]

(ccc) publication of name of any person and

particulars relating to any proceeding under sub-

section (1) of section 73D;]

(d) the form in which appeal under section 85 or

under sub-section (6) of section 86 may be filed

and the manner in which they may be verified;

(e) the manner in which the memorandum of cross


16

objections under sub-section (4) of section 86

may be verified;

(eee) the credit of service tax paid on the services

consumed or duties paid or deemed to have been

paid on goods used for providing a a taxable

taxable service;]

(eeee) the manner of recovery of any amount due to

the Central Government under section 87;]

(f) Provisions for determining export of taxable

services;

(g) grant of exemption to, or rebate of service tax

paid on, taxable services which are exported out

of India;

(h) rebate of service tax paid or payable on the

taxable services consumed or duties paid or

deemed to have been paid on goods used for

providing taxable services which are exported

out of India;

(hh) rebate of service tax paid or payable on the

taxable services used as input services in the

manufacturing or processing of goods exported

out of India under Section 93A;]

(hhh) the date for determination of rate of service tax

and the place of provision of taxable service

12"under section 66C";]

(i) provide for the amount to be paid for

compounding and the manner of compounding

of offences;

(j) provide for the settlement of cases, in

accordance with sections 31, 32 and 32A to 32P

(both inclusive), in Chapter V of the Central

Excise Act, 1944 as made applicable to service

tax vide section 83.

(k) any other matter which by this Chapter is to be

or may be prescribed.

In the section 94 there is no provision in relating

to conduct of an audit and the said section does

not grant power to make rule w.r.t to manner &

conduct of audit of accounts by the Departmental

officer, hence said rule 5A ultra vires to the

Finance Act.

Therefore, Departmental Officer cannot conduct

the audit of the assessee.

Similarly this view has been upheld by the Hon'ble

HC Delhi in case of TRAVELITE (INDIA) Vs. UOI 2014-

TIOL-1304-HC-DEL-ST.

Moreover, Department vide circular no. 986/10/2014-

CX dated 09.10.2014 also clarified that based on the

above judgment though departmental officers cannot

conduct the audit of service tax but same is not

applicable in case of central excise.

However,

Part-II: Audit by CERA / CAG:

Yes. Central Excise Revenue Audit (CERA) Team /

CAG can conduct the audit at the premises of the

assessee.

1. Section 16 of the Act of 1971 deals with audit

of receipts of Union or States, reads as

under:

"16. It shall be the duty of the Comptroller and

Auditor-General to audit all receipts which are

payable into the Consolidated Fund of India

and of each State and of each Union Territory

having a Legislative Assembly and to satisfy

himself that the rules and procedures in that

behalf designed to secure an effective check on

the assessment, collection and proper allocation

of revenue and are being duly observed and to

make for this purpose such examination of

the accounts as he thinks fit and report

thereon."

2. The expression "to audit all receipts" includes all

the revenue of the government. Revenues like,

• Income Tax

• Other Direct Tax

• Indirect Tax like Central excise, Customs

and Service tax.

• Fees / Revenue to be received allocation of

assets like Coal Blocks, Spectrum etc.

• Disinvestment income

3. For the purpose of audit of receipts, the duty of

the CAG extends "to such examination of the

accounts as it thinks fit and report thereon".

4. Above reasoning is further re-enforced if we

look at Section 18 of the Act, which deals

with the powers of the CAG in connection

with the audit of accounts, which reads as

follows :-


17

"18. (1) The Comptroller and Auditor-General

shall in connection with the performance of his

duties under this Act, have authority -

a) to inspect any office of accounts under the

control of the Union or of a State including

treasuries, and such offices responsible for

the keeping of initial or subsidiary accounts,

as submit accounts to him;

b) to require that any accounts, books,

papers and other documents which deal

with or form the basis of or an otherwise

relevant to the transactions to which his

duties in respect of audit extend, shall

be sent to such place as he may appoint for

his inspection;

c) to put such questions or make such

observations as he may consider

necessary, to the person in charge of the

office and to call for such information as he

may require for the preparation of any

account or report which it is his duty to

prepare.

(2) The person in charge of any office or

department, the accounts of which have to be

inspected and audited by the Comptroller and

Auditor-General, shall afford all facilities for such

inspection and comply with requests for

information in as complete a form as possible

and with all reasonable expedition."

Section 18(1) (b) delegates the powers of the

CAG to call for the books of accounts, papers

and other documents which form the basis of

various transactions to which his duties extend.

5. Section 16 of Act 56 of 1971 has to be understood

in the light of Article 266 of the Constitution.

Article 266 also uses the expression "all revenue

receipts by the Government of India" which

evidently includes income of the nation received.

This also includes service tax.

6. Service tax is a "revenue received by the

Government" within the meaning of Article 266

i.e. "a receipt payable into the Consolidated Fund

of India" within the meaning of Section 16 of 1971

Act.

7. Revenue share receivable by the Union being a

receipt payable into the Consolidated Fund" by

virtue of Section 16 and 18(1)(b) of 1971 Act, in

relation to such receipts, the CAG is entitled to

seek the records maintained by the assessee.

This view has also been expressed by the Hon'ble

Supreme Court in case of Association of Unified

Teleservices & Ors Vs. UOI.

CBEC have clarified that:

"The statutory backing for rule 22 thus flows from

clause (x) of section 37(2) and the general rule making

powers under section 37(1) of the Central Excise Act,

1944. Clause (x) of section 37(2) empowers the

Central Government to make rules for verification of

records and returns to check the correctness of levy

and collection of duty which in the present regime of

self-assessment would mean verification of

correctness of self-assessment and payment of duty

by the assessee. It may be noted that the expression

"verification" used in the section is of wide import and

would include within its scope, audit by the

Departmental officers, as the procedure prescribed

for audit is essentially a procedure for verification

mandated in the statute."

Whereas in terms of Section 83 of Finance Act 1994

as amended, [sub- section (2) of section 9A"], 9AA,

9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C,

12D, 7(12E, 14, 15, 31, 32, 32A to 32P (both inclusive),

33A, 34A, 35EE, 35F)],8[35FF,] to 35O (both

inclusive}, 35Q, 9[35R,] 36,36A,37A, 37B, 37C, 37D

10[38A] and 40 of Central Excise Act 1944 have been

made applicable to Service Tax also and Section 37

of Central Excise Act as referred in the board Circular

is not applicable to Service tax and therefore Central

Excise Officer can audit only the records to be

maintained for Central Excise and not for service tax,

but CERA / CAG Auditors can audit service tax records.


18

Validity of SCN issued by DGCEI asking

Commissioner to adjudicate

By CMA V. S. Datey

It is observed that in many cases, offences are

investigated by office of Director General of Customs

and Central Excise Intelligence (DGCEI). Show cause

notice is issued by DGCEI and assessee is asked to

reply to Commissioner of Central Excise. The

Commissioner of Central Excise is required to

adjudicate the case on the basis of show cause notice

issued by DGCEI.

It is doubtful if such procedure of adjudication is valid.

In my view, Notice issued by DGCEI but made

answerable to Commissioner is void. The reasons for

the same and issues involved are discussed in this

Article.

1 Statutory Provisions

Provisions for issue of show cause notice and its

adjudication are contained in both Central Excise and

Service tax law.

Provisions in service tax law - Section 66B of

Finance Act, 1994 w.e.f. 1-7-2012 (earlier section 66

of Finance Act, 1994), which is 'charging section'

states that service tax shall be collected in such

manner as may be prescribed.

'Prescribed' means prescribed by Rules made [section

65B(39) of Finance Act, 1994.

Rule 3 of Service Tax Rules empowers CBE&C to

appoint Central Excise Officers to exercise powers

under the Chapter V of Finance Act, 1994.

Section 73(1) of Finance Act, 1994 (which contains

provisions relating to service tax), empowers the

Central Excise Officer to serve notice demanding

service tax short levied or short paid and then

determine the tax payable.

As per section 73(1), the Central Excise Officer may

serve notice on the person chargeable with service

tax.

The Central Excise Officer obviously means who has

jurisdiction over the assessee.

As per section 73(2) of the Finance Act, 1994, the

Central Excise Officer shall, after considering the

presentation, if any, made by the person on whom

notice is served under section 73(1) determine the

amount of service tax due from him.

The section 73(2) use the term 'The Central Excise

Officer' and not 'An Central Excise officer'. 'The'

obviously means the Central Excise Officer who has

issued the show cause notice under section 73(1) of

the Finance Act, 1994.

Provisions in Central Excise - Section 3 of Central

Excise Act (which is charging section) states that

excise duty shall be collected in such manner as may

be prescribed. Section 2(b) of Central Excise Act read

with rule 3(1) of Central Excise Rules empowers

CBE&C to confer powers on an officer of excise with

powers of Central Excise Officer.

Section 11(1) of Central Excise Act authorizes Central

Excise Officer empowered by CBE&C to levy such

duty or require the payment of such sums, to

commence recovery proceedings.

Section 11A(1) of Central Excise Act empowers the

Central Excise Officer to serve show cause notice to

person chargeable with duty.

Section 11A(10) of Central Excise Act states that the

Central Excise Officer shall determine the amount of

duty of excise due from such person.

The section 11A(10) use the term 'The Central Excise

Officer' and not 'An Central Excise officer'. 'The'

obviously means the Central Excise Officer who has

issued the show cause notice under section 11A(1)

of the Central Excise Act.

1.1 Departmental instructions

The aforesaid statutory provision has been reflected

in departmental circular also.

Para 8 of CBE&C circular No. 752/68/2003-CX dated

1-10-2003 states as follows -


19

8. Regarding issue of show cause notices, it is clarified

that in respect of all cases, whether or not fraud,

collusion, wilful mis-statement, suppression of fact or

contravention of Central Excise Act/Rules with intent

to evade duty and/or where extended period has been

invoked i.e. cases falling under any category (A), (B)

or (C) of Para 3 above, the show cause notice shall

be approved in writing and signed by the officer

competent to adjudicate the said show cause notice.

This instruction will come into effect prospectively i.e.

from the date of issue of this Circular.

The same instructions have been reiterated vide

Chapter 13 part I para 2.7 of CBE&C's excise Manual

of Supplementary Instructions, 2005.

1.2 Adjudicating authority is required to apply

his mind before issuing show cause notice

The reason for the aforesaid provision is quite clear

that the adjudicating authority should apply his mind

about prima facie case, before issuing show cause

notice.

If the SCN is issued by DGCEI, the adjudicating

authority has not even seen the notice, let alone

applying his mind.

This procedure is completely against statutory

provisions, the specific instructions of CBE&C and also

against basic principles of natural justice.

1.3 Officer of DGCEI is authority to issue SCN if

he is adjudicating the matter

Officer of DGCEI is 'Central Excise Officer', as per

Notification No. 38/2001-CE(NT) dated 26-6-2001

Thus, he has powers to issue show cause notice.

However, he can issue show cause notice only if he

himself is going to adjudicate the case, in view of

statutory provisions as well as departmental circular

cited above.

2. Parallel Jurisdiction when one authority

exercises jurisdiction

Since officer of DGCEI has been designated as

Central Excise Officer having al India jurisdiction, it is

clear that there are two authorities having parallel

jurisdiction.

When there are two or more authorities having parallel

jurisdiction, then when any one of them takes

cognizance of the issue, jurisdiction of second and

other authorities are eclipsed. This is theory of

'committee of courts'. - Pushpit Steels v. CC

2001(130) ELT 520 (CEGAT). [Otherwise, chaotic

conditions will prevail]

In Orient Arts v. CC 2003 (155) ELT 168 (CEGAT), it

was held that the theory of 'committee of courts'

postulates that when there are two or more courts

having parallel jurisdiction over the same matter, when

one authority exercises its powers, jurisdiction of

second and any other authority are deemed to be

ousted. [In this case, it was held that when

Commissioner of Customs has exercised his powers,

Commissioner of Customs (Preventive) cannot

exercise the powers, even if he has concurrent parallel

jurisdiction - followed in Saraf Fabrics v. CC 2003

(157) ELT 62 (CESTAT).

3. Adjudicating authority should not adjudicate

whether there is real likelihood of bias

Apart from the fact that the show cause notice is clearly

against the statutory provisions and is void, and that

when one authority has exercised jurisdiction,

jurisdiction of other authority is deemed to have been

ousted, another issue is that the adjudicating authority

should not exercise jurisdiction where there is real

likelihood of bias.

3.1 Officer in department of senior in organisa-

tional hierarchy cannot ask officer junior in

organisational hierarchy to decide the case

The DGCEI is an all India body having jurisdiction all

over India, while Commissioner of Central Excise is

one of the various Commissioners of a limited area.

Thus, office of DGCEI which has all India jurisdiction

is certainly superior to office of Commissioner in

organisational hierarchy of the department.

In such case, there is reasonable ground to believe

that the Commissioner is not likely to take an

independent and unbiased view in the matter.

In view of the organisational hierarchy, the

Commissioner who is in lower strata of authority is

very much likely to be prejudiced to uphold the

demand. He will be under tremendous psychological

pressure to decide the matter in favour of revenue.

Thus, there is real likelihood of bias towards confirming

the demand by Commissioner.


20

3.2 Justice should not only be done but should

be seen to have been done

It is well settled that justice should not only be done

but should also be done.

In this case, there is real likelihood of bias as

department higher in organisational hierarchy is

asking officer in a junior department to decide the

matter.

In P K Ghosh v. J F Rajput - AIR 1996 SC 513 =

(1995) 6 SCC 744, it was observed - 'A basic postulate

of the rule of law is that 'justice should not only be

done but it also must be seen to be done'.

3.3 Case law in respect of Real likelihood of bias

In following cases, it has been held that when there is

real likelihood of bias, the authority should not decide

the case.

In Rattan Lal Sharma v. Managing Committee 1993(4)

SCC 10 = 1993 AIR SCW 2400 = AIR 1993 SC 2155,

it was held that the test was one of 'real likelihood' of

bias even if such bias was not in fact the direct cause.

A real likelihood of bias means at least substantial

possibility of bias. It is in this sense that it is often said

that justice must not only be done but must also

appear to be done. - quoted with approval in Badrinath

v. Government of Tamil Nadu 2000 AIR SCW 3745,

where it was held that plea of bias can be raised at

appellate stage even if not raised during inquiry

proceedings, as it goes to root of the question, if based

on 'admitted and un-controverted facts'.

In P D Dinakaran (1) v. Judges Enquiry Committee

(2011) 8 SCC 380, it was held that test of 'real

likelihood of bias' and 'reasonable suspicion' should

be applied. There is preference to 'real likelihood' over

'real suspicion' test in India.

In Kumaon Mandal Vikas Nigam Ltd. v. Girija S Pant

AIR 2001 SC 24 = 2000 AIR SCW 3826 = (2001) 1

SCC 187, it was observed, 'Bias means and imply

pre-disposition or prejudice. The test is as to whether

there is mere apprehension of bias or there is real

danger of bias. If there exists a real danger of bias,

the administrative action cannot be sustained. If

allegations pertaining to bias is rather fanciful and

otherwise to avoid a particular curt, tribunal or

authority, question of declaring them unsustainable

would not arise.

In State of Punjab v. V K Khanna (2001) 2 SCC 330 =

2000 AIR SCW 4472, it was held that there must be

real danger of bias and not mere apprehension -

quoted with approval in N K Bajpai v. UOI (2012) 4

SCC 653 = 35 STT 350 = 19 taxmann.com 178 = 278

ELT 3 (SC).

In Jindal Drugs v. UOI (2008) 223 ELT 561 (Bom HC

DB), it was observed that adjudicator should be

disinterested and unbiased. Actual existence of bias

is not necessary. Test of bias is 'real likelihood of bias'.

The Courts have applied the test of real likelihood

and reasonable suspicion of bias. The test is whether

a reasonable man would, in the circumstance, infer

that there is a real likelihood of bias or not - N K Bajpai

v. UOI (2012) 4 SCC 653 = 35 STT 350 = 19

taxmann.com 178 = 278 ELT 3 (SC).

3.4 Practical experience

It is also practical experience that once show cause

notice is issued by DGCEI, it is almost always

confirmed by Commissioner, whatever may be the

merits of the case.

4. Writ jurisdiction at show cause notice

There is ample case law that High Court should not

interfere at the show cause stage and exercise writ

powers.

It is consistent view of Supreme Court that the

adjudicating authority should be allowed to decide the

issue in normal course.

As a general rule, writ petition is not entertained by

High Court when alternate remedy is available.

As an obvious corollary, if alternate remedy is not

available, High Court can exercise its writ powers.

Interference of writ court at show cause stage -

Normally, writ court should not interfere at the stage

of issueance of show cause notice. However, the said

rule is not without exceptions. Where a show cause

notice is issued either without jurisdiction or if there is

abuse of law, writ court would not hesitate to interfere

at the stage of show cause notice. The interference

at show cause notice stage should be rare and not in

a routine manner - UOI v. Vicco Laboratories (2007)

13 SCC 270 = 218 ELT 647 (SC).

If the show cause notice is in excess of jurisdiction,

writ powers can be exercised to save unnecessary


21

harassment to the person concerned - East India

Commercial Co. v. CC (1963) 3 SCR 338 = AIR 1962

SC 1893 = 13 ELT 1342 (SC) * N B Sanjana v. E S

and W Mills - AIR 1971 SC 2039 = 1978 (2) ELT (J

339) (SC) = AIR 1961 SC 372 * Calcutta Discount Co.

Ltd. v. ITO (1961) 41 ITR 191 (SC) = AIR 1961 SC

372 (Constitution Bench) * UOI v. Hindalco Industries

2003 AIR SCW 2062 = 135 STC 281 = 153 ELT 481

(SC) * Universal Cables Ltd. v. UOI - 1978 (2) ELT

(J632) (MP HC) * Venlon Polyester v. CCE 1999(108)

ELT 23 (Kar).

If the show cause notice issued is without jurisdiction,

Court can interfere as the show cause notice itself

cannot be sustained without any provision of law -

State of UP v. Anil Kumar Ramesh Chandra (2005)

11 SCC 451 = 145 STC 656 (SC) * Telco v. UOI -

1991 (52) ELT 500 (Bom HC), followed in S L Kirloskar

v. UOI - 1993 (68) ELT 533 (Bom HC) same view in

Hindustan Electro Graphites Ltd. v. UOI - 1990 (50)

ELT 15 (MP HC) * Panama Chemical Works v. UOI -

1992 (62) ELT 241 (MP HC) * Jayant Vitamins Ltd. v.

UOI - 1991 (53) ELT 278 (MP HC) * Godrej and Boyce

Mfg. Co. (P.) Ltd. v. UOI - (1984) 18 ELT 172 (Bom

HC) * Dr. Hemendra Surana v. State of Rajasthan -

(1993) 90 STC 251 (Raj HC) * Krishna Kumar

Agarwala v. CTO - (1993) 90 STC 392 (WBTT).

5. Commissioner may be requested to decide

the issue as preliminary issue

In view of the aforesaid statutory provisions,

departmental instructions, real likelihood of bias and

when one authority i.e. DGCEI has exercised the

jurisdiction, it can be said the Commissioner has no

jurisdiction to decide the case.

In my view, Commissioner can be requested to decide

this issue as preliminary issue, since the matter goes

to root of the case as the show cause notice is void.

6. Conclusion

Following conclusions can be drawn -

Show cause notice is void - The show cause notice

issued by DGCEI and made answerable to

Commissioner is void for following reasons - (a) It is

not according to statutory provisions and departmental

circular (b) When authority senior in hierarchy

exercises jurisdiction, the jurisdiction of authority lower

in departmental hierarchy stands eclipsed (c) There

is real likelihood of bias in deciding the matter and

hence is in complete violation of principles of natural

justice.

Commissioner may be requested to decide the

issue as preliminary issue - Commissioner may be

asked to decide the issue preliminary issue as

preliminary issue.

Writ petition may be tried - If Commissioner refuses

to decide the issue as preliminary issue or takes

adverse view, in my view, it is a good case to file writ

petition before High Court, though normally High

Courts do not entertain writ petitions at show cause

stage.


22

CENTRAL EXCISE

v Natural Justice: Non receipt of the SCN and

Order passed on basis of single hearing without

knowledge of Assessee about SCN. The service

of the order by revenue by pasting of the order

on closed doors though having the information

of the closure of the factory is not proper service.

Claim of the Assessee that, no knowledge of the

impugned order justified and hence delay in filing

appeal condoned. [2014(309)ELT 505(Tri.- Del)]

v Appeal on the basis of Notesheet of

Committee of Commissioner: Appeal filed by

department on the basis of notesheet of

Committee of Commissioners accepting

proposal of revenue to appeal against impugned

order. As the said notesheet merely signed by

Committee without clearly stating their

disagreement with impugned order, it was held

that no formal order produced under Section

35B(2) of Central Excise Act, 1944 giving findings

that impugned order is illegal and authorizing a

Central Exicse officer to file Appeal. Appeal held

to be not maintainable. [2014(309) ELT 520 (Tri.-

Del)]

v Area based exemption: Manufacturing plant

located in Gangyal Industrial Area, Jammu.

Certificates issued by labour officer read with

certificates issued by General Manager, District

Industrial Centre, sufficient to satisfy condition

of 25% increase in regular employment by

manufacturer on making additional investment

in plant. Objection by revenue regarding non-

inclusion of Khasra No.s 770 & 770 min at Chhani

Himmat in Notificaton, where units were located,

countered by the facts that the said Khasra Nos

acquired by State Authorities and included in

Gangyal Private Land Inustrial Area. Since

location of said unit falls within the industrial area

included in Annexure-II of Notification No. 56/

2002-CE, benefit of exemption not deniable.

[2014(309)E.L.T.558(Tri.Del.)]

v CESTAT to record issues, discuss for the

same and then come to conclusion: Tribunal

while rendering the judgement should have

recorded the issues involved in the matter then

ought to have discussed the same and then come

to conclusion. Tribunal referred some judgments

but whether the same are applicable or not to

the case was not discussed. Thus, Tribunal has

not put a right question to itself, Matter remanded

back to Tribunal. [2014(36)S.T.R.721(A.P.)]

v Cenvat not deniable on the ground of non -

registration of unit: Denial of credit for want of

registration with Central Excise Department not

sustainable. Unless a factory is set up, trial runs

are taken an assessee will be unable to

manufacture excisable products. The entire

exercise for setting up of factory is for

manufacturing excisable goods which can be

done when he erects, installs and commissions

the capital goods with the help of various

agencies. Hence, Credit not deniable. [2014 (36)

S. T. R. 551 (Tri. - Ahmd.)]

v Accounting, Financing, Recruitment and

Quality control are input services eligible for

Cenvat : Certain services which are not directly

related to manufacture or ultimate sale of the

goods but would be used by the manufacturer in

his day to day business activity such as

accounting, auditing, financing, recruitment,

quality control, etc. Such services are linked to

manufacturing activity and input service credit is

available to a manufacturer and has to be related

to the final products being manufactured by that

manufacturer. (2014 (36) S. T. R. 704 (Tri.-

Mumbai)

v Recovery of wrongly availed Cenvat Credit:

Cenvat Credit wrongly taken by the


23

manufacturer. Jurisdictional excise authority over

unit, availing the credit should initiate the

proceedings against that unit. The distribution

of Service tax through ISD is only a facility

provided under the rule and does not deal with

recovery. Therefore the credit if taken has to be

recovered from the person who has taken credit.

[2014 (36)S. T. R. 885(Tri. - Mumbai)]

v Mere shortage of finished goods without

evidence of clandestine removal cannot lead

to inference of evasion of duty: Department

made allegation of non receipt of inputs in the

premises of the Assessee. Reliance has been

placed on RTO's Report statting vehicle numbers

used for transportation of inputs belonging to

three wheelers capable of transporting only 21

kgs of material. No further investigation made

from owner of said vehicles, transporters and

input suppliers to establish shortage of inputs

reveived. Merely because the vehicle numbers

were of commercial transport, the said fact alone

cannot lead to denial of credit without their being

any other evidence. [2014(309) E.L.T.560

(Tri.del.)]

v Procedural lapse can be condoned: SAD

refund cannot be denied merely because

endorsement to the effect that 'No Cenvat credit

of the SAD is admissible' was not made on

Invoices. [2014-TIOL-1191-CESTAT-MUM-LB]

v Third Member of Hon'ble CESTAT allows

input credit on slitting / pickling of HR coils;

Sec 5B inapplicable: Third Member concurs

with Member (Judicial) and allows input credit

on H.R. Coils subjected to process of slitting &

pickling and cleared on payment of duty. Hon'ble

Member rejects Revenue's contention that such

process not "manufacture" as held by Delhi HC

in Faridabad Iron & Steel Traders Association

and consequently, credit inadmissible absent

Notification from Central Govt u/s 5B of Central

Excise Act (allowing non-reversal) and CBEC

Circular Nos. 940/01/2011-CX & 911/01/2010-

CX. Such exercise is revenue neutral, as credit

utilisation for duty payment on non-excisable

goods by assessee amounts to credit reversal

on inputs cleared 'as such'. No HC / SC judgment

on specific issue as to whether slitting & pickling

of HR coils would amount to "manufacture",

hence Sec 5B of CEA not attracted and as such,

Central Govt not required to issue any

notification. CESTAT relies on co-ordinate bench

ruling in Ajinkya Enterprises, as upheld by

Bombay HC, to hold that there is no illegality in

passing of credit and that assessee's customers

could avail the same on the basis of invoices

issued for pickled sheets. [TS-497-Tribunal-

2014-EXC]

v Concentrate manufacture nexus absent,

credit of services at bottler's factory prima

facie inadmissible: Prima-facie CENVAT Credit

is unavailable on quality control & testing services

provided by third party at bottler's premises.

There is no any integral connection with soft drink

concentrate manufacture with services rendered.

Rule 2(l) of CENVAT Credit Rules allows credit

of services used in relation to manufacture of

own final products. Assessee and bottler transact

on 'principal to principal' basis, having quality

control to safeguard own interest does not entitle

assessee to avail credit on activities performed

at bottler's factories. Further, no credit can be

availed on security services at godown, but

maintenance for coffee vending machines,

landscaping work in own factory would qualify

as 'input services'. [TS-496-Tribunal-2014-ST]

v Refund limitation must be calculated from

date of goods clearance on price revision:

Excess duty refund u/s 11B of Central Excise Act

consequent to downward revision of product

price admissible, since it was filed within 1 year

from clearance of goods from factory. Revenue's

contention that refund claim was time barred has

been rejected, since limitation period to be

calculated from the date of submission of

complete claim, devoid of any defects. Further,

ratio of Bombay HC in the matter of Oriental

Explosives has been applied to set aside the

rejection for want of provisional assessment.

Relevance of assessment, either provisional or

otherwise, would come into play only for

computation of time limit from relevant date u/s

11B, and has nothing to do with refund eligibility.

However, matter has been remitted back to

Adjudicating Authority to determine the issue of


24

unjust enrichment. [TS-506-Tribunal-2014-EXC]

v HC Dismisses Restaurateurs' writ at

summons stage; Presuming tax imposition

through summons unacceptable: Hon'ble

High Court dismisses writs challenging summons

issued u/s 14 of Central Excise Act that called

upon Restaurateurs to produce documents for

alleged service tax evasion. Assessees cannot

assume / presume initiation of proceedings

against them for imposition of tax on restaurant

services, summons does not specify the evaders

/ against whom proceedings have to be initiated.

Sec 14 clearly prescribes that Revenue can issue

summons to any person, either prospective

assessee or third party. Therefore assessees'

presumption & challenge based on Kerala HC

ruling in South Malabar Trading Company

unacceptable. Hon'ble High Court directs

assessees to appear before concerned Officer(s)

to know the real intention of summons vis-à-vis

its nexus and only then Kerala HC ruling would

be relevant. [TS-545-HC-2014 (TEL & AP)-ST]

Depot to customer delivery charges - taxable

or not? Third Member to decide: Two

Members Bench refers matter to Third Member

on inclusion of transportation charges in

assessable value of petroleum goods supplied

to ONGC from depot. As per Member

(Technical), since sale takes place at depot, it

would constitute 'place of removal' for

determination of transaction value in terms of Sec

4(1)(b) r/w Rule 7 of Valuation Rules. Disregards

assessee's contention that absent 'depot' in

"place of removal" definition between July 2000

to May 2003, price charged at refinery/factory

gate/warehouse constitutes assessable value.

On the other hand, Member (Judicial) applies

Rule 5 of Valuation Rules to exclude

transportation cost from place of removal to place

of delivery, while calculating price of goods. Now

Third Member alongwith all other issues, to also

consider applicability of extended period and

penalty u/s 11AC in light of suppression of facts.

[TS-542-Tribunal-2014-EXC]

v HC dismisses writ as Transfer of right to use

'copyright' taxability is appealable before SC:

Hon'ble High Court refuses to entertain writ filed

for levy of service tax on transfer of right to use

'copyright', as the said issue is appealable before

SC u/s 35L of Central Excise Act. Further, issues

like actual use of assessee's logo - as 'artistic

work' / 'trademark' - by Group Cos. involve

adjudication of disputed questions of fact, which

is impermissible in writ petition. Reliance has

been placed on principle set forth in United

Bleachers Ltd. ruling, and by Allahabad HC in

Royal Bank of Scotland. As per said rulings, writ

petition not maintainable since Sec 35G of

Central Excise Act contains specific embargo for

HCs to entertain appeals relating to determination

of rate of duty/classification. Moreover, since

assessee agitated matter before Tribunal for

earlier period & withdrew appeal after obtaining

stay order from HC without disclosing true facts,

petition to issue writ of prohibition cannot be

sustained. [TS-539-HC-2014(MAD)-ST]

v CESTAT allows credit of plant installation;

Service availed beyond 'place of removal'

irrelevant factor: Hon'ble CESTAT allows credit

of plant installation/erection service at customers'

premises, where entire contract a composite one,

and not extra consideration recovered for these

services. Hon'ble CESTAT relies upon decision

of this bench in Alidhara Textool Engineers Pvt.

Ltd. and Gujarat HC ruling in Cadila Healthcare

Ltd. Revenue's contention that erection,

installation and commissioning services availed

beyond place of removal, hence, cannot be

considered as services availed in relation to

manufacture, is rejected. It is not a case for

interpreting inclusive part of definition given in

Rule 2(I) of the Cenvat Credit Rules, 2004, but

these services covered by main body of Input

Service definition, which has not undergone any

change either before April 2008 or thereafter.

Hon'ble CESTAT has recorded that "It is now a

settled legal position that cenvat credit on input

services is also admissible if the same was

availed beyond place of removal provided such

services are availed in relation to manufacture".


v Credit on wastage during manufacture of

exempted goods ineligible, "actual removal"

test irrelevant: Hon'le High Court upholds


25

Commissioner's findings, CENVAT Credit

attributable to quantity of inputs used for

manufacture of exempted final product, reported

as wastage/storage loss, reversible as per Rule

6(1) of CENVAT Credit Rules, 2004 (CCR).

Assessee's contention that no question of credit

reversal, as per Rule 6(3) contemplates reversal

only at stage of actual removal of goods. Credit

not available on wastage arising after

manufacture, since objective of CCR is to avoid

cascading effect of duties. Hon'ble High Court

has observed that, "Merely because it is not

cleared for the reason that it cannot be cleared,

does not mean that the manufacture did not take

place". Present dispute pertains to CCR and

Tribunal wrong in applying practice under State

Excise Law holding that loss within permissible

limit of 0.5%". [TS-532-HC-2014(UTT)-EXC]

Customsv Alternative remedy available under certain

circumstances: SCN issued before expiry of

period of EO fulfillment. As importer did not reply,

adjudication order passed against him and

attained finality. Technically importer could not

have maintained as they had exhausted all the

statutory remedies and orders already passed

attained finality. But initiation of the proceeding

was completely faulty and arbitrary as SCN was

issued before the expiry of period for EO

fulfillment and importer had fulfilled the EO.

Technicality of the law could not be put against

them, as substantial justice fail in such cases.

Writ petition allowed. [2014(309)ELT 431 (Mad)]

v Appeal by Department and consistency in

grounds: In several assessment years, revenue

had accepted Tribunal Order in favour of

assessee without pursuing matter any further,

and in respect of some assessment years matter

was taken up in appeal before HC without

success. In such cases, Revenue canot be

allowed to flip-flop on the issue. It ought to let

matter rest rather than spend tax payers' money

in pursuing litigation for sake of it. [2014(309)ELT

386 (SC)]

v Hon'ble CESTAT upholds 'cost plus'

valuation for related party imports;

Assessing Authority's reasoning

"impeccable": Hon'ble CESTAT upholds

transaction value on related party imports at

'Cost Plus' method, taking in into account raw

material cost, manufacturing cost and profit

margin of 25%. Commissioner (Appeals)

rejection of declared value involving special

discounts to exclusive agents, in terms of Rule

12 of Customs Valuation Rules, unsustainable.

Rule 12 does not provide any valuation method,

it only mentions circumstances in which

transaction value can be rejected. Once

transaction value is rejected, value must be

determined sequentially following Rules 4 to 8,

which Appellate Authority has failed to do. On

the other hand, finds Assessing Authority's

reasoning impeccable for accepting declared

transfer price, he analysed the issue using

'deductive' method under Rule 7 as well as

compared prices of identical goods supplied to

other related parties in different countries.

[TS-550-Tribunal-2014-CUST]

v 'Manufacture' under EXIM Policy, not Excise,

relevant for Advance Licenses: CESTAT

allows customs duty exemption on import of bulk

drugs through high seas sale under Advance

Licenses, for manufacture and export of

compacted drugs. Revenue contention that

process of compacting does not amount to

"manufacture" and assessee merely re-supplied

imported goods, hence exemption benefit

unavailable, is rejected. Definition of

"manufacture" under Notification No.47/2002-

Cus must be understood in terms of EXIM Policy

2002-07, not under Sec 2(f) of Central Excise

Act, which applies to excisable goods. Since

Drugs & Cosmetics Rules as well as DGFT

Committee have recognised compacting as

manufacturing process at intermediate stage of

making tablet, contrary view of Customs

Authorities unsustainable. Reliance has been

placed on coordinate bench rulings in Dina

International, Reliance Industries while granting

unconditional waiver of pre-deposit. [TS-543-

Tribunal-2014-CUST]

v Customs duty inapplicable on burning loss

generated during manufacture in bonded


26

warehouse: Burning loss arising during

manufacture in a customs bonded warehouse

(CBW), not liable to customs duty u/s 65(2) of

Customs Act, 1962, as waste and scrap.

Assessee availed benefit of Notification No. 20/

99-Cus extending exemption w.r.t. raw materials

imported for manufacturing goods for off-shore

oil exploration. Burning loss nothing but quantity

consumed in manufacture which becomes

invisible and not part of quantity of waste and

scrap. Accepts assessee's contention that

custom duty not leviable as no material exists in

case of burning loss, therefore, no clearance

takes place physically from CBW for home

consumption. Reliance has been placed on

Larger Bench Decision in the matter of Paras

Fab and distinguishes Tribunal's decision in the

matter of Cochin Shipyard. [TS-531-Tribunal-

2014-CUST]

Service Taxv Show Cause Notice should not be vague

which leaves assessee confused and unable

to answer/reply: The object and purpose of

show cause notice is to inform the assessee so

that reply or submissions can be made and

relevant facts which are in the knowledge of the

assessee can be brought on record. The object

is to inform the recipient of the allegations against

him so that he can meet them effectively.

Assessee must be given a reasonable and real

opportunity and made aware as to what he has

to meet. [2014 (36) S. T. R. 481 (Del.)]

v Demand - Extended period not applicable

when statutory provisions ambiguous:

Invocation of extended period requires deliberate

act of suppression or malafide intention. Hence,

Order of Hon'ble Tribunal disallowing invocation

of extended period in absence of suppression

on the part of Assessee, is proper. [2014 (36) S.

T. R. 513 (Guj.)]

v Rule 6(7) of Service Tax Rules, 1994 struck

down by Sikkim H.C: Rule 6 (7)of Service Tax

Rules, 1994 provides an optional composite

scheme for payment of Service Tax which by itself

does not create a charge of Service tax. Rule 6

(7) is only a subordinate legislation framed under

law making powers provided in Finance Act,

1994 and could not go beyond that. When there

is no liability to pay tax under Finance Act, it is

not open to Departmental authorities to demand

it under optional scheme of payment of service

tax notified under subordinate legislation. [2014

(36) S. T. R.733 (Sikkim)]

v Services rendered in the State of Jammu &

Kashmir not taxable: Demand of service tax

for services provided by sub -brokers in Jammu

& Kashmir to clients situated there. Sub - brokers

have been appointed by assessee for dealing,

assisting, buying & selling securities for investors

situated in J &K & in terms of Section 64 of

Finance Act, 1994 discharging of service tax has

been exempted for the purposed of whole of J &

K. Merely because the accounts of such services

were being maintained in Delhi NCR offices, for

the sake of facility & maintaining a control on its

finance, such services rendered in the state of J

& K cannot be held to be taxable. [2014 (36)

S.T.R.937 (Tri.-Del.)]

v Bail in case of offences committed prior to

1-4-2013: Offence was committed under Section

89(1) (d) of Finance Act,1994, the Counsel on

behalf of Revenue could not satisfy the Court

whether strictly custodial detention of accused

is necessary for interrogation or not. Hence,

offence was originate it was bailable but in view

of amendment by Finance Act, 2013 w.e.f.

1-4-2013 it became non - bailable, without

retrospective effect, hence question of bailability

and non - bailability also merged, benefit of which

should be extended to accused person. [2014

(36) S. T. R. 724 (Cal.)]

v Lambasts Revenue for non-disbursal of

refund; Threatens "Court Contempt" against

erring officials:Hon'ble Tribunal sanctioned

refund after considering all relevant documents,

however, Revenue failed to take necessary steps

to implement Tribunal's order. Commissioner

only gaining time by one reason or other to not

sanction assessee's refund claim, finds no

consistency in Departmental officers' view as

refund already granted to assessee by another

Commissionerate. Revenue's conduct not

appreciated in interest of justice as refund claim


27

bears interest payable from kitty of general

public. Hon'ble CESTAT grants 15 days time to

dispose of refund claim, failing which contempt

of Court proceedings shall be initiated against

erring officials. [TS-495-Tribunal-2014-ST]

v Contract carriage not 'tourist vehicle';

Employee transportation not 'tour operator

service' pre-Sept 2004:Contract Carriage

Vehicles providing to & from bus transportation

to Company employees not 'Tourist vehicles'.

Prior to September 2004, only person engaged

in operating tours in tourist vehicle taxable under

'Tour Operator Service' category, since assessee

neither had 'tourist permit' nor 'tourist vehicle',

no liability would arise during said period. Post

September 2004, 'Tour Operator Service'

definition extended to include planning /

scheduling / organizing / arranging packaged

tours, however, Notification No. 20/2009-ST

exempts inter-state or intra-state transportation

of passengers. Hon'ble CESTAT remanded

matter to Adjudicating Authority for determining

taxability post September 2004 since such

contention not raised earlier by the assessee.

[TS-498-Tribunal-2014-ST]

v Hon'ble Kerala HC affirms non-taxability of

AC restaurant & hotel services, differs from

Bombay HC ratio: Division Bench of Kerala HC

upholds Single Judge order, service tax levy on

serving food & beverages in AC restaurant,

hotel, inn, guest house, club or camp-site u/s

65(105)(zzzzv) & (zzzzw) of Finance Act

unconstitutional. Post 46th Constitutional

Amendment, supply of food & other articles for

human consumption in restaurants was

considered as 'deemed sale' under Art 366(29-

A) and no service involved therein. Said activity

enumerated in Entry 54 of List II of Seventh

Schedule and States alone have legislative

competence to impose tax on whole

consideration received. Further, reliance was

placed on Hon'ble SC decision in Godfrey Philips

India Ltd wherein held that hotels, inn, clubs,

guest-house enumerated in Entry 62 of List II,

taxable as 'luxuries' by State legislature. Vide

introduction of Art. 366(29-A), characteristics of

restaurant transaction have changed for the

purpose of imposition & levy of tax, hence

European Court's ruling in Faaborg-Gelting

Linien A/S vs. Finanzamt Flensburg cannot be

relied upon. Further Hon'ble Bench also differs

from Bombay HC ratio in Indian Hotels and

Restaurant Association & Anr., since whole

consideration for supply of food (including service

part of transaction) is exigible to State tax by

virtue of constitutional definition, Union cannot

characterise the same transaction as 'service'

for levy of service tax. [TS-501-HC-2014(KER)-

ST]

v Providing data on Magnetic Tapes not

'Consulting Engineer Service': Activity of

providing sub-surface data on magnetic tapes

to ONGC not taxable as 'Consulting Engineer

Service'. There is no analysis of data collected /

recorded, hence it cannot be said that technical

assistance / consultancy service rendered by

assessee. Moreover, assessee neither a qualified

professional engineer nor Engineering Firm as

per Sec 65(31) of Finance Act, 1994. Mere

employment of Engineer does not render

assessee as an 'engineering'. [TS-502-Tribunal-

2014-ST]

v Infrastructural facilities to plot-owners by

State Corporation a Sovereign function, not

taxable: Provision of infrastructural facilities like

maintenance of roads, street lights to plot owners

by State Corporation constituted under

Maharashtra Industrial Development Act, not

liable to tax. Hon'ble CESTAT has rejected

Revenue's contention that said services

specifically taxable under 'Management,

Maintenance or Repair Service'. Assessee

undertaking a statutory/sovereign function and

no service provided to any individual or for any

consideration, relies on CBEC Circular No. 89/7/

2006. Fee collected is in nature of compulsary/

statutory levy which is deposited into State Govt.

Treasury. Moreover, demand post July 1, 2012

unsustainable absent existence of Sec 65(64) in

the negative list regime. [TS-507-Tribunal-

2014-ST]

v Services received by overseas branches non-

taxable; Local GST / VAT payment relevant:

No tax applicable on services received by


28

overseas branches on which local (country) VAT

/ GST already paid. Revenue's contention that

such branch offices act only as facilitators and

that services so procured are consumed in India,

hence tax leviable on assessee under reverse

charge mechanism, is rejected. Reliance has

been placed on British Airways ruling and OECD

Guidelines to hold that payment of local VAT /

GST an indicator to decide whether service

provided and consumed in India, and since

services consumed and taxed abroad, Sec 66A

inapplicable. However confirms tax on

reimbursement of advertising and marketing

expenses incurred by overseas distributors at

actuals, being services availed on behalf of

assessee. [TS-546-Tribunal-2014-ST]

v Mumbai Police deployment for events prima

facie not 'Security Agency services': Services

provided by Mumbai Police to individuals /

organisations for private and public events prima

facie not taxable as 'Security Agency Services'

u/s 65(94) r/w Sec 65(105)(w) of Finance Act.

As per provisions of Mumbai Police Act, services

provided by deployment of additional police force,

either to individuals or for public events partake

the nature of maintenance of peace and

preservation of order. Moreover, credit of costs

received from service recipients to State

Consolidated Fund suggests statutory /

sovereign nature of such function. Delhi Tribunal

in Dy. Comm. Police vs. CCE, Jaipur-II as well

as Bombay HC in Security Guards Board vs.

CCE, Thane-II also of prima facie view that such

services are not taxable. Since taxability of

security services provided by Police a triable

issue, Hon'ble Tribunal waives pre-deposit and

stays recovery of dues during pendency of

appeal. [TS-536-Tribunal-2014-ST]

v No Service tax on collateral lending, Amount

retained by Bank constitutes 'interest on

loan': Prima facie Service tax will be inapplicable

on amount retained by Bank while advancing

loan through Clearing Corporation of India

(CCIL). Such transaction of collateral borrowing

and lending amounts to giving loans and

advances against securities, therefore, amount

retained constitutes 'interest on loan'. Further,

no service tax leviable on discounting of accounts

receivable in terms of Notification No. 29/2004-

ST, such discount constitutes interest for lending

money and not 'commission'. Similarly, penal

interest recovered, pertaining to delay of advance

given to clients, forms part of interest on loan,

not liable to service tax. [TS-535-Tribunal-2014-

ST]

VAT/CSTv Goods sold in 'course of export' exempt; Set-

off unavailable under BST Rules: Hon'ble High

Court has upholds Tribunal order and disallows

set-off under Rule 42H of Bombay Sales Tax

(BST) Rules, 1959 in respect of exempt goods

declared against Form N-14B. Said Form

prescribed under Rule 21A in relation to goods

procured from another dealer who sold them in

course of export out of India, u/section 5(3) of

Central Sales Tax (CST) Act. Sec 5(3) inserted

in CST Act retrospectively w.e.f. April 1976 to

exempt the last sale/purchase of any goods

preceding sale/purchase occasioning the export

of those goods. Harmonious reading of Sec 5(1)

& 5(3) of CST Act with Sec 75 of BST Act & Rule

21A suggests that what is not within the purview

of sales tax can never be brought in for claiming

deduction / set-off under Rule 42H. [TS-504-HC-

2014(BOM)-VAT]

v Profit retained by contractor towards sub-

contracted works non-taxable under Kerala

VAT law: Hon'ble High Court allows writ, quashes

tax demand on profit retained by works contractor

under Kerala VAT Act & Rules. Entire works sub-

contracted by assessee for execution and

material transferred directly from sub-contractor

to contractee / awarder. Absent sale of material

by works contractor - assessee, no taxable event

can be said to have occurred under the Act. Relies

on SC's 2008 ruling in Larsen & Toubro Ltd,

wherein it was observed "work executed by a

sub-contractor, results in a single transaction and

not multiple transactions….if the argument of the

Department is to be accepted it would result in

plurality of deemed sales which would be

contrary to article 366(29A)(b) of the

Constitution". Hon'ble HC directs Revenue to


29

either refund tax amount paid under protest or

grant credit to assessee for future periods.

[TS-552-HC-2014(KER)-VAT]

v HC to decide Auto Air Conditioners

classification under Bombay Sales Tax Act:

Hon'ble HC allows assessee's sales tax

application, directs Maharashtra Sales Tax

Tribunal to refer question of classification of

'Motor Vehicle/Auto Air Conditioners' under

Bombay Sales Tax Act, 1959. Tribunal

concluded that said goods would be taxable

under specific and clear Schedule Entry C-II-148

vis-à-vis assessee's classification under Entry C-

II-102(2) /104, taxable @ 8%. Whether reference

to ACME Mfg. Co. Ltd and Bradma India Ltd.

rulings by Tribunal can be of any assistance itself

raises questions of law. Motor vehicles can be

sold with / without air conditioners, hence

question whether Schedule Entry C-II-48 would

be governing Entry, requires to gone in further

detail. Hence, Tribunal's refusal to refer matter

to HC unwarranted and unsustainable. [TS-544-

HC-2014(BOM)-VAT]

EOU/SEZv CESTAT allows SAD exemption & Education

Cess credit utilisation on EOU - DTA stock

transfer: Hon'ble CESTAT allows Special

Additional Duty (SAD) exemption on stock

transfer by EOU to units in DTA under Notification

No. 23/2003-CE. A plain interpretation of

condition that 'goods must not be exempted by

State Govt from sales tax / VAT' in said

Notification, must to determine exemption

eligibility. Hon'ble CESTAT also allows utilisation

of Education Cess and Secondary & Higher

Education Cess credit for duty payment on DTA

clearances, excise duty aggregate of customs

duties leviable u/s 3 of Central Excise Act. Larger

Bench's Moser Baer ruling inapplicable as EOU

exempt from local sales tax ab initio in that case,

on the other hand, refers to AAR decision in

GE India Industrial Pvt Ltd.


v HC not a "drop-box"; Can't invoke writ

jurisdiction to perpetuate illegal stay: Hon'ble

High Court refuses to exercise writ jurisdiction to

grant relief to SEZ unit to continue in premises,

due to absence of valid tenancy agreement with

Development Commissioner. Hon'ble HC rejects

assessee's contention that it cannot be

dispossessed / evicted pending letter of approval

extension at Authorities' end, and satisfactory

annual performance. Authorities have to deal with

immovable property in accordance with SEZ Act

and Constitutional mandate and continued

occupation / use of premises by assessee will

not enable HC to exercise its plenary powers and

issue prerogative writs. If anybody gets an

impression that by virtue of Authority's inaction,

a right is created in its favour in public property,

then that impression must immediately be

removed. Hon'ble HC has strictly instructed that

HC is not a "drop-box", assessee has absolutely

no legal / constitutional right to invoke writ

jurisdiction to perpetuate an illegal stay. [TS-505-

HC-2014(BOM)-SEZ]

Miscellaneous:v If appeal filed within limitation period,

presentation before wrong forum no bar for

consideration: Date of filing appeal papers &

receipt thereof albeit in wrong office / forum, must

be considered as "appeal filing date" for the

purpose of Sec 35 of Central Excise Act. Appeal

must be considered to have been filed before

Commissioner (Appeals) within prescribed

period of 60 days, without delay, in light of co-

ordinate bench ruling in Maruti Udyog;

Commissioner (Appeals) cannot refuse to

entertain appeal on ground of limitation, stating

that date of receipt cannot be taken as date on

which appeal was filed in wrong office. Reliance

has been placed on Premchand Gokaldas ruling

where similar view taken by co-ordinate bench

in assessee's favour. [TS-527-Tribunal-2014-

ST]


30

v Jaitley keen on GST Bill in winter session, meeting State FMs on Dec 11

v Mr. Kaushal Srivastava appointed as Chairman of CBEC, with status of Special Secretary to Govt. of

India

v Retirement age of Central Government Employees may be lowered to 58 years w.e.f. 30.6.2015

v CBEC Member Mala Srivastava retires

v SM Nigam, Rani Singh Nair, Surbhi Sinha & RC Mishra selected for appointment as CBDT Members

v Government may close divestment of ONGC & Coal India by 15th December

v Banks ask Bhushan Steel to sell its Orissa Steel Plant to re-pay part of its loan of Rs 36000 Crore

v CESTAT Members transferred-Senior most Member Archana Wadhwa moves from Delhi to Bangalore -

DN Panda goes to Chennai - Ashok Jindal moves from Mumbai to Delhi - MV Ravindran from Ahmedabad

to Mumbai - P K Das from Chennai to Ahmedabad - SK Mohanty from Bangalore to Delhi

v Ex-CBDT Chairman K V Chowdary appointed as Advisor on Black Money

v Justice G S Singhvi appointed as Chairman of Competition Appellate Tribunal

v Anita Kapur appointed as Chairperson of CBDT

v Service Tax demand of Rs 5.5 Crore issued to Noida based Film Training Institutes owned by Sandeep

Marwah

v Patna Customs seizes 20 kg silver near Motihari

v Sanction for Prosecution of 247 govt servants pending

v Chit Fund scam: CBI grills former Assam Health Minister

v Trichy Customs seizes gold bars worth Rs. 1.2 Crore smuggled through Lanka route


31

v For Salary People……

After 2 years of selfless service, I realized that I had not been promoted, no salaryincrement, no commendation.So I decided to walk up to my HR Manager. The manager looked at me,smiled and asked me to sit down saying: "My friend you have not workedhere for even a single day."I was shocked to hear this !!!, but the manager went on to explain,and here's the conversation that took place.Manager: How many days are there in a year?Me: 365 days and sometimes 366.Manager: How many hours make up a day?Me: 24 Hours.Manager: How long do u work in a day?Me: 10 am to 6 pm (i.e 8 hours a day.)Manager: So, what fraction of the day do u work in hours?Me: 8/24i.e 1/3 (one third).Manager: This is nice of u! what is 1/3rd of 366 days?Me: 122 (1/3 x 366 =122 days)Manager: Do u come to work on weekends?Me: No sir.Manager: How many days are there in a year that are weekends?Me: 52 Saturdays and 52 Sundays equals to 104 days.Manager: Thanks for that. If u remove 104 days from 122 days.how many daysdo u now have?Me: 18 days.Manager: I do give u 2 weeks sick leave every year. Now remove that 14 days from the 18 days left.How many days do u have remaining?Me: 4 days.Manager: Do u work on Republic Day?Me: No sir!Manager: Do u come to work on Independance Day?Me: No sir!Manager: So how many days r left?Me: 2 days Sir!Manager: Do u come to work on New Years Day?Me: No sir!Manager: So how many days r left?Me: 1 day sir!Manager: Do u work on Diwali ?Me: No Sir!Manager: So how many days are left?Me: None Sir!Manager: So what r u claiming?Me: I have understood, Sir. I did not realise that I was stealing companymoney all these days.Moral - NEVER GO TO HR FOR HELP!!!(HR-HIGH RISK.)So, How many days do you work ?


32

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