Case Studies And Latest Amendments of IDT

LATEST AMENDMENTS

1 Deemed Marketability in case of any article, material or substance which is capable of being bought and sold for a consideration. [Explanation to Sec. 2(d)]
2 Compounded Levy Scheme based on Annual Production [Sec 3A of CEA]



SECTION 2(d) EXCISABLE GOODS

means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and

includes salt.

Explanation to Section 2(d) of Central Excise Act, 1944 (Inserted by Finance Act 2008)
 “Goods” includes
 any article, material or substance which is capable of being bought and sold
 for a consideration and
 such goods shall be deemed to be marketable.

Comment : goods is not defined under Central Excise Act, 1944.Various Judicial Authority has given two tests to called any article as goods
 Movability &
 Marketability
The principle of marketabily clarified S.C. in Delhi Cloths & General mills Ltd that any article is said to be marketable if it is ordinarily cable of being sold as such i.e.
 Capable of being sold
 Capable of being sold ordinarily
 Capable of being sold as such.

This explanation nullified the effect of “ordinarily” from the test of marketability. Thus explanation introduced deeming fiction provision & consequently any article material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

Section 3A of Central Excise Act, Duty Based on production capacity

Notwithstanding anything contained in Section 3,
where the Central Government, is of the opinion that it is necessary to safeguard the interest of revenue
→ having regard to the nature of manufacture or production of excisable goods,
→ the extent of evasion of duty in regard to such goods

Provide for the manner of determination of duty
→ on the basis of annual capacity of production of the factory
→ by an officer not below the rank of AC
→ and such capacity shall be deemed to be the annual production capacity.

Provided that where the factory producing notified goods is in operation during a part of the year only, the annual production thereof shall be calculated on proportionate basis of the annual capacity of production



Provided further that where a factory producing notified goods
→ did not produce the notified goods
→ during any continuous period of fifteen days or more,
→ the duty calculated on proportionate basis
→ shall be abated in respect of such period.


NEW CASE LAWS

FEDDERS LLOYD CORPORATION LTD. -2008
Fedders Lloyd Corporation Ltd., cleared condensing units from their unit at New Delhi to Mumbai, where the assessee purchased cooling units from local manufacturers fabricated on order with motors, etc., supplied by the assessee. After carrying out certain tests for quality by filling gas, affixing the brand name “Fedders Lloyd’.
The complete unit was cleared along with pipe kits, electrical cord, remote control, etc., to various customers from their warehouse/godown at Mumbai. The invoices were raised by the assessee’s Mumbai office for supply of split air-condition. The department contended that the assessee was manufacturing split air-conditioners.

ISSUE: whether The complete unit was cleared along with pipe kits, electrical cord, remote control, etc., to various customers from their warehouse at Mumbai amounts to manufacture of Split A.C.
DECISION : Neither the condensing unit nor the cooling unit by itself is a complete air conditioner. It is only when these two, i.e. condensing unit and cooling units are put together the complete unit of air conditioner fit for use came into existence at the workshop. Air conditioner is a commercially new article than either the condensing unit or the cooling unit.


PHIL CORPORATION LTD-2008
M/s. Phil Corporation Ltd, Assessee manufactures processed cashew nuts, peanuts, almonds etc. by dry roasting, oil roasting, salting, seasoning and packs them in different containers and clears these items under its brand name.

Department contention Assesee’s representation
Processed cashew nuts, peanuts, almonds etc. manufactured by dry roasting, oil roasting, salting, seasoning and packed in different containers and cleared under assessee’s brand name - Classifiable under Chapter 20 of Central Excise Tariff and not under Chapter 8
Chapter note ( Under chapter 20): In relation to products of this Chapter, labeling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to “manufacture”.
Therefore the aforesaid process amounts to deemed manufacture u/s 2(f)(ii) products were correctly classifiable under Chapter Heading 0801.00 of the Central Excise Tariff Act, 1985 and chargeable to Nil rate of duty
Decision: Processing on cashew nuts, peanuts, almonds etc. manufactured by dry roasting, oil roasting, salting, seasoning and packed in different containers and cleared under assessee’s brand name amounts to deemed manufacture and liable to duty




A.P. PRODUCTS-2007
The assessee is engaged in the business of purchasing various spices like Cumin Seed (Jeera), Fenugreek Seeds (Methi), Cinnamon (Dalchini), Caraway Seeds (Shahijeera) etc. from the registered dealers in the State of Andhra Pradesh and the said items are subjected to sales tax at the point of first sale. All the said items are called ‘spices’. The assessee by mixing and grinding all these spices together produces ‘masala powder’ which is used for enhancing the taste of food. Department contended that this process amount to manufacture. Whether the contention of department is correct in law?

ISSUE: Whether the process of mixing and grinding all these spices together produces ‘masala powder’ which is used for enhancing the taste of food amount to manufacture or not?

DECISION :Masala powder prepared by grinding and mixing of various spices and condiments in certain proportion .After grinding and mixing, ingredients losing their own identity/character and a new product separately known to commercial world coming into existence

Conclusion: Such preparation of the masala powder amounted to manufacture.



PRACHI INDUSTRIES– 2008
Assessee buys duty-paid MS Tubes from local market. After receiving MS tube, it cuts the same into requisite lengths. The cut MS tube is thereafter put in the swaging machine in which dies are fitted which imparts “folds” to the flat surface of the MS tube/pipe. Department raised duty demand on the ground that the process of swaging undertaken by the assessee on swaging machine on the duty paid MS tubes amounts to “manufacture on first principle”. Assessee challenged the demand.


ISSSUE: Whether process of swaging undertaken by the assessee on swaging machine on the duty paid MS tubes amounts to “manufacture on first principle”.

DECISION: “In the present case, the rotary swaging machine with different dies therein imparts a change of lasting character to the plain pipe or tube by use of dies. That, a work piece having a distinguishable identity comes into existence. On facts, we find that after undergoing the swaging process a work piece of a different shape and user emerges and therefore, the process of swaging amounts to manufacture on first principle.



HINDUSTAN POLES CORPORATION-2007
XYZ Ltd. adopted the process that M.S. Welded Pipes of three different diameters are purchased from open market and cut to required lengths. One end of the higher diameters is heated red hot and reduced to shorter diameters by hammering sufficient to make room for insertion of the pipe of the next lower diameters in three parts which are then allowed to cool down under natural atmosphere whereby the joints of insertion get solidified resulting in forming a strong grip holding the inserted pipe of smaller diameters firmly from dislocation. The joints are, thereafter, swaged by hammering and the points of reduction are welded .The whole length of jointed pipes of different diameters is, thereafter, painted and delivered to customers against Orders placed therefore. Department contention is that by carrying aforesaid process (broadly called as welding) new product emerge “Steel Tubular Poles” which falling under the residual entry 73.08.Therefore XYZ Ltd. is liable for payment of duty on “Steel Tubular Poles” which is manufactured product. Whether the contention of department is tenable in law?

Issue before consideration Whether process of welding of M.S. Welded Pipes into large mother pipes amount to manufacture or not?



Facts of the given case is same with facts of HINDUSTAN POLES CORPORATION where S.C. observed that
Mere joining of three pipes, one with other, of different dimensions to obtain a desired length can by no stretch of imagination be brought within category of manufacture. Process carried out by assessee do not change basic identity or original character of M.S. welded pipes to make it a new marketable product leading to manufacture as defined under Section 2(f) of Central Excise Act, 1944.


CRANE BETEL NUT POWDER WORKS-2008
The assessee is engaged in the business of marketing betel nuts in different sizes after processing them by adding essential/non-essential oils, menthol, sweetening agent etc. It was contended that the crushing of betel nuts into smaller pieces with the help of machines and passing them through different sizes of sieves to obtain goods of different sizes/grades and sweetening the cut pieces did not amount to manufacture in view of the fact that mere crushing of betel nuts into smaller pieces did not bring into existence a different commodity which had a distinct character of its own. Whether the contention of assessee is correct in law?

It was observed by S.C. in CRANE BETEL NUT POWDER WORKS that “Crushing betel nuts into smaller pieces and sweetening the same with essential/non-essential oils, menthol, sweetening agents etc. did not result in manufacture of a new and distinct product having a different character and use as end product continues to retain its original character though in a modified form”.






CIPLA LTD-2008
Assessee is engaged in the manufacture of patent and proprietary medicines and organic chemicals (bulk drugs and intermediate) falling under Chapters 29 & 30 of the Central Excise Tariff Act, 1985 in their factory at Virgonagar. Assesee filed classification lists in which they declared that one of the items, viz., BMS (Benzyl Methyl Salicylate) prepared in their factory was a non-excisable item.
Department contention Assesee’s representation
BMS was an item liable to duty under sub-heading 2913.0.
Grounds
product in question to be marketable was that BMS, being drug intermediate was being transported by the Assessee from its factory at Bangalore to its Patalganga manufacturing facility after being packed in drums. It was held that as the product was packed and had a shelf life, it was capable of being marketed.
Chemical Weekly Drug Directory wherein BMS was shown as an intermediate product. BMS was not an excisable commodity since the same was neither sold by it nor was it being purchased by any other party. It was also pointed out that the show cause notices did not give any ground based on which the proposal was made to levy duty on BMS.
Evidences produce to support the representation
Affidavits and letters from bulk drug dealers to hold that BMS manufactured was not marketed.
Customs officer had also stated that there had been no import or export of BMS at the port of Bombay
Decision : Mere transfer of BMS by Assessee from its factory at Bangalore to its own unit at Patalganga for manufacture of final product does not show that product was either marketed or was marketable .
Revenue failed to lead any evidence to show that product in question was marketable or was capable of being marketed and that product in question was a distinct product for being sold in the market .Product held as not marketable.


GURDASPUR DISTILLERY-2008
assessee was engaged in the manufacture of de-natured Ethyl Alcohol and during the manufacture of de-natured Ethyl Alcohol, a residue known as spent wash comes into existence and the same is reacted in a closed type digester and Methane gas is produced which, in turn, is used by the respondent as fuel in distillery.

Department contention Assesee’s representation
Methane gas classifiable under Chapter Heading 2711.29 specified in the Schedule to the Central Excise Tariff Act, 1985 is liable to excise duty when consumed captively and not marketed. Methane gas produced by it is not marketable and, therefore, no excise duty could be levied on the same.
the burden to prove that the gas in question is marketable was on the Department and the Department failed to discharge the same.
Decision: an article does not become liable to excise duty merely because of its specification in the schedule to the Central Excise Tariff Act unless it is salable and known to the market. Counsel for the Revenue has very fairly stated that the Revenue had not led any evidence to show that the goods in question were marketable.







SUNCO RUBBERS LTD.

Major processing of raw material was done by job worker and certain process were done at hands of supplier of raw materials to make manufacturing process complete - Goods made ready for marketing only after goods subjected to deflashing, testing and inspection at hands of raw material supplier i.e. primary manufacturers - Tribunal has correctly come to conclusion that goods received back by raw materials supplier from job worker, cannot be regarded as manufactured goods, and as such, ultimate conclusion reached by Tribunal having regard to activity to be regarded as a manufacturing process, is correct as required under Rule


























LATEST AMENDMENT

CENTRAL EXCISE (DETERMINATION OF RETAIL SALE PRICE OF EXCISABLE GOODS) RULES, 2008

RULE 1
These rules may be called the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
RULE 2
In these rules, unless the context otherwise requires, -
(a) ‘Act’ means the Central Excise Act, 1944.
(b) ‘retail sale price’ means the retail sale price as defined in section 4A of the Act; and
(c) words and expressions used in these rules and not defined but defined in the Act or any other rules made under the Act shall have the meaning as assigned therein.
RULE 3 
The retail sale price of any excisable goods under sub-section (4) of section 4A of the Act, shall be determined in accordance with these rules.

RULE 4. RULE 5
Where a manufacturer removes the excisable goods specified under sub-section (1) of section 4A of the Act, -
A) without declaring the retail sale price on the packages of such goods; or
B) by declaring the retail sale price, which is not real.
C) by declaring the retail sale price but obliterates the same after their removal from the place of manufacture,
then, the retail sale price of such goods shall be ascertained in the following manner, namely :-

Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price,

then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods :

Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.
(i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price,

Then, the said declared retail sale price shall be taken as the retail sale price of such goods (ii) if the retail sale price cannot be ascertained in terms of clause (i),


The retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture

Explanation. - for the purposes of this rule, when retail sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis
Provided that if more than one retail sale price is ascertained under clause (i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods.





NEW CASE LAWS

SOUTHERN STRUCTURALS LTD-2008
Assessee is engaged in the manufacture of railway wagons and conveyor systems . Assessee had entered into a contract with the Southern Railways for manufacture and supply of wagons . The cost of each wagon worked out to Rs. 15,29,724/- .The Assessee paid central excise duty @ 15% ad valorem and cleared 21 wagons to their customer till 16th July 1998. Assessee had also collected a sum of Rs. 2,400/-per wagon as by way of inspection charges. This amount allegedly was not included in the assessable value.

Decision :Inspection charges paid by manufacturer to any third party in addition to normal inspection would be includible in assessable value


MAHAVIR SPINNING MILLS LTD.-2008
Assessee is a manufacturer of sewing thread and sells the threads from 30 depots to wholesale dealers. The assessee had claimed deductions “additional discounts” which was denied by department.

Department contention Assesee’s representation
Additional Discount were not uniformly allowed to all the buyers
the credit notes were issued after effecting sale and through negotiation with the buyers
the purpose of allowing this discount was also not disclosed to the department discounts including additional discount are purely commercial and that discounts were given at a uniform rate for dealers located in the same area.
Sale order in the present case, makes clear that additional discount in dispute is one of the items specifically mentioned in the sale order.

Additional discount specifically mentioned in sale order which also indicates rate of discount and how much of it would be given in invoice itself and how much through credit notes .Thus, discount known at time of sale of goods & satisfied all requirements of being known at time of clearance of goods and not refundable for any reason. Therefore it is allowed as deduction from assessable value.
Time of quantifying discount is not relevant for determining eligibility for deduction.


PRAXAIR INDIA LTD.-2008
Assessee is engaged in the manufacture of oxygen and nitrogen gases. They had entered into an agreement with M/s. KFIL for supply of the said products through pipeline. As per the agreement, M/s. KFIL were under an obligation to purchase from the assessee specified minimum quantities of the gases every month. Even in the event of taking less than the specified minimum quantity, they were under an obligation to pay to the assessee for the entire specified minimum quantity, referred to as ‘MTOP’ [Minimum Take or Pay] obligation. the MTOP charges were also included in the assessable value and accordingly the original authority demanded differential duty of over Rs. 1.00 crore from the assessee.

Decision : MTOP charges paid by the buyer to the assessee on account of the former’s failure to take the minimum guaranteed quantity of the excisable goods [Oxygen, Nitrogen etc.] were not additional consideration for the goods actually sold and hence not to be included in the assessable value vide . Also, it had been held that the compensation paid by the buyer to the assessee at previously agreed rate on account of the former’s failure to lift the agreed quantity of excisable goods [Nitrogen etc.] was in the nature of liquidated damages for breach of contract, not includible in the assessable value of the goods.



SCAN SYNTHETICS LTD-2008
assessee is engaged in the manufacture of grey yarn as well as dyed yarn. Grey yarn further used for manufacturing of dyed yarn.the product dyed yarn was chargeable to ‘NIL’ rate of duty.
Department contention Assesee’s representation
According to the Revenue the grey textured yarn is used captively in the manufacture of dyed yarn and the assessee had undervalued the price of the grey textured yarn by inflating the dyeing cost
assessee was selling a considerable portion of the product in question to independent purchasers at the factory gate.
The price charged by the assessee from the independent purchasers/unrelated wholesale purchasers at the factory gate would be the normal price of the grey yarn captively consumed by the assessee on the basis of which assessable value of the product in question could be arrived at.
The assessee had produced a number of invoices showing the sale to such independent buyers.
Decision: The assessable value of the captively consumed grey yarn would be on the basis of the price at which the grey yarn was sold by the assessee to unrelated buyers in wholesale at the factory gate.



BHARTI TELECOM. LTD-2008
‘BTL’ manufactures “electronic push button telephones”. It sells about 75% of its product to Department of Telecommunications (for short “DOT”) and Mahanagar Telephone Nigam Limited (for short “MTNL”) and remaining about 25% of its product in the open market through Siemens Telecom Limited (for short ‘STL’), which is a joint venture company of BTL and STL having 49% and 51% sharing respectively.

Department contention Assesee’s representation
BTL & STL are related persons having mutuality of interest.
BTL sells its product to STL at a far less price than STL sells it in the whole sale trade.
the assessable value for the purpose of duty of excise is the price at which the afore-mentioned products are sold by STL in the open market whereas BTL has been paying the duty on the price at which it was sold to STL
Even though it was assumed to be related to STL,since the price at which goods were sold to STL were comparable with the price at which goods were sold to DOT or MTNL , there fore no addition could be made.


Sale of goods to STL company at or about the same price adopted for other buyers. Price at which goods sold to STL company by assessee not influenced by such relationship . Transaction value acceptable






DAMNET CHEMICALS PVT. LTD.-2008
Assessee sales the goods to BBL at 40% discount .the registered office of BBL and the assessee company was located in the same premises. The BBL owns the industrial gala in which respondent’s factory exists for which the respondent-company pays market rent for its operation. Department contended That the assessee was a dummy or a facade of and also that the assessee and BBL were related persons and that therefore the price at which BBL sold the assessee’s products should be taken as the assessable value.

ISSUE: Whether the respondent was a facade or dummy of BBL and/or whether the respondent and BBL are related persons within the meaning of Section 4(a) and 4(3)(b) of the Act?

DECISION :
• The BBL entered into a lease agreement with the assessee’s company under the Board Resolution of the company and pays market rent for its operation.
• BBL admittedly does not hold any shares in assessee’s company nor the assessee’s company owns any shares in BBL.
• There is no evidence on record in support of the allegation that the transactions between the assessee’s company and BBL were not on a principle to principal basis.
• There is no evidence to arrive at any conclusion that there was a hidden flow back of money between both the companies. The assessee did not take any loan or advances from BBL.
• BBL was a bulk buyer of the product manufactured by the assessee and there is nothing wrong in giving 40% discount. It was a normal trade practice.
• BBL obviously is a distributor and not a relative within the meaning of Section 4(a) and 4(3)(b) of the Act.

In such view of the matter it cannot be said that the respondent-assessee and BBL were related persons.


KRAFTECH PRODUCTS-2008
The respondents manufacture “Godraj Permanent Powder Hair Dye” and “Godrej Kali Mehendi”. These products are packed in small packages containing 3 units each but the combined weight is less than 10 gms. The dispute is whether such packages are exempted from declaring the M.R.P. under Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 and they are entitled for assessment under Section 4 of the Central Excise Act, 1944.


OTHER INFORMATION: Multi-piece package is defined in Rule 2(j) of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977to mean :-
‘(j) “multi-piece package” means a package containing two or more individually packaged or labelled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole;
The main ground of the Departmental appeal is that the exemption under the said Rule 34 does not apply to a case where several units are packaged together.
As per Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 “The exemption under the same clearly applies to any package containing a commodity if the net weight of the commodity is 20 gms. or less.”
We have noticed hereinbefore that each package offered to sell to the customer contains three sachets. Net weights of all the three sachets are 10gm each.

DECISION: It is a “multi-piece package” which is capable of being offered to sell as such only because a package is a “multi-piece package”, the same cannot be taken out of the umbrage of exemption clause contained in Rule 34 of the Rules.
Only because a package is a “multi-piece package, it cannot be taken out of umbrage of exemption clause contained in Rule 34. Section 4A of Central Excise Act, 1944 not applicable


MARUTI UDYOG LTD.-2008
The appellant has been engaged in the manufacture and sale of automobiles for more than 3 decades now. First sale of car is to dealers, who in turn sell cars to customers. The sale of car is covered by a manufacturer’s warranty for 2 years. The charges, if any, towards that warranty remain included in the sale price.
 In March, 2002 the appellant introduced and extended optional warranty for 3rd and 4th years. Under this scheme the owner of the car could purchase a warranty for 3rd and 4th year on payment of certain amount. This warranty was later on made available to cars which had been already sold also. The warranty scheme was administered through dealers, who obtain a commission for each sale of the extended warranty.Under the  impugned order the Central Excise authorities have held that the cost of extended warranty should also be the part of the assessable value of cars.

DECISION: We have already noted that the first sale of the car is to dealers. Central Excise duty is being levied on manufacture. It is well settled that the first sale transaction is the relevant price for the purpose of valuation of manufactured goods. In the present case, in the first sale price of the manufacturer, the cost of normal warranty for 2 years remains included and duty is being discharged based on that transaction value.


 The extended warranty is an agreement between the buyers of the cars and Maruti Udyog Ltd. The dealers figure in this only as commission agent for sale of the car. The purchase of such a warranty bear no condition for sale of the cars by manufacturer or the dealers.
 Thus the dealer who purchase the cars in wholesale or individual buyers of the cars are under no obligation to obtain the extended warranty.
 There is no direct or proximate connection between the sale of the car to the dealer and the purchase of extended warranty inasmuch as its purchase is not obligatory.
 The sale of extended warranty is also under a separate agreement. It has also no connection between the sale agreement with the dealer.
 The definition of transaction value in Section 4 of the Central Excise Act makes it clear that the payment must be by the buyer of the goods.
 In the present case first buyer of the goods is not in the picture and makes no payment to the manufacturer or anybody else towards extended warranty.
Thus the manufacturer’s sale of car, and sale of extended warranty are two different businesses carried out by the appellant and consideration of one cannot be included in the consideration of other.





















SSI NOTIFICATION

LATEST AMENDMENT

Computation of limit of 150 lakhs / 400 lakhs

For the purposes of determining 150 lakhs, Clearances bearing the brand name or trade name of another person shall not be taken into account, namely

But there are certain exception to this clause

i) Where the specified goods, being in the nature of components or parts of any machinery or equipment or appliances, are cleared for use as ORIGINAL EQUIPMENT in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001

ii) Where the specified goods bear a brand name or TRADE NAME OF-
1) Khadi and Village Industries Commission [KVIC];
2) State Khadi and Village Industry Board [SKVIB];
3) National Small Industries Corporation [NSIC]; 4) State Small Industries Development Corporation [SSIDC];;
5) State Small Industries Corporation [SSIC];

iii) Where the specified goods are manufactured in a factory located in a RURAL AREA.

iv) Where the specified goods are Account books, Registers, Writing pads and File folders

v) Where the specified goods are in nature of PACKING MATERIALS, namely, Printed cartons of Paper/Paper Board, Metal Containers, HDPE Woven sacks, Adhesive Tapes, Stickers, PP caps, crown corks, Metal label. ---- [inserted in Year 2008 (dated 1/9/2008)]















NEW CASE LAWS
SUPERIOR PRODUCTS-2008
M/s. Super Products is a partnership firm. This Partnership firm started producing pet bottles from 1997. M/s. Superior Pet Pvt. Ltd. started production of the same goods from the next year i.e. 1998. Both the units were being managed by one of the common director. On this background deparment contended that both the units to be of the same manufacturer & their turnover required to be clubbed for determining SSI exemption.
Department contention Assesee’s representation
clearance of both the units be not clubbed together as both the units had common Directors and that one person was looking after the affairs of both the units
Second unit was created only to get the loan and did not have even complete machinery in its premises to manufacture the final product. both the manufacturing units are
 separate entities in law as well as in their operation.
 separate capital, separate accounts, separate machinery, separate premises and separate work force.
There is no financial accommodation between the two, leave alone flow of funds from one to another and each unit bears its loss or enjoys its profit.

Decision: capital, premises, machinery and labour. Both are carrying out separate operations. The commonality of share holders and Partners and a common manager do not destroy the separateness of the two units. That they are manufacturing the same product or that one unit purchases a material from the other on commercial terms also do not go against their separate identity as manufacturers’ consequent denial of exemption to the units is not sustainable.

NIRLEX SPARES PVT. LTD.-2008
Nirlex Spares Pvt. Ltd. was engaged in the business of manufacture and sale of Riderless Steel Healds and Flat Steel Healds under its own brand names/trade names viz. ‘Intatex’ and ‘Intaco’ which were affixed/printed on its corrugated boxes. However, a company was availing the benefit of exemption under SSI
The Assessee, however, started printing a hexagonal artistic design (alleged monogram) along with its brand names/trade names ‘Intatex’ and ‘ Intaco’ on its corrugated boxes. During Investigation ,the investigating officers came to the conclusion that this hexagonal artistic design also used on the visiting cards of the executives of L.M.S. Marketing Company (in short ‘the Marketing Company’) as a brand name for the goods manufactured and cleared by it and therefore, the assessee was not entitled to exemption in view of paragraph 4 of Notification 8/2003.
We find that the said hexagonal shape/design was not at all a brand name/trade name of the Marketing Company, which would be clear from the following admitted facts:
 The said hexagonal shape/design was not at all owned by or belonged to the Marketing Company. The Marketing Company had no proprietary or other right over the said shape/design.
 The symbol referred is only a geometrical design and, therefore, question of our allowing use of this does not arise.”
 It is an admitted position that the said hexagonal shape/design was only printed on the visiting cards of the two executives of the Marketing Company and the same was not even printed on the commercial documents like letterheads and sales invoices of the Marketing Company.
 It also appears from the record that the design printed on the letterheads and sales invoices of the Marketing Company was totally different.
 Accordingly, we hold that the hexagonal design cannot be said to be descriptive enough to serve as an indicator of nexus between the goods of the appellant and the Marketing Company.
Therefore, we hold that the alleged monogram cannot be said to be the brand name or trade name of the Marketing Company and such being the position and in view of the discussions made herein above, we hold that the benefit of exemption provided by the notification is available to the appellant.






GUJARAT STATE FERTILIZERS & CHEMICALS-2008
The Assessee was receiving duty paid LSHS and was availing of Cenvat credit thereon . The LSHS so procured was used in the generation of steam which in turn was exclusively used in the manufacture of fertilizers exempted from payment of excise duty under the Tariff itself.

Department contention Assesee’s representation
LSHS which is used for generation of steam which in turn is used as fuel in the manufacture of fertilizers which were cleared at nil rate of duty if sold for agricultural purpose should not be allowed inputs used for generation of electricity or steam are specifically covered by Rule 2(k) and secondly it contemplates a situation where the inputs are used for generation of electricity or steam, used for manufacture of final products or any other purpose would also entitle the assessee to avail the CENVAT credit.

Issue: whether the Respondent-Assessee is entitled to CENVAT credit on low Sulphur heavy stock (in short “LSHS”) used in the manufacture of steam which in turn was used for the manufacture of the final product, namely, fertilizer which was fully exempt from payment of excise duty.

Decision : CENVAT credit would be available on inputs used to manufacture steam which was in turn used for manufacture of final product (which include) exempted or nil duty rated final product )or for any other purpose.



MDS SWITCHGEAR LTD.-2008
The assessee was receiving ‘tripstar MCB’s single pole’ of various configurations from their unit at Sinnar in semi-finished condition for manufacture of ‘circuit brakers’. cost of semi-finished goods supplied by their sinner unit is arrived at by adding the raw material cost, direct/indirect labour cost, average overheads, notional profit and Cenvat element. Further, the cost so arrived is rounded off to the next higher figure, i.e. the cost of Rs. 56.68 has been rounded off to Rs. 60/- whereas the assessable value Circuit brakers declared by the assessee is ranging between Rs. 45.20 to 52.47 which is less than cost of semi finished goods.

Department contention Assesee’s representation
Assesee have deliberately entered into practice of raising value of semi-finished goods by adding Cenvat element and rounding off the value to higher figure so as to pass on the excess Cenvat credit. The valuation as given by the Sinnar unit was duly approved by the department and the payment of duty was also duly accepted.

Decision: Even if supplier of inputs has paid duty in excess of that payable thereon , the assessee is eligible to avail CENVAT credit of the total sum. The credit cannot be denied in the hands of the assessee without, in the first instance,disturbing the assessment of the supplier of inputs.







SOLARIS CHEMTECH LIMITED-2008
whether the assessee is entitled to CENVAT on Low Sulphur Heavy Stock (LSHS) and furnace oil used for generating electricity captively consumed for the manufacture of the final products such as caustic soda, cement etc. and which is also consumed by residential colony of factory’s workers’ families, schools etc.

DECISION : Low Sulphur Heavy Stock (LSHS) and furnace oil used to generate electricity which is captively consumed for manufacture of final product such as caustic soda, cement etc. - Without continuous supply of such electricity generated in the plant, manufacture of cement/caustic soda not possible - Assessee entitled to CENVAT credit on LSHS in view of expression “used in relation to the manufacture” Rules 2(k) of Cenvat Credit Rules, 2004. Even otherwise, goods used in generation of electricity which is used in or in relation to manufacture of final product are eligible as input in terms of inclusive part of definition of input.

Cenvat credit of Inputs used in electricity generated which is consumed by residential colony of factory’s workers’ families, schools etc. is not admissible

SPENTA INTERNATIONAL LTD.-2008
The facts of the case are that the assessee is manufacturing socks and were exempted from payment of duty prior to the 2003 Budget. The goods became dutiable only w.e.f. 1-4-2003. Certain capital goods were received by the assessee during June 2002 and September 2002 and installed in March 2003 and some of the capital goods were used in March 2003. Cenvat credit on the goods has been denied by department on the ground that final products (socks) were exempt at the time of receipt of capital goods.

ISSUE: Whether the eligibility of CENVAT credit on Capital goods is decided with reference to the dutiability of the final product on there receipt in the factory or on there use.

DECISION: Cenvat credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods.

Conclusion: Capital goods not eligible for Cenvat credit because on there receipt in the factory the final product is exempted goods



SLOVAK INDIA TRADING CO. LTD – 2008
Assessee closed down his factory. He was having unutilized cenvat credit in his books of accounts. There is no express prohibition in Cenvat Credit Rules, 2004 regarding refund of cenvat credit. But at the same time, there is no express provision allowing refund of cenvat credit. [Under CCR, 2004, only Rule 5 and Rule 5-A deals with situations where refund is permissible and none of these cover this situation].

ISSUE: Whether cenvat credit shall be refundable to the assessee or shall it lapse?

DECISION: “if the assessee opts out of the Cenvat Scheme or its unit is closed, then, the assessee is eligible for refund of unutilized Cenvat credit, which is to be made in cash. There is no express prohibition in Rule 5 and 5-A of CCR in that regard.”

Conclusion: Refund is available








BALLARPUR INDUSTRIES LTD-2008
The assessee is engaged in manufacture of paper. The assessee is availing the benefit of CENVAT credit. The assessee is also manufacturing pulp, which is chargeable to nil rate of duty. The said pulp is captively consumed for the manufacture of paper. According to the assessee, a small portion of the pulp is sent to the sister unit of the assessee at Asthi. According to the assessee, there was no sale of pulp as small quantity of pulp manufactured by the assessee was stock transferred to its sister unit at Asthi and he is not liable for payment of an amount of 10% on selling price of exempted goods under Rule 6(3)(b) of Cenvat Credit Rules,2004. Whether the view taken by the assessee is relevant in law or not?

ISSUE: Whether the amount is payable under Rule 6(3)(b) of Cenvat Credit Rules,2004 if there is no sale of exempted goods but only the stock transfer to sister concern.

DECISION: In our view Rule 6(3)(b) of Cenvat Credit Rules,2004 required payment of a presumptive amount of 10% of the price of the exempted goods, net of sales tax and other taxes. This rule was self contained provision indicating the basis on which price had to be determined. If manufacturer who did not maintain account or inventory was required to debit the amount equal to 10% of the value of exempted goods at the time of removal of goods from the factory. Entire rule is based on “deemed price” and “recovery of presumptive amount” hence, the words “price charged at the time of sale” must be read as “ten per cent of the value of exempted goods” (Value of exempted shall be determined as per rule 8 of Excise valuation rules,2000)






































CENTRAL EXCISE RULES, 2002


RULE 12 OF CENTRAL EXCISE RULES, 2002

1. Return:-
Provided that in case where an assessee is availing area based exemption, he shall file a quarterly return, in the form specified, of production and removal of goods and other relevant particulars, within 20 days after the close of the quarter.

(2A) ( Inserted by F.Y. 2008)
(a) Every assessee shall submit to the Superintendent, an Annual Installed Capacity Statement in Form ER-7 declaring the annual production capacity of the factory for the F/Y to which the statement relates by 30th April of the succeeding F/Y.

(b) The CG may, specify class of assessees who may not require to submit such an Annual Installed Capacity Statement.

ANNUAL FINANCIAL INFORMATION STATEMENT
 
Every assessee shall submit, an Annual Financial Information Statement for the every financial year in the specified form[ER-4] by 30th day of November of the succeeding year.
 
EXEMPTION
 Any assessee who paid duty less than one crore [from account current] has been exempted from such statement.
 Indian Ordnance Factories, Department of Defence Production, Ministry of Defence have also been exempted from filing annual information financial statement.

COMMENT: Thus every Assessee (other than Indian Ordinance Factories & etc.) who paid Excise duty (PLA+ Cenvat credit) one crore or more shall submit, an Annual Financial Information Statement.

Excise Duty
1.5 crores Balance of Cenvat Credit
Rs. 80 lacs Payment through PLA
Rs 70 lacs No need to submit AFIS.
Because payment from Account Current is less than 1 crore.

But under new provision assessee shall submit AFIS. Because payment of excise duty (PLA + CENVAT) is more than 1 crore)



















SEC 3 OF CENTRAL EXCISE ACT, 1944 (Proviso)
Provided that the duties of excise which shall be levied and collected
 on any excisable goods which are produced or manufactured, by a hundred per cent export-oriented undertaking and brought to any other place in India,
 shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 on like goods produced or manufactured outside India if imported into India.

Exemption (Inserted by F.A. 2008)
 Goods manufactured or produced by a 100% EOU/STP/EHTP and sold in Domestic Tariff Area
 are exempt from 50% of Basic Custom Duty.

RULE 17 OF CENTRAL EXCISE RULES, 2002
(1) If any goods are removed from 100% EOU to domestic tariff area,
 then such removal shall be made under an invoice by following procedure of rule 11 and
 on payment of appropriate duty before removal of goods by debiting the account current required to be maintained for this purpose or by utilizing the CENVAT credit.
 (Inserted by F.A. 2008) on payment of appropriate duty before removal of goods by debiting the account current or utilizing the CENVAT credit in the manner specified in Rule 8.(Monthly facility made available to 100% EOU )
(2) RECORD OF AC-1
The unit shall maintain in proper form [form: AC-1] appropriate account relating to production, description of goods, quantity removed, duty paid.

(3) RETURN OF EOU – MONTHLY RETURN
The unit shall submit a monthly return [form: ER-2] to the SCE, within 10 days of following month.

(4) SCRUTINY OF RETURN OF EOU [INSERTED IN YEAR 2008]
the proper officer may on the basis of information contained in the return filed by 100% EOU, and after such further inquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee on the goods removed, in the manner prescribed by the board.
(5) Every assessee shall available to the proper officer all the documents and records for verification as and when required by such officer.

RULE 3(7) OF CENVAT CREDIT RULES, 2004 (IMP)

If Inputs capital goods manufactured by 100% EOU, EHTP/STP and such goods purchased by Manufacturer or OSP for manufacturing the goods or for providing Output service then amount of credit available to Manufacturer or OSP is as follows

Cenvat Credit = Assessable value x { 1 + BCD } X {CVD}
200 100


OLD FORMULA Cenvat Credit = Assessable value x { 1 + BCD } X {CVD}
400 100

This because manufacture in EOU/EHTP/STP is exempted from payment of 50% of Basic Customs duty.





Write a short note on Boards Powers to issue Instructions to Central Excise Officers. (May 03)
Ans: Section 37B of the Central Excise Act, 1944 empowers the Central Board of Excise and Customs to , issue orders, instructions and directions to the Central Excise officers for the purpose of uniformity in classification of the goods and such Central Excise officers and all other persons employed in the .execution of the Act, are bound by such orders, instructions and directions.
However, no such orders, instructions and directions can be issued -
a) to the Central Excise officer so as to make a particular assessment or to dispose of a particular cas e in a particular manner; or
b) so as to interfere with the discretion of Commissioner (Appeals) in his appellate functions.

Effect, and Binding Nature, of CBEC Circular

Landmark Judgment in CCEx. v. Ratan Melting ant Wire Industries [2008] 231 ELT 22 (SC – 5 judges Constitution Bench)
It was observed that
 circular is binding on CEO but not on the court (Appellate authority). Circular represents merely the government understanding of Statutory provisions. It is for The court to. Declare what the particular provisions says.

 Circular taking A stand contrary to decision of SC has no existence in law. Thus in case Stand taken in circular is contrary to new taken by SC, then CEO is not bound by circular. In that case, CEO is entitled to File appeal taking ground contrary to circular.

 Judgment of courts finding over all authorities & not the circulars.

ANALYSIS

Whether Circular Binding on the Assessee ? NO
Whether Circular Binding on Appellate tribunal or the courts ? NO
Circular Contrary to provision of the Act Void ab-initio
Whether Circular binding on all authorities of Revenue? YES
But Stand taken in circular is contrary to new taken by SC, then CEO is not bound by circular. In that case, CEO is entitled to File appeal taking ground contrary to circular.

Whether Circular Whittle down the scope of an Exemption Notification. NO.
SANDUR MICRO CIRCUITS LTD.{2008}
It was held that “ by issuing a circular a new condition restricting the scope of the exemption notification cannot be imposed. Such circular imposing new condition is invalid as it runs counter to the exemption notification issued by C.G.








GODREJ INDUS. LTD.-2008
Goods under dispute Available headings/subheadings conclusion
Liquid hair dye Tariff Item no. 14F(old tariff)
Hair lotion
105% Product Classifiable under Tariff Item no. 68 (old tariff)

Tariff Item no. 68 (old tariff)
Other goods
8%
Decision:
 The expression “lotion” refer liquid preparation having a soothing, cleansing or antiseptic action applied to the skin, eyes etc.”
 Hair dye only a hair colouring agent which could not be used to have a soothing, cleansing or antiseptic action while washing out one’s hair.
 Even in common parlance or trader’s jargon a hair dye, unless it had other properties besides the capacity to darken hair, could not be equated with hair lotion




INSULATION ELECTRICAL (P) LTD - 2008
Goods under dispute Available headings/subheadings conclusion
Rail assembly, front seat adjuster/assembly slider and rear back lock assembly 9401.00- parts of seats 18% Product Classifiable under Tariff Item 8708.00-motor vehicle parts
8708.00-motor vehicle parts 15%.

Decision:
 The items manufactured by the assessee are only adjuncts. These are to be affixed on the floor of motor vehicles. When seats are affixed on these rails, seats can slide back and forth with the operation of a lever forming part of other rail assembly front seat adjuster. This enables the driver or the passenger, to adjust the position of the seat to suit his comfort and convenience. These are merely to improve the efficiency and convenience of the seat and does not form part of the seat. The seats are complete in themselves without these mechanisms and therefore it cannot be held that the parts of seat (under chapter 9401) manufactured by the assessee.

 It would be accessories to the motor vehicle as claimed by the assessee and would merit classification under chapter heading 8708, because they are fitted in the motor car for adjustment of the seats for the convenience and comfort of the passengers.














ISHAAN RESEARCH LAB (P) LTD.-2008
Goods under dispute Available headings/subheadings conclusion
Bio-aloevera, bio-bhringraj, bio-cucumber, bio-coconut, bio-costus, bio-kelp, bio-milk, bio-margosa, bio-peach, bio-pro, bio-quince, bio-saffron, bio-soya, bio-wheat, bio-wintergreen and bio-walnut Chapter 30- ayurvedic medicines 10% Products are classifiable under chapter 30
Chapter 33- Cosmetics 40%


Department contention Assesee’s representation
Products were used to enhance the beauty and retain youth & products were being sold to various hotels and beauty parlours. The products has medicinal value and were produced under drug licence
Products had ayurvedic herbs
Labels of the products contained medicinal properties along with the declaration ‘Not a cosmetic product’

Decision: all Bio-products containing ayurvedic ingredients and produced under drugs licence are classifiable as ‘medicine

Grounds:
 The quantity of medicament used in a particular product and the fact that the use of the medicinal element in the product was minimal does not detract from it being classified as a medicament.
 It was not necessary that the item must be sold under a doctor’s prescription. Similarly, availability of the product across the counter in shops is not relevant as it makes no difference either way.
 Products contained the elements having Ayurvedic medicinal value.
 It was also noted rightly that all these products were produced under the drugs licence issued under the Drugs and Cosmetics Act.
 Further it was obvious from the labels of the products which we have ourselves inspected in the court that there is a claim made in each of the liable of the medicinal properties of the product.
 It is settled law that the burden of showing correct classification lies on the revenue. It was for the revenue to show and establish that the products in question were not medicament but were cosmetic , which burden revenue failed to discharge.

NAGA LTD.-2008
Goods under dispute Available headings/subheadings conclusion
Vim Dish Wash Bar
mixture of detergent and abrasive powders, used for scouring 3401.20 - Organic surface-active products and preparations for use as soap in the form of bars, cakes moulded pieces or shapes;
30% Product classifiable under sub-heading 3405.40 of Central Excise Tariff and not under sub-heading 3401.20
3405.40 :
“Scouring pastes and powders and other scouring preparations”

20%
Decision: Product is neither a soap nor an organic surface active product for use as soap but is a mixture of detergent and abrasive powders, used for scouring. As per Rule 3(b) of Rules of Interpretation applicable as chemical examiners indicate that pre-dominantly product in question contains abrasive powder to the extent of 62% to 72% - Product classifiable under sub-heading 3405.40 of Central Excise Tariff





LATEST AMENDMENT

SEC 11-D: EXCESS AMOUNT COLLECTED FROM BUYER TO BE DEPOSITED WITH CG

Notwithstanding anything to the contrary contained in any order / direction of the Appellate Tribunal or any Court or in any other provision of this Act / Rules, every person who
 is liable to pay duty under this Act / Rules and

 has collected any amount in excess of the duty assessed and paid on excisable goods under this Act/Rules from the buyer of such goods in any manner representing duty of excise,

shall forthwith pay the amount so collected to the credit of the CG.

(1-A) [Inserted by FA- 2008] EVERY PERSON who

 has collected any amount in excess of the duty assessed or determined OR

 has collected any amount representing duty of excise on any excisable goods which are wholly exempt or chargeable to Nil rate of duty
from any person in any manner shall forthwith pay the amount so collected to the credit of the CG.

COMMENT: This Sec applicable to “ Every person who is liable to pay duty under this Act” only liable for payment of excess collection to the C.G. Undue benefit of this Section was taken by person who were not liable for payment of duty under this Act e. g. 1st or 2nd stage dealers or manufacturer manufacturing exempted goods or Nil rated goods were collecting excess duty without payment to C.G. Also various judicial authority had given same decision that given Section does not cover dealers or person manufacturing exempted or nil rated goods. Hence Sub rule (1A) introduced.




Sec 11-B: REFUND OF EXCISE DUTY

Application for refund to AC/DC
Any person claiming the refund of Excise Duty and INTEREST(inserted by F.A.-2008), if any, paid on such duty
may make an application for refund of such duty to the AC/DC before the expiry of 1 year from the Relevant Date. The application shall be made in the Form-“R” & manner.

COMMENT: Now the Assessee not only claim the refund of Excise duty but also Interest.




NEW CASE LAWS

DHARAMENDRA TEXTILE PROCESSORS-2008 { M. IMP}
Whether penalty u/s is mandatory?

Decision : Since Section 11AC uses the expression ‘shall be liable to pay, therefore, once it established that extended period of limitations applicable and conditions set out in Sec 11AC are fulfilled, the imposition of penalty follows and is mandatory in nature. The quantum of such penalty is also fixed as being equal to duty. There is no discretion with Central Excise officers not to impose penalty or to impose lesser penalty than amount equal to duty.

M.M.K. JEWELLERS-2008
M/s. M.M.K. Jewellers is a unit in Santacruz Electronics Export Processing Zone, engaged in the manufacturing of plain/studded/unstudded gold jewellery for export from directly imported gold.
During stock checking conducted at the premises of the assessee it was found that the assessee had not maintained proper records for accounting of imported goods and wastage claimed by the assessee was excessive. A show cause notice was issued after expiry of about 2 years therefrom in order to recover differential duty.


Decision: Department could not invoke extended period of limitation alleging suppression facts by the assessee. Therefore, issue of show cause notice after expiry of 2 years was barred by limitation.

LAJYA DYEING & BLEACHING WORKS-2008
The ‘assessee’, was a job worker and was engaged in the processing of man made fabrics received from supplier. Assessee had accepted the declaration filed by the principal manufacturers who was supplying fabrics to the assessee and discharge all theduty liabilities under the Central Excise Act, 1944.
Benefit of concessional rate of duty is available to a man made fabrics containing polyster below 70%. Assessee filed classification lists on the basis of declaration filed by the principle manufacturers declaring the man made fabrics containing polyster below 70%.
Samples were collected from the assessee-company and they were got chemically tested which indicated that they were having polyster above 70% and thus would attract higher rate of duty and the assessee company had mis-declared the contents of the fabrics at the time of filing the classification lists with deliberate intention to evade payment of excise duty & hence department invoked extended period of limitation.


Decision: There being no legal requirement for the Assessee-processors to verify the correctness of the declaration furnished by the supplier. Further there was no allegation that the assessee was a party to such mis-declaration by the principal manufacturer. Therefore, extended period of limitation is not applicable.

GEO TECHNOLOGY FOUNDATIONS AND CONSTRUCTION – 2008
Assessee manufactured PSC girders at site to be used in the construction of railway bridges. The articles were cleared without payment of central excise duty under the Central Excise Act, 1944. A SCN was issued invoking normal period of limitation (i.e., 1 year) but drop. Subsequently, second SCN was issued invoking extended period of limitation (i.e., 5 years). Assessee challenged SCN on the ground of limitation.

ISSUE: Whether the extended period is available if earlier SCN drop?

DECISION: “When in the first SCN, allegation of suppression had not been made; the same could not have been made subsequently as the facts alleged to be suppressed by the assessee were known to them. Extended period of limitation has no application in the instant case.
Conclusion: Extended period is not available




LATEST AMENDMENTS

SEC 35-B: APPEAL TO CESTAT

Appeal to CESTAT by Department
‘Committee of CCE’ may,
 if it is of the opinion that an order passed by CCE(Appeals), is not legal and proper,
 direct any CEO to appeal on its behalf to CESTAT against such order.

Provided that (inserted by F.A. 2008) where the Committee of CCE differs in its opinion as to the legality or propriety of the order of CCE (Appeals),
 it shall state the point or points on which it differs and
 make a reference to jurisdictional Chief CCE.
Chief CCE shall, after considering the facts of the decision or order, if is of the opinion that the decision or order passed by the CCE(Appeals) is not legal or proper, may, by order, direct any CEO to apply to the Appellate Tribunal.

(Similar proviso have been introduced in Sec 129-A of the Customs Act, 1962)

.
SEC 35-E: REVIEW OF ORDERS

Review by “Committee by Chief CCE”
The Committee of Chief CCE may, of its own motion,
 call for and examine the record of any proceeding in which a CCE as an adjudicating authority has passed any order,
 for the purpose of satisfying itself as to the legality or propriety of any such order

Provided that (inserted by FA, 2008) where the Committee of Chief CCE differs in its opinion as to the legality or propriety of the decision or order of the CCE,
 it shall state the point or points on which it differs and
 make a reference to CBEC .
CBEC shall, after considering the facts of the decision or order, if is of the opinion that the decision or order passed by the CCE is not legal or proper, may, by order, direct such CCE to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order, as may be specified in its order.
(Similar proviso have been introduced in Sec 129-D of the Customs Act, 1962)







.
SEC 35-FF: INTEREST ON DELAYED REFUND OF AMOUNT DEPOSITED U/S 35-F (Newly introduced by F.A.- 2008)

Where an amount deposited by the appellant in pursuance of an order passed by the CCE (Appeals) or the Appellate Tribunal, under the first proviso to section 35F [i.e., pre-deposit],

 is required to be refunded consequent upon the order of the appellate authority &

 such amount is not refunded within 3 MONTHS from the date of communication of such order to the adjudicating authority,
there shall be paid to the appellant interest at the rate specified in Sec 11BB [i.e., 6% p.a.] after the expiry of 3 months from the date of communication of the order of the appellate authority, till the date of refund of such amount.

Comment: As per Sec 35F assessee has to compulsorily deposit the disputed amount to Adjudicating authority before hearing of appeal. But Comm(A) or CESTAT have a power to waive the requirement of pre-deposit if he consider undue hardship.
If appeal goes in favour of assessee after deposit of amount under Sec 35F, then assessee will get the refund as consequential relief without applying for refund. There was no provision under this Act for interest on such refund of pre-deposit. Hence this Sec introduced.

NEW CASE LAWS

SAURASHTRA KUTCH STOCK EXCHANGE LTD. ( M.IMP)

An error cannot be said to be apparent on face of record if one has to travel beyond record to see whether judgment is correct or not .An error apparent on face of record means an error which strikes on mere looking and does not need long drawn-out process of reasoning on points where there may conceivably be two opinions

Non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake “apparent from record” which could be rectified.


















CUSTOMS ACT, 1962
LATEST CASE LAWS

ABAN LOYD CHILES OFFSHORE LTD. – 2008 Landmark decision (Most expected)
Facts: The Assessee is engaged in drilling operations for exploration of offshore oil, gas and other related activities under contracts awarded by ‘ONGC’. The drilling operations are carried on at oil rigs/vessels, which are situated outside the territorial waters (12 Nautical miles) of India but within Exclusive Economic Zone (200 Nautical miles) .Spare parts & equipment (Stores), imported by the Assessee and supplied to Oil rigs for use. There clearance sought by the Assessee without payment of duty which denied by the department.
Some important definitions of Customs Act, 1962 for discussion of above case study.
SEC 2(27) INDIA
“India” includes the territorial waters of India.

SEC 2(21) FOREIGN GOING VESSEL OR AIRCRAFT
means any vessel or aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not,
and includes
(i) any naval vessel of a foreign Government taking part in any naval exercises;
(ii) any vessel engaged in fishing or any other operations outside the territorial waters of India.
(iii) any vessel or aircraft proceeding to a place outside India for any purpose whatsoever.

SECTION 87: Imported stores may be consumed on board a foreign-going vessel or aircraft without payment of duty.

Some Important provision of Maritime Zones Act, 1976,
SEC 7(7) Central Government has been authorized to extend the enactment for the time being in force in India to the exclusive economic zone or any part thereof in the exclusive economic zone or any part thereof by issuing a notification.
and any enactment so extended shall have effect as if the exclusive economic zone or the part thereof to which it has been extended is a part of the territory of India.”
Central Government here by notification extends the Customs Act, 1962 and Customs Tariff Act 1975 to the continental shelf of India and the exclusive economic zone of India
(a) The prospecting for extraction of production of mineral oils in the continent shelf of India or the exclusive economic zone of India and
(b) The supply of any goods as defined in clause (22) of Section 2 of the Customs Act, 1962 in connection with any of the activities referred to in clause (a).
Issue:
1. Whether the expression outside the territorial water of India shall be read as outside territory of india ( which includes Exclusive Economic Zone as per Maritime Zone Act, 1976)?
2. Whether the rigs beyond the territorial water of India but within the territory of India shall be treated as FGV?

DECISION:
 The Central Government by fiction of law, can extend by notification any law(i.e. Customs Act, 1962 and Customs Tariff Act 1975) to designated area of Exclusive Economic Zone, deeming it to be part of territory of India.
 Effect of these notifications is that such ‘designated areas’ have to be treated as part of territory of India under Section 2(27) of Customs Act, 1962.
 Territorial jurisdiction of India extends to these areas. In these areas, if mineral oil is extracted and brought to main land, it will not be treated as import liable to customs duty. Similarly, goods supplied to these zones cannot be treated as exports liable to duty .However, minerals produced in these zones are liable to excise duty.
 Section 2(21) of Customs Act, 1962 cannot be read in isolation. It has to be read with Maritime Zones Act, 1976.
In the present case, as the goods were being taken to a territory which would be deemed to be a part of the territory of India though the goods have left the territorial waters, the same would be subject to levy of duty when they are taken and consumed within the deemed territory of India.




SHAKTI LPG LTD- 2008

Shakti LPG Ltd. Imported a boiler steel plates .The goods were warehoused in one of the bonded godowns of the Central Warehousing Corporation for an initial period of one year. The Assessee thereafter applied for the extension of the warehousing period which was allowed by the Commissioner. But the goods were not cleared from warehouse even after extension period. Several notices were sent to the respondent to clear the goods or to pay the duty. As no reply was forthcoming, a notice under Section 72(2) of the Act was issued to the respondent on 3rd December 2001 for sale of the goods by auction so as to recover of the outstanding dues. Interestingly, however, the respondent vide his letter dated 31st December 2004 also surrendered the goods with the result that it ceased to have any claim over them. The auction of the goods was duly advertised and it was actually held on the 28th of September 2005 and on the same day the respondent made a request for permission to re-export the goods under Section 69(1) of the Act and for the cancellation of the auction sale. Department denied the request of Assessee.

Issue: Whether the goods which have been decided to sale by auction after surrender of title by importer can subsequently withdrawn it and claim release of goods?
Decision: Once Importer having surrendered its title in goods, it was not open to it to contend that this surrender had been withdrawn subsequently.



LATEST AMENDMENT

SEC 9-A OF CTA 1975: ANTI-DUMPING DUTY

(2-A) Notwithstanding anything contained in sub-section (1), (inserted by F.A.- 2008)
Any notification imposing Anti-dumping duty shall not apply to articles imported by a 100% EOU unless,
(i) specifically made applicable in such notification, as the case may be; or

(ii) the article imported is either
 cleared as such into the DTA or
 used in the manufacture of any goods that are cleared into the DTA,

and in such cases Anti-dumping duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India.

Comment: Thus now, anti-dumping duty is payable by 100% EOU if they cleared the unit to DTA.



















M.S. SHOES EAST LTD
Model Rolls Royce car imported by the appellant in 1996. The Bill of Entry of the car was filed at the customs barrier by the appellant on 31-8-1996 in which value declare is US$10000. There is delay of nine years in release of car on 28-3-2005.At the time of clearance importer claimed that value shall be determined after considering depreciation of nine year. Whether the contention of assessee is tenable in law?

It was observed by S.C. in M.S. SHOES EAST LTD that “Valuation to be based on price at the time of import and delay in release of goods not relevant for valuation. Transaction value as on date of filing Bill of Entry to form basis for assessment and Post import depreciation not permissible.






































LATEST BOARD CIRCULARS IN EXCISE & CUSTOMS
Board circular dated 16 may, 2008
Subject :Payment of amount under Rule 6(3)(i) (10% or 8% of value of exempted good or exempted service) of the CENVAT Credit Rules, 2004
Issue: wherein the issue of the applicability of the provision of section 11D (Excess collection) of the Central Excise Act, 1944 in cases of payments made under Rule 6(3)(i) and recovered from buyer.
Relatrd Judicial Decision :
It is seen that the Larger Bench of the Tribunal in thecase of Unison Metals Ltd. v. CCE that section 11D provides that any amount which has been collected as representing the excise duty(payment under 6(3)(i) is not ED) and not paid to the credit of the Central Government shall be liable to be recovered.
The scheme of the Law is that manufacturers shall not collect amounts falsely representing them as Central Excise duty and retain them, thus, unjustly benefiting themselves. However, in case of payments made under rule 6(3(i), section 11D of the Act is not applicable since the amount of 8% or 10% has already been paid to the revenue and no amount is retained by the assessee. The said order of the Tribunal has been accepted by the Department.
Clarification by CBEC :
In the light of what is sated above, it is clarified that as long as the amount of 8% or 10% is paid to the Government in term rule 6 of the CENVAT Credit Rules, the provisions of section 11D shall not apply even if the amount is recovered from the buyers.
However, it may be noted that the CENVAT credit of the said amount of 8% or 10% cannot be taken by the buyer since such payment is not a payment of duty in terms of rule 3(1) of the CENVAT Credit Rules, 2004. Therefore, the said 10% amount should be shown in the invoice as “10% amount paid under Rule 6 of the CENVAT Credit Rules, 2004”.
Board Circular 27/16/2008-CX.1, dated 25-8-2008
Subject :Levy of Education Cess and Higher Education Cess in case goods notified under Compounded Levy Scheme under Rule 15 of CER-2002(OPTIONAL levy) & SEC 3A of Central Excise Act,1944 (MANDATORY Levy) .
Notified goods under Rule 15: Stainless Steel patta patti or Aluminium
Notified goods under SEC 3A: Pan Masala
CBEC Clarification: It has been clarified that no education or higher education cess will be leviable over and above the amount paid under the compounding scheme.

SERVICE TAX
LATEST AMENDMENT
Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then
(i) in a case where the provision of service is for a consideration in money, Value shall be the gross amount charged by the service provider for such service provided or to be provided by him.
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, Value shall be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;

(iii) in a case where the provision of service is for a consideration which is not ascertainable, Value shall be the amount as may be determined in the prescribed manner.

Comment : still no Rules are prescribed for this clause

Explanation. — For the purposes of this section,
(a) “Money” includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments.


(b) “Gross Amount Charged” includes [inserted by FA, 2008]
 Payment by cheque, credit card,
 Deduction from account and
 Any form of payment by issue of credit notes or debit notes and
 Book Adjustment, and
 any amount credited or debited, as the case may be, to any account, whether called “SUSPENSE ACCOUNT” or by any other name, in the books of account of a person liable to pay service tax,
where the transaction of taxable service is with ANY ASSOCIATED ENTERPRISE

[Associated Enterprise shall have the meaning as assigned to it under section 92-A of the Income Tax Act, 1961]


Rule 6 of Service Tax Rules, 1994
(1) Due Date for payment:-

Explanation:- - For the removal of doubts, it is hereby declared that

where the transaction of taxable service is with any ASSOCIATED ENTERPRISE, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called ‘Suspense account’ or by any other name, in the books of account of a person liable to pay service tax.





SECTION 72 - BEST JUDGMENT ASSESSMENT [IMP]

● When there is a failure to
 Furnish return under Section 70 of the Act
 Assess the tax in accordance with the Act and the Rules after having filed the return
●Then
“the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.”
● No time limit prescribed

PENALTIES ( IMP) (MOST EXPECTED)

Section Description Penalty
76 Penalty for failure to pay service tax within due date. A penalty
 which shall not be less than two hundred rupees for every day during which such failure continues or
 At the rate of two per cent. of such tax (outstanding tax) , per month,
whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax.
Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable.
77 Penalty for failure to
 take registration
 furnish information / produce documents called for
 appear before the Central Excise Officer when issued with a summons togive evidence/ produce document in an inquiry Penalty upto Rs. 5000 or Rs. 200 per day for period of failure/period ofactual compliance, whichever is higher,
Penalty for
 Failure to keep, maintain or retain books of accounts/ other documents
 Failure to pay tax electronically
 Issue of invoice with incorrect and incomplete details or failure to account for an invoice in the books of account
 For any other contravention under the Act or Rules where no penalty is specifically provided Penalty which may extend to Rs. 5000 for
78 Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of —
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, Penalty shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded.
(Remaining provision same as Provision of Section 11AC of Central Excise Act,1944)
Note: 1) Penalty under Section 76 cannot be levied if levied under Section 78 of the Act.(IMP)

SEC-71 SERVICE TAX RETURN PREPARER
1. The Board may frame a scheme enabling specified persons to prepare and furnish a return u/s 70 through a Service Tax Return Preparer authorized to act as such under the Scheme.
2. Scheme framed shall specify the manner in which the Service Tax Return Preparer shall assist the persons furnishing the return of income.
3. The scheme shall provide:-
- the manner in which a Service Tax Return Preparer shall be authorized,
- educational and other qualifications to be possessed,
- training and other conditions to be fulfilled by a person to act as a Service Tax Return Preparer,
- the code of conduct for the Service Tax Return Preparer,
the duties and obligations of the Service Tax Return Preparer

BOARD CIRCULAR NO. 104/7/2008 ( Most expected)
Issue1 :GTA provides service to a  person in relation to transportation of goods by road in a goods carriage. The service provided is a single composite service which may include various intermediary and ancillary services such as loading/unloading, packing/unpacking, transshipment, temporary warehousing. For the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services. In such a case, whether the intermediary or ancillary activities is to be treated as part of GTA service and the abatement should be extended to the charges for such intermediary or ancillary service?
Clarification :GTA provides a  service in relation to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in section 65A.
Thus, if any ancillary/ intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.
 Issue 2 :GTA providing service in  relation to transportation of goods by road in a goods carriage also undertakes packing as an integral part of the service provided. It may be clarified whether in such cases service provided is to be classified under GTA service.
Clarification :Cargo handling  service [Section 65(105)(zr)] means loading, unloading, packing or unpacking of cargo and includes the service of packing together with transportation of cargo with or without loading, unloading and unpacking. Transportation is not the essential character of cargo handling service but only incidental to the cargo handling service. Where service is provided by a person who is registered as GTA service provider and issues consignment note for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing, then the service shall be treated as GTA service and not cargo handling service.
 Issue 3 Whether time sensitive  transportation of goods by road in a goods carriage by a GTA shall be classified under courier service and not GTA service?
Clarification :On this issue, it is  clarified that so long as, (a) the entire transportation of goods is by road; and (b) the person transporting the goods issues a consignment note, it would be classified as ‘GTA Service’.

SCOPE OF TAXABLE SERVICE ALSO INCLUDES

CONSULTING ENGINEER SERVICE

Explanation.(Inserted by F.A.-2008) — For the purposes of this sub-clause, it is hereby declared that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this( consulting Engg.) sub-clause


BANKING & FINANCIAL SERVICES
Foreign Exchange broking.
 securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing {Introduced by finance Act 2008}
 foreign exchange broking and purchase or sale of foreign currency, including money changing provided by a foreign exchange broker or an authorised dealer in foreign exchange or an authorised money changer, other than those covered under sub-clause (a);

If Foreign Exchange broker shows fees or commission separately in invoice- pay S.T. at Normal rate (i.e. @12%)
Rule 6(7B) of S.T. Rules 1994
If no separate fees or commission in invoice then pay 0.25 % of Gross amount of currency Exchange.
Illustration
Buying rate $US 1 = Rs. 38, selling rate $US 1 = Rs. 40
(i) Person exchanged $100 for equivalent rupees
Transaction value = Rs. 3800 (Rs. 38 x 100)
Service tax payable = Rs. 9.5 (0.25% x 3800)
(ii) Person exchanged equivalent rupees for $100
Transaction value = Rs. 4000 (40 x 100)
Service tax payable = Rs. 10 (0.25% x 4000).

BUSINESS AUXILIARY SERVICE (MOST EXPECTED)
Explanation. (F.A.2008)
It includes any service provided in relation to promotion or marketing of games of chance, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo.

E.g. Distributor distributing & promoting lottery ticket & charging commission to State Govt.--- Commission is taxable

CARGO HANDLING SERVICE
Service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking,

Comment: Packing with transportation of goods is classifiable under this clause