SFD CCGatL TAX ag Newsletter on In: September, 2015 Tssue 1 GST Central Excise Service Tax Customs Foreign TradeTAX Update Dear Readers, Greetings from Team SRD Legal. It gives us immense pleasure to launch this fortnightly newsletter, “TAX Update” on Indirect Taxation. Typically it would cover updates on GST, Central Excise, Service Tax, Customs, SEZ, EUs, Foreign Trade etc. ‘The world of taxation has routinely remained in flux. Changes in law occur at fast pace and the industry is expected to implement a new legislation, the moment it is signed in New Delhi. One has to cope-up with the deluge of notifications/ circulars/ public notices etc, At the same time, the Tribunals, High Courts & Supreme Court keep on updating the interpretations. What was right yesterday or even today may prove to be wrong tomorrow. Ignorance proves costly and comes bundled ‘with harassment. With efforts of the government in implementing GST becoming stronger and realistic, the time to understand the concept & intricacies of GST too has arrived, In coming days, the situation will demand more frequent and elaborate communication between us. channel of communication. Starting this month, this newsletter would reach you on the O1 and the 16% day of every month with the latest news on Indirect Taxes. However, it will not be exhaustive. We don't intend to bombard you with stream of irrelevant information. We will be very selective and would include only that information which, in our judgment, would be essential and useful to our clients We have no doubt in our minds that every piece of information included in this newsletter would be informative and useful. We are confident that you all will appreciate and give your patronage to this new initiative by SRD LEGAL. Thanking you, ‘Manoj Kasale Advocate Q| SRD Legal, Advocates & ConsultantsTAX Update Central Excise 7 of Edue ations 12/2015-CE (NT), dt. 30/04/2015] When in this year’s budget the b, government granted complete exemption from payment of Education Cess and the Secondary & Higher Ed. Cess, everyone Credits of expected that the Cenvi these cesses would be allowed to be f the vice tax. availed and used for paym basie excise duty and the After two month’s wait, the government came out with amendment to the Cenvat Credit Rules, 2004 allowing utilizations Credit of cesses paid on inputs or capital goods received in our factory on or after 01% March, 2015 can be utilized for payment of Basic Excise Duty. Tn respect of capital goods received in 2014-15 the balance 50% of these cesses can be utilized to pay BED (we would avail this 50% credit in 2 5-16) Credit of the cesses paid on input es received on or after O1* March, 2015 can be utili payment of BED. ‘SRD Legal, Advocates & ConsultantsTAX Update However, the amendment does not provide for utilisation of the credit of the cesses lying in balance as on 28 February, 2015. Thus, a major part of the problem remains unresolved ‘The said balance can still be utilized for the following purpos i, For payments of Cesses on removal of input/ capital goods as such under rule 3 (6) of Cenvat Credit Rules, 2004. ii, For payment of Cesses on goods to be cleared under rule 16 of C. Excise Rules, 2002. iii, For reversal of wrong credits of Cesses. Amount payable under rule 6 of Cenvat Credit Rules, 2004: [Notification 14/2015-CE (NT), dt. 19/05/2015] You would recall that one of the options under rule 6 was to pay an amount of 6% of the value of exempted goods cleared or the services provided. This payment is treated as equivalent of reversal of the credit. When the rate of service tax was enhanced to 14% (w-e.f. 01/06/2015), the rate of above amount was also revised. ‘The amount payable now is as under: - On exempted goods: 6% - On exempted services: 7% Refund of unuti under Rule 5B: ized Cenvat Credit [Notification no. dated 19/05/2015] 15/2015-CE (NT), Cenvat Credit gets accumulated with those providing services covered under partial reverse charge because a part of the tax is payable by the service receiver. Therefore, the government has made provision for grant of refund of such unutilized credit [under Rule 5B read with notification 12/2014-CE (NT). The following two services were covered under partial reverse charge till 31¢ March 2015 (25% tax was payable by the service provider and the balance by the service receiver). However, with effect from 01% April, 2015 the entire tax became payable by the service receiver: - Supply of Manpower; and + Security Services Now, with effect from 19/05/2015 the government has withdrawn the facility of refund of unutilised credit in respect of these two services. Issuance of digitally signed invoices and_preservation of records in_e- for) [Notification No.8/2015-CE (NT) dated 06/07/2015] Rules permit maintenance of Daily Stock Account (RG-1) and Service Tax records in electronic form (.e. on computer). It also provides for issuance of digitally 4] SRD Legal, Advocates & ConsultantsTAX Update signed C. Excise Invoices and the Service Tax invoices! —_bills/-_—_challans/ consignment notes. The notification prescribes the conditions, safeguards & procedures to be adhered to. Some of the requirements under: * Class 2 or Class 3 Digital Signature Certificate issued by Certifying Authority in India is must. * The assessee is required to intimate certain details to the Deputy/ Assistant Commissioner before he starts using the Digital Signature. Those who are already using Digital Signature should file the intimation within 15 days of issuance of the notification, © Appropriate back up of the e-records has to be maintained and preserved for five years. Supply of goods into SEZ: Rebate and Refund of accumulated Cenvat Credit available: [Circular 1001/8/2015-CX.8, dated 28/04/2015] Rebate on exports is available under Rule 18 of C, Excise Rules, 2002. refund of Cenvat Credit accumulated due to exports is available under rule 5 of Cenvat Credit Rules, 2004 Similar! Both the rules were amended in this year's budget, so as to define ‘export’ and ‘export goods’. From the definitions it appeared that SEZ supplies would not be treated as export and consequently the benefits under the two rules would not be available. CBEC has now clarified that: “any licit clearances of goods to an SEZ from the DTA will continue to be export and therefore be entitled [licit = legal or proper] All indenting agents & traders need not be registered as a dealer with C. Excise: Credit available against manufacturer’s invoice itself [Circular 1003/10/2015-CX.8, dated 05/05/2015] Rule 11 of C. Excise Rules, 2002 was amended vide notification no. 08/2015- CE (NT) dated 01/03/2015, invoices to be issued on instructions of registered dealers. This had given rise to a widespread confusion. The C. Excise officers started insisting that if we receive goods through some agent or a trader then we cannot avail credit unless the agent/ trader is registered as an excise ‘dealer’ regarding CBEC has now clarified that. + A registered dealer need not bring the goods to his premises. The goods can be supplied directly from the premises of the manufacturer! importer to the 5 | SRD Legal, Advocates & ConsultantsTAX Update consignee. The dealer can issue Cenvatable invoice. * A manufacturer can avail CENVAT Credit on the basis of the invoices issued by manufacturer's invoice when the goods are directly sent to him on the direction of a dealer. The dealer may or may not be registered, and he does not need to issue C. Excise Invoice. CASE LAWS Refund - Unjust Enrichment - (High Court Madras) - In case any amount is deposited during the pendency of adjudication proceedings or investigation, the said amount would be in the nature of deposit under protest and, therefore, the principles of unjust enrichment would not apply. CCE, Coimbatore vs, Pricol Ltd. [2015 (039) STR 0190 (Mad.)] EOU - Rebate of duty paid on Export Goods — (High Court Rajasthan) EOU does not have option to pay duty on export goods. Hence it cannot claim rebate of duty paid on final products Notification No. 24/2003-C.E., dated 13- 3-2003 provides absolute exemption to the goods manufactured by EOU. Vanasthali ‘Textile Industries Ltd. vs. U.O.L 2015 (321) ELT 0089 (Raj.) Related Person — A manufacturer and his customer cannot be treated as ‘related person’ merely because the manufacturer decides to sell his entire production to the said customer, instead of incurring expenses. — on marketing/advertising. (2015-TIOL-1748-CESTAT-DEL) 6 | SRD Legal, Advocates & Consultants| 14x update SERVICE TAX Rate of S. 6% to 14 ‘The new rate of tax came into force with fe ne 2015. [Notification 14/2019 19/05/ 201 Service Tax on Job-work in respect of alcoholic liquor: 109(2) of Finance Act, 2015 read with notification 14/2015-ST, dt. 19/05/2015). Th processes n are ke [Entry 66D (] and service tax on anyone in the negative list hence there is no arrying out such processes. However, the entry has been amended so as to exclude the processes for production or manufacture of alcoholic liquor for human consumption. Thus, Service Tax shall be levied or contract manufacturing/job work for production of potable liquor for a consideration. Detailed manual scrutiny of Service Tax Returns has directed carry out detailed scrutiny of the service 7 | SRD Legal, Advocates & ConsultantsTAX Update tax returns. Quite detailed guidelines have been issued. Following are the highlights: + A Return Scrutiny Cell is being created in each Commissionerate. + The focus would be on those assessees who are not being audited, (Paying tax below Rs. 50 lakh per annum) * The department has developed certain risk parameters. ‘The Directorate General of Systems & Data Management (DGS&DM) will provide the Risk Data to the Commissionerate, on the basis of which assesses would be selected. * A detailed checklist has been provided. + The department will also compare the date with 26AS statement, Income Tax Return ete. CASE LAWS ON SERVICE TAX No levy of Service Tax on Works Contract prior to 01.06.07 The Hon'ble Supreme Court has set to rest the long standing controversy on applicability of service tax under Works Contract Service prior to 01.06.07. In its landmark judgement, the Hon'ble Supreme Court held that Finance Act, 1994 did not lay down any charge or machinery to levy and assess service tax on indivisible works contracts. [CCE & C, Kerala Vs. Larsen & Toubro Ltd.- 2015-TIOL-187-SC-ST] Ground of Appeal - In relation to appeal against order for pre-deposit, the Hon'ble High Court of Allahabad held that a new ground cannot be raised for the first time in appeal, when it was not raised before the adjudicating authority Bharat Sanchar Nigam Ltd. vs. CCE. 2015 (820) ELT 0544 (All) Penalty - Benefit of section 80 - Reasonable Cause for failure to pay tax - Once it is held that the assessee was eligible for benefit of Section 80 then not only the penalty under Section 78, but the penalties under Sections 76 and 77 too stand waived. [Akbar Travels of India (P) Ltd. vs. CCE & ST, Thiruvananthapuram - 2015 (038) STR 0957 (Ker.)] 8] SRD Legal, Advocates & Consultants| 14x update CUSTOMS Payment of customs duty in case of bonafide default _in export obligation. CBEC has permitted suo- motu payment of customs duty during the pendency of applications with DGFT for regularizing bonafide default in export obligation under Advance Authorization/EPCG Scheme. This would save interest cost for such exporters. (Circular No.11/2015-Cus dated 01.04.15) Refund of 4% SAD Importers are allowed to file refund of 4% SAD at the Customs Stations where imports are made, Number of refund claim at such customs station is limited to one per month. Earlier, importers were permitted to file only one refund claim per month in a Commissionerate (Circular No.12/2015-Cus dated 09.04.15) SDF Form dispenses: A declaration included in the Shipping Bill: Where exports are taking place through EDI ports, the RBI dispenses with SDF form. Instead on its desire the CBEC has added a declaration in the Shipping Bill to the effect that the exporter undertakes to abide by the provisions of FEMA, 1999 (Circular No.15/2015-Cus dated 18.05.15) Clearance Facilitation CBEC has set up Customs Clearance Facilitation Committee at every major customs seaport and airport. This committee comprises of senior-most functionaries of various de Plant/Animal Quarantine Department, Drug Controller of India, Textile Committee, Port Trust, Airport Authority of India, Custodians, Wildlife Authorities, Railways/ CONCOR/Pollution Control Board ete tments viz, It is s fated that this Committee will ensure expeditious clearance of import/export of goods, (Circular —_No.13/2015-Cus dated 13.04.15) 9| SRD Legal, Advocates & Consultants| tax update About SRD LEGAL: SRD LEGAL was established in 2007 by Sanjay Dwivedi, Advocate and has grown into a team headed by four Advocates. The firm handles litigations on C. Excise, Service Tax & Customs matters up to High Court. It also renders legal advisory services. Contact: ‘Del, : +91-22-25 6565 47/ 48 512, Business Park, Citi of Joy, +91- 9004825702/ 8767661950 J. 8. D, Road, Mulund (West), Pax : +91-22-25 6565 49 ‘Mumbai - 400 080. e-mail: mail@srdlegal.in Team SRD Legal Mr. Sanjay Dwivedi, Advocate - 9320 456 555 ‘Mr. Manoj Kasale, Advocate - 96 190 290 95 ‘Mr. Raymond George, Advocate - 98204 80597 ‘Mrs, Savita Dwivedi, Advocate - 998 737 0673 For private circulation only. © SRD Legal Disclaimer The information contained in this publication is intended for informational purposes only and does not constitute legal opinion or advice. The views & information contained herein are of general nature and are not intended to address the circumstances of any particular person or entity. The contents are not comprehensive or sufficient for taking decisions. Please do not act on the information/ views provided in this newsletter without obtaining professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi judicial authorities may not take a position contrary to the views mentioned herein. Although we endeavour to provide accurate and timely information, there is no assurance or guarantee in this regard. SRD LEGAL neither accepts nor assumes any responsibility or liability arising from any decision or action taken or to be taken or refrained to be taken, by anyone on the basis of this publication. 10 | SRD Legal, Advocates & Consultants