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TMI BlogMinutes of Tariff Conference held on 28th & 29th October, 2015 at ChandigarhX X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment and Valuation B1 to B4 2 Classification B5 to B9 3 Scope of Exemption B10 to B17 4 Cenvat Credit B18 to B32 5 Central Excise Rules and Procedures B33 to B41 6 Implementation and other related issues B42 to B52 7 Audit Manual B53 ANNEXURE-B B1- Hyderabad Zone- Assessment and Valuation-Non-adoption of Section 4A-Valuation of Goods-Clearances made to Depots by Cement Manufacturers:- Issue: Cement in packaged form has been notified under Section 4A of the Central Excise Act, 1944 with effect from 17.3.2012. The assessee affixes a label on the bags removed to its depots clearly stating. meant for industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consumer Affairs, Food Public Distribution. The revised definition includes the consumer who buys packaged commodities directly from the manufacturer or from an importer from a whole sale dealer. The conference was of the view that the valuation of goods in respect of clearances to industrial consumers even from the depot will be made under Section 4 of the Central Excise Act, 1944 and not under Section 4A of the Act ibid. The conclusion was reached in view of the fact that in case of institutional buyers purchasing goods, depot is only an extended arm of the manufacturer, being a place of removal. The issue is also covered in the Hon'ble Supreme Court judgment in case of M/s Sony India Ltd. [2004 (167) E.L.T 385]. B2-Jaipur Zone - Assessment and valuation-Retention of Sales Tax Collected from Customers and Inclusion thereof in the Transaction Value: Issue: During the course of audit of certain units, it has been noticed that Government of Rajasthan has declared that the concerned manufacturer shall be eligible for Customized Package (a financial package) under Rajasthan Investment Promotion Policy-2010 (RIPS 2010) on fulfillment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under the scheme. Section 4 provides for abatement of taxes actually paid. Taxes can be considered to be paid for the purposes of granting abatement under Section 4 only if they are deposited with the exchequer. It was also noted that the issue in circular dated 10.7.2014 was relating to addition of additional consideration whereas the present issue relates to allowing abatement of taxes actually paid. Therefore, the circular dated 10.7.2014 has no application to the present case. Further, fertilizer subsidy is directly paid by the Government to the manufacturer which is not the case presently at hand as the present scheme works by mechanism of adjustment of subsidy against taxes. There is no abatement for taxes not paid, even when such taxes are considered notionally paid by adjustment against a subsidy payable by the State Govt. State VAT laws may considers VAT as fully paid in such situations but it is only a deeming fiction of full payment and not actual payment to the exchequer. Such deeming fiction would apply only for purposes of considering VAT fully paid under the State law and not for allowing abatement under Section 4 of the Central Excise Act, 1944. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Issue: It was explained by the sponsoring zone that an assessee was engaged in the manufacture of various food products and cosmetic products under chapter 21 and chapter 33 and availing area based exemption notification no 20/2008-CE dated 27.03.2008 and 38/2008-CE dated 10.06.2008. The assessee had applied for fixation of special rate for the F.Y 2011-12. The Joint Director (Cost) Kolkata initially worked out the percentage of value addition based on the Value Addition Formula prescribed in the notification no 20/2008-CE dated 27.03.2008 But a re-working of actual value addition in respect of these products was carried out by the Joint Director adopting the formula prescribed in Cost Audit Report Rules, 2011 and taking into account two more ingredients viz (i) consumption of stores spares and (ii) consumption of fuel indicated a different value addition. The Advisor (Cost) Kolkata expressed agreement with the recommendations of the Joint Director (Cost) and opined that subject matter being contentious, should not be decided for the time being. The jurisdictional Commissioner elaborated the logic of applicability of Cost Audit Report Rules, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that explanatory notes to the HSN of Heading 3816 covers certain preparations (e.g. for furnace linings)..., with an added refractory binder Many of the products of this heading also contain non-refractory binders such hydraulic binding agents, therefore, to qualify for classification under heading 3816, refractory binder is required to be added to such powdered/grained quartz/quartzite mixture. Since no refractory binder is added to the impugned product, the same is not covered under heading 3816. This view is reinforced by the Tribunal in the case of M/S Mayur Chemicals Industries [2001 (136) ELT 1389] upheld by the Hon'ble Supreme Court. Chapter Note I of Chapter 25 is also relevant to this issue. Hon'ble CESTAT, in the matter of M/S 20 Microns Ltd. [2012-TIOL-1467-CESTAT-AHM] has held that specific heading has to be preferred to the general heading and Chapter 38 being a residual chapter, Chapter 25 is to be preferred. In this regard, para 10 of the CESTAT order is specifically relevant may be referred where it has been explained that where no material of different composition is mixed, the exclusion clause of Note 1 of Chapter 25 does not apply. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in [2015(321) ELT 4792011-TlOL-775-CESTAT]. The issue of classification can now be decided by the field taking into consideration the facts of the case read with the judicial pronouncements. For further details the circular may be referred. B.7 - Kolkata Zone - Classification - Description of Goods under Tariff Item No 22029020 being Fruit-Pulp or Fruit Juice Based Drinks Issue: The sponsoring zone pointed out that tariff item 22029020 provides description of goods as 'fruit-Pulp or fruit Juice based drinks but this description of goods seems incomplete as no percentage of fruit juice is mentioned. The rate of duty under this tariff item is lower than most of other tariff items of this chapter. This may lead to some assessees taking advantage and classifying goods of other headings into this heading. It is suggested that a percentage of fruit juice be mentioned against the CETH concerned. Discussion Decision The conference noted that fruit juices [CETH 2009] and fruit pulp or fruit juice based drinks [ CETH 22029020] have same tariff rate of duty @ 6%. Thus all fruit juices and fruit pulp or juic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... household articles. On the other hand tariff item 8201 applies to hand tools and other tools of a kind used in agriculture or forestry. Thus it is quite clear that for classification in tariff item 7323 the size and use of the product is relevant. From the description of the product as explained by the zone, it does not fit the description namely table, kitchen or other household articles of iron and steel. Specific heading of 73239410 meant for Ghamellas in the tariff would apply only to articles which qualify to be classified under tariff head 7323 and fits the description Table, Kitchen or other household articles of iron and steel . The quality of steel or iron is also a relevant consideration as goods need to be safe for use as kitchenware. In the present case these criteria are not satisfied. Classification of goods solely on the basis of description as Ghamella on website for sale is not a relevant consideration. Rule 3(a) of the rules of interpretation has no application in the present case as rule 3 applies only as a sequel to rule 2(b). Rule 2(b) applies to mixtures and combinations, which is not the case at hand. The issue of classification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 84342000, the assessee started to classify Bulk Milk Cooler under tariff item 84198990 which attract duty @ 12.5%. References have been received from the Trade that in respect of the said product there is no uniformity of practice. Different classifications under contention in different zones are under the headings 8418, 8419 and 8434. Sponsoring zone requested that the scope of these headings and classification of the product may be decided. Discussion Decision The issue was discussed in the conference with respect to scope of the three headings. It was noted that in the context of the goods under discussion heading 8418 applies to refrigerators, freezers and other refrigerating or freezing equipment; tariff item 8419 applies to machinery, plant for treatment of material by a process involving a change of temperature whereas tariff item 8434 applies to Milking machines and dairy machinery. Note 2 of chapter 84 interalia provides that a machine or appliance which answers to a description of one or more of the heading of 8401 to 8424 and at the same time to a description in one or other of the headings 8425 to 8480 is to be classified under app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in chilling of water is able to achieve cooling only up to 8 0 C and not freezing temperature which is around zero or sub-zero degree, hence it is not classifiable as refrigerating equipment [8418]. In case of Pan Asia Corporation [1999 (107) ELT 306] the distinction between the two headings 8418 and 8419 was explained by the tribunal to say that - A distinction is to be made between Tariff Heading 84.18 and 84.19. Cooling is no doubt affected by machineries and appliances falling under Tariff Heading 84.18 but the cooling should be of the range which a refrigerator or refrigerating machines achieves i.e. around zero or sub-zero temperatures. In the present case it is not disputed that the cooling effect is from 450C to 60C. Further it is also clear that it is not based on the refrigerating system. The lower appellate authority s finding that the goods would be rightly classifiable under Tariff Heading 84.19 is correct. The conference noted that the Bulk Milk Cooler under discussion apparently achieves a cooling up to 4 degree centigrade in three hours. The information regarding whether the machine under discussion is a refrigeration machine and achieves zero and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification and the clarification issued by TRU and concluded that clarification was clearly worded with no room for doubt. All processes prior to cold rolling are eligible for exemption from duty under sr. no. 203 of notification no. 12/2012-CE dated 17.03.2012 . It appeared that the view of the zone was premised on the interpretation that the expression patties and pattas do not include stainless steel flats. There is no reason for such interpretation as the expression patties and pattas have to be understood in terms of general trade parlance and would include stainless steel flats. Benefit of exemption was available to the process of hot rolling of SS flats. It was also observed by the Member(CX) that field officers are bound by the clarifications and letters issued by the Board and where they have a contrary view, it should be referred to the Board. It was expected that the Chief Commissioners would take steps to ensure that the clarification issued by the Board are implemented in right earnest. B11 - Chennai zone - scope of Exemption Notification No.12/2012-CE dated 17.3.12 (Sl.No.336 dealing with 10): Issue: Spon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been prescribed in the Excise notification. Now the option before us is to hold that Excise Duty exemption under such notification will not be applicable at all to any clearances by a strict interpretation of the condition as canvas by revenue or to hold that the excise duty exemption is to be made available subject to necessary changes read into the conditions prescribed under Customs notification. The former interpretation is not justified because to our mind it is implied that the condition prescribed in Customs Notification is to be read mutatis mutandis for excise exemption. Once the later proposition is agreed to, we are of the view that correct interpretation is that the goods should have been supplied to the contractor or sub. contractor who has used the goods in oil exploration activity, the exemption should be available. In the present case, such condition has been satisfied in the case of supplies to M/S. Reliance Industries Ltd though after clearance. Sponsoring zone suggested that in order to avoid this kind of dispute, the conditions prescribed under Customs notification may be incorporated under the Central Excise notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B13 - Hyderabad Zone - Scope of exemption- admissibility to intermediate goods used in the manufacture of cement supplied to SEZ units: Issue: Notification No. 67/95-CE dated 16-03-1995 provides duty exemption to captively consumed inputs in the manufacture of dutiable final products. Exception to this notification is that this duty exemption is not applicable, if the final products are exempted from duty payment or attract nil rate of duty. An exception to this exception is when clearance of final products is made to a unit in Free Trade Zone (FTZ), a 100 % EOU and a unit in Hardware Technology Park or Software Technology Park. Thus, when final products are supplied to FTZ, EOU etc intermediate products continue to be exempted. Now, FTZ scheme does not exist and existing EPZ/FTZ have been notified as SEZ. The issue is whether the benefit of exemption to the intermediate product is available when final products are supplied to the SEZ. The issue has been discussed in the past tariff conference also but no final view was taken. Show Cause Notices have been issued in the zone on the subject. Discussion Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification may be issued where necessary but not in all cases particularly where the language of the notification or amendment in the rule is quite clear. B15 - Meerut Zone -Scope of Exemption-Duty Rate applicable to 'Mobile Handsets' in terms of Notification No. 12/2012-CE Dated 17.03.2012 : Issue: Central Excise duty @ 1% is applicable for manufacture of 'Mobile Handsets' in terms of Sr. No. 263A to the notification no. 12/2012-CE dated 17.03.2012 subject to condition that no credit under Rule 3 or Rule 13 of the CENVAT Credit Rules, 2004 has been taken in respect of inputs or capital goods used in the manufacture. units manufacturing Mobile Handsets are Sourcing inputs required to manufacture Mobile Handsets at 'NIL' rate of duty in terms of S. No. 431 of the notification no. 12/2012-Cus dated 17.3.2012 subject to the condition that the importer follows the procedure set out under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The duty foregone on such imports ranges from 17.5% to 28.5% (approx.). However, if Cenvat Credit is availed on the inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself without electric cables, although wind mill may not be able to function without these cables, hence the benefit of exemption is not available to Cables and wires. Further, in case of M/S. Enercon (India) Ltd., Authority of Advance Ruling had ruled that entry Wind Operated Electricity Generator covers the generator per-se and it is not intended to include equipments which are deployed with the generator for production of electricity. The sponsoring zone was of the view that the towers and others parts, which are not directly related to generation of electricity would not be eligible for exemption. In view of the sponsoring zone, it would be desirable that the list of equipments/parts/components eligible for exemption may be spelt out in the Exemption Notification. Discussion Decision It was noted in the conference that a clarification has already been issued on 20.10.2015 vide Circular No. 1008/18/2015-CX by the Board wherein details of parts on which exemption is available is specified. Ministry of New and Renewable Energy had clarified to CBEC that tower, nacelle, rotor , turbine controller are parts of wind turbine and accordingly the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proviso is reproduced below: Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the [duty of excise or additional duty of excise leviable thereon] or are chargeable to nil rate of duty, other than those goods which are cleared :- (i) to a unit in a Free Trade Zone, or (ii) to a hundred per cent Export Oriented Undertaking, or (iii) to a unit in an Electronic Hardware Technology Park, or (iv) to a unit in a Software Technology Park, or (v) under notification No. 108/95-Central Excise, dated the 28th August, 1995 , or (vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in [rule 6 of the CENVAT Credit Rules, 2001.1 By virtue of the exception as mentioned in sl. no. (vi) of the above proviso, a manufacturer, producing dutiable and exempted products, would be eligible for exemption on captively consumed goods, if he discharges the obligation prescribed under Rule 6 of the Cenvat Credit Rules. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % amount cannot be considered to be at a different footing as compared to credit reversal. In light of this it was concluded that there was no need to amend the notification. Conference concluded that exemption is available to the intermediate products manufactured by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules, 2004 and such manufacturer has the option of choosing any of the alternatives provided in rule 6. B.19 - Chennai Zone - Cenvat Credit - Reversal of Credit on Common Input Services: Issue: In terms of Rule 6(3) of Cenvat Credit Rules, 2004 [CCR], a manufacturer of goods or the provider of output service, opting not to maintain separate accounts for the receipt and use of input services used in the manufacture of dutiable final goods and exempted goods, or for providing output and exempted services, shall pay an amount equal to 6% of the value of exempted goods or 7% of the value of exempted goods and exempted services or pay an amount as determined under Sub-rule 3A of Rule 6 of CCR 2004. The above sub rule prescribes a formula for arrivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing statute one has to look merely at what is clearly said. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used . If, we apply this principle to the formula prescribed in sub-rule (3A), there is no scope for interpreting the term P otherwise. If the formula leads to an anomalous situation, the remedy lies in amending the provisions of statute and judiciary is helpless. In this regard, the decision of the Hon'ble Apex Court in the case of Shakar Raju - 2011 (271) E.L.T. 492 (S.C.) REFERS. In the present case, it is a fact that the total CENVAT credit taken on common input services is only ₹ 2.07 Crore (approximately) whereas, if we apply the formula, the amount of credit required to be reversed works out to ₹ 8.62 Crore 4. It may be seen that the Hon'ble CESTAT has noticed in the aforesaid order, an anomalous situation, where an assessee would be required to reverse more than the amount of Cenvat credit taken on common input services, if P is to mean total Cenvat credit taken on all the input services by the assessee instead of Cenvat credit taken on 'com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not included in Rule 9 of CCR, 2004 which specifies various documents for taking credit. It was suggested that an amendment to Rule 9 of CCR, 2004 may be considered to include the invoices issued by a provider of output service for clearances of inputs or capital goods as such as an eligible document for taking credit . Discussion Decision The suggestion made by the sponsoring zone was found acceptable by the conference and it was recommended to the Board that necessary amendments in the Cenvat Credit Rules, 2004 be made by inserting service provider in Rule Conference also noted that even without the amendment in the rules, CENVAT credit is available on the basis of an invoice issued by a service provider removing inputs and capital goods as such in view of provisions of rule 3(5) and 3(6) of CCR, 2004. Conference was of the view that various provisions of the rules need to be read harmoniously to make the rule operational for the purpose for which it is intended. B.21 - Hyderabad, Coimbatore, Vadodara, Vishakhapatnam, Delhi Zone-Cenvat Credit - Balance of Education Cess and Secondary Higher Education Cess lying in the GNVAT Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Cenvat credit so accumulated should be allowed refund under Rule 5 of the Cenvat Credit Rules, 2004. Discussion Decision The provisions of refund of accumulated credit under rule 5 of the Cenvat Credit Rules, 2004 are only meant for physical exports and not for deemed exports with one exception i.e. supplies to SEZs which is treated as exports. The meaning of the expression export goods has been inserted in the rule 5 of CCR, 2004 by notification no. 6/2015-C.E(N.T) dated 1.3.2015 to say that export goods means any goods which are to be taken out of India to a place outside India. Thus, supplies to EOU and supplies under ICB can not avail the benefit of refund of accumulated credit under rule 5. Under the present policy, it would not be possible to allow refund of accumulated credit on supplies to ICB. B.23 - Coimbatore Zone - Cenvat Credit - Applicability of Section IID of Central Excise Act, 1944 and amendment thereof where the amount of 6% is charged from the buyer but not deposited with the department. Issue: Board circular no. 870/8/2008-CX dated 16.05.2008 clarifies that the amount paid under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what are export goods till 01.03.2015. In the absence of such definition of Export Goods till 01.03.2015, the contentious issue that arose was whether refund under the provisions of Rule 5 the Cenvat Credit Rules, can be sanctioned in respect of clearances made to EOUs (which are termed as 'deemed exports' under Para 8.1 of the Foreign Trade Policy) or the same is to be restricted only for the physical exports made without payment of duty under 'bond or letter of undertaking'. It is pertinent to mention that conceptually SEZs and EOUs merits to be equated and supplies to EOUs may also have to be treated as Exports (Deemed exports as per FTP), but for the recent incorporations of the definition of Export Goods . The terms exports, prior to incorporation of the definition, was interpreted in several judicial pronouncements to include deemed exports. In a similar situation in respect of SEZs, Board vide Circular 1001/8/2015-CX.8 dated 28.04.201 5 has clarified that all supplies to SEZ should be treated as exports. However, the said circular did not cover the supplies to EOU. Clarification is needed regarding benefit under Rule 5 of the Cenvat Credit Rules, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is relatable to the exported goods/services to prevent premature cash refund of tax on inputs/input services where such inputs/input services are at a much later stage. Discussion Decision - The conference discussed the issue and it emerged that there was no empirical data with respect to the number of instances and quantum of credit encashed in advance as anticipated in the point sponsored. Further, no prudent business establishment would invest in excess inventory, simply to claim refund of credit, before the same actually gets used in manufacture of export goods. Further, the present scheme is administratively simple to implement and was introduced in the year 2012 as a measure of simplification. Therefore, it was decided that no change was needed at present when the department was focusing on ease of doing business by simplification of business processes. 3.26 - Meerut Zone - CENVAT Credit - Reversal of Cenvat Credit in respect of Service tax paid on Input Services: Issue: Rule 3(5) of the Cenvat Credit Rules, 2004 provides as under: when inputs or capital goods, on which CENVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b worker for further processing, testing, repair, reconditioning or for the manufacture of intermediate goods necessary for the manufacture of final products. Such inputs and capital goods are required to be received back in the factory within one hundred and eighty days of their being sent to a job worker. If the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service is required to pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise. Rule 4(5)(a)(iii) of the CENVAT Credit Rules, 2004 provides for reversal of Cenvat credit when the inputs and capital goods are not received within the stipulated time. It is however silent on the question whether interest should also be charged at the time of reversals of Cenvat Credit taken on the inputs or capital goods sent for job work and not received within the stipulated period of 180 days and if yes, what should be the period for which interest should be charged, i.e. period starting from the date of clearance from the factory or for the period starting after 180 days of clearance of such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21]. As the issue is pending before the Hon'ble Supreme Court, for the present the cases may continue to be in the Call Book. Further the conference recommended that Board should examine the issue and if needed amend the rules to bring certainty to the issue of availability Of credit on welding electrodes used under different situations. B.29 - Meerut Zone - Cenvat Credit - Dutiability of Baggase, Pressmud in Sugar Factory and Zinc, Aluminium Ash/Dross in Metal Industry and Similar Waste/Refuse arising from Cenvated Inputs: Issue: Baggase, press mud in sugar factory and zinc and aluminium ash/dross in non-ferrous metal industry have been held as non-excisable goods by Hon'ble Supreme Court in the following cases respectively - M/S DSCL SUGAR LTD,(2015-TIOL-240-SC) Indian Aluminium Company Ltd., [2006 (203) ELT 3(SC)]. As such a provision similar to the one that existed in the erstwhile Modvat scheme may be provided in the Cenvat Credit Rules, 2004 to treat waste/scrap produced from inputs on which Cenvat credit has been availed as 'deemed manufactured products' so that appropriate duty/credit may be recovered from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments have been delivered. It was noted that the judgment of Hon'ble High Court of Gujarat was in a very specific set of circumstances where the sales commission agent seemed to be only trading in the goods i.e. buying and selling the goods without undertaking any sales promotion or advertising. In the said judgment, Hon'ble Court noted that there is nothing to indicate that such commission agents were actually involved in any sales promotion activities as envisaged under the said expression. Obviously, commission paid to the various agents would not be covered in this expression since it cannot be stated to be a service used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from the place of removal . Board Circular No. 943/4/2011-CX., dated 29.4.2011 at point no 5 on the other hand has explained the situation where the commission agent renders the service of sales promotion in following words - ....... Moreover the activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale....... . Board circular directs that input service credit would be ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To make the credit eligible on such receipt, the rule creates a deeming fiction as if these goods have been received are inputs and allows credit after entering the particulars of such receipt in the records. Credit is thus taken by making appropriate entry in records and not on the basis of documents issued by a seller. Further, there is no bar of time in the rule 16 itself for receipt of the goods back in the factory. The conference was of the view that when rule 16 does not provide for any time limit, the same cannot be read into the rules indirectly through amendment in rule 4(7). Taking into consideration the intent behind the amendment, scope of Rule 9 of the CENVAT Credit Rules, 2004 and scope of rule 16 of the Central Excise Rules, 2002, it was concluded that the time-limit prescribed in 5th proviso of sub-rule (7) of rule 4 of the CENVAT Credit Rules, 2004 CCR, 2004 would not apply when goods are brought back to the factory for reprocessing, reconditioning etc under rule 16 of the Central Excise Rules, 2002. B.32-Delhi Zone - Cenvat Credit - CAG Audit - Loss of Revenue on clearance of Inputs As Such. Issue: CAG audit has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount to demanding Central Excise duty on an activity which is not manufacture. The audit objection is accordingly not acceptable and reply to the same may be given suitably. B.33 - Nagpur Zone - Central Excise Rules Procedures - Proper Officer to Issue Show Cause Notice for Recovery of Duty under the Concessional Duty Rules: Issue: (i) Manufacturers and manufacturer importers are permitted to procure excisable goods at concessional rate of duty by following the procedure prescribed under Central Excise (Removal Of Goods At Concessional Rate Of Duty For Manufacture Of Excisable Goods) Rules, 2001 [CE Concessional Duty Rules] and Customs (Import Of Goods At Concessional Rate Of Duty For Manufacture of Excisable Goods) Rules, 1996 [Cus Concessional Duty Rules]. (ii) In many cases, the duty foregone becomes recoverable on account of violation of the conditions of the Concessional Duty Rules viz. short receipt of goods, diversion of goods, loss of goods, use of goods for manufacturing ineligible final products etc, benefit under the Concessional Duty Rules is to be denied. The power to recover the duty foregone has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the Tribunal that the Show cause notice issued under Rule 8 by the DCCE/ACCE having jurisdiction over the recipient manufacturer importer was without jurisdiction whereas in the cases of Samtel Colour Ltd. - 2000 (126) E.L.T. 1256 (Tribunal) and Cosmo Ferrites Ltd. - 2014 (308) E.L.T. 633 (Tri. - Del.), it has been held by the Tribunal that it is only the DCCE/ACCE, having jurisdiction over the recipient manufacturer importer, who can issue Show cause notice for recovery of differential duty under Rule 8. Discussion Decision The conference noted that there are three judgments cited by the sponsoring zone on the subject. In case of Samtel Colours Ltd it was held by the tribunal that Assistant Commissioner having jurisdiction over his factory shall have jurisdiction to issue notice for recovery of differential duty under Rule 8 ibid, and not the Assistant Commissioner of Customs at the port of importation under Rule 5 ibid. Civil appeal filed by the assessee was dismissed by the Hon'ble Supreme Court leading to merger of the order of the tribunal with the order of the Supreme Court. The issue of jurisdiction to issue show cause notice is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture. Such indiscriminate availment of CENVAT credit would be against the cardinal principles of the CENVAT scheme. For e.g. cutting and slitting of steel sheet in coil is considered as not amounting to manufacture. However, as per the present provisions of Rule 16(1) ibid, the processor can avail theCENVAT credit (which in such cases is normally of a considerable amount running into crores) and pass on the same to their customers. Secondly, the duty paid goods can also be brought in the factory and subsequently cleared as a Trading activity under the provisions of said Rule 16(1) ibid. In order to eliminate the possibility of misuse of the provisions of Rule 16(1) ibid for availing the CENVAT credit, it is suggested that the words for any other reason may be substituted by the words for any other similar process . Discussion Decision It was agreed in the conference that the words for any other reason appeared to cover many bona-fide business situations. Further, there was no data to indicate that the provision was currently being misused. It was accordingly decided that no amendment in the rules were warranted . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty paid on input raw-materials. To claim the rebate of Central excise Duties paid on input raw materials on export of these exempted products, they were advised to avail facility under notification no. 21/2004 CE (NT) dated 06.09.2004 and to export the goods in Form ARE2 specified under the said notification; to which they have been intimated that by filing ARE2 which contained a declaration as at (d) that they shall not claim any drawback on export of the consignment covered under this application, they could not claim drawback of the Customs portion of the notified rate. Further as per the drawback schedule, the rate indicated in column no. 4 i.e Drawback when Cenvat facility has not been availed and column no. 6 i.e Drawback when Cenvat facility has been availed are same which shall mean that the rate pertains to only customs component in terms of condition no. 6 of the said notification. Therefore the trade was apprehensive that clearing the goods under notification no. 21/2004 CE (NT) dated would make them ineligible to claim drawback of customs portion of duty in view of the declaration given in Form ARE2. Association has suggested that for claiming both the reba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid view and are paying penalty @ 1% on actual no of days of failure to pay the duty calculated on prorate basis as this r view is supported by the judicial decisions of the CESTAT and High Courts on the interpretation of the phrase part of the month . It is suggested that the phrase for every month or part thereof be read down as for every month or part thereof considered on a pro rata basis. Discussion Decision The issue was discussed and it was noted that there was variance in the practice of calculation of penalty under rule 8(3A). There are court cases wherein it is provided that calculation for part of the month for levy of interest should be done only for the number of days of delay and not for the full month. Case of BPL Mobile Cellular Ltd [2005(183) ELT 324] may be referred in this regard. However, such judgments relate to payment of interest and not to payment of penalty. The character of tax, interest and penalty has been explained by Hon'ble Supreme Court in case of Pratibha Processors [1996 (86) ELT 88]. Para 13 of the judgment is relevant and is reproduced below - 13. In fiscal Statutes, the import of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service tax return is filed on half yearly basis whereas excise return is filed on monthly or quarterly basis. The nature of the assessee in Service tax and Central Excise is also different as a manufacturer often has better qualified compliance team. Therefore the need for revision of return is not as pressing in Central Excise. Further, the nature of revision would also be a relevant issue for consideration. Whether revision should be allowed for all elements of the return including turnover and tax liability or should it be allowed only for bona-fide and clerical mistakes needs to be examined. The conference concluded that a blanket provision for revision of all the prescribed returns may not be desirable and may complicate the compliance regime in Central Excise. The issue would also involve changes in ACES and would need consultation with DG, Systems. The conference concluded that a more nuanced view needs to be taken on the subject after collecting inputs from various stake holders. Conference suggested that policy wing in the Board may take further action as deemed fit. B.39 - Coimbatore Zone - Central Excise Rules Procedures-e-payment of Excise Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to implementation of the rule as it exists, it was noted that non-payment of duty duly reflected in a Return is a case of admitted liability. Provisions of section 11A(16) introduced in the budget of 2015 are relevant in this regard wherein it has been provided that provisions of section IIA do not apply for duty which has been self assessed, reflected as payable in the Return but has not been paid. The implication of this sub-section is that for admitted liabilities no show cause notice and adjudication proceedings need to be undertaken. For such liability, provisions of rule 8(4) of the CER, 2002 apply. This rule provides that provisions of section 11 of the Act shall be applicable for recovery of duty, interest and penalty in case of default. The conference concluded that recovery of admitted liability thus can be initiated forthwith once the return has been filed and duty shown payable has not been paid. As the legal empowerment is available, necessary recovery can be made forthwith. B.41 - Vishakhapatnam Zone - Central Excise Rules Procedures - No penalty for non-filing of NIL return: Issue: Rule 12(6) of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing maximum speed, capacity etc. While appreciating the above concerns of the zone, the conference did not agree with the suggestion of the sponsoring zone to reduce the number of slabs of speed to lesser number of slabs as it would not address the issue of miss-declaration of speed. The slabs were fixed only in the last one year after detailed study and certainty in taxation required that frequent changes should not be made in the duty structure. It was decided that besides measuring the speed, assessees may be asked to furnish manufacturer's certificate or chartered engineer's certificate to verify the speed. B43 - Chennai Zone- Implementation Other Related Issues - Mismatch in UQC with regards to Matches: Issue: There is a mismatch in the Unit Quantity Code (UQC) as per the Central Excise Tariff and the UQC adopted in trade parlance, with regard to matches. The UQC is Kg in Tariff, whereas in practice it is in boxes of 50 sticks. The trade sells products in units pack only. Therefore, it is felt that the Unit Quantity Code prescribed in the Central Excise Tariff be changed from Kg to boxes as this would be in tune with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBECs Excise manual of Supplementary Instructions 2005 stipulates procedures to be followed on various aspects w.r.t. registration, invoice systems, etc. For instance, Chapter 4 CBEC's Supplementary Instructions stipulates prior intimation of serial numbers of invoices, maintenance of different invoice books, submission of cancelled invoices within 24 hours of cancellation etc. Similarly, Chapter 7 stipulates annual filing of Letter of Undertaking [LUT] for effecting exports, filing of ARE-I in respect of exports made under self-sealing to the Range Officer within 24 hours, etc. Such conditions have lost relevance with the advent of self-assessment and they also expend considerable compliance time and paperwork. Therefore, the Supplementary Instructions should be revamped with an objective to dispense with redundant procedures and in place prescribe online filing of intimation, LUT, bonds, etc to reduce transaction cost. Supplementary instruction also needed to be revised to make it consistent with subsequent legal changes. Discussion Decision It was decided in the tariff conference that that after taking inputs from the field Supplementary Instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade and is also prone to litigation. Many assessees are of the view that they have time till the first hearing of the case for making the mandatory pre- deposit. On the other hand, at present an appeal is considered incomplete without proof of payment of pre-deposit. In order to alleviate possible litigation and to ensure that due payment of the pre-deposit can be made with convenience by the assessee, it is felt that a further period 30 days from the date of expiry of the normal appeal period should be inserted as 3rd proviso to Sec 35F. Further, the appeal in the CESTAT comes up for first hearing after a gap of couple of years and therefore it would be reasonable to allow the assessee to pay pre-deposit till such time. Discussion Decision The conference noted that after the amendment the new provisions, trade and department have just settled with the new provisions. Since the amendment in the law was made only last year, at present no further change in law was recommended in the conference. B.48 - Hyderabad Zone-Implementation Other Related Issues - Section 11 AC of the Central Excise Act 1944 - Penalty in Cases Concerning Errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of manufacture of finished goods and disposal of goods(inputs) that have been procured duty free as per provisions of the above said Rules. The Rule 6 of the said rules has a provision for recovery of duty, if goods are not used for the intended purpose. As per Rule 6 of the said Rules, the provisions of Section IIA and IIAA of Central Excise Act 1944 shall apply mutatis mutandis for effecting such recoveries. 'n absence of any time limit for export of goods, it not only becomes difficult but impossible for the field formations to keep track of records and verify the proper use of the inputs by them duty free in the past. Lack of such provision may pave way for unscrupulous manufacturers for misuse of duty free procurement of inputs. In case of Customs, an importer has an obligation to export the goods within certain time limit of import or raw materials obtained duty free under certain schemes like DEEC etc. It is suggested that a time limit for completion of manufacture/processing and export of finished goods from the date/period of procurement of duty free goods (inputs) may be incorporated in the aforesaid notification. In order to make the provisions of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, if the end use condition is not satisfied. B.50 - Implementation Other Related Issues- Reassignment of Cases for Adjudication by Chief Commissioner and Reassignment of Cases for Adjudication by Commissioner. Issue: The issue regarding competence of Chief Commissioner and Commissioner for to reassignment cases for adjudication amongst different Commissionerates was discussed. Discussion Decision After discussion of the legal provisions and delegated power with the Chief Commissioner it was concluded that - (i) Audit Commissioners of Central Excise do not have powers to adjudicate and cannot be assigned any case for adjudication. (ii) In exercise of powers of the Board, delegated to the Chief Commissioner vide notification no. 11/2007-C.E(N.T) dated 1.3.2007 , Chief Commissioner may assign cases from one Commissioner to another for expeditious adjudication, when pendency is large and such reassignment is necessary. Similarly, the Chief Commissioner may reassign cases for levels below the Commissioner from one Commissionerate to another within his zone. Appropriate orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s office. This process may take time and during this process protective in many cases show cause notices are issued to protect the interest of revenue. The issue is whether the adjudication of such show cause notices after the closure of audit paragraphs in consultation with CERA, should follow the procedure of examining the reply of the assessee to the notice, grant of personal hearing etc. The conference was of the view that where an audit objection by CERA is dropped and the audit paragraph closed on the basis of the reply of the department and the view of the department continues to be so, elaborate adjudication proceedings are not required as the department itself has not agreed with the audit paragraph and the consequential show cause notice. Such show cause notices may be dropped by the adjudicating authority without waiting for reply from the assessee or grant of personal hearing as insistence on these steps imposes unwarranted litigation cost on the assessee. This procedure would also apply regarding adjudication of cases where the issue has been clarified by the Board in favour of the trade or where the issue has been decided in favour of the assessee by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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