Amazing Cases in Excise Duty

AMENDMENTS FOR NOV-2011
CA VISHAL BHATTAD
BASIC CONCEPTS
LATEST AMENDMENTS
RELEVANT NOTIFICATION
Notification No. 10/2010 CE (NT) dated 27.02.2010 has notified the chewing tobacco falling under tariff item 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 manufactured with the aid of packing machine and packed in pouches for the purposes of section 3A of the Central Excise Act, 1944. Therefore, the duty on the said products would be charged on the basis of capacity of production. Notification No. 26/2009 CE (NT) dated 18.11.2009 has exempted the assessee who manufactures the biris without the aid of machines (falling under tariff item 2403 10 31) from the submission of Annual Installed Capacity Statement.
LATEST CIRCULARS Circular No. 927/17/2010-CX., dated 24-6-2010

Subject: Whether process of pickling and oiling would amount to manufacture Clarification: As per ASM Metal Reference Book, Third Edition page 65 Pickling is removing surface oxides from metals by chemical or electro chemical reaction and pickle means the chemical removal of surface oxides (scale) and other contaminants such as dirt from metal by immersion in an aqueous acid solution. Therefore it can be said that the process of pickling is only a chemical cleaning process to remove scales and dirt from the metal by immersion in chemical solution and does not result in emergence of any new commercially different commodity. Since in the present case no new product emerges as a result of the process of pickling it will not amount to manufacture. Therefore it is clarified that mere undertaking the process of oiling and pickling as preparatory steps do not amount to manufacture.
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Ph.No.9890953771
NEW CASE LAWS
CA VISHAL BHATTAD
YEAR 2011
Mehta & Co. [2011] 264 ELT 481 (SC)
Facts: M/s. Mehta & Company, Mumbai (the assessee) are engaged in the business of interior decoration. The assessee provides composite services including woodwork, furniture items etc. They entered into an agreement with M/s. Adyar Gate Hotel Ltd (now M/s. Welcome Group) for carrying out the renovation of the existing structure in their hotel.Assessee has Manufacture of furniture at customers site. like chairs, beds, tables, desks, etc., The items like chairs, beds, tables, desks, etc., manufacture at client site & affixed to the ground could be said to be moveable assets and liable to excise duty.
Department issued SCN on contention that the assessee manufactured movable goods like chairs, beds, tables, desks, etc.,covered under different chapter headings at the customers site and removed them without payment of proper duty. Assessee Argued that Furniture is an Immovable property & attached to the wall hence not subject Duty. Issue: whether the items like chairs, beds, tables, desks, etc., affixed to the ground could be said to be immoveable assets and not liable to excise duty? Decision: Furniture refers to desk, table and chairs, etc. and is different from fixtures that are attached to earth/ground/walls. Furniture cannot be regarded as immovable property. Thus the items which are ordinarily immovable or which ordinarily cannot be removed without cannibalizing e.g. storage units, running counters, over- head unit, rear and side unit, wall unit, pantry unit, kitchen unit and other items which are ordinarily immovable or cannot be removed without Cannibalizing are not furniture. However, items like tables, desks, chairs etc. are furniture and hence excisable. Therefore, furniture manufactured at customer's site is movable and is liable to excise duty.
Medley Pharmaceuticals Ltd. [2011] (SC)

Issue: Whether physician samples distributed to medical practitioner as free samples, are goods under excise? Decision: Even though Drugs and Cosmetics Act, 1940 bars the sale of physicians' samples, however, exciseability of a product is not dependent on its salability. Excise duty is a levy on production or manufacture and is payable whether or not the goods are sold. Further, such prohibition on sale of physicians' samples under Drugs Act doesn't also affect the marketability of such samples : marketability doesn't require actual sale, it is capability of being bought and sold.
physician samples distributed to medical practitioner as free samples is marketable & goods liable to Excise duty
Even otherwise, restrictions under Drugs Act cannot affect imposition of excise duty under the Central Excise Act thereby causing loss of revenue. Therefore, physicians' samples are liable to excise duty.
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Ph.No.9890953771
Note: What is Physician samples?
CA VISHAL BHATTAD
Some pharmaceutical companies, distributes physician samples to medical practitioners, which serves the company as a marketing tool. As per the drugs and cosmetic rules, the physician samples of patent and proprietary medicines are statutorily prohibited from being sold. It is also held in the said rules that the word Physicians sample Not to be sold requires to be printed.
Usha Rectifier Corpn. (I) Ltd. [2011] (SC)

The assessee is a manufacturer of electrical & electronic equipments. He made testing equipments in the course of manufacture and used it captively for testing of final products manufactured by it. The Department demanded excise duty on such testing equipments. The assessee denied the liability contending that: 1) assembly of testing equipments from various parts and components bought from outsideis purely for R& D and didn't amount to manufacture. 2) After completion of research, the testing equipment will be disassembled 3) even if manufacture was involved, the testing equipments were not marketable; and since they were not removed outside the factory, hence, they were not liable to excise duty.
Testing equipments manufactured instead of importing the same & used captively Marketable and Liable to excise duty
Issue: Whether the Testing equipments manufactured instead of importing the same & used captively is Marketable and Liable to excise duty? Decision: assembly of various parts and components so as to make testing equipments therefrom, having different name, character and use, amount to manufacture. The assessee had stated in its Balance Sheet that it had fabricated the testing equipments itself with a view to avoid import thereof so as to save foreign exchange. This statement in the Balance Sheet proved that the testing equipments were marketable, as they could be bought and sold in the market. Once the assessee has themselves made admission in their own Balance sheet, he now cannot turn around and make submission which are contrary to their own admission. As per Explanation to Rule 5 of the Central Excise Rules, 2002, the issue of excisable goods for captive use amounts to 'removal' for the purposes of levy of excise duty. Hence, the testing equipments were liable to excise duty.
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Ph.No.9890953771
CA VISHAL BHATTAD
Orissa Bridge & Construction Corporation Ltd. (2011) (SC)

The assessee is buying angle iron, MS Plates, MS Sheets, HR Sheets from the open market, the same are cut into specific sizes. They are further bent and welded at the cut/bent end to give the desired shape result into shuttering plates, vertical props and Derricks. Further holes in some items are made by drilling machine. The adjudicating authority has held that such activity to be a manufacturing activity by observing that the raw material no longer continues to be in that form or shape after conversion. Plates and sheets, which are the starting materials, get transformed into various products shuttering plates, vertical props and Derricks, which are having a distinct name, identity, character and use.
The fabrication of shuttering plates, vertical props and Derricks made from Steel angle, MS plates, MS sheets and pipes amount to manufacture & are marketable product & liable to Excise Duty
Issue Involved: Whether the fabrication of shuttering plates, vertical props and Derricks made from Steel angle, MS plates, MS sheets and pipes amount to manufacture? Whether Shuttering plates, Vertical props and Derricks are marketable products so as to become chargeable to excise duty?
Decision: The plates and sheets which are starting materials get transformed into various products which are having distinct name, identity, character and use. The sheets, plates or angle irons cannot be used as shuttering plates for the reason of which they are specifically transformed into new product.
Thus the fabrication of shuttering plates, vertical props and Derricks made from Steel angle, MS
plates, MS sheets and pipes amount to manufacture & are marketable product & liable to Excise Duty.
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Ph.No.9890953771
CA VISHAL BHATTAD
YEAR 2010
Shital International [2010] (SC)
Facts The assessee, engaged in the manufacture of knitted pile fabrics as well as knitted hosiery fabrics of man-made fibres, cleared such goods at NIL rate of duty claiming such goods to be unprocessed knitted or crocheted fabrics. The Department contended that the said goods were not unprocessed and, therefore, he benefit of exemption/Nil rate was not available to them.
The processes of shearing and back-coating carried on by the assesse amounts to manufacture or not
The assesse contended that the processes carried by it viz. shearing and back-coating didnt amount to manufacture and, therefore, the impugned products were not liable to excise duty. Statutory provisions note 4 of Chapter 60 of CETA In relation to products referred to in this Chapter(knitted Fabrics), bleaching, mercerising, dyeing, printing, waterproofing, shrink-proofing, tentering, heat-setting, crease-resistant, organdie processing or any other process or any one or more of these processes shall amount to manufacture. ISSUE: Whether the processes of shearing and back-coating carried on by the assesse amounts to manufacture or not? Decision: The processes falling under any other process must take their colour from the process of bleaching, dyeing, printing, shrink-proofing, tendering, heat-setting, crease-resistant processing, specifically mentioned in the note. When a grey fabric is subjected to any of these process, a permanent or lasting change is brought about in the fabric. Whereas, in this case, it has been found that neither shearing nor back-coating brings about any permanent or lasting change in the knitted pile fabric manufactured by the assesse by carding and knitting.
The processes of shearing or back-coating are not of the same nature as other processes mentioned in the said chapter Note and therefore, fall outside the scope and ambit of any other process. Hence, the processes of shearing and back-coating carried on by the assesse didnt amount to manufacture and, therefore, the assesse was not liable to pay any excise duty. Note: Meaning of Carding, knitting & etc
a) b) c) d)
Carding : Firstly, the fibre/synthetic waste/mixed fibre and waste is fed into the carding machine which opens the compressed material and after loosening the same, sliver is made. Knitting : Thereafter, the carded sliver plus yarn is inserted into the loops of the circular knitting machines and the fabric is made. Shearing : The next process is on the back-coating machine where the cloth is sheared, polished and the pile is kept to the required level. Back-coating : The final process is on the back coating machine where the back coating is done and fur is ready. Then, it is measured on semiautomatic measuring table and the rolls are made which are ready for show in the Excise Bond room and for sale.
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Ph.No.9890953771
CA VISHAL BHATTAD
Nicholas Piramal India Ltd. CCEx. [2010] 260 (SC)

Facts The assessee was engaged in the manufacture of Vitamin A in a finished and marketable form, which was cleared on payment of excise duty. The assessee was also engaged in the manufacture of animal feed supplements, which was exempt .During the intermediate stage of manufacture of vitamin A, a crude Vitamin A ("Vitamin A Acetate Crude" and "Vitamin A Palmitate") emerges. The assessee consumed "crude Vitamin A Acetate in the manufacture of animal feed supplements. Department demanded excise duty on such "crude Vitamin A" used for manufacture of animal feed supplements. Assessee contended that crude Vitamin A was not marketable, as it had a shelf-life of 2-3 days only; further, it was unstable if it was not stored in sub-zero degree centigrade. Crude Vitamin A which was captively consumed was commercially known and was capable of being marketed, hence liable for payment of excise duty
Exempt Under N/N 67/95
"Vitamin A Consumed "Vitamin A Palmitate Palmitate
Dutiable Vitamin A
Raw material Vitamin A Acetate Crude Consumed Animal feed supplemen ts Issued SCN for demanding duty Office r Exempt
Decision
Intermediate products, even if captively consumed and not actually sold, are liable to levy of excise duty if they satisfy the test of both manufacture and marketability. Marketability of a product is essentially a question of fact The orders passed by Departmental Authorities clearly demonstrated that the crude Vitamin A was commercially known and was capable of being marketed. The facts that the assessee had chosen not to sell the crude Vitamin A did not mean that the same was not capable of being marketed. Had theassessee not used the crude Vitamin A, they would have had to buy the same from the market to manufacture and sell the Animal Feed Supplement This clearly shows that a marketable product emerges. Short shelf-life cannot be equated with no shelf-life and would not mean that it cannot be marketed. A shelf-life of 2 to 3 days is sufficiently long enough for a product to be commercially marketed. Shelf-life of a product would not be a relevant factor to test the marketability of a product unless it is shown that the product has absolutely no shelf-life or the shelf-life of the product is such that it is not capable of being brought or sold during that shelf-life.
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Ph.No.9890953771
CA VISHAL BHATTAD
TARPAULIN INTERNATIONAL 2010 (S.C.)(VVIMP)

Brief Facts: Assessee is carrying on the business of producing and selling tarpaulin made-ups. The tarpaulin made-ups are made from tarpaulin cloth by cutting the cloth into various sizes and stitched and eye-lets are fitted. Department is contended that, the made-ups prepared by means of cutting, stitching and fixing of eye-lets amounts to manufacture and hence, they are exigible to duty under the Central Excise Act. The process like cutting, stitching and fixing of eyelets on tarpaulin made-ups does not amounts to manufacture
The Assessee states that the process of mere cutting, stitching and putting eyelets does not amount to manufacture and hence, the department cannot levy Excise Duty on tarpaulin madeups. Issue: whether the process like cutting, stitching and fixing of eye-lets on tarpaulin made-ups amounts to manufacture? Decision: The process does not bring into existence a new and distinct product with total transformation in the original commodity. The original material used i.e., the tarpaulin, is still called tarpaulin made-ups even after undergoing the said process. Hence, it cannot be said that the process is a manufacturing process. The process of stitching and fixing eyelets would not amount to manufacturing process, since tarpaulin after stitching and eyeleting continues to be only cotton fabrics. The purpose of fixing eyelets is not to change the fabrics, even though there is value addition. To sum up, the conversion of Tarpaulin into Tarpaulin made-ups would not amount to manufacture. Therefore, there can be no levy of Central Excise duty on the tarpaulin made-ups.
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Ph.No.9890953771
CA VISHAL BHATTAD
Bata India Limited-2010 (S.C.)

Brief Facts: Assessee is a well known manufacturer of foot wear. During the process of manufacturing of foot wear various chemicals / rubbers / solvents etc. are mixed together and a thin layer of such mixed materials is unvulcanised fabric sandwiched. Unvulcanised Fabric sandwiched is later cut and stitched according to the assessee's requirements and in-process materials are used as shoeuppers in the foot wear. Such fabrics are also at same times sent to job workers for stitching purposes only and the fabric sandwiched with the mixed materials are inputs of the intermediate stage during the course of manufacture of footwear. Unvulcanised sandwiched fabric assembly produced in the Assessee's factory is not is commercially distinct or marketable product.
Vulcanisation of the foot wear takes place only after completing the entire process to render it a finished product as footwear. Collector of Central Excise held unvulcanised sandwiched fabric/double textured fabrics are marketable products fulfilling the requirement of the definition of excisable goods attracting the levy of central excise duty under the Act (Vulcanisation =Process of treating rubber or rubberlike materials with sulphur at great heat to improve elasticity and strength or to harden them) Issue: Whether unvulcanised sandwiched fabric assembly produced in the Assessee's factory and captively consumed can be termed as goods and can be classified as "rubberized cotton fabrics. Decision : F product in question is used as an intermediate product, goes to make the component for the final product F Burden to show that the product in question is marketed or capable of being bought or sold in the market so as to attract duty is entirely on the Revenue. F Revenue has not produced any material before the court to show that the product is either been marketed or capable of being marketed but expressed its opinion unsupported by any relevant materials. F Mere fact that the product in question was entrusted outside for some job work such as stitching is not an indication to show that the product is commercially distinct or marketable product F Hence, Given product is not excisable
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Ph.No.9890953771
CA VISHAL BHATTAD
TIKITAR INDUSTRIES 2010 (S.C.)

Issue: (i) Whether the conversion of Straight Grade Bitumen not Blown Grade Bitumen amounts to manufacture or not. Decision: it was held that the process of converting straight grade bitumen into blown grade bitumen through Oxidation, known as blowing process, does not amount to manufacture and therefore, exempted from payment of Excise duty.
Solid & Correct Engg. Works -2010 (S.C.)

Brief Facts: M/s Solid and Correct Engineering Works & other three sister concern are partnership concerns engaged in the manufacture of parts and components for road and civil construction machinery and equipments like Asphalt Drum/Hot Mix Plants and Asphalt Paver Machine etc.
Asphalt Drum Mix Plant by using duty paid components is tantamount to manufacture of MOVABLE GOODS.
M/s Solidmec Equipments Ltd. the fifth unit (with which we are concerned in the present appeals) is a marketing company advertises its (aforesaid sister concerns) product and undertakes contracts for supplying, erection, commissioning which result in manufacture of Asphalt Drum/Hot Mix Plants at the sites of customer by using components purchased from aforesaid sister concern. Solidmec also provides after sale services relating thereto. Department issued the show cause notice alleged that the process of assembly of the parts and components at the site provided by the customer was tantamount to manufacture of Asphalt Batch Mix, Drum Mix/Hot Mix plants as a distinct product with a new name, quality, usage and character emerged out of the said process. This Asphalt Drum/Hot Mix Plants became exigible to Central Excise duty. Assessee Contention: Such plants (Asphalt Drum/Hot Mix) have to be permanently embedded in earth as it required to be fixed to a foundation that is 1 and ft. deep for the sake of stability of the plant which causes heavy vibrations while in operation. Thus, the setting up of the plant is result into immovable property and not subject to excise duty. Issue: Whether setting up of an Asphalt Drum Mix Plant by using duty paid components is tantamount to manufacture of excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944? Decision: the expression attached to the earth has three distinct dimensions, viz. (a) rooted in the earth as in the case of trees and shrubs (b) imbedded in the earth as in the case of walls or buildings or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1 feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. Hence setting up of an Asphalt Drum Mix Plant at customer site by using duty paid components tantamount to manufacture of movable property and subject Excise duty.
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Ph.No.9890953771
CA VISHAL BHATTAD
Bemcee Ltd. - 2010 (S.C.)

Issue: Whether slitting/shearing of steel coils to produce sheets constitutes manufacture for the purpose of levy of Central Excise Duty
Decision: slitting/shearing of steel coils does not amount to manufacture as the description as flat rolled products was continuing even when tariff sub-heading changed following width of product. since the identity of the product remained unchanged even with change of classification, activity causing such a change does not amount to manufacture.
SONY MUSIC ENTERTAINMENT (I) PVT. LTD-2010 (H.C.)(VV IMP)

Brief facts: The assessee imported recorded audio and video discs packed in boxes of 50. After receipt of the material in its factory, it packed each individual disc in transparent plastic cases known as jewel boxes, an inlay card containing the details of the content of the compact disc was also placed in the jewel box. The whole was then shrink wrapped. The assessee thereupon sold such packed compact discs in wholesale. Department contention The processes undertaken by the assessee in regard to the compact discs amounted to manufacture as the packed compact discs were not marketable without being packed in the jewel box & they would otherwise be subject to damage and that the insertion of the inlay card was also essential because without it the customer would not be aware of the identity of the compact disc or the nature of its contents The Department also cited the provisions of Note 6 to Section XVI of the tariff that conversion of an unfinished or incomplete product into a complete finished product amounts to manufacture. Issue: Whether the activity of packing imported Compact discs in a jewel box along with inlay card would amount to manufacture under Section 2(f) of the Central Excise Act, 1944? Held: Assessee received was compact discs containing data reproducible as music or visual images or both. What it sold was nothing other than such discs, Even though packed in a box and containing details of the contents of each disc. It is therefore not possible to say that an article that is new and different from the commodity that the assessee imported has emerged as a result of the treatment that was imparted to the imported article at the assessees hands. It continued to be a compact disc. The fact that the value addition to the compact disc does not result in the conclusion that there is manufacture. Note 6 to Section XVI of the tariff provides that in respect of goods covered by that section, conversion of an article which is incomplete or unfinished but having the essential character of a finished article into a complete finished article shall amount to manufacture. It clearly does not apply for given case. Those compact discs were complete and finished. They could be played by any person in order to listen to the sound and view the images that they contained. They were imported in finished and complete form. The mere packing of these discs has no bearing on the fact that they were imported complete and finished. Thus, the activity of packing imported Compact discs in a jewel box along with inlay card would not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 The activity of packing imported Compact discs in a jewel box along with inlay card would not amount to manufacture. Assesses response Pack the compact discs and sell them and such packing did not amount to manufacture.
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Ph.No.9890953771
CA VISHAL BHATTAD
CENTRAL EXCISE RULES, 2002 Amendment in INTEREST RATE

Section/Rule Rule 8 of CER,2002 Rule 7 of CER,2002 Rule 19 of CER,2002 Sec 11AB Sec 11DD Particulars Payment of duty after due date Provisional Assessement.(for payment of differential duty after Final Assessment) If Export Cancelled and Goods Diverted for Home Consumption. Interest of duty short levied or non levied or etc. Amount recovered from buyer in excess Old Rate 13% p.a. 13% p.a. 13% p.a. 13% p.a. 15% p.a. New rate 18% p.a. 18% p.a. 18% p.a. 18% p.a. 15% p.a.(No change)
LATEST AMENDMENTS
Rule 4 of Central Excise Rules, 2002 1. Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided
[Ready-made Garments Manufactured on Job work Basis] (Inserted in F.A. 2011)

(1A) Notwithstanding anything contained in sub-rule (1), every person who gets the goods, falling under Chapter 61 or 62 or 63 of the First Schedule to the CETA, produced or manufactured on his account on job work, shall pay the duty leviable on such goods, at such time and in such manner as is provided under these rules, as if such goods have been manufactured by such person. Provided that such person may authorize the job worker to pay the duty leviable on such goods on his behalf and the job worker so authorized may undertake to discharge all liabilities and comply with all the provisions of these rules. Explanation. - For the purposes of this sub-rule, the expression job worker means a person engaged in manufacture, or undertaking any process on behalf and under the instructions of such person for manufacturing, from any inputs or goods supplied by such person or by any other person authorized by such person so as to complete a part or whole of the process resulting ultimately in the manufacture of goods falling under Chapters 61 or 62 or 63 of the First Schedule to the Tariff Act, and the term job work shall be construed accordingly.
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Ph.No.9890953771
CA VISHAL BHATTAD
IMPLICATION OF AMENDMENT
It is the practice in the garment and made up industry for brand owners to have goods manufactured from several job-workers. The brand owners may or may not, themselves, possess any manufacturing facility. By virtue of the aforesaid amendment, in case of ready-made garments and made-up articles of textiles manufactured on job-work basis, liability to pay duty is on the merchant manufacturer (person on whose behalf the goods are manufactured by job-workers) and not on the job-workers. Hence, the job-worker is exempt from payment of duty if the merchant manufacturer pays the duty. Further, merchant manufacturer would be required to register his private store-room or warehouse in which inputs are received for distribution to job-workers and finished goods are received from the jobworkers. He would also be required to comply with all the other provisions of Central Excise law. Comment: It was observed by S.C. in Ujjagar Prints Ltd that raw material supplier is not the manufacturer. Job worker manufacturing the goods under his control & supervision shall be treated as manufacturer for the purpose of excise and hence, shall be liable for payment of excise duty. But aforesaid amendment overrules this decision for goods falling under chapter 61 or 62 or 63 of the First Schedule to CETA. Thus for these category of goods Raw material Supplier (also called principal manufacturer) Shall deemed to be the real manufacturer of goods. Let us understand with the help following Chart
Goods under Central Excise Tariff Act (CETA) manufactured through job work
Goods other than those falling under chapter 61,62,63.
Chapter 61 -Articles of apparel and clothing accessories, knitted or crocheted Chapter 62 -Articles of apparel and clothing accessories, not knitted or crocheted Chapter 63 -Other made up textile articles, sets, worn clothing and worn textile articles, rags As per Rule 4(1A) Raw material supplier shall be treated as manufacturer & liable for payment of duty
As per Ujjagar Prints Ltd case Job worker is manufacturer
As per Rule 4(1) Every person who produces or manufactures(i.e. Job worker) any excisable goods, shall pay the duty leviable on such goods
Exception: Provided that Raw material supplier may authorize the job worker to pay the duty leviable on such goods on his behalf and the job worker so authorized may undertake to discharge all liabilities and comply with all the provisions of these rules.
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Ph.No.9890953771
AMENDMENTS FOR NOV-2011 CA VISHAL BHATTAD Exemption from Registration in case of mines engaged in production/manufacture of specified goods Notification No. 10/2011(Centralised Registration Facility in Excise)
Every mine engaged in the production/manufacture of following goods is exempt from obtaining registration where the producer/manufacturer of such goods has a centralized billing/accounting system in respect of such goods produced by different mines and opts for registering only the premises or office from where such centralized billing or accounting is done:
Coal, briquettes, Ovoids and similar solid fuels manufactured from coal [Chapter heading 2701] Lignite, whether or not agglomerated, excluding jet [Chapter heading 2702] Peat (including peat litter), whether or not agglomerated [Chapter heading 2703] Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon [Chapter heading 2704] Tar distilled from coal, from lignite or from peat and other mineral tars, whether or not dehydrated or partially distilled, including reconstituted tars [Chapter heading 2706]
E- PAYMENT
Rule Prior to amendment Amendment made by Notification No. 04/2010-CE (NT) dated 19.02.2010
An assessee shall deposit the excise duty electronically through internet banking if he has paid the total duty of Rs. 10 lakh or more (including the amount of duty paid by utilisation of CENVAT credit) in the preceding financial year. Clarification : Thus limit of 50 lakhs reduced to 10 lakh Example: Previous year 2009-2010 Payment through PLA Rs 6 lakh Credit utilized Rs 5 lakh Total payment of duty including the amount of duty paid by utilisation of CENVAT credit is Rs 11 lakh. Hence all payment for current Financial 2010-11 is electronically.
Third proviso to rule 8(1)
An assessee was required to deposit the excise duty electronically through internet banking if he had paid the total duty of Rs. 50 lakh or more (including the amount of duty paid by utilisation of CENVAT credit) in the preceding financial year
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Ph.No.9890953771
DUE DATE OF PAYMENT-SSI

Rule
Rule 8(1)
CA VISHAL BHATTAD
Prior to amendment
Payment of duty in case of SSI Period: Monthly Due date of payment E-payment- 16th of next Month Other- 15th of next Month In the case of goods removed during the month of March: by the 31st day of March.
Amendment made by the Notification No. 5/2010-CE (NT) dated 27.02.2010

Payment of duty in case of SSI Period: Quarterly Due date of payment E-payment- 6th of next Month following quarter Other- 5th of next Month following quarter In the case of goods removed during the quarter ended in March: by the 31st day of March. Comment: Above relaxation is available to a unit whose aggregate value of clearances did not exceed Rs. 400 lakh in the preceding financial year regardless of whether he actually claims it or opts to pay duty. Further, the said relaxation is available to an SSI unit for the entire financial year even if it crosses the limit of Rs.150 lakh (aggregate value of clearances) in the current financial year.
RETURN SSI
Rule
Rule 12(1)
Prior to amendment
Return in case of SSI Period: Quarterly Due date of Return within 20 days after the close of the quarter to which the return relates
Amendment made by the Notification No. 5/2010-CE (NT) dated 27.02.2010

Return in case of SSI Period: Quarterly Due date of Return Within 10 days after the close of the quarter to which the return relates. Comment: Above relaxation is available to a unit whose aggregate value of clearances did not exceed Rs. 400 lakh in the preceding financial year regardless of whether he actually claims it or opts to pay duty. Further, the said relaxation is available to an SSI unit for the entire financial year even if it crosses the limit of Rs. 150 lakh (aggregate value of clearances) in the current financial year.
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Ph.No.9890953771
CA VISHAL BHATTAD
E- RETURN
SUMMARY:
E-Returns & declaration under Central Excise CENTRAL EXCISE RULES,2002
Rule Assessee Period Form Due date ER-1 10th of following month 12(1) Assessee Monthly Return the CONDITION FOR MANDATORY RETURN OR DELARATION E-
12(1)
SSIs
Quarterly ER-3 10th of the next month Return following the quarter ER-4 30 Nov of the succeeding year ER-2 10th of following month the
Assessee who has paid total duty of Rs. 10 lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year. Clarification : thus limit of 50 lakhs reduced to 10 lakh Example: previous year 2009-2010 Payment through pla Rs 6 lakh Credit utilized Rs 5 lakh Total payment of duty including the amount of duty paid by utilisation of cenvat credit is Rs 11 lakh. Hence all payment for current financial 2010-11 is electronically.
12(2)
17(3)
Annual yearly Financial Information statement 100 % EOU Monthly for removals Return made in DTA
CENVAT CREDIT RULES,2004 th

9(2) All assessee Monthly ER-6 10 of (submission following of Monthly month return on Principal Inputs)
the
9A(1) CCR
All assessee (who have paid Excise duty of Rs. 1 Crore or more) Yearly Declaration
April of Annual ER-5 30 the Informat ion on succeeding principal year inputs
where a manufacturer of final products has paid total duty of rupees ten lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year
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Ph.No.9890953771
AMENDMENTS FOR NOV-2011 Rule

Rule 11(5)
Pre-authentication of invoices dispensed with

Prior to amendment
Each foil of the invoice had to be preauthenticated by the assessee-i.e. By owner, working partner, managing director or the company secretary or any person duly authorized for this purpose, before being brought to use.
CA VISHAL BHATTAD
Amendment
The rule 11(5) has been omitted. Therefore, for the purpose of procedural simplification, pre-authentication of invoices is not required now.
Export of exempted goods under Bond not allowed (Notification No. 24/2010-C.E. (N.T.), dated 26-5-2010)
In the said notification No. 42/2001, in Paragraph 1, after Condition (iii), the following Condition shall be inserted namely:(iv) that export of excisable goods which are chargeable to nil rate of duty or are wholly exempted from payment of duty, other than goods cleared by a hundred per cent export oriented undertaking, shall not be allowed under this notification
Significance of amendment:
It was observed by H.C. in Repro India Ltd-2009 that if nil rated or exempted goods can be exported under bond & if such goods exported under bond then manufacturer is eligible to take Cenvat credit of Input used in such goods and also no need to pay 5% of value of exempted goods under rule 6(3) for common inputs. To nullify the effect of this decision Central Govt. has introduced above said condition in the notification. Thus after this amendment nil rated or exempted goods cannot be exported under bond & benefit of rule 6(6) of Cenvat credit rules, 2004 is not available. i.e. Manufacturer is not eligible to take Cenvat credit of Input used in such goods and also require to pay 5% of value of exempted goods under rule 6(3) for common inputs is Such goods are exported outside India.
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Ph.No.9890953771
CA VISHAL BHATTAD
EXCISE VALUATION
LATEST AMENDMENTS Circular No. 923/13/2010-CX, dated 19-5-2010 [VV IMP] Valuation Cost of return fare not includible
Subject: Clarification regarding inclusion of cost of return fare of vehicles in assessable value. Clarification: the clarification issued by the Board vide circular no. 634/34/2002-CX dated 1st July 2002 as amended & it is clarified that cost of return fare of vehicles is not required to be added for determining value.
Circular No. 936/26/2010 CX

Subject: Inclusion of After Sale Service and Pre-delivery Inspection Charges in the assessable value. Clarification: the larger bench of CESTAT in the case of Maruti Udyog Ltd has now held that Predelivery Inspection charges and After-sale Service charges collected by the dealers are to be included in the assessable value under Section 4 of the Central Excise Act, 1944.
Circular No. 915/05/2010-CX dated 19.02.2010

Valuation of free samples of the product assessed on the basis of MRP Circular No. 813/10/2005-CX dated 25.4.2005 clarifies that in the case of free samples, the value should be determined under rule 4. The CBEC has now clarified in respect of the free samples of the products covered under MRP based assessment that the valuation of these samples shall also be done under rule 4 of the valuation rules by taking into consideration the deemed value under section 4A(1) notwithstanding the non availability of normal price under section 4(1)(a) of the Act.
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Ph.No.9890953771
CA VISHAL BHATTAD
NEW CASE LAWS
YEAR 2010
Kwality Ice Cream Co. [2010] (SC)
Interest-free deposit Facts on account of The assessee, a manufacturer of ice cream, entered into an commercial agreement for the sale of the entire production to M/s. BBLIL and, later, with HLL, for marketing. Under the terms of the expediency not agreement, amounts to additional (i) the assessee was to exclusively source and produce products for BBLIL/HLL; consideration to treat as related (ii) the products were to be manufactured and produced in accordance with the specifications, contained in tile person agreement and reasons for change, if any, in raw material will be intimated by the assessee to BBLIL/HLL and approved list of suppliers of material will be intimated by BBLIL/HLL; (iii) price was to be fixed based on a formula agreed to between the parties; (iv) BBLIL/HLL could ask the assessee to close down any factory and relocate it elsewhere as per logistic and other commercial considerations and if the assessee decided not to accept BBLIL/HLL's suggestion, BBLIL/HLL could purchase from other parties and they would be discharged of obligations to the assessee in respect of exclusive sourcing and minimum guaranteed volumes. (v) BBLIL/HLL was to make interest-free deposits of 2.75 crores to the assessee. The Department contended that, in view of the aforesaid terms of the agreement, M/s. BBLIL/HLL exercised full control over the assessee and was 'related person' and the transaction value was liable to be rejected.
The assessee claimed that M/s. BBLIL/HLL was not 'related person'; the entire transaction was on principal to principal basis and the price was the sole consideration for sale. Question Whether the assessee and M/s. BBLIL/HLL were related persons. Decision As per section 4(3)(b)(iv), persons shall be deemed to be "related" if they are so associated that they have interest, directly or indirectly, in the business of each other. M/s. BBLIL/HLL couldn't compel the assessee to close down the factory or move it from its current location; the only effect of assessee not accepting the suggestion was that BBLIL/HLL will be relieved of its obligations under the sourcing agreement. This provision of the agreement provided for a circumstance when agreement could come to an end. It didn't show any control by M/s. BBLIL/HLL. The deposits of Rs.2.75 crores from BBLIL/HLL were taken by the assessee as a matter of commercial expediency and as a trade practice. Certain interdependence and reciprocity beyond the relationship of either a distributor or manufacturer is required so as to consider as to whether the parties are 'related persons'. In this case, the relationship between the assessee and BBLIL/HLL was one sided and each one of them didn't have interest'direct or indirect, in the business of each other. Hence, the assessee and BBLIL/HLL were not 'related persons'. The transaction between them was of the nature of principal to principal and the price was the sole consideration for the sale of goods.
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Ph.No.9890953771
CA VISHAL BHATTAD
Makson Confectionery [2010] (SC)

Facts: The assessee used to manufacture 'Eclairs'/'Max Caramel' brand chocolate/toffee, which was cleared in packs/jars containing about 100 pieces of 'Eclairs'/'Max Caramel'. Chocolates/toffees were notified u/s 4A. Assessee discharged duty on transaction value under Sec 4, while the Department demanded RSP-based duty u/ s 4A. Legal provision: As per section 4A The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 ) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, then value shall be determined under section 4A.
There was no need to declare RSP on the packs/jars containing 100 'Eclairs'/'Max Caramel'(Wholesale package). Accordingly, the packs/jars were assessable u/s 4 at transaction value; not u/s 4A on the basis of RSP.
Decision: S.C. observed that, as per SWM Rules, a package containing 10 or more than 10 retail packages is defined as 'wholesale package' and there is no need to declare retail sale price on a wholesale package. Further, the packs/jars containing 'Eclairs'/'Max Caramel' were not intended for retail sale to consumers. Therefore, there was no need to declare RSP on the packs/jars containing 100 'Eclairs'/'Max Caramel'. Accordingly, the packs/jars were assessable u/ s 4 at transaction value; not u/s 4A on the basis of RSP.
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Ph.No.9890953771
CA VISHAL BHATTAD
XEROGRAPHIC LTD. 2010 (S.C.)
Brief Facts: Assessee was engaged in the manufacture of Plain Paper Copier Machines with the Trade mark Ricoh Murphy. He was selling its products through two other related companies viz. M/s. Murphy (India) Limited and M/s. Mecotronics (P) Limited. Department alleged that the assessee was evading excise duty by under-valuing the goods. The assessee and the afore-mentioned two companies were related persons within the meaning of Section 4(3)(b) of the Act and therefore the transaction between the assessee on the one hand and the two aforementioned companies on the other were not on principal to principal basis.
Price between Assessee and buyers is on principal to principal basis. Hence Normal price is the value of goods.
Assessee contended that contract with abovementioned companies is on principal to principal basis Decision: Since the finding that M/s. Murphy (India) Limited and M/s. Mecotronics (P) Limited are related persons to the assessee within the meaning of Section 4(3)(b) . The department failed to show the existence of any extra commercial consideration in fixing the normal price between the assessee and the distributors-aforementioned two companies. Department has also failed to show that the price at which the goods were sold to the related persons was not the normal price at which the goods were being sold through any other distributor or dealer or was less than the market price at which it was being sold in the market or that there was any extra commercial consideration in fixing the normal value. Hence normal price between Assessee and aforementioned two companies is acceptable.
MARUTI SUZUKI INDIA LTD. 2010 (Tri. - LB)(IMP)

Brief Facts: The M/s. Maruti Udyog Limited (MUL) is a manufacturer of automobiles. They sell the automobiles produced by them to dealers at ex-factory prices. They also fix maximum selling price for re-sale of the products in retail to customers. The dealers cannot exceed those maximum selling prices while selling the automobiles to retail buyers. Any amount collected by the dealer towards pre-delivery inspection or after sale services from the buyer of the goods on the behalf of manufacturer is includible in value of goods sold by manufacturer to dealer.
The dealership agreement also specified the commission which the dealer shall receive from customers. The dealership agreement also stipulates the services which a dealer shall render to the buyer. Clause 39 under Article 9 (servicing) of the dealership agreement states as under :PDI and after sales service. - The Dealer shall ensure that the pre-delivery inspection and aftersales service for Vehicles are carried out fully and efficiently in accordance with the requirements and policies of the Company established from time to time & consideration from same can be taken by dealer from buyer. Department contended that that the amount of Rs. 850/- collected by dealer from the buyer on account of PDI, was built by M/s. MUL into the dealers margin/commission, which, coupled with ex-show room price, and that this evinced that the PDI charges were collected by the dealer on behalf of M/s. MUL. On the basis of these facts, the department alleged that the PDI charges, formed the part of transaction value as defined in Section 4(3)(d) of the Central Excise Act, 1944. M/s. MUL, in this regard, have contended that though the amount of PDI was fixed, or increased/decreased periodically by them, in order to have a uniformity amongst all dealers, and they acted as arbitrator in case of dispute between dealers in this regard, yet the fact is that the
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Ph.No.9890953771
CA VISHAL BHATTAD
amount in question was neither received by M/s. MUL, nor the dealers were ever instructed to transmit that amount to M/s. MUL.
S.P.
MUL
500000 Dealer
S.P.
600000
Buyer
Condition: Dealer obliged to provide pre-delivery Inspection consideration from same can be taken by dealer from buyer.
Dealer has collected Rs 850 as PDI
Issue: Whether the charges towards pre-delivery inspection and after-sale-service by dealers from buyers of the cars are to be included in the assessable value of cars in the light of the definition of transaction value given in Section 4(3)(d) of the Central Excise Act, 1944? Decision : Apparently, the transaction value does not merely include the amount paid to the assessee towards price but also includes any amount a buyer is liable to pay by reason of or in connection with the sale of the goods, including any amount paid on behalf of assessee(MUL) to the dealer. Transaction value would include the amount paid by the buyer of vehicle to the dealer in pursuance of the contract between the dealer and the assessee in relation to or connection with the sale of the vehicles and such payment may be in the course of sale or even after sale. The theory of flow back of consideration or part thereof is not confined to direct monetary benefit to the assessee in connection with the sale of vehicles but rejuvenated to include consideration integrally connected with post sale obligations also and indirect benefit received in the course of or on account of sale as well as subsequent to the sale pursuant to any service rendered by dealer under the contract with the manufacturer relating to the sale of the vehicles in view of meaning of transaction value as incorporated in to the provisions of Section 4(3)(d). If one peruses the definition clause of the expression transaction value, it refers to any amount that buyer is liable to pay. Only restriction that has been imposed is that such payment should be by reason of or in connection with the sale on such goods. Thus reason of sale and inter connection thereto are essential elements to contribute for assessable value. Being so, any amount collected by the dealer towards pre-delivery inspection or after sale services from the buyer of the goods under the understanding between the manufacturer and the dealer or forming part of the activity of sale promotion of the goods would be a payment on behalf of the assessee(MUL) to the dealer by the buyer of vehicle, and hence, it would form part of the assessable value of such goods. However, in relation to the Assessee, it would be an indirect consideration received by the assessee in relation to the clearance of the product manufactured by him.
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Ph.No.9890953771
CA VISHAL BHATTAD
SSI EXEMPTION
LATEST AMENDMENTS-2010
100% CREDIT ON CAPITAL GOODS IN FIRST FINANCIAL YEAR FOR SSI Rule Prior to amendment Amendment made by Notification No. 6/2010-CE dated 27.02.2010
Rule 4(2)(a) of Cenvat Credit Rule,2004 CENVAT credit in respect of capital goods could be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the year of receipt of such capital goods in the factory (in case of both SSIs and non-SSIs)
the (NT)
Third proviso to rule 4(2)(a) has been inserted which provides as follows:An assessee eligible to avail SSI exemption regardless of whether he actually claims it or opts to pay duty is allowed to take the CENVAT credit in respect of capital goods for the whole amount of the duty paid on such capital goods in the same financial year.
Relaxation from brand name restriction under the SSI exemption scheme extended to all packing materials - Notification No. 24/2010 SSI exemption is available in case the specified goods are in the nature of packing materials and are meant for use as packing material by or on behalf of the person whose brand name they bear even if they bear the brand name of others.
all kinds
Packing material includes labels of
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Ph.No.9890953771
NEW CASE LAWS
CA VISHAL BHATTAD
YEAR 2011 M/S ACE Auto Co. Ltd. [2011] (SC) (M. IMP)
Facts:The assessee, a manufacturer of clutch plates& pressure plate for motor vehicles. Assesee used the symbol of TATA & clear such goods under the brand name "TATA ACE" into the Market. The assessee had claimed SSI-exemption, which was denied by the Department contending that since the assessee had used the brand-name of other person "TATA" (along with its own brand "ACE" to make it "TATA ACE"), hence, it was not eligible for SSI-exemption. Issue: Wheter SSI exemption is available to assessee? Decision:It was held that,Notification No. 8/2003-CE bars exemption if an assessee uses another person's brand name or trade name with the intention of indicating a connection between the assessee's goods and such other person. However, if the assessee is able to show that there was no such intention or that the user of the brand name was entirely fortuitous, it would be entitled to the benefit of exemption. The object of SSIexemption is to grant benefits only to those industries which other do not have advantage of brand or trade name. In this case, the brand name "TATA" didn't belong to assessee. Further, by using the said brand name, the assessee had not only intended to indicate a connection between the goods manufactured by them and TATA Company, but also the quality of their products as that of a product of TATA Company. Hence, the assessee was not entitled to the benefit of SSI-exemption notification.
Assesee using the symbol of TATAon clutch plates& pressure plate along own Brand name ACE & clear such goods into the Market is not eligible for ssi exemption
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Ph.No.9890953771
CA VISHAL BHATTAD
Parle Bisleri Pvt. Ltd. v. CCEx. [2011] 263 ELT 15 (SC)

The assessee used to manufacture soft-drink flavours, which were assigned code names viz. G-44T, L-33A, etc. It availed the benefit of SSI-exemption and cleared goods to its subsidiary M/ s. Parle Exports Ltd. (PEL). M/ s. PEL used to manufacture Non-Alcoholic Beverages Base (NABB) out of flavours supplied by the assessee and also used to manufacture the same flavours as the assessee. M/s. PEL also claimed SSI-exemption. The aforesaid flavours manufactured by the assessee with the code names given by M/ s. PEL.
Some effective financial control and management between two companies Clearances to be clubbed for SSIexemption
The Department contended that since the assessee cleared flavours in the "code names" belonging to M/ s. PEL (i.e. brand name of other person), hence, it was not entitled to SSIexemption. Further, it was argued that both the companies (assessee and its subsidiary M/ s. PEL) had the same effective financial control and management and were, therefore, one company and their clearances were liable to be clubbed for determining SSI-exemption. Decision: It was held that, Clubbing of clearances : The directors of the two companies: assessee and M/s. PEL were same. M/s. PEL had advanced Rs 1 crores to assessee for purchase of raw material. The flavours being manufactured by the assessee were developed by M/s. PEL at their R&D Lab. This points out to that fact that both the companies were created as separate legal entities with a view to avail of the SSI-exemption. In reality, both of them had same effective financial control and management control. Hence, the clearances of both the companies were liable to be clubbed for determining the eligibility to SSI-exemption. Code names were 'brand names': Code names, used on the flavours cleared by the assessee, belonged to M/s. PEL. The codes were used to identify the flavours and they indicated a connection in the course of trade between the flavours and M/s. PEL. The franchisers were purchasing the flavours by referring to the code names. Hence, the code names were 'brand names' within the meaning of SSI-exemption notification. Therefore, the assessee and M/s. PEL were not entitled to SSI-exemption.
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Ph.No.9890953771
CA VISHAL BHATTAD
UNISON ELECTRONICS PVT LTD-2009 (S.C.)

Brief Facts: Assessee manufacture ice-cream makers cooler and Popcorn makers and avail of the benefit of SSI Exemption Notification and sell ice cream maker in their own brand name CREMICA and sell the same to different customers including United Tele Shopping (in short UTS) and Tele Shopping Network (in short TSN) . In respect of sale to UTS & TSN the goods were being examined by the Supervisors of these customers before dispatch from their factory and stickers bearing UTS/TSN were being affixed and these sticker bear the words Checked Sl. No. Do not remove this sticker. DEPARTMENT CONTENTION The words UTS and TSN as brand name belonging to other and has disallowed the benefit of small scale exemption notification. Assessee has submitted that the words UTS and TSN are not brand names but are the abbreviations of the name of the marketing companies which does not amount to use of the brand name. DECISION: In fact it is apparent from the sticker that these goods have been specially packed for TSN/UTS. The use of words TSN/UTS clearly indicates a connection in the course of trade between the goods manufactured by the Assessee and TSN/UTS. Thus the use of these words on the packaging of their product clearly falls within the definition of brand name as given in the SSI Notification. We are, therefore, of the view that the assessee is using the brand name of another person which makes them ineligible for the SSI exemption notification. United Tele Shopping (in short UTS) and Tele Shopping Network (in short TSN) sticker on the package is the brand name of another person which makes them ineligible for the SSI exemption notification.
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Ph.No.9890953771
CA VISHAL BHATTAD
CLASSIFICATION OF GOODS
Circular No. 929/19/2010-CX., dated 29-6-2010
Subject: Classification of Polyester Staple Fibre manufactured out of PET scrap and waste bottles. Dispute: It has been brought to the notice of the Board that divergent practices are being adopted in respect of classification of the Polyester Staple Fibre manufactured out of PET scrap and waste bottles. Whereas in some jurisdictions the said product has been classified under the Chapter 39 as article of plastic, in other jurisdictions the same has been classified under Chapter Heading 55032000 as textile material. Clarification: Thus manmade fibre can be obtained either starting from monomers or from polymers itself. The process of manufacture is not determinative of the classification of the manufactured product. What is essential for determining the classification is the nature of the end product and the market understanding of the said end product. In the present case there appears to be no dispute with regard to the nature and commercial understanding of the product viz Polyester Staple Fibre. Thus the product under consideration is nothing but a textile material and hence will be classified as textile material under Tariff Item 5503 20 00 and not as article of plastic in Chapter 39. To ensure uniformity in the manner of classification of the Polyester Staple Fibre obtained from PET scrap and waste bottles it is clarified that this product is correctly classifiable under heading 55032000.
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Ph.No.9890953771
NEW CASE LAWS
CA VISHAL BHATTAD
YEAR 2010 Xerox India Ltd. [2010] (SC)

Facts The assessee has imported Xerox Regal 5799, Xerox Work Centre XD100 and Xerox work Centre XDl55df. The assessee contended that the imported machines were Multi-Functional Machines performing the functions of printers, fax machine, copier and/or scanner and therefore, required to be classified as Printers in Automatic Data Processing Machine (ADD) under Tariff Heading 8471.60. The Department opined that aforesaid machines require to be classified under Heading 8479.79 (Residual Heading). Statutory provisions Heading 84.71 Description of heading Automatic data processing machines and units thereof. (magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data not elsewhere specified or included.) 8471.60. Inputs or output units whether or not containing storage units in the same housing, 84.79 Machines and mechanical appliances having individual functions not specified or included elsewhere in this Chapter.
The printing function emerges as the principal function and gives the MultiFunctional Machines its essential character. Therefore, multi functional machines also become classifiable under Heading 8471
Decision: Product shall be classified under heading 8471.60 as Automatic Data Processing Machine Rule 3(b) provides the composite goods shall be classified as if they consisted of the material or component which gives them their essential character. Xerox Regal 5799 has about 85% of the its total parts and components along with manufacturing cost allocated to printing, while the same is 74% in case of Xerox XD155df model. This clearly shows that the printing function emerges as the principal function and gives the Multi-Functional Machines its essential character. Printers are classifiable under Heading 8471.60, therefore, multi functional machines also become classifiable under Heading 8471.60.
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Ph.No.9890953771
CA VISHAL BHATTAD
N.I. SYSTEMS (INDIA) P. LTD. 2010 (S.C.)( VV IMP)

Brief Facts: Assessee imports various products from its Holding Company and supplies the same to its customers in India. The products were computer based instrumentation products. The importer filed 64 bills of entries. The importer claimed the items to be computers and/or parts of computer & grouped the items in accordance with similar/identical functions broadly under CTH 8471, 8473 and other headings falling under Chapter 84. Broadly, the importer categorized the imported items as follows: (i) (ii) (iii) (iv) PXI Controllers. Input/Output Modules (also known as Modem or Control/Adaptor Units). Signal Converters. Chassis and its parts.
On verification of the technical data (including the catalogue and the webcast of the importer), Department observed that the subject goods were not structurally designed to function as a computer.
Department contentions
E Subject goods were not structurally designed to function as a computer. E The embedded controllers may perform all functions of a CPU but,it is controllers are not CPUs. E the subject goods stood manufactured for a special purpose and that purpose was either measurement or control for industrial use & not as ADP Machines. . E the test of common parlance then the subject goods are measuring/controlling instruments E the importer stated that they use real-time operating systems (software) and not the standard operating systems such as Microsoft Windows. E In the circumstances, the department has broadly classified embedded Controllers, Programmable Automation Controllers (PACs), Data Acquisition Boards, Digital Input-Output Boards, PXI Chassis etc. under Chapter 90. E The department has rejected the classification sought by the importer under CTH 8471.
Assessee Contention
E imported items cannot perform any specific function unless the end-users have an appropriate programming software. E just because the imported items were to be used with measuring instruments, it cannot be said that such items are to be classified under Chapter 90. E PXI controller, I.O. modules and signal converters are all varieties of ADP Machines. They all run on operating systems like linux, windows etc. E an ADP Machine requires various types of interface boards/units which are required to be installed in it and connected to sensors so that temperature, voltage and pressure can be received by the interface boards/units and converted into digital signals and then sent to ADPM processing. E it is the sensor which measures the real world phenomena as ADPM cannot interface by itself directly with the sensors. E as the PXI controller satisfies the requirement of free programmability, storing and processing of programmes, performance and arithmetical computation and execution of programmes, the PXI controller qualifies as ADP Machine in terms of Chapter Note 5(A) to Chapter 84 of Customs Tariff.
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Ph.No.9890953771
CA VISHAL BHATTAD
Legal provision: Chapter 90 includes measuring and checking instruments and apparatus; parts and accessories thereof Decision: (i) PXI Controllers. PACs/Programmable Process Controllers are parts and accessories of a system/instrument which are suitable for use solely or mainly with a number of machines, instruments, apparatus of the same Heading, i.e., 9032 like sensors, thermostats etc. In our view, PACs/Programmable Process Controllers imported by the assessee herein are suitable for use principally with Industrial Process Control Equipment like sensors, thermostats etc. which measures temperature, process etc. Therefore, they are correctly classifiable as a part of the said machine, instrument or apparatus. The principle function of controllers is to execute control algorithm for real time monitoring and for controlling devices, processes or systems. As such, a PAC/PPC is a part of an industrial process control equipment/system and accordingly such controllers are classifiable as a part of instrument or apparatus under chapter 90 I.O. Modules and Chassis We may say that the primary function of I.O. Modules (Boards) is to function as a part of measuring and control System. It is for this reason that such Modules are required to be classified as parts and accessories of regulating and measuring System. For this purpose, it is necessary to examine each of the imported items apart from Controllers in order to see whether the hardware coupled with the pre-installed software gives it a definite identity and function. From the catalogue and technological write-ups we find that each and every I.O. Module imported by the assessee is configured with a sensor at one end. This aspect is very important. For the aforestated reasons, we are of the view that the imported goods were rightly classified by the Department under Chapter 90. We are also of the view that the Department was right in classifying the I.O. Modules and Chassis as parts and accessories of Automatic Regulating or Controlling Instruments and Apparatus in terms of CTH 9032.90.00.
L.M.L. Ltd. v CC [2010]- S.C.
Brief Facts: Assessee imported CD ROMs containing images of drawings and designs of engineering goods. The assessee claimed classification under heading 4906, or, heading 4911 , or, as Information Technology Software , or as CD ROM, where exemption is given from duty. The Department, the Commissioner (Appeals) and Tribunal classified the same under heading 8524.39 (Recorded CD ROMs, liable to duty). Legal provisions:
CD ROMs containing images of drawings and designs of engineering goods classified the same under heading 8524.39 (Recorded CD ROMs, liable to duty).
Heading 49.06 : Plans and drawings for architectural, engineering, industrial, commercial topographical or similar purposes, being original drawn by hand; handwritten texts; Heading 49.11: Other printed matter, including printed pictures and photographs. 8524 : Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records. Decision Heading 49.06. covers only those plans / drawings / designs, which are originals drawn by hands. The drawings and designs, in this case, were not originals drawn by hands but were images of drawings and designs, which have been loaded on a CD ROM. Not covered by 49.11 : This heading covers other printed matter not covered under preceding headings of Chapter 49. In general, this heading is intended to cover : goods executed in paper.
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Ph.No.9890953771
CA VISHAL BHATTAD
The drawings and designs recorded on a CD ROM cannot be regarded as printed matter. Since, in this case, the import was not of the bare CD, but, of drawings and designs contained in the CD, hence, the said exemptions means for bare CDs could not be available. Not Information Technology Software. A software is a computer program, which enables the computer or the hardware to function. The drawings and designs of engineering goods recorded on a CD ROM could not be regarded as a computer program or instructions meant for functioning of computer hardware. Classification of technical products by lower authorities not to be rejected unless patently wrong. Since the classification by the lower authorities and Tribunal is correct, hence, CD ROMs containing images of drawings and designs of engineering goods classified the same under heading 8524.39 (Recorded CD ROMs, liable to duty).
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Ph.No.9890953771
CA VISHAL BHATTAD
DEMAND & REFUND

Amendments in the Central Excise Act, 1944
Penalty not to be imposed in case of voluntary payment of duty and interest before issuance of show cause notice [Explanation 3 to section 11A(2B)] [VV IMP] Explanation 3 to section 11A(2B)(voluntary payment of duty) inserted by the Finance Act, 2010 clarifies that no penalty under any of the provisions of this Act or the rules made there under shall be imposed in case the duty short paid and interest thereon is paid under section 11A(2B) before service of the show cause notice.
LATEST CIRCULARS Circular No. 922/12/2010-CX., dated 18-5-2010
Subject :Power of adjudication of Central Excise Officers.

Central Excise Officers Powers of Adjudication (Amount of duty involved) Superintendents UptoRs. 1 Lakh (excluding cases which involve excisability of a product, classification, eligibility of exemption, valuation and cases involving suppression of facts, fraud etc.) Deputy/Assistant Commissioners Joint Commissioners Additional Commissioners Commissioners Up to Rs. 5 lakhs(except the cases Superintendents are empowered to adjudicate). Above Rs. 5 lakhs and up to Rs. 50 lakhs Above Rs. 20 lakhs and up to Rs. 50 lakhs Without limit where
Circular No. expected)
898/18/2009-CX
dated
15-9-2009
Most
Subject: Benefit of reduced penalty under provisos to Section 11AC - Whether also available at appeal stage. Issue: A case has been brought to the notice of the Board wherein a Commissioner (Appeals) had allowed the benefit of proviso to Section 11AC of the Central Excise Act, 1944 to pay penalty at the reduced rate of 25% within 30 days of the communication of the Order-in-Appeal. Commissioner (Appeals) has read Section 11AC and Section 35F together to arrive at the aforesaid decision. Board View: The matter has been examined. The provisions relating to reduction of penalty to 25% are contained in proviso (1) to (4) of Section 11AC.Interms of proviso (1) and (2), a penalty imposed under Section 11AC can be reduced to 25% on fulfillment of following conditions. (i) Duty determined under Section 11A(2) and interest payable thereon has been paid within 30 days.
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(ii) The said period of 30 days is calculated from the date of communication of the order passed by a Central Excise Officer determining the duty. (iii) The reduced 25% penalty is also paid within 30 days of the date of communication of the order passed by the Central Excise Officer. From the above it is clear that in order to avail the benefit of 25% penalty, the duty, interest and penalty are required to be paid within 30 days of communication of the order passed by the adjudicating authority. Further, the reading of proviso would also support this interpretation because the said proviso stipulate that wherever duty amount is increased at any appellate stage, in that case in order to avail the benefit of 25% penalty, the assessee is required to pay differential amount within 30 days of the passing of the order by the appellate authority. A combined reading of the entire proviso would, therefore, make it clear that the benefit of 25% penalty is applicable only when the assessee has paid duty, interest and the reduced penalty within 30 days of communication of the order passed by the adjudicating authority. However, if the penalty amount is increased at the appellate stage, in that case the 25% of differential amount of penalty can be paid within 30 days of communication of said appellate order. Therefore, the view taken by the Commissioner (Appeals) is not as per the provision of law.
Conclusion: Therefore, when the assessee does not pay the duty & interest within 30 days of order of adjudicating order, even if such duty is paid within 30 days of the appellate order upholding the demand, the benefit of reduced penalty of 25% shall not be available.
NEW CASE LAWS

YEAR 2011
HANS STEEL ROLLING MILL [2011](SC)

The Assessee is engaged in the manufacture of iron and steel products. Assessee Co. has opted for compounded levy(under Rule 15).In a particular period, it failed to pay excise duty. Department issued SCN for recovery of duty under Section 11A. Assessee argued that SCN issued by department under section 11A is invalid in law because recovery of duty under compounded levy scheme is governed by specific provision of scheme & not under Section 11A.
The provisions of Section 11A of the Central Excise Act, 1944 are not applicable to the recovery of amounts due under the compound levy scheme
Issue: whether the provisions of Section 11A of the Central Excise Act, 1944 are applicable to the recovery of amounts due under the compound levy scheme? Decision: Held that 1. 2. Compounded levy scheme is a comprehensive scheme in itself and general provisions of sec 11A in the Act cannot prevail over specific provision. Hence provision of section 11A is not applicable to compounded levy scheme.
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Ph.No.9890953771
CA VISHAL BHATTAD
YEAR 2010
NIRMAL PRODUCTS (2010) (Tri)

Issue: whether SCN/ORDER/SUMMON can be served by courier?
Serving of SCN by courier is invalid in law
Legal provision: SECTION 37C. Service of decisions, orders, summons, etc. Any decision or order passed or any summons or notices issued under this Act or the rules made thereunder, shall be served, 1. by tendering the decision, order, summons or notice, or sending it by registered post with acknowledgment due, to the person for whom it is intended or his authorised agent, if any; 2. if the decision, order, summons or notice cannot be served in the manner provided in clause (a), by affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person for whom such decision, order, summons or notice, as the case may be, is intended; 3. if the decision, order, summons or notice cannot be served in the manner provided in clauses (a) and (b), by affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice. Decision: Section 37C has made provision for service of decision, order, summons or notices issued by the Department by registered post with acknowledgement due. Public authorities cannot act beyond the modality prescribed by law. If they act beyond the scope of law , they are said to have not exercised the Authority in accordance with law. We do not approve the modality of dispatch of order-in-original by courier when law does not prescribe such modality for service. Law does not permit Department to approve the courier service to deliver the order-in-original. Hence any SCN/ORDER/SUMMON served by courier is invalid in law.
Brief Facts:Assessee supplied auto parts to their customers Interest under section manufacturers of motor vehicles, who determined the prices 11AB is leviable on of auto parts having regard to the cost of raw material, voluntary delayed or manufacturing cost, profit margin, etc. and placed orders deferred payment of duty with the assessee. for whatever reasons. Since price difference arose between the price on the date of removal and the enhanced price at which the goods stood ultimately sold. Assessee paid differential duty pertaining to the price rise. Department issued a show-cause notice proposing to levy interest on the differential duty, paid by the assessee, under Section 11AB of the Central Excise Act, 1944. Assessee contended that in the present case was not a case of short-levy or non-levy of the goods removed by the assessee calling for recovery under Section 11A of the Act, hence, this was not a case for charging of interest under Section 11AB of the Act. Legal provision: Section 11A(2B)voluntary payment Provides that the assessee in default may, before the notice can make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice. But Explanation to this makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment of the duty. Section 11ABthat states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty voluntarily under section 11A(2B) shall, in addition to the duty, be liable to pay interest.
International Auto ltd 2010 (S.C.) (IMP)
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Decision: It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared, on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act. It is thus to be seen interest is leviable on delayed or deferred payment of duty for whatever reasons.
Hero Cycles Ltd. 2010 (S.C) (IMP)
Brief Facts: The Assessee imported goods and paid customs duties thereon. The goods importedby the assessee are fully exempt from payment of Central Excise duty and consequently no additional duty of customs under Section 3 of the Customs Tariff Act, 1975 is payable on the goods. The Assessee however, contended that inadvertently and under a bona fide mistake they did not claim exemption under the aforesaid notifications in respect of some Bills of entry. The Department assessed all the Bills of Entry without extending the benefit of the above Notifications. The Assessee cleared the goods imported by them on payment of additional duty under Section 3 of the Customs Tariff Act, 1975. The Assessee realizing their mistake, that no additional duty is payable on the import of bicycle parts claims refund to department. The assessee did not take the credit of the said additional duty of customs paid on the imported goods. Department rejected the refund claim on the ground that the importer has not challenged the final assessment order in appeal. Decision: In our opinion It is duty department to assess the goods and impose duty according to law. The fact that the assessee has paid the duty under mistake of law and or in the instant case by oversight cannot result in being assessed to duty which was otherwise not payable. In our opinion, this will be a case of manifest injustice and on the face of it erroneous. If we order to the department for amendment in original order then it was not a case of violation of principles of natural justice or fairplay or violation of any fundamental rights and the mere existence of alternative remedy does not act as bar for Court in exercising extraordinary jurisdiction which depend on circumstances of the case. We will have to issue directions to the Department to amend the original order of assessment. In so far as the claim for refund is concerned, that would only arise after the order is amended.
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Ph.No.9890953771
CA VISHAL BHATTAD
APPEAL, REVIEW & RIVISION NEW CASE LAWS YEAR 2010 AMCHONG TEA ESTATE 2010 (S.C.)
Brief Facts:The assessee has challenged the order dated 9-7-2003 passed by the Deputy Commissioner, Central Excise, by filing an appeal before the Commissioner (Appeals). The said appeal was filed on 6-102004 and by an order dated 15-10-2004, the Commissioner (Appeals) rejected the application filed by the petitioner seeking condonation of delay on the ground that the appeal is barred under the provisions of Section 35 of the Central Excise Act.
Commissioner (Appeals) cannot condone the delay beyond period of 30 days.
The aforesaid order of the Commissioner (Appeals) was challenged before the learned Single Judge of the Gauhati High Court. By an order dated 3-6-2008, the learned Single Judge held that sufficient ground is not made out for condonation of delay, even assuming that such a power is vested on the Commissioner (Appeals) to condone delay beyond a period of 30 days. The said order of the learned Single Judge was challenged by assessee before the Division Bench of the High Court, which dismissed the appeal holding that the Commissioner (Appeals) did not have the power and jurisdiction to condone such delay beyond a maximum period of 30 days after expiry of the earlier 60 days as contemplated in the said provisions. Assessee had filed before Supreme Court. Decision: The proviso to sub-section (1) of Section 35 makes the position crystal clear that the Appellate Authority has no power to condone the delay beyond the period of 30 days and that the language used makes the position clear that the Legislature intended to entertain the appeal by condoning the delay only upto the 30 days and not 60 days. We find no error in the judgment and order of the High Court.
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Ph.No.9890953771
CA VISHAL BHATTAD
Settlement Commission Scope of cases, in respect of which an application can be made to Settlement Commission, expanded
Prior to amendment
EXCISE Section 32E
Amendment made by Finance Act, 2010
Earlier, section 32E(1) provided that He admits Short levy on account of under-valuation, applications for the settlement of misclassification, cases could not be admitted in cases inapplicability of exemption notification or where an assessee admitted short- Cenvat credit or otherwise and any such levy for goods in respect of which he application shall be disposed of in the manner had not maintained proper records in his daily stock register (i.e. Comment: Now, the scope of the cases which may cases of misdeclaration, clandestine be admitted to the Settlement Commission has removal etc.). been expanded. Finance Act, 2010 has lifted the prohibition on filing of applications for the settlement of cases where an assessee admits short-levy for goods in respect of which he has not maintained proper records in his daily stock register (i.e. cases of misdeclaration, clandestine removal etc.is allowed). Earlier, section 127B(1) provided that applications for the settlement of cases could not be admitted in cases where assessee admitted short levy in respect of the goods which were not included in the Bill of entry or Shipping Bill, as the case may be. He admits short levy on account of misclassification, under-valuation or inapplicability of exemption notification or otherwise and such application shall be disposed of in the manner hereinafter provided Comment: Now, the scope of the cases which may be admitted to the Settlement Commission has been expanded. Finance Act, 2010 has lifted the prohibition on filing of applications for the settlement of cases where assessee admits short levy in respect of the goods which were not included in the Bill of entry or Shipping Bill, as the case may be.
CUSTOMS SEC127(B)
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Extension of time-limit for passing an order of settlement allowed

Prior to amendment
EXCISE Sec 32F CUSTOMS SEC 127C
CA VISHAL BHATTAD
The time-limit for passing the settlement The proviso added to the said suborder is nine months from the last day of section provides that the 9 month period the month in which the application was may be extended, for reasons to be made [Section 32F(6)]. Earlier, no recorded in writing, by the Settlement extension in the said time-limit was Commission for a further period not exceeding 3 months. allowed.
Amendment made by Finance Act, 2010
Assessee entitled to apply for settlement more than once

EXCISE Section 32O Earlier, as per section 32- Now, amended section 32-O reads as under:- Where O, the assessee was (i) an order of settlement passed as provides for the allowed to apply for imposition of a penalty on the person who made the application for settlement, on the ground of concealment of settlement under section particulars of his duty liability or 32E not more than once. (ii) after the passing of an order of settlement in relation to a case, such person is convicted of any offence under this Act in relation to that case or (iii) The case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission then, he shall not be entitled to apply for settlement under section 32E in relation to any other matter. Comment: The said section has been amended so as to provide that now the assessee can apply for settlement more than once if does not fall under above specified cases. Earlier, as per section 127, Where, the assessee was allowed (i) an order of settlement passed provides for the imposition of a penalty on the applicant on the ground of to apply for settlement under section 127B not concealment of particulars of his duty liability; or (ii) after the passing of an order of settlement in relation to a more than once. case, such person is convicted of any offence under this Act in relation to that case; or (iii) the case of such person is sent back to the proper officer by the Settlement Commission then such person shall not be entitled to apply for settlement under section 127B in relation to any other matter.
Prior amendment
to Amendment made by Finance Act, 2010
CUSTOMS section 127L
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Ph.No.9890953771
NEW CASE LAWS
CA VISHAL BHATTAD
Qualimax Electronics Pvt. Ltd. [2010] (H.C.)

The assessee filed an application for settlement on 8-1-2011, while an adjudication order dated 24-12-2010 passed in respect of the said matter was received by assessee after 8-1-2011 (i.e. after filing of application for settlement). The Department contended since the case was not "pending" on the date of filing of application, as the adjudication order was passed before the date of filing of application for settlement, hence, the said application was not maintainable.
Application for Settlement of cases after passing the Adjudication order is not maintainable
Decision: Held that ,the adjudication order was passed on 24-12-2010. The same was despatched by the Department on 31-12-2010, while it was received by the assessee after 8-1-2011. Receipt of adjudication is order not relevant for the settlement of case; when the order has been passed (dated and signed) and the same has been sent to the assessee so as to be out of control of the adjudicating authority, the same ceases to be "pending" before the adjudicating authority. The adjudication became complete and effective on 31-12-2010, when the order left the hands of adjudicating authority. Since the matter was not "pending" on 8-1-2011, hence, no application for settlement could be filed in respect thereof. Therefore, the said application was not maintainable.
UOI v/s Customs & Excise Settlement Commission 2010 (VVIMP)

Brief Facts:-Department issued show cause notice for recovery of duty drawback with interest, by contending that said drawback to have been obtained fraudulently by exporting Solvent Mixture which do not qualify for duty drawback under Customs and Central Excise Duties and Service Tax Drawback Rules, 1995. Assessee instead of responding to the show cause notice, preferred to file an application before the settlement Commission under Section 127-B(1) of the Customs Act, 1962 for settlement of the case. On being noticed, the Department contended that cases of recovery of duty drawback do not fall within the definition of case stipulated under Section 127-A(b) of the Act for settlement.
Settlement Commission had jurisdiction to deal with the question relating to the recovery of drawback erroneously paid by the Revenue
Issue: whether the settlement commission had jurisdiction to deal with the question of recovery of duty drawback under Section 127-A(b) of the Act. Decision:- As per Section 127-A(b) case means as any proceeding under this Act or any other act of the levy, assessment and collection of customs duty. A proceeding for recovery of drawback of duties could be treated as a case as defined in the Act and that application before the Settlement Commission was very much maintainable in accordance with law. duty drawback is nothing but a remission of duty on account of the statutory provisions in the Act and scheme framed by the Government of India. Under these circumstances, the duty drawback or claim for duty drawback is nothing but a claim for refund of duty may be as per the statutory scheme framed by the Government of India or in exercise of statutory powers under the provisions of the Act. We, thus, hold that the Settlement Commission had jurisdiction to deal with the question relating to the recovery of drawback erroneously paid by the Revenue.
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Ph.No.9890953771
AUSTRALIAN FOODS LTD.- 2010 (H.C.)

Brief Facts:-The assessee is manufacturer of Cookies. Cookies is notified under Section 4A for MRP base valuation. He also manufacture dough the main ingredient used in the manufacture of their final product cookies and the product Dough is also liable to duty. Assessee was clearing the product dough, without payment of duty, to their franchisee/outlets. The assessees unit was visited by the officers of the Central Excise Department & on scrutiny of the records it was found that Assessee was clearing the product dough, without payment of duty, to their franchisee/outlets. Assessee also has cleared their final products viz. cookies to M/s. Taj Group of Hotels; M/s. GRT Grand Hotels, M/s. Jet Airways etc. in bulk based on specific contract with each of the parties & have done the valuation under section 4A (RSPAbatement).
CA VISHAL BHATTAD 1. Settlement comission does not have the power to decide question of Law: Cookies cleared to Hotels/Airways were assessable u/s 4 at transaction value
2.
Department issued the show cause notice to the assessee for demanding Excise duty on Dough and also seeking valuation of cookies cleared to Hotels.Airways & etc. in bulk u/s 4 of Act as Transaction value. Without giving any explanation to this show-cause notice, the assessee straight away approached the Settlement commission. By the time the assessee has paid the duties regarding the dough clearance and the important question that was left for consideration before the Settlement Commission was whether the assessee is entitled to claim benefits under Section 4-A of the Central Excise Act, on clearance cookies made to Hotels & etc.? Settlement commission held that the value should be determined u/s 4A of the Act as claimed by the assessee. Hence demand in that regard was dropped. Department claimed that the settlement commission did not have the jurisdiction to decide the matter of valuation directly relating to assessesment & Hence, said order was bad in Law. Decision: Settlement Commission does not have the power to decide question of Law: As per section 32E assessee may approach the Settlement Commission, before adjudication to settle the case, disclosing his duty liability which has not been disclosed by him before the Central Excise Officer. But, it nowhere provides that the assessee could approach the Settlement Commission, regarding a disputed question, particularly regarding a disputed question of fact and law as to the applicability of whether Section 4 or Section 4-A of the Central Excise Act. Applicability of whether Section 4 or Section 4-A of the Central Excise Act is out of the jurisdiction of the Settlement Commission, since it has not been vested with the power to decide such a question of direct assessment. By such an act, the Settlement Commission has usurped the jurisdiction of the adjudicating authorities and the order of settlement commission is bad in law. Cookies cleared to Hotels/Airways were assessable u/s 4 at transaction value :Since the cookies had been cleared in bulk to institutional consumers viz hotels airway etc.,even if MRP is declared on such clearance, there was no requirement under the provisions of the Standards of Weights and Measures Act or the Rules made thereunder to declare on the package the retail sale price on such goods.Consequently, Section 4A could not apply to such clearance & the said goods were liable to be assessed u/s 4 of the Act at the transaction value.
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Ph.No.9890953771
CA VISHAL BHATTAD
SERVICE TAX
Amendment in FINANCE ACT, 1994
SECTION 65 Definition of Business Entity is introduced under section 65
65(19b) Business entity

business entity includes an association of persons, body of individuals, company or firm but does not include an individual.
SECTION 73 Penalty not to be imposed in case of voluntary payment of duty and interest before issuance of show cause notice [Explanation 2 to section 73(3)]
Explanation 2 to section 73(3)(voluntary payment of service tax) inserted by the Finance Act, 2010 clarifies that no penalty under any of the provisions of this Act or the rules made there under shall be imposed in respect of payment of service tax under this sub-section and interest thereon.
SECTION 75 Increase in Interest Rate Sec/Rule Particulars

Sec 73B Sec 75
Old Rate
New Rate
18% p.a. 18% p.a.
Excess collection of S.T. 13% p.a. Interest on delay payment of 13% p.a. service Tax
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Ph.No.9890953771
Extension of scope of India Notification No. 14/2010-S.T., dated 27-2-2010

the Central Government hereby extends the provisions of Chapter V of the Finance Act, 1994 , to the areas specified in column (2) of the Table below, in the continental shelf and exclusive economic zone of India for the purposes as mentioned in column (3) of the said Table :Sl. No. The areas in the Continental Shelf and the Exclusive Economic Zone of India Purpose
CA VISHAL BHATTAD
(1)
1.
(2)
Whole of continental shelf exclusive economic zone of India
(3)
2.
and Any service provided for all activities pertaining to construction of installations, structures and vessels for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. The installations, structures and Any service provided or to be provided by or to such vessels within the continental shelf and installations, structures and vessels and for supply of the exclusive economic zone of India, any goods connected with the said activity. constructed for the purposes of prospecting or extraction or production of mineral oil and natural gas
1) Installation of wind mill S.T. is not payable
Territorial water (12NM) Contiguous zone(24NM)
Indian exclusive economic zone (200 NM)
Installations, structures and vessels
1) Installations, structures and vessels the purposes of prospecting of mineral oil and natural gas and supply thereof 2) Any service to such installation
S.T. is payable
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Amendment in Service Tax Rule, 1994

Rule 6(2)
E- PAYMENT
Rule Prior to amendment Amendment made by Notification No. 1/2010-S.T., dated 19-2-2010
proviso to rule An assessee was required to deposit 6(2) the service tax electronically through internet banking if he had paid the total duty of Rs. 50 lakh or more (including the amount of duty paid by utilisation of CENVAT credit) in the preceding financial year
An assessee shall deposit the service tax electronically through internet banking if he has paid the total duty of Rs. 10 lakh or more (including the amount of service tax paid by utilisation of CENVAT credit) in the preceding financial year. Clarification : Thus limit of 50 lakhs reduced to 10 lakh
Rule 6(4A)
Self Adjustment of Service Tax paid in excess

The Limit of Rs 100000 adjustment per month/quarter has been increased to Rs 200000. Rule 6(6A)
Recovery procedure in case of non payment of Self Assessed Tax

Where an amount of service tax payable has been self-assessed (under section 70(1) ), but not paid, either in full or part, the same, shall be recoverable alongwith interest in the manner prescribed under section 87 of the Act. Comment: Provision of Section 87 is similar to provision of Sec 11A of Central Excise Act, 1944 Rule 7(2)
E- RETURN
Rule Prior to amendment Amendment made by Notification 1/2010-S.T., dated 19-2-2010 No.
proviso to rule The facility of e-filing of Electronic filing of returns mandatory for the 7(2) returns was earlier optional assessee who has paid total duty of Rs. 10 lakh or more including the amount of service tax paid by for the assessees. utilization of CENVAT credit in the preceding financial year. Rule 4A
Air ticket to be considered as valid Invoice under Rule 4A

In the Service Tax Rules, 1994, in rule 4A(1), after the fourth proviso, the following proviso shall be inserted, namely:Provided that in case the provider of taxable service is aircraft operator providing the service of air transport of passenger, an invoice, a bill or as the case may be, challan shall include ticket in any form by whatever name called and whether or not containing registration number of the service provider, classification of the service received and address of the service receiver but containing other information in such documents as required under this sub-rule.
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AMENDMENT IN THE SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006

RULE 5(1) Inclusion in or exclusion from value of certain expenditure or costs.
1. 2. 3.
CA VISHAL BHATTAD
Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.
Explanation (Inserted in year 2011)- For the removal of doubts, it is hereby clarified that for the Telecommunication service (Sec 65(105)(zzzx) the value of the taxable service shall be the gross amount paid by the person to whom telecom service is provided by the telegraph authority. Comment:
Board has clarified thatin case of service provided by way of recharge coupons or prepaid cards or the like, the value shall be the gross amount charged from the subscriber or the ultimate user of the service and not the amount paid by the distributor or any such intermediary to the telegraph Authority. Example
IDEA Cellular Ltd
Recharge coupon sold for Rs 180 Printed price Rs 200
Recharge coupon sold for Rs 200 Distributor Telephone user
Value for Idea Cellular Ltd is Rs 200
Rule 6(2)
Statutory taxes levied by any Government on air passenger to be excluded from the value of service (Notification No. 15/2010-S.T. dated 27-2-2010] Rule 6(2) enumerates the exclusions from the value of taxable services. The said Notification provides that the statutory taxes charged by any Government (including foreign Governments, where a passenger disembarks) on air passenger would be excluded from taxable value for the purpose of levy of service tax under the air passenger transport service. Such charges would be eligible for exemption only if they are shown separately on the ticket/the invoice for such ticket. Significance of amendment Clarification by Board:The taxes on transport of passengers travelling by air were in operation in the past. These were not in the nature of service tax but operated through separate legislations. Inland Air Travel Tax [@ 15%] was levied on domestic travel in 1989. Foreign Travel Tax [@ Rs. 500 per trip, except to neighboring countries for which the rate was Rs. 150 per trip] was levied on international travel in 1979. These taxes were withdrawn in the interim Budget 2004. In 2006, tax was imposed on international air travel by a passenger embarking in India and travelling in higher [other than economy] classes. This tax continues.
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Ph.No.9890953771
CA VISHAL BHATTAD
Construction of Residential Complex service 65(105)(zzzh) F.A.2010

Alteration or expansion in the scope of existing services
The following Explanation shall be inserted, namely: Explanation.For the purposes of this sub-clause, construction of a complex which isintended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer; Significance of amendment in construction activity In order to achieve the legislative intent and bring in parity in tax treatment, an Explanation is being inserted to provide that unless the entire payment for the property is paid by the prospective buyer or on his behalf after the completion of construction (including its certification by the local authorities), the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the Service tax would be charged accordingly. This would only expand the scope of the existing service, which otherwise remain unchanged. Considering the practical difficulties, the scope of the phrase authority competent to issue completion certificate has been widened by issuing an order for removal of difficulty (Refer M.F. (D.R) Order No. 1/2010 dated 22nd June 2010). Completion certificate issued by an architect or chartered engineer or licensed surveyor can be now taken to determine the service tax liability.
EXEMPTIONS 4.
SECTION
ABATEMENT FROM VALUE: Notification No. 1/2006-S.T.

SERVICE cost of land has not been cost of land has been separately recovered from the separately recovered buyer. from the buyer.
TAXABLE VALUE ABATEMENT TAXABLE ABATEMENT VALUE
65(105) (zzzh)
Construction of Complex (Builder to buyer)
25%
75%
33%
67%
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Ph.No.9890953771
AMENDMENTS FOR NOV-2011 CA VISHAL BHATTAD 2) Construction of complex Exemption if provided to Jawaharlal Nehru National Urban Renewal Mission and Rajiv AwaasYojana, [Notification No. 28/2010-S.T., dated 22-62010]
The Central Government hereby exempts the taxable service of construction of complex referred to Sec 65(105(zzzh) of the Finance Act,when provided to Jawaharlal Nehru National Urban Renewal Mission and Rajiv AwaasYojana,from the whole of the service tax leviable thereon under section 66 of the Finance Act.
Significance of amendment
Clarification by Board:Exemption has been provided for construction of residential complex service,
when the same is rendered as part of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv AwaasYojana (Refer Notification No. 28/2010-Service Tax, dated 22nd June 2010). These are flagship schemes of the Government of India to provide shelter for the poor and the disadvantaged and hence taxable service of construction of complex in the context of these two development schemes have been kept out of the ambit of service tax.
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Ph.No.9890953771
CA VISHAL BHATTAD
Commercial or industrial constructionSection 65(105)(zzq))

F.A.2010
1) for the words commercial or industrial construction service, the wordscommercial or industrial construction shall be substituted. 2) the following Explanation shall be inserted, namely:
ExplanationFor the purposes of this sub-clause, the construction of a new building which
is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer
EXEMPTIONS 3) ABATEMENT FROM VALUE: Notification No. 1/2006-S.T. SECTION SERVICE cost of land has not been separately recovered from the buyer.
TAXABLE VALUE ABATEMENT
cost of land has been separately recovered from the buyer.

TAXABLE VALUE ABATEMENT
65(105) (zzzh)
Commercial & Industrial construction. (Builder to buyer)
25%
75%
33%
67%
2) Exemption when provided wholly within the port or other port for certain activities [Notification No. 38/2010-S.T, dated 28-6-2010]
The Central Government hereby exempts the taxable service of commercial or industrial construction referred in 65(105)(zzq) of the Finance Act, when provided wholly within the port or other port, for construction, repair, alteration and renovation of wharves, quays, docks, stages, jetties, piers and railways, from the whole of service tax leviable thereon under section 66 of the Finance Act.
3) Exemption when provided wholly within the airport [Notification No. 42/2010-S.T., dated 28-6-2010]
Central Government hereby exempts the taxable service of commercial or industrial construction referred to in Sec 65(105)(zzq) of the Finance Act, when provided wholly within the airport, from the whole of service tax leviable thereon under section 66 of the Finance Act.
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Works Contract service [section 65 (105) (zzzza)]

Works contract (Composition scheme for payment of Service tax) Rules,2007 Rule 3(2A)(newly inserted by N/N 1/2011) The CENVAT credit of tax paid on taxable services
1. Erection,commissioning and installation services (Sec65(105) (zzd)) 2. Commercial or Industrial construction(Sec65(105) (zzq)) 3. Construction of Residential complex (Sec65(105) (zzd)) shall be available only to the extent of 40% of the service tax paid when such tax has been paid on the full value of the service after availing CENVAT credit on inputs.
Significance of amendment
If service provider opts for Works Contract Composition scheme then he is not eligible to take credit of duties or cess paid on inputs used in or in relation to works contract. However Service provider is eligible to take entire credit on Input Service. A clever device is used by works contractor to take credit of inputs, instead of purchasing inputs directly if he outsources any of above 3 services to sub contractor who is using inputs and subcontractor render such service without opting for 1/2006(i.e. S.T. paid on full value of contract by availing the credit of inputs) then works contractor gets entire credit service tax paid by subcontractor. Thus works contractor can indirectly avail the cenvat credit on inputs while availing composition scheme. In order to plug this lacuna, new sub rule 2A has been introduced.
Let us discuss with help of chart

If Service provider opts for Works Contract Composition scheme then eligibility of Cenvat credit as fallows
Input Cenvat Credit Not available
Input Service
Capital Goods Cenvat Credit available
If Input Service provider providing following services
Erection, commissioning and installation service Commercial or Industrial construction Construction of Residential complex
If Input Service provider providing other services.
If Input Service provider (for above 3 services) paid service tax on the full value of the service after availing CENVAT credit on inputs Cenvat Credit available only to the extent of 40% .
EXEMPTIONS
If Input Service provider (for above 3 services) paid service tax under abatement scheme 1/2006 100% Cenvat Credit is available
100% Cenvat Credit is available
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Exemption to construction of residential complex and finishing and completion services thereto for specified projects[Notification No. 6/2011-S.T., dated 1-3-2011] The C.G. hereby exempts the taxable service of execution of a works contract when provided for the purpose of carrying out,1. construction of new residential complex or part thereof; or 2. completion and finishing services of new residential complex or part thereof, under Jawaharlal Nehru National Urban Renewal Mission and Rajiv AwaasYojana, from the whole of the service tax leviable thereon under section 66 of the Finance Act.
Transport of goods by rail service [section 65 (105) (zzp)]

EXEMPTION 1) Exemption to transport of goods by rail by government railways excluding transport of containerized goods by others[Notification No. 33/2009-S.T., dated 1-9-2009] The Central Governmenthereby exempts the taxable service provided to any person in relation to transport of goods by rail, from the whole of the service tax leviable thereon under section 66 of the Finance Act, Provided, nothing contained in this notification shall apply to any service provided or to be provided, by any person other than government railway, in relation to transport of goods in containers by rail. Aforesaid exemption is extended upto 31 Dec 2011.
Summary:
Service provider
Govt Railway
Mode of transport
Containerized Cargo
rail Taxability exemption
or
Exempt upto 31st Dec 2011 Exempt upto 31st Dec 2011 Taxable Exempt upto 31st Dec 2011
Non Containerized Cargo Private railway(only one Containerized Cargo operator in India Pipavav railway corporation Non Containerized Cargo Ltd.(PRCL)
2) Transportation of goods outside India (Notification No.8/2011) The taxable services transport of goods by rail provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, exempt from the whole of service tax leviable thereon under section 66 of the Finance Act.
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Transport of goods by road service (GTA)

EXEMPTIONS 1) Transportation of goods outside India (Notification No.8/2011) The taxable services transport of goods by road provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, exempt from the whole of service tax leviable thereon under section 66 of the Finance Act. 2) Food grains and pulses included in the list of items eligible for exemption when transported by road
Particular
Goods transport agency
to Amendment made by the Notification No. 4/2010-ST dated 27.02.2010 At present, transport The scope of exemption has been enhanced of fruits, vegetable, by including food grains and pulses in the eggs or milk by road aforesaid list of exempted goods. by a goods transport Thus now exemption is available on transport agency is exempt of fruits, vegetable, eggs or milk food grains from service tax. and pulses
Prior amendment
Transport of goods by Air service [section 65 (105) (zzn)]

EXEMPTIONS
1) Transportation of goods outside India (Notification No.8/2011) The taxable services transport of goods by rail provided to any person located in India, when the goods are transported from a place located outside India to a final destination which is also outside India, exempt from the whole of service tax leviable thereon under section 66 of the Finance Act. 2) Exemption Freight included in value under section 14 of the Customs Act, 1962 for payment of Customs duty. (Notification No. 9/2011) The taxable services in relation to transport of goods by exempt from service tax leviable under section 66 of the Finance Act to the extent so much of the value as is equal to the amount of air freight included in the value determined under section 14 of the Customs Act, 1962 or the rules made there under for the purpose of charging customs duties Let us take example Xyz co. Imported goods by Air FOB 10,00,000.Service tax payable by Aircraft Co. on Air Freight as fallows Case Actual Freight to be included in the value Exemption Under Freight amount on Freight under Section 14 of Customs Act Service Tax which service tax is Incurred read with Rule 10(2) payable Case-I 180000 Actual or 20% of FOB whichever is Rs 180000 NIL lower. i.e. Rs 180000 Case-II 250000 Actual or 20% of FOB whichever is Rs 200000 Rs 50000 lower. i.e. Rs 200000
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Transport of coastal goods (transport of goods through national water way/inland water service) [section 65 (105) (zzzzl)]
E/N 1/2006 amended- Abatement Abatement allowed 75% Taxable value- 25 %
Air Passenger Transport Service [section 65 (105) (zzzo)]

The scope of the taxable service Air Passenger Transport Service is being expanded to includedomestic journeys, and international journeys in any class.
EXEMPTIONS
EXEMPTION PROVIDING EFFECTIVE RATE FOR DOMESTIC JOURNEY IN ANY CLASS AND INTERNATIONAL JOURNEY IN ECONOMY CLASS W.E.F. 1-7-010 [Notification No. 26/2010-S.T., dated 22-6-2010] the Central Government hereby exempts the Travel by Air services from so much of service tax as is in excess of,1. 10% of the gross value of the ticket or Rs 150 per journey, whichever is less, for passengers travelling in economy class, within India; 2. 10% of the gross value of the ticket or Rs 750 per journey, whichever is less, for passengers embarking in India for an international journey in economy class : Provided that this exemption shall not apply in cases where the credit of duty paid on inputs used for providing such taxable service has been taken under the provisions of the CENVAT Credit Rules, 2004; Explanation, - For the purposes of this notification, economy class in an aircraft means, where there is more than one class of travel, the class attracting the lowest standard fare; or where there is only one class of travel, that class.
Comment: Generally, service tax has to be paid at the rate of service tax applicable on the value of
taxable services. However, in case of air passenger transportation, through a specific exemption notification, the value based levy of service tax has been departed with and the Government has introduced a flat amount of service tax irrespective of the value of the air ticket. The following table summarises the applicability of service tax in such cases:
Nature of Transport International Transport International Transport Domestic Transport Domestic Transport International Transport International Transport Originating From India From India From India From India Outside India Outside India Class Economy Other Economy Others Economy Others Amt. Payable upto 1.4.2011 500 per journey 10.30% of gross value 100 per journey 100 per journey Not Applicable Not Applicable Amt Payable after 1.4.2011 750 per journey 10.30% of gross value 150 per journey 10.30% of gross value Not Liable Not Liable
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AMENDMENTS FOR NOV-2011 CA VISHAL BHATTAD Exemption to in-transit international passenger and other specified persons w.e.f. 1-72010[Notification No. 25/2010-S.T., dated 22-6-2010]
Air Transport of following person has been exempted from service Tax
(i) a person who has arrived at a customs airport from a place outside India and is in transit through India, provided that he does not pass through immigration and does not leave customs area and continues his journey to a place outside India; and (ii)a person employed or engaged by the aircraft operator in any capacity on board the aircraft;
Airport Services [Sec 65 (105) (zzm)]
Port Services [section 65 (105) (zn)]
Other Port Services [section 65 (105) (zzl)]

The definitions of the taxable services, namely the Airport Services, the Port Services and the Other Port Services are being amended to provide that,(a) (b) all services provided entirely within the airport/port premises would fall under these services; and an authorization from the airport/port authority would not be a precondition for taxing these services.
Exemption for some services provided within a port [Notification No. 31/2010-S.T., dated 22-6-2010]
or an airport
The Central Government hereby exempts the following services when provided within a port or an airport: (i) Repair of ships or boats or vessels belonging to the Government of India including Navy or Coast Guard or Customs but does not include Government owned Public Sector Undertakings. (ii) Repair of ships or boats or vessels where such process of repair amounts to manufacture and has the meaning assigned to it in clause (f) of Section 2 of the Central Excise Act, 1944. (iii) Supply of water. (iv) Supply of electricity. (v) Treatment of persons by a dispensary, hospital, nursing home or multi-specialty clinic (except cosmetic or plastic surgery service). (vi) Services provided by a school or centre to provide formal education other than those services provided by commercial coaching or training centre. (vii) Services provided by fire service agencies. (viii)Pollution control services.
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AMENDMENTS FOR NOV-2011 CA VISHAL BHATTAD Airport Service/Port Services Exemption to specified services provided within airport or port w.e.f. 1-7-2010 [Notification No. 41/2010-S.T., dated 286-2010] Central Government hereby exempts the following services when provided wholly within the port or other port or airport namely :(i) taxable service provided by a cargo handling agency in relation to, agricultural produce of goods intended to be stored in a cold storage;
(ii) taxable service provided by storage or warehouse keeper in relation to storage and warehousing of agricultural produce or any service provided for storage of or any service provided by a cold storage; (iii) taxable service in relation to transport of export goods in an aircraft by an aircraft operator; (iv) taxable service of site formation and clearance, excavation and earthmoving and demolition and such other similar activities. Exemption to construction, repair, alteration and renovation of wharves quays, docks, stages, jetties, piers and railways within port w.e.f. 1-7-2010[Notification No. 38/2010S.T., dated 28-6-2010]
Central Government hereby exempts the taxable service of commercial or industrial construction when provided wholly within the port or other port, for construction, repair, alteration and renovation of wharves, quays, docks, stages, jetties, piers and railways, from the whole of service tax leviable thereon under section 66 of the Finance Act.
Abatements Under E/N 1/2006 is available to specified services to continue when provided wholly within a port/Airport Description of taxable service
1)
Conditions
Same as above
T AXABLE
VALUE
ABATEMENT
Commercial or industrial construction service provided wholly within a port/Airport Construction of residential complex. provided wholly within a port/Airport Erection, commissioning or installation provided wholly within a port/Airport
33%
67%
2)
1. The gross amount charged shall

include the value of goods and materials supplied
33%
67%
3)
4) 5)
6)
Renting of a cab provided wholly within a port/Airport Transport of goods in containers by rail provided wholly within a port/Airport Goods transport agency provided wholly within a port/Airport
The bill amount shall include the value of the plant, machinery, equipment,structure, parts and any other material sold during the course of service. -
33%
67%
40% 30%
60% 70%
25%
75%
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AMENDMENTS FOR NOV-2011 Works Contract service Exemption to services airport[Notification No. 10/2011-S.T., dated 1-3-2011]
CA VISHAL BHATTAD provided wholly within
The Central Government hereby exempts services provided in relation to the execution of works contract, when provided wholly within an airport from the whole of service tax leviable thereon under section 66 of the Finance Act.
Works Contract service Exemption to specified services provided wholly within port or other port [Notification No. 11/2011-S.T., dated 1-3-2011]
The Central Government hereby exempts services provided in relation to the execution of works contract,when provided wholly within the port or other port, for construction, repair, alteration and renovation of wharves, quays, docks, stages, jetties, piers and railways from the whole of service tax leviable thereon under section 66 of the Finance Act.
Banking & Financial services [section 65 (105) ]

PURCHASE OR SALE OF FOREIGN CURRENCY, INCLUDING MONEY CHANGING,
Following two options are available for payment of service tax

or
Option 1- Determine the value of service under Rule 2B S.T. (Determination of value) Rules AND Pay Service Tax @ 10.3% of such value Option 2- Pay Service Tax under Composition scheme as per
RULE 6(7B) OF S.T. RULES 1994
Rule 2B S.T. (Determination of value) Rules Determination of value of service in relation to money changing.
Subject to the provisions of section 67, the value of taxable as it pertains to purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner:For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency. Example I: US$1000 are sold by a customer at the rate of Rupees 45 per US$. RBI reference rate for US$ is Rupees 45.50 for that day.
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The taxable value shall be Rupees 500.
CA VISHAL BHATTAD
Example II: INR70000 is changed into Great Britain Pound (GBP) and the exchange rate offered is Rupees 70, thereby giving GBP 1000. RBI reference rate for that day for GBP is Rupees 69. The taxable value shall be Rupees 1000. Provided that in case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money. Provided further that in case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI
Example: Foreign currency to be Exchange Exchange Rate
$ 100
Euro 1000
GBP 10000
F.C. 100000
Rate 1$ = Rs Rate Euro Rate GBP = Rate 1(F.C.) 45.50 = Rs 57 Rs 70 = Rs 8
RBI Rate
Rate 1$ = Rs 42.50
Rate 1$ = Rs 55
Rate 1$ = Rs 69
Not available
Converting 1000 Euro into 1250 Doller Buy Rate 1$ = Rs 45.50 Sale Rate 1Euro=Rs 57 Buy Rate 1$ = Rs 42.50 Sale Rate 1Euro=Rs 55
Value under Rule 2B
[(Rs45.50-Rs 42.50)x 100] =Rs 300
[(Rs 57-Rs [(Rs 70-Rs 55)x 1000] 69)x 10000] = Rs 2000 = Rs 10000
1%(100000x8) 1% of lower of = Rs 8000 following a) 42.50 x 1250 b) 55 x 1000 Value= 531.25
Service Rate
Tax
10.3%
10.3%
10.3%
10.3%
10.3%
Service Tax
Rs 30.9
Rs 206
Rs 1030
Rs 824
Rs 54.72
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FOREIGN EXCHANGE BROKING RULE 6(7B) OF S.T. RULES 1994

The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer, referred to in sub-clauses (zm) and (zzk) of clause (105) of section 65 of the Act, shall have the option to pay an amount calculated at the following rate towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66 (i.e. 10%) of Chapter V of the Act, namely: (a) 0.1% of the gross amount of currency exchanged for an amount upto rupees 100,000, subject to the minimum amount of rupees 25; and (b) Rs 100 and 0.05 % of the gross amount of currency exchanged for an amount of rupees exceeding rupees 100,000 and upto rupees 10,00,000; and (c) Rs 550 and 0.01 % of the gross amount of currency exchanged for an amount of rupees exceeding 10,00,000, subject to maximum amount of rupees 5000: Provided that the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.
Example: Exchange Rate 1$ = 45.50 Foreign currency to be Exchange Gross value in Rs. $ 100 $ 1000 $ 10000 $100000 $ 1500000
Rs 4550
Rs 45500
Rs 455000
Rs 4550000
Rs 68250000
0.1%(4550) = Rs 4.55 OR Rs 25 Whichever is higher Service Tax Rs 20
0.1%(45500) Rs 100 + 0.05%(455000= Rs 45.5 100000) = Rs 277.5 OR Rs 25 Whichever is higher Rs 45.5 Rs 277.5
Rs 550 + 0.01%(45500001000000) = Rs 905
Rs 550 + 0.01%(682500001000000) = Rs 7275 subject to maximum amount of rupees 5000
Rs 905
Rs 5000
Note: on above service tax ed. Cess 3% also payable
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Renting of immovable property [section 65 (105) (zzzz)]

Amendments are being made in the definition of the taxable service Renting of immovable property to,(i) provide explicitly that the activity of renting itself is a taxable service. This change is being given retrospective effect from 1-6-2007; and (ii) provide that renting of vacant land, where the agreement or contract between the lessor and lessee provides for undertaking construction of buildings or structures on such land for furtherance of business or commerce during the tenure of the lease, shall be subjected to service tax.
Significance of amendment Clarification by Board: This service was introduced in 2007 with a view to tax the commercial use
of immovable property hired on rent. The tax on rent paid is available as input credit if the commercial activity involves provision of taxable service or manufacture of dutiable goods. However, the Honble High court of Delhi in its order dated 18-4-2009 in the case of Home Solutions Retail India Ltd. & Others v. UOI has struck down this levy by observing that the renting of immovable property for use in the course of furtherance of business or commerce does not involve any value addition and therefore, cannot be regarded as service. Apart from the revenue loss caused to the exchequer, the judgment has placed the landlords in a very precarious situation. In view of this judgment, the commercial tenants have stopped them reimbursing the tax element. However, the landlords are receiving regular demand notices from the department issued to protect governments revenue for the interim period. In order to clarify the legislative intent and also bring in certainty in tax liability the relevant definition of taxable service is being amended to clarify that the activity of renting of immovable property per se would also constitute a taxable service under the relevant clause. This amendment is being given retrospective effect from 1-6-2007. Under the definition of taxable service pertaining to renting of immovable property, the renting of vacant land used for agriculture, farming, forestry, animal husbandry, mining, education, sports, circus, entertainment and parking purposes, is excluded from the purview of service tax. Further, vacant land, whether or not having facilities clearly incidental to the use of such vacant land has also been excluded from the tax net. It has been reported that in many states, the local industrial corporations or PSUs or even private organizations rent vacant land on a long term leases with an explicit understanding that lessee would construct factory or commercial building on that land. In such cases the ownership of the land is not transferred to the lessee and thus it is a service provided by the lessor to the lessee. The situation is similar to renting out a constructed structure for commercial purposes except that at the time of executing the lease agreement the land is in a vacant state and that later the lessee constructs commercial structure thereon after executing the lease deed. Such lease agreements escape service tax because of the exclusion mentioned above. Suitable amendment in the definition of taxable service relating to renting to immovable property is being made so as to provide that tax would be charged on rent of a vacant land if there is an agreement or contract between the lessor and lessee that a construction on such land is to be undertaken for furtherance of business or commerce during the tenure of the lease.
Renting of vacant land
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Management, maintenance or repair [section 65 (105) (zzg)]

Exemption from Service Tax to management, maintenance or repair of roads [Notification No. 24/2009-S.T., dated 27-7-2009]
The Central Government hereby exempts the taxable service provided to any person by any other person in relation to management, maintenance or repair of road ,bridges, tunnels, dams, airports, railways and transport terminals, from the whole of the service tax leviable thereon under section 66 of the said Finance Act.
Erection, commissioning and installation

Exemption of the taxable service erection, commissioning and installation [Notification No. 12/2010-S.T., dated 27-2-2010]
Exemption of the taxable service erection, commissioning and installation in relation to the following from the whole of the service tax, namely :(i) erection, commissioning or installation of mechanised food grain handling systems; (ii) erection, commissioning or installation of equipment for setting up or substantial expansion of cold storage;
(iii) installation and commissioning of machinery or equipment for initial setting up or substantial expansion of units for processing agricultural, apiary, horticultural, dairy, poultry, aquatic and marine products and meat.
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Amendment to Export of Service Rules, 2005

Re-categorization of certain services
Taxable Services Export of Services Rule, 2005 Prior amendment
Preferential services Location Rule 3(1)(iii) (Recipient category) Rule 3(1)(ii) (Performance category)
CA VISHAL BHATTAD
to After Amendment
base Rule 3(1)(i) (Immovable property category) Rule 3(1)(iii) (Recipient category) base base
Taxation of services (provided from outside India & received in India)Rule, 2006 Prior to After amendment Amendment
Rule 3(iii) (Recipient category) Rule 3(1)(ii) (Performance category) base Rule 3(i) (Immovable property base category) Rule 3(1)(iii) (Recipient base category)
Tecnicle testing and analysis service Transport of goods by Air service Transport of goods by Rail service Transport of goods by Road service(GTA) Opinion Poll Service Rail Travel Agent Health check up service Credit rating Agency service Market Research agency service Chartered Services Cost Services Company Services Accountant Accountant Secretarys
base
base
Rule 3(1)(iii) (Recipient category) Rule 3(1)(ii) (Performance category) Rule 3(1)(ii) (Performance category)
base base
Rule 3(1)(ii) (Performance base category) Rule 3(1)(iii) (Recipient base category) Rule 3(1)(iii) (Recipient category)
Rule 3(1)(iii) (Recipient category) Rule 3(1)(ii) (Performance category) Rule 3(1)(ii) (Performance category)
base base
Rule 3(1)(ii) (Performance base category) Rule 3(1)(iii) (Recipient base category) Rule 3(1)(iii) (Recipient base category)
base
base
base
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IMPORTANT BOARD CIRCULARS Notification No. 48/2010-S.T., dated 8-9-2010 Circular No. 130/12/2010 ST
Subject: Powers of adjudication of Central Excise Officers in Service Tax cases
The revised monetary limits are as follows:

Sr. No. Central Excise Officer Amount of service tax or CENVAT credit specified in a notice for the purpose of adjudication under Section 83A
(1) (1) (2) (3) (4) (5)
(2)
Superintendent of Central Excise
(3)
Not exceeding Rs.1 lakh(excluding the cases relating to taxability of services or valuation of services and cases involving extended period of limitation.) Assistant Commissioner of Central Not exceeding Rs. 5 lakhs (except cases where Excise or Deputy Commissioner of Superintendents are empowered to adjudicate.) Central Excise Joint Commissioner of Central Excise Above Rs. 5 lakhs but not exceeding Rs. 50 lakhs Additional Commissioner of Central Above Rs.20 lakhs but not exceeding Rs. 50 lakhs Excise Commissioner of Central Excise Without limit.
AUDIT OF SERVICE TAX ASSESSEE- FREQUENCY NORMS Director General of Audit,New Delhi has published Service Tax Audit Manual, 2010. As per the guidelines ,frequency of Audit of taxpayers would be as per Following norms: S.NO. 1 2 3 4 Taxpayer with S.T. payment (cash + Cenvat) Above Rs 3 crores (Mandatory Units) Between Rs 1 Core and Rs 3 Cores Between Rs 25 lakhs and Rs 1 Core Upto Rs 25 lakhs To be Audited Every year Once every two year Once every five year 2% of taxpayers to be audited every year.
Circular No.127/09/2010
Subject: whether donations and grants-in-aid received from different sources by a charitable
Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as consideration received for such training and subjected to service tax under commercial training or coaching service. Clarification: The important point here is regarding the presence or absence of a link between consideration and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to service tax. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training.
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AMENDMENTS FOR NOV-2011 Circular No. 120/2/2010-ST dated 16.04.2010 Container detention charges not liable to service tax Meaning of container detention charges
CA VISHAL BHATTAD
Container detention charges are imposed by shipping companies for marine containers kept beyond the pre-determined period and not returned to the designated location within that period.
Service tax liability on container detention charges

Container detention charges are actually the penal rent for retaining the containers beyond the predetermined period. The retention of the container beyond the pre-determined period is not a business auxiliary service because: it is not a service provided on behalf of the client it is not an infrastructural support in the business of either the shipping lines or the customer
Therefore, the amount collected as detention charges is not chargeable to service tax.
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Exemption with respect to Services provided to developer (or) units of SEZ Notification No. 17/2011
Eligibility for exemption The taxable services received by any of the following are eligible for exemption under this notification Units located in SEZ Developers of SEZ for the Authorized operations Manner of Exemption:
Specified services received and used for authorised operations are wholly consumed within the SEZ
where the specified services received and used for authorised operations are wholly consumed within the SEZ, the provider of such services or the receiver of such services on reverse charge basis, as the case may be, has the option not to pay the service tax ab initio instead of the Unit or 61 | P a g e WWW.IDTFORUM.COM Ph.No.9890953771
AMENDMENTS FOR NOV-2011 CA VISHAL BHATTAD Developer claiming exemption by way of refund in terms of this notification. (Direct
Exemption -Dont pay at all)
Specified services received and used for authorised operations are not wholly consumed within the SEZ
Specified services received and used for authorised operations are partially consumed within the SEZ & partially outside the SEZ then exemption shall be provided only by way of refund of service tax paid on the specified services received for the authorised operations in a SEZ
Restriction an amount of Refund in case specified services are not wholly consumed within SEZ
Where, then refund shall be restricted to the extent of ratio of export turnover to the total turnover for the given period for which the claim related i.e., Max Refund = = ST paid on specified services used for SEZ Authorized operations shared with DTA unit for the period Export Turnover of SEZ unit for the period Total Turnover for the period
Conditions to be fulfilled
(a) Approval of Services: The developer or units of SEZ shall (as are required in relation to the authorized operations in the SEZ), (hereinafter referred to as the specified services); (b) Submission of Declaration as to no operation outside SEZ: The developer or SEZ Unit who does not own or carru out any business other than SEZ operations shall furnish a declaration to that effect [Form A -1); (c) Actually paid the Service Tax: The developer or units of SEZ claiming the exemption has on the specified services; (d) Non-availment of Cenvat Credit: of service tax paid on the specified services used in relation to the authorized operations in the SEZ under the Cenvat Credit Rules, 2004; (e) Proper Accounts: The developer or SEZ Unit shall for which exemption is claimed 1) Registration requirement: For the purpose of claiming that refund, Developer shall first file a Declaration (in prescribed form) with its jurisdictional AC/DC. The to it (within 7 days of receipt of Declaration). Filling of refund claim: The [no form Prescribed] shall be submitted to AC/DC from the end of the month to service provider (AC/DC may extend this period) Documents to be attached: The refund claim shall be accompanied by the following documents, namely: a) An approved copy of the list of specified services required in relation to the authorized operations in SEZ; b) Documenmts for having paid the service tax; A declaration by the Developer / SEZ Unit to the effect that such service is received by him in relation to Authorized operations in SEZ.
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IMPORTANT CASE LAWS

Association of (SC) (vvimp) Leasing & Financial Service Companies [2010]
Levy of Service Tax by Central Govt. on Finance lease/ Hire purchase is constitutionally valid even though such transactions are already subject to VAT under Deemed sale
Issue: Whether levy of Service Tax by Central Govt. on Finance lease/ Hire purchase is constitutionally valid even though such transactions are already subject to VAT under Deemed sale{Article 366(29A)}? Decision:
Article 366(29A) of Constitution defining 'deemed sale' is essentially sales tax specific and expands sales tax base by taxing mere delivery on hire purchase as deemed sale. However, the Parliament continues to have the power to levy service tax on same transactions. Equipment leasing and hire purchase finance are activities of long term financing and are facilities/ financial services falling within Banking and Other Financial Services. Hence, they are liable to service tax. Under ENTRY NO.54 of List II to the constitution of India State legislature is competent to impose tax on sale and tax on aspect of services not being relatable to any entry in the state list. Hence C.G is eually competent to levy service tax under ENTRY NO. 97 of List-I.
Valuation: Amount received as principal by the lessor is not the consideration for services rendered.
However, valuation of taxable services based on income earned by lessor by way of finance/ interest charges in addition to the management fees or documentation charges, etc. is valid, as such charges are treatable as consideration for service. Exemption from Service tax to financial leasing services including equipment leasing and hire-purchase on taxable value comprising of 90% of the amount representing as interest provided under Notification No. 4/2006-S.T. further takes care of all aspects.
BSBK Pvt. Ltd. (2010) (TRI)

Will the service provided by way of advice, consultancy or technical assistance in the case of turnkey contracts attract service tax and can these turnkey contracts be vivisected? Decision: Constitution has allowed the vivisection of Advice, consultancy or technical assistance in the case of turnkey contracts attract service tax and these turnkey contracts can be vivisected.
indivisible contracts in order to find out goods component and value thereof. Therefore, the remnant part of the contract may be attributable to the scope of service tax under the provisions of the Finance Act, 1994. It inferred that turnkey contracts can be vivisected and discernible service elements involved therein can be segregated and classifiable as well as valued for levy of service tax under the Finance Act, 1994 provided such services are taxable services as defined by that Act and Depending on the facts and circumstance of each case, services by way of advice, consultancy or technical assistance in the case of turnkey contract shall attract service tax liability.
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Indian Railways Catering [2010] (H.C.)
& Tourism Corporation (IRCTC) Ltd.

Supply of food and beverages on board is purely of sale of goods. Hence, only VAT is levible & there is no levy of service tax.
Facts: The assessee supplied food and beverages on board the trains. While the State-VAT authorities demanded VAT; the assessee had paid service tax under 'Outdoor Catering service' and challenged the levy of VAT.
Issue: whether supply of food and beverages on board the train is subject to levy of VAT or Service tax?
Decision: Held that,

Catering contract is covered under 'deemed sale'. {Article 366(29A)} The providing of food, snacks and water to passengers on board in the trains is different from Outdoor Catering service; the assessee or passengers have no choice of articles served as the same are supplied as per menu fixed by the Railway Board. Thus, no element of service is involved except heating and serving the cooked food; and such service element in providing food is incidental and bare minimum required for selling the food and beverages. selling the food and beverages is in dominant position than service of heating and serving the cooked food. The contract, in this case, is neither for providing any service nor is there any composite contract of goods & services. There was transfer of goods by the assessee for consideration and the property in goods had passed to Railways. The transaction was purely of sale of goods. Hence, there could be no levy of service tax.
IDEA MOBILE COMMUNICATION LTD-2010 (H.C.)

ISSUE: whether the value of SIM cards sold by the assessee (on which sale tax is paid)to their mobile subscribers is to be included in taxable service under Section 65(105)(zzzx) (telecommunication service) of the Finance Act, 1994 or it is taxable as sale of goods under the Sales Tax Act.
The value of SIM card supplied by the assessee forms part of taxable service on which service tax is payable by the assessee.
Decision: 1)
SIM card is a computer chip having it's own SIM number on which telephone number can be activated. SIM card is a device through which customer gets connection from the mobile tower. In other words, unless it is activated, service provider cannot give service connection to the customer. 2) SIM cards are considered as part & parcel of service provided. SIM card has no intrinsic value or purpose other than use in mobile phone for receiving mobile telephone service from the service provider.Thus the Dominant position in the transaction is to provide service & not the sale of material i.e. SIM card. 3) Consequently, we hold that the value of SIM card supplied by the assessee forms part of taxable service on which service tax is payable by the assessee. 4) Even if sale tax is wrongly paid that would affect the responsibility of payment of service tax. If sale tax is wrongly remitted & paid, it is for them to claim refund.
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CUSTOMS ACT, 1962
CA VISHAL BHATTAD
Recent Board Circulars

Circular No. 11/2010 (VV IMP) Issue: Whether the assessable value of the warehoused goods which are sold before being cleared for home consumption should be taken as the price at which the original importer has sold the goods, before a Bill of Entry for home consumption is filed? Clarification: With effect from 10.10.2007, section 14 of the Customs Act has been amended to
provide that the value of the imported goods shall be the transaction value of goods. Definition of Transaction value: The price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. In the instant case, the goods are sold after being warehoused, therefore, it cannot be said that export of goods is not complete and thus the sale of warehoused goods cannot be considered a sale for export to India. Hence, the price at which the imported goods are sold after warehousing them in India does not qualify to be the transaction value as per section 14. In this case also, the sale of imported goods made after warehousing cannot be considered to have been made in the course of international trade and hence, the price at which such sale takes place cannot be the assessable value in terms of erstwhile section 14.
Circular No. 34/2010

Issue: Whether Refund of Spl. CVD (ACD 3(5)) paid on their purchases is available to manufacturers availing full exemption on final products Clarification: Special CVD is one of the duties specified under sub-rule (1) of rule 3 of the CENVAT
Credit Rules, 2004. Credit of this duty, when paid on inputs (imported) used in or in relation to the manufacture of excisable goods, is available. This credit can be used for payment of duty on the final product. Hence a textile manufacturer who opts to pay excise duty on his final product can avail of CENVAT credit of 4% Special CVD paid on his inputs. But this benefit obviously cannot be extended to a manufacturer who opts to avail of full exemption (and hence not pay excise duty) on his final product. Further, if the imported inputs on which 4% Special CVD has been paid are used by such a manufacturer for the manufacture of final products, the benefit of exemption (by way of refund) under Notification would also not be available.
Circular No. 7/2010-Cus., dated 23-3-2010 Subject: Recovery of drawback amount on the portion of the FOB value of export not realized by the exporter but compensated by ECGC -
Clarification: Since the Drawback scheme is governed by the provisions of the Customs Act, 1962 and the Rules made there under which clearly provide that drawback should be recovered if sale proceeds have not been realized. Hence, Drawback' would not be payable in cases where export proceeds have not been realised in accordance with the provisions of the Foreign Exchange Management Act, 1999 even if the claim has been settled by ECGC or realisation waived by RBI. Action should be taken for recovery of drawback amount in such cases.
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LATEST CASE LAWS

YEAR 2011
SBEC Sugar Ltd. [2011] (SC) (VVIMP)
Facts
The assesse imported certain capital goods / machines for use in manufacture of sugar. the assesse got them cleared in warehouse. He failed to clear the goods within permitted warehousing period & the assesse-importers application for extension of the warehousing period was not allowed. Subsequently, on 1-4-1997, the capital goods used for agro-based industries (like, sugar) were exempted from excise duty under Export Promotion Capital Goods (EPCG) Scheme and a license thereunder was issued to the assesse.
CA VISHAL BHATTAD
If the goods are cleared from the warehouse after the expiry of the permitted warehousing period then it is deemed to have been improperly removed & duty rate applicable on the date of expiry of the permitted warehousing period
Customs officer issued SCN u/s 72 asking importer to pay duty with interest & Demand order is raised On 21-1-1998, the assesse filed bill of entry for ex-bond clearance for home consumption of such goods lying in the warehouse claiming exemption from duty under the EPCG Scheme. Department argued that on expiry of warehousing period, the subjected goods are treated to have been improperly removed u/s 72 from the warehouse.Thus at the time of filing Bill of Entry the duty is payable along with Interest. Assessee argued that since the goods had been cleared u/s 68 by filing bill of entry, hence, the provisions of section 72 of the Act were not applicable. The relevant for determining rate of duty was as determined u/s 15(1)(b). It was also argued that since no duty was payable, hence, no interest could be charged.
Decision section 72 : If the goods are cleared from the warehouse after the expiry of the permitted warehousing period (s) or permitted extension thereof, the goods are deemed to have been improperly removed u/s 72(1) (b) Section 61: Warehousing is permissible for a limited period as provided u/s 61. However, section
61(2) provides for the levy of interest, if goods remain in the warehouse beyond period (s) provided therein regardless of whether the goods remain in the warehouse by reason of extension or otherwise.
Section 15(1)(b) providing for relevant date of determining rate of duty as the date of filing of exbond bill of entry for home consumption, applies only if the goods are cleared from the warehouse u/s 68 i.e. within the permitted warehousing period or permitted extension thereof. If the goods are cleared from the warehouse after the expiry of the permitted warehousing period (s) or permitted extension thereof, the goods are deemed to have been improperly removed with the consequence that the rate of duty has to computed with reference to the rate applicable on the date of expiry of the permitted warehousing period(s) or permitted extension thereof. Therefore, the rate of duty prevalent on 1.1.1997 was applicable to the said goods.
EPCG Scheme : Even otherwise, exemption under EPCG Scheme was available only in respect of 66 | P a g e WWW.IDTFORUM.COM Ph.No.9890953771
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goods cleared u/s 68 of the Act; and not in respect of goods deemed to have been improperly removed u/s 72. If exemption is made available to deemed improper removals u/s 72, then, it would render section 72 nugatory and would result in EPCG becoming an amnesty scheme to defaulters.
Hence, the assesse-importer was liable to full duty along with interest and other charges, etc.
Decorative Laminates (I) Pvt. Ltd. 2010

FACTS: Decorative laminates imported resin impregnated paper and plywood for the purpose of manufacture of furniture. The said goods were warehoused from the date of its import. It sought an extension of the warehousing period which was granted by the authorities.
No remission under Sec 23 is available on imported goods destroyed in warehouse after extension period.
However, even after the expiry of the said date, it did not remove the goods from the warehouse. Subsequently, the assessee applied for remission of duty under section 23 of the Customs Act, 1962 on the ground that the said goods had become unfit for use on account of non-availability of orders for clearance.
ISSUE: Whether remission of duty is permissible under section 23 of the Customs Act, 1962 when the remission application is filed after the expiry of the warehousing period (including extended warehousing period ?
Decision:
Section 23 of the Act states that only when the imported goods have been lost or destroyed at any time before clearance for home consumption, the application for remission of duty can be considered. Therefore the expression at any time before clearance for home consumption would mean the time period as per the initial order during which the goods are ware housed or before the expiry of the extended date for clearance and not any period after the lapse of the afore said periods. The said expression cannot extend to a period after the lapse of the extended period merely because the assessee has not cleared the goods within the stipulated time. Having regard to the facts of the present case, wherein even during the extended period, the goods were not cleared for home consumption and the fact that since the goods were not removed for home consumption they continued to be in the warehouse, even after the expiry of the warehousing period, it would be a case of goods improperly removed from the warehouse as per Section 72(1)(b) read with Section 71 of the Act. We have to hold that in the instant case, the circumstances made out under Section 23 of the Customs Act are not applicable to the present case since the destruction of the goods or loss of the goods has not occurred in the instant case before the clearance for home consumption within the meaning of that section. Hence no remission is available on imported goods destroyed in warehouse.
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M. Ambalal & Co. [2010] (SC)

Facts The assessee-importer imported rough diamonds without a valid import licence. On search & seizure Department recovered large quantity of imported rough diamonds without a valid import licence. Thus, the customs authorities confiscated such "smuggled rough diamonds" u/s 111(d) of the Act (Le. import in violation of a prohibition).
Smuggled goods shall not be treated as Imported goods not eligible for exemption.
The customs authorities demanded import duty and penalty and also gave an option to redeem the goods on payment of redemption fine. The assessee-importer agreed to pay redemption fine and penalty but contended that since import of rough diamonds was exempt, no duty could be demanded on smuggled rough diamonds. Department denied the benefit of exemption by contending that benefit of exemption cannot be claimed in respect smuggled goods. Exemption benefit is available only in respect of goods legally imported. Issue: Whether smuggled goods is eligible for benefit of exemption as Imported goods? Decision
Any import of goods of which importation is prohibited by law,cannot be valid import under the Act. Goods so imported cannot therefore, be treated to be lawfully "imported goods" within the definition of "imported goods" in Section 2(25) of the Act. According Sec 2(25) Imported goods means any goods brought into India from a place outside India but does not include that goods which have been cleared for Home consumption.It is necessary that this definition is to be read along with Sec 111 & Sec 112 of the Act. The benefit of the exemption envisaged is for those goods that are imported. The exemption is ' available only in accordance with the terms and conditions of the exemption notification. 'Smuggledgoods' do not come within the definition of 'imported goods' for the purpose of the exemption notification, for the reason, both the expressions: imported goods and smuggled goods, are separately defined in the Customs Act and 'smuggled goods' cannot be read within the definition of 'imported goods' for the purpose of the Act and it would be contrary to the purpose of exemption notifications to accord the benefit meant for imported goods on smuggled goods. The exemption is for imported goods; not for smuggled goods.
Therefore, the assessee was not entitled to the benefit of the exemption notification.
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AMENDMENTS FOR NOV-2011 Brief Facts: The assessee filed two Bills of Entry for clearance of Brass Scrap and Copper Scrap as per ISRI grade Honey and Birth/Cliff respectively. The Bills of Entry were assessed at the declared invoice value, viz., CIF US $ 1100 and US $ 1300 PMT respectively. After inspection, the goods were cleared on payment of customs duty assessed.
CA VISHAL BHATTAD
PRABHU DAYAL PREM CHAND 2010 (S.C.)

Assessment purely on the basis of LME Bulletin without any corroborative evidence of imports at or near that price is not permissible under law.
Subsequently, on the basis of the information received from the London Metal Exchange, (for short, the LME) to the effect that the price of the said metals in the LME as on the date of import was more than the price declared by the assessee. Department had issued SCN for demand of additional duty by contending that the LME bulletin is a true indicator of current international prices of metals.
The assessee contended that they were not confronted with any contemporaneous material relied upon by the revenue for enhancing the price declared by them in the bills of entry.
Decision:
Even though there is a reference to contemporaneous import in the order passed by the Department no material regarding such import has been placed before us or made available by the Department at any point of time. Therefore, assessment in this case has to be taken as having been made purely on the basis of LME Bulletin without any corroborative evidence of imports at or near that price which is not permissible under law. Hence Transaction value declared by assessee is acceptable.
Pernod Ricard India (P) Ltd. [2010] (SC)

Brief Facts: The assessee-importer was a wholly owned subsidiary of M/s. SCL, Canada. It imported Concentrate of Alcoholic Beverages (CAB) from M/s. JESSL, another wholly owned subsidiary of M/s. SCL. Since the import was made from a related person, hence, the Department rejected the transaction value declared by the assessee and assessed the goods under Rule 5 of the Customs Import Valuation Rules, 2007 at the transaction value of the similar goods.
Adjustment to transaction value of similar goods should be based on demonstrated evidence. In absence thereof, the adjustment is invalid.
The Tribunal upheld valuation as per the said Rule 5, but, gave directions to apply Rule 5 after accounting for differences in commercial levels and quantity and allowing a discount of 20% from the value of similar goods. The assessee went in appeal before the Supreme Court.
Decision
The transaction value of similar goods can be taken, subject to adjustment to take account of the difference attributable to commercial level or to the quantity or both and such adjustments should be made on the basis of demonstrated evidence.
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The Tribunal had granted the adjustment (i.e. discount / deduction) of 20% from the value of similar goods on the ground that the imports made by the assessee were higher in quantity dan the comparable imports of the similar goods. The grant of discount, in case of larger imports, is a normal commercial practice. However, there was no demonstrated evidence to allow such 20% discount. In absence of any demonstrated evidence, the adjustment was invalid.
Accordingly, the Tribunal decisions was set aside.
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Atherton Engineering Co. Pvt. Ltd. - 2010 (H.C.) Brief Facts: Assessee imported artemia cyst (brine
shrimp eggs). It classified it as prawn feed under the heading 2309 which includes products used as animal feed. However, the Department contended that this product was classifiable under the heading 0511.99 which refers to other products in the category of non edible animal products. In reply, the importer pleaded that these imported cysts contained little organisms/embryos which later became larva that prawns feed on. Therefore, according to them, the nature and character of this product was not changed by nurturing or incubation. You are required to examine whether the contention of the Department is justified in in law. Artemia cyst (brine shrimp eggs) should be classified as feeding materials for prawns under the heading 2309. These embryos might not be proper prawn feed at the time of importation but could become so, after incubation.
Held: Court held that it was the use of the product that had to be considered in the instant case. If
a product undergoes some change after importation till the time it is actually used, it is immaterial, provided it remains the same product and it is used for the purpose specified in the classification. Therefore, in the instant case, it examined whether the nature and character of the product remained the same. The Court opined that if the embryo within the egg was incubated in controlled temperature and under hydration, a larva was born. This larva did not assume the character of any different product. Its nature and characteristics were same as the product or organism which was within the egg. Hence, the Court held that the said product should be classified as feeding materials for prawns under the heading 2309. These embryos might not be proper prawn feed at the time of importation but could become so, after incubation. The contention of the Department is not justified in law.
ESSAR STEEL LIMITED-2010 (H.C.)

Issue: Whether Export duty is payable goods which are cleared from DTA unit to the SEZ.?
Clearance from DTA unit to the SEZ only for allowing export benefits to seller and for levy of export duty under Sec 12 of customs Act. Hence, no Export duty is payable goods which are cleared from DTA unit to the SEZ.
Held:
There is no provision in the SEZ Act, 2005 for levy of export duty on supplies made by a DTA unit to the SEZ. In case good s cleared from DTA (Domestic tariff area) to SEZ, then said goods are deemed to exported under SEZ Act., but such deemed export only for allowing export benefit to the seller and not for levy of export duty under Sec 12 of customs Act,1962
As per sec 12 of customs Act, 1962 liability of customs duty arises only in case where goods are exported from India Section 2(18) defines export to mean taking out of India to a place outside India. Thus section 12 cannot be applied to goods which are cleared from DTA unit to the SEZ. Hence, no Export duty is payable goods which are cleared from DTA unit to the SEZ.
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AMENDMENTS IN DRAWBACK RULES

NOTIFICATIONS [Notification No. 48/2010 Cus. (N.T.) dated 17.06.2010] 1. Extension of time period for filing drawback claim under rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 Proviso to rule 5(1) of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 has been substituted with a new proviso. Rule 5(1) provides that a claim for drawback shall be filed within three months from the date on which an order permitting clearance and loading of goods for exportation is made by proper officer of customs. The new proviso lays down that the said period of three months may be extended by a period of three months by Assistant/Deputy Commissioner on an application accompanied with a fees of 1% of the FOB value of exports or ` 1000/- whichever is less and a further period of six months by Commissioner of Customs/Commissioner of Customs and Central Excise on an application accompanied with a fees of 2% of the FOB value or ` 2000/- whichever is less. 2. Amendments in the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (a) Change in time periods available under rules 6, 7, 15 and 16A Following amendments have been made in the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995: (i) The time period for the following has been extended from sixty days to
three
months:
making an application( For Brand Rate) to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback [Rule 6BRAND TATE]. (i) making an application( For special Brand Rate) to the Commissioner of Central Excise/Commissioner of Customs and Central Excise for determination of the amount or rate of drawback where the amount or rate of drawback is low [Rule 7 Special brand rate]. Further, the aforesaid periods of three months may be extended by a period of three months by Assistant/Deputy Commissioner on an application accompanied with a fees of 1% of the FOB value of exports or ` 1000/- whichever is less and a further period of six months by Commissioner of Central Excise/Commissioner of Customs and Central Excise on an application accompanied with a fees of 2% of the FOB value or ` 2000/whichever is less. (ii) The extended period of nine months for filing a supplementary claim under rule 15 will now be available on making an application accompanied with a fees of 1% of the FOB value of exports or ` 1000/- whichever is less. Further, the said period may be extended by six months by Commissioner of Customs/Commissioner of Customs and Central Excise on an application accompanied with a fees of 2% of the FOB value or ` 2000/- whichever is less [Rule 15]. (iii) The time period available to an exporter for producing evidence of realisation of export proceeds, where the drawback has been recovered by the Government due to nonrealisation of the export proceeds by the exporter, has been reduced from one year to three months from the date of realisation of sale proceeds provided the sale proceeds have been realised within the period permitted by the Reserve Bank of India [Rule 16A].
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Further, the aforesaid period of three months may be extended by a period of nine months by Commissioner of Customs/Commissioner of Customs and Central Excise on an application accompanied with a fees of 1% of the FOB value of exports or ` 1000/whichever is less. [Notification No. 49/2010 Cus. (N.T.) dated 17.06.2010] (b) In case of non-realization of sale proceeds within prescribed time, drawback not to be recovered under specified circumstances/conditions [Rule 16A] Prior to Amendment The drawback granted to an exporter or a person authorised by him shall be recovered from him if the sale proceeds in respect of such export goods have not been realised in India within the period allowed under the Foreign Exchange Management Act, 1999, including any extension of such period [Sub-rule (1) of rule 16A]. Amendment made by Notification No. 30/2011-Cus. (N.T.) dated 11-4-2011 Sub-rule (1) has been amended to provide that such drawback shall not be recovered under circumstances or conditions specified in sub-rule (5). Further, sub-rule (5) provides as followsWhere sale proceeds are not realised by an exporter within the period allowed under the Foreign Exchange Management Act, 1999, but such non-realisation of sale proceeds is compensated by the Export Credit Guarantee Corporation of India Ltd. under an insurance cover and the Reserve Bank of India writes off the requirement of realisation of sale proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer, the amount of drawback paid to the exporter or the claimant shall not be recovered.
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Applicability of indirect taxes on packaged/canned software ( For sake of reading)

Assessment of packaged/canned software
Where affixation of Retail Sale Price (RSP) is mandatory (i) Excise duty MRP based valuation of the packaged or canned software Packaged or canned software is to be valued on the basis of MRP* under section 4A of the Central Excise Act, 1944 for the purpose of charging excise duty. An abatement of 15% of retail sale price is allowed while arriving at the assessable value.
Note: such retail sale price declared will be combined values of the software and licenses (right to use) [clarified vide circular no. 15/2011cus. Dated 18.03.2011].
Where affixation of Retail Sale Price (RSP) is not mandatory (i) Excise duty Exclusion of consideration for transfer of right to use such packaged/canned software from the assessable value Such packaged/ canned software, on which affixation of retail sale price is not required under the Standards of Weights and Measures Act, 1976, the assessment would be based on the value determined under section 4 of the Central Excise Act, 1944. Further, the excise duty will be charged only on the value, excluding the value representing consideration for transfer of right to use such packaged/canned software. (ii) Custom duty (CVD) Valued on the basis of T.V under section 4 of the Central Excise Act, 1944 (iii) Service tax Service tax would be charged under the category of information technology software service on the value representing consideration for transfer of right (license fees) to use such packaged/canned software.
(ii) Custom duty (CVD) Valued on the basis of MRP under section 4A of the Central Excise Act, 1944 (iii) Service tax Exemption to packaged/canned software from service tax on specified taxable service when excise/customs duty is paid
Meaning of packaged or canned software Packaged software or canned software means a software developed to meet the needs of variety of users, and which is intended for sale or capable of being sold off the shelf e.g. Window 2007, M.S. office, Norton Antivirus Etc. Customised Software: built as per requirements of customers to suit there specific need. Also called Tailor made software.
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Amazing Cases in Excise Duty

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AMENDMENTS FOR NOV-2011

LATEST CIRCULARS Circular No. 927/17/2010-CX., dated 24-6-2010

NEW CASE LAWS

AMENDMENTS FOR NOV-2011

Medley Pharmaceuticals Ltd. [2011] (SC)

AMENDMENTS FOR NOV-2011

Note: What is Physician samples?

Usha Rectifier Corpn. (I) Ltd. [2011] (SC)

AMENDMENTS FOR NOV-2011

Orissa Bridge & Construction Corporation Ltd. (2011) (SC)

AMENDMENTS FOR NOV-2011

AMENDMENTS FOR NOV-2011

Nicholas Piramal India Ltd. CCEx. [2010] 260 (SC)

Exempt Under N/N 67/95

"Vitamin A Consumed "Vitamin A Palmitate Palmitate

AMENDMENTS FOR NOV-2011

TARPAULIN INTERNATIONAL 2010 (S.C.)(VVIMP)

AMENDMENTS FOR NOV-2011

Bata India Limited-2010 (S.C.)

AMENDMENTS FOR NOV-2011

TIKITAR INDUSTRIES 2010 (S.C.)

Solid & Correct Engg. Works -2010 (S.C.)

AMENDMENTS FOR NOV-2011

Bemcee Ltd. - 2010 (S.C.)

SONY MUSIC ENTERTAINMENT (I) PVT. LTD-2010 (H.C.)(VV IMP)

AMENDMENTS FOR NOV-2011

CENTRAL EXCISE RULES, 2002 Amendment in INTEREST RATE

[Ready-made Garments Manufactured on Job work Basis] (Inserted in F.A. 2011)

AMENDMENTS FOR NOV-2011

Goods other than those falling under chapter 61,62,63.

As per Ujjagar Prints Ltd case Job worker is manufacturer

Third proviso to rule 8(1)

DUE DATE OF PAYMENT-SSI

AMENDMENTS FOR NOV-2011

Amendment made by the Notification No. 5/2010-CE (NT) dated 27.02.2010

Amendment made by the Notification No. 5/2010-CE (NT) dated 27.02.2010

AMENDMENTS FOR NOV-2011

CENVAT CREDIT RULES,2004 th

AMENDMENTS FOR NOV-2011 Rule

Pre-authentication of invoices dispensed with

AMENDMENTS FOR NOV-2011

Circular No. 936/26/2010 CX

Circular No. 915/05/2010-CX dated 19.02.2010

AMENDMENTS FOR NOV-2011

NEW CASE LAWS

AMENDMENTS FOR NOV-2011

Makson Confectionery [2010] (SC)

AMENDMENTS FOR NOV-2011

XEROGRAPHIC LTD. 2010 (S.C.)

MARUTI SUZUKI INDIA LTD. 2010 (Tri. - LB)(IMP)

AMENDMENTS FOR NOV-2011

Dealer has collected Rs 850 as PDI

AMENDMENTS FOR NOV-2011

Packing material includes labels of

NEW CASE LAWS

AMENDMENTS FOR NOV-2011

AMENDMENTS FOR NOV-2011

Parle Bisleri Pvt. Ltd. v. CCEx. [2011] 263 ELT 15 (SC)

AMENDMENTS FOR NOV-2011

UNISON ELECTRONICS PVT LTD-2009 (S.C.)

AMENDMENTS FOR NOV-2011

NEW CASE LAWS

AMENDMENTS FOR NOV-2011