Udyog Tax News Flash

December 2013

Non-filing of appeal not a precedent in some cases

The CBEC has issued instructions to its field formations to draw their attention to the provisions of section 35R of the Central Excise Act 1944. This is relevant in the context of the extant instructions not to file government appeal in matters below a specified monetary value. It was observed that in some cases the departmental appeal has been dismissed in CESTAT on the ground that the department did not file appeal in similar cases earlier. However, section 35R explicitly provides that if the department has not filed an appeal in compliance to instructions for not filing an appeal below the monetary limit, no person shall contend that the department has acquiesced in the decision on the disputed issue by not filing an appeal against it. The CBEC has therefore, in Instruction dated 12 December 2013, directed departmental counsels and departmental authorized representatives to defend such matters on the basis of section 35R of the Central Excise Act 1944: http://cbec.gov.in/customs/cs-instructions/cs-instructions-13/ins-cscx35R.htm.

Customs: Exchange rates notified

The CBEC has notified exchange rates for nineteen currencies under section 14 of the Customs Act 1962. Now in valuing imported goods for customs purposes, the US dollar exchanges for INR 62.90, and the pound sterling exchanges for INR 103.30. In valuing export goods, the US dollar exchanges for INR 61.90, and the pound sterling exchanges for INR 101. The notification 131/2013-Customs (NT) dated 19 December 2013 can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2013/csnt2013/csnt131-2013.htm.

Customs: further tariff concessions for imports from Singapore

The central government has issued notification number 50/2013-Customs dated 16 December 2013 to deepen the tariff concessions for imports of specified items from Singapore. This is in pursuance of its commitment under the Comprehensive Economic Cooperation Agreement between India and Singapore. The notification 50/2013-Customs dated 16 December 2013 can be seen at

http://cbec.gov.in/customs/cs-act/notifications/notfns-2013/cstarr2013/cs50-2013.htm.

Central excise: parts or unassembled machine? CESTAT remand

It is an old controversy. Over two decades ago, when some importers brought in different parts of photocopying machines in matching sets, and claimed them as parts, the Supreme Court, in its order dated 24 August 1990 in Civil Appeal 2403-24-5 filed by Sharp Business Machines Private Limited, held that these were to be assessed as the full machine rather than as parts. The same principle was sought to be applied by the department in various situations. However, in the central excise case of Salora International, the Supreme Court, while affirming the demand for duty as television sets rather than parts, clarified that it was doing so because the sets had been assembled and tested as television sets at the factory before being disassembled and despatched in sets of matching serial numbers. The Court observed that if the manufacturer had merely cleared parts in bulk, leaving the matching and numbering functions to its satellite units, then there would have been no production of identifiable television sets, and the manufacturer could have availed the benefit of classification as parts. The same issue came up before the CESTAT recently in the case of several manufacturers of television sets who were following the same practice of dispatch of parts. The CESTAT, Delhi bench, vide its order no. FO/A/57508-57530/2013-Ex(Br) dated 7 August 2013, remanded all the matters to the original authorities for re-decision in the light of the above-mentioned decision of the Supreme Court.

Cenvat credit changes proposed in ISD provisions

The CBEC proposes to amend Rule 7 of the Cenvat Credit Rules 2004, which pertains to the manner of distribution of credit by an input service distributor. The changes are meant to mitigate the rigour of the rule. At present, if a service is used in more than one unit, the credit of service tax pertaining to it has to be distributed based on the proportionate turnover of the units in which the service is used. The change proposes to remove this restriction and permit distribution to the units of the assessee based on the turnover of each unit as a proportion of the total turnover of all the units. Also, the previous financial years figures are proposed to be used as a basis, rather than the previous months figures. The draft circular can be seen at http://cbec.gov.in/draft-circ/dft-amdmt-cenvatrules.htm. The CBEC invites comments, to be sent in by 27 December 2013.

Bank guarantee can be encashed without adjudication; HC

While it has been the received wisdom thus far that a bank guarantee given to the department is not to be encashed unless there are adjudicated dues, the Delhi High Court has taken a different stand and held that there is no such stipulation in the bank guarantee, which is given against breach of any of the conditions of the bond. In the matter of Unitech Developers and Hotels Private Limited v Commissioner of Customs [WP(C) 7897/2013], the Delhi High Court dismissed the writ petition filed by the importer against encashment of bank guarantee by the customs authorities for alleged breach of the conditions of the EPCG licence. The order can be perused by entering the case number in the portal of the High Court at http://delhihighcourt.nic.in/case.asp

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Updated and written by Radha Arun [radha.arjuni@gmail.com], Consultant to Udyog Software (India) Ltd.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.