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Indirect Taxes

8th July, 2009New Delhi

The Customs Act, 1962

Refund of Import Duty

A new provision (Section 26A) is proposed to be inserted to the Customs Act,1962 so as to provide refund of import duty paid at the time of clearance for home consumption on imported goods if-

(i) the goods have been found to be defective; or (ii) otherwise not in conformity with the

specifications agreed upon between the importer and the supplier of goods,

subject to prescribed conditions.

Continued…

No drawback is claimed.

Refund under this provision would be available only if the importer either exports the goods or relinquishes title and abandons them to customs or if the goods are destroyed so that they become commercially valueless, etc.

Authority for Advance Rulings [S. 28F]

Section 28F of the Customs Act, 1962 is proposed to be amended so as allow the notification of the Authority for Advance Rulings (AAR) constituted under the provisions of the Income-tax Act, 1961 to be the AAR for the purposes of Customs, Central Excise and Service Tax.

Power of HC to condone delay

It is proposed to amend section 130 and 130A of the Customs Act retrospectively (w.e.f. 1st July 2003 and 1st July, 1999) so as to make express provisions empowering High Court to condone delay in filing of appeals and reference applications (as the case may be) beyond the period of 180 days.

[CCE v. Hongo India Pvt. Ltd. (2009) 236 ELT 417 (SC) ]

The Customs Tariff Act, 1975

Section 3 of the Customs Tariff Act

It is proposed to amend Section 3 so as to provide that fixed tariff values under the Central Excise Act, 1944 to be taken for the purposes of valuation of like goods, when imported into India, for the purpose of additional duties.

This would obviate the need to re-assess the value of an imported goods.

Application of Provisions of Customs Act to Customs Tariff Act

The application of the machinery provisions of the Customs Act, 1962 including those relating to the date of determination of the rate of duty, assessment, non-levy, short-levy, refunds, interest, appeals, offences and penalties are proposed to be extended to the safeguard duties, countervailing duty and anti-dumping duty levied under Section 8B, 8C, 9 and 9A of the Customs Tariff Act, 1975.

The Central Excise Act, 1944

CAs included to conduct Special Audit[Amendment of Sections 14A and 14AA]

• Previously the Chief Commissioner of Central Excise was empowered to nominate ‘Cost Accountant(s)’ for conducting Special Audit.

• Proposed amendment provides that the Chief Commissioner of Central Excise may also nominate Chartered Accountant(s) for conducting Special Audit.

Power of HC to condone delayAmendment of Section 35G and Section 35H

– Provides for appeal or application (as the case may be) to be filed to High Court from order of Tribunal within 180 days.

– Proposed amendment gives explicit power to the High Court to condone reasonable delay in filing of such appeal.

– Insertion to be effective retrospectively from July 1, 2003.

[Commissioner of Customs & Central Excise Vs. Hongo India Pvt. Ltd. 2009 (236) E.L.T 417 (S.C)] & [Circular No. 888/8/2009-CX dated May 21, 2009]

CVD/ Central Excise Exemption on ‘Right to Use’ Packaged or Canned Software

With effect from 7th July 2009, packaged software or canned software has been exempted from CVD/ central excise duty on the value representing the consideration for transfer of the right to use such software, subject to specified conditions.

Under “Information Technology Software Service”, service tax shall be leviable on the portion of the value exempted from CVD/ excise duty.

[Notification No. 80/ 2009 Customs, dated July 7, 2009 &Notification No. 22/ 2009 C.E., dated July 7, 2009]

Amendment in the definition of “INPUT”[under CENVAT Credit Rules, 2004]

Rule 2 (k) of CENVAT Credit Rules has been amended to clarify that ‘input’ would not include cement, angles, channels, CTD/ TMT bars etc. used for construction of shed, building or structure for support of capital goods.

Thus, credit would not be allowed on cement, angles, channels, CTD/ TMT bars, etc. used in construction of sheds and structure for support of capital goods.

[Notification No. 16/ 2009 C.E. (N.T.), dated July 7, 2009]

CENVAT Credit to be paid on fully written off input/ Capital Goods

It is proposed to amend Rule 3 (5B) of CENVAT Credit Rules to provide that a manufacturer or a service provider shall pay back the amount of credit taken on inputs/ capital goods (before being put to use) which are fully written off or for which provision to fully write-off is made.

[Notification No. 16/ 2009 C.E. (N.T.) dated July 7, 2009]

CENVAT credit in case of non-maintenance of separate accounts

[Rule 6(3) of CENVAT Credit Rules]

It is proposed to amend Rule 6(3) to prescribe that a manufacturer of both dutiable & exempted goods, who does not maintain separate accounts of inputs, shall pay an amount equal to 5%, instead of 10%, of the total price of exempted goods.

Similarly, the provider of both taxable & exempted services, who does not maintain separate accounts of inputs/ services, shall pay an amount equal to 6% of the value of the exempted services, instead of 8%.

[Notification No. 16/ 2009 of Central Excise (N.T.) dated July 7, 2009]

Time Limit for Returning of Books Seized

A new rule has been inserted in Central Excise Rules, 2002 which provides that where the books of account or other documents, seized by the Central Excise Officer or produced by an assessee or any other person, are not relied on for the issue of notice under the Act or the Rules made thereunder, the same shall be returned –– within 30-days of issue of the said notice; or

– within 30-days from the date of expiry of the period for issue of the said notice.

[Notification No. 16/ 2009 of Central Excise (N.T.) dated July 7, 2009]

Service Tax

NEW SERVICES

New categories of services proposed:

• Cosmetic surgery or plastic surgery service [65(105)(zzzzk)]

• Service provided in relation to transport of –

– (i) coastal goods;

– (ii) goods through National Waterway; and

– (iii) goods through Inland Water [65(105)(zzzzl)]

• Legal Consultancy service [65(105)(zzzzm)]

MODIFIED SERVICES

• Business Auxiliary Service

• Information Technology Software Service

• Stock Broker Service

• Transport of Goods in Containers by Rail

Cosmetic Surgery or Plastic Surgery

Services provided to any person by any other person in relation to –– cosmetic surgery or plastic surgery

But does not include –– any surgery undertaken to restore or reconstruct anatomy or

functions of body affected due to congenital defects, development abnormalities, degenerative diseases, injury or trauma

• CCE & Cus., Vadodara-I v. M/s New Look Cosmetic Laser Center [Order No. A/2411/WZB/AHD/2008] –Deptt. treated cosmetic surgery services under ‘beauty parlour service’.

PROPOSED SERVICES

Service provided in relation to transport of (i) coastal goods; (ii) goods through national waterway; and (iii) goods through inland water

Service provided to any person by any other person, in relation to transport of –

(i) coastal goods;

(ii) goods through national waterway; or

(iii) goods through inland water.

PROPOSED SERVICES

Legal Advice/ Consultancy

• In clause (105), sub-clause (zzzzm) to be inserted, to include –

– service provided to a business entity, by any other business entity in relation to Advice, Consultancy or Assistance in any branch of law in any manner.

• However, any service provided by way of appearance before any court, tribunal or authority shall not amount to taxable service.

PROPOSED SERVICES

• Explanation appended to define Business Entity, which includes –

- an association of persons

- body of individuals

- Company or Firm

But does not include an Individual.

MODIFIED SERVICES

Business Auxiliary Service

• Scope amended to exclude such activities that amount to manufacture of excisable goods from the purview of Business Auxiliary Service.

• Even if a process of manufacture is undertaken for the client, but the resultant product does not fall under the category of excisable goods under the Central Excise Act, such as ‘alcoholic beverages for human consumption’, the service tax would be attracted.

MODIFIED SERVICES

Information Technology Software Service

• The word ‘providing’ to be substituted by the term ‘acquiring’ [appearing at Sr. No. (v) and (vi) of the definition of Information Technology Software Service]

[w.e.f. 16.5.2008]

Stock Broker Service

• Definition of ‘stock broker’ amended to exclude sub-broker from its ambit.

Transport of Goods in Containers by Rail Service

• To provide level playing field to private operators, transport of goods by rail amended to include Government Railways as defined under section 2 (20) of the Railways Act.

• Exemption provided to inter-state or intra-state transportation of passengers, in vehicle bearing ‘Contract Carriage Permit’, excluding tourism, conducted tours, charter or hire service.

[Notification No. 20/2009-ST dt. 7. 7.2009]

• Exemption provided in relation to membership of Federation of Indian Export Organizations (FIEO) and specified Export Promotion Councils (leviable under ‘club or association service’) [upto March 2010]

[Notification No. 16/2009-ST dt. 7. 7.2009]

• Exemption to inter-bank purchase and sale of foreign currency between scheduled banks (leviable under ‘banking and other financial services’ or under ‘foreign exchange broking service')

[Notification No. 19/2009-ST dt. 7.7.2009]

• All Exemptions to come into effect immediately.

EXEMPTIONS

REFUND SCHEME FOR EXPORTERS OF GOODS

Notification –for refund of service tax paid on services relatable to export of goods.

[Notification No. 17 and 18 both dt. 7.7.2009]

Two taxable services namely, ‘transport of goods by road’ and ‘commission paid to foreign agents’ exempt from levy of service tax, if exporter liable to pay service tax on reverse charge basis.

[Notification No. 17/2009 dt. 7.7.2009]

Salient features of revamped refund scheme incorporated[Notification No. 18/2009 dt. 7.7.2009]

(a) ‘Terminal Handling Charges’ being added to list of eligible services.

(b) Time period for filing refund increased to one year from date of export; condition for filing refund claims once in quarter being dispensed with.

(c) Simplified format for filing refund claims.

(d) Self-certification of refund claim being introduced. In case total amount of refund claim is less than 0.25% of FOB value of export, self certification by exporter containing requisite information to be furnished. Refund to be granted within one month without pre-audit.

(e) In case where amount of refund claim is more than 0.25% of FOB value, documents submitted to be certified by chartered accountant. Refund claim sanctioned within one month without pre-audit on basis of such certification.

AMENDMENTS IN THE FINANCE ACT

• Revision procedure under Section 84 abolished. • Procedure of filing Departmental appeals before the

Commissioner (Appeal) in service tax cases prescribed

• Consequential changes to Section 86• Saving Clause being provided to protect pending

cases• Central Government empowered to frame rules

regarding place of provision of taxable services; and relevant date for determination of rate of service tax.

[w.e.f. date of enactment]

Notification No. 1/2009 dt. 5.1.2009 relating to Goods Transport Agency Service given retrospective effect from 1.1.2004

[w.e.f. date of enactment]

TAXATION OF SERVICES (PROVIDED FROM OUTSIDE INDIA AND RECEIVED IN INDIA) RULES, 2006

Definition of “India” for service tax extended to installations,

structures and vessels in the continental shelf and exclusive economic zone of India

[Notification No.22/2009-ST dt. 7.7.2009]

AMENDMENTS IN THE FINANCE ACT

CENVAT CREDIT RULES, 2004

Rule 6(3) amended whereby provider of taxable and exempted services, not maintaining separate accounts, to pay an amount equal to 6% of value of exempted services (reduced from 8%).

Rule 3(5B) amended whereby service provider to pay back the credit taken on inputs/ capital goods fully written off.

[with immediate effect][Notification No. 16/2009-CE (N.T) dt. 07.07.2009]

WORKS CONTRACT (COMPOSITION SCHEME FOR PAYMENT OF SERVICE TAX) RULES, 2007

Explanation modified. Allowing benefit of optional composition scheme only to works contract where tax payer declares entire value of goods and services used in the execution of the works contract as ‘gross value’ charged.

Not applicable to ongoing works contract.

[Notification No. 23/2009-ST dt. 7.7.2009]

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ROADMAP FOR GST

• Dual system of GST to be adopted - at National Level and State Level

• To come into place by 1st April 2010

• Centre and States to legislate enactments, respectively.

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THANK YOUTHANK YOU