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SUGGESTED SOLUTION
Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666
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Ans. 1 (a) The said section empowers the Central Excise Officer to recover the monies due to the
Government from any person (Garnishee) other than from whom money is due, if that other person holds money for/on account of the first person. The procedure for the same is as under:- 1. Issurance of the notice for recovery to any person other than from whom money is
due : The Central Excise Officer may issue a written recovery notice to the following persons- any person from whom money is due to such person; any person who holds money may become due to such person; any person from whom money may become due to such person; any person who may subsequently hold money for or on account of such person.
The garnishee would be required to pay to the credit of the Central Government so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount. The money would be paid either forthwith upon the same becoming due or being held, or at or within the time specified in the notice. However, the garnishee cannot be required to make any such payment before the money becomes due or is held by him.
2. Garnishee bound to comply with the notice: Every garnishee to whom notice has been served shall be bound to comply with such notice. In case any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary.
3. In case of failure to make the payment, the garnishee deemed to be liable for payment of the dues : In a case where the garnishee, fails to make the payment, he shall be deemed to be a person from whom duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or the rules made there under have become due, in respect of the amount specified in the notice.
(b) Computation of value of taxable service and service tax liability:
Particulars `
1. Price of flat (including apportioned value of cost of land) 40,00,000
2. Prime Location Charges (PLC) (extra charges for getting sea view) (These charges are part of construction service of flat. These are part of „naturally bundled services')
2,00,000
3. Charges for providing space for covered parking (These charges are part of construction service of flat)
1,25,000
4. Club membership fee (for club to be formed after construction is complete) these are not part of construction service of flat. These are not part of 'naturally bundled services'.
NIL
5. Charges for carrying out modifications as required by customer (These charges are part of construction service of flat.)
2,00,000
6. Stamp duty for executing sale deed on actual basis (Stamp duty is not a part of service. It is only reimbursement of expenses incurred on behalf of customer.)
NIL
7. Documentation Charges (These charges are part of construction service of flat.)
75,000
8. Maintenance charges to maintain building till the residential complex is handed over to Housing Society of members. (These are not part of construction service of flat. These are not part of 'naturally bundled services').
NIL
Total Amount 46,00,000
Less: Abatement (75%) (Since carpet area is less than 2000 sq ft and amount
charged is less than `1,00,00,000) 34,50,000
Taxable Value 11,50,000
Service-tax payable @ 12.36% 1,42,140
Less: CENVAT credit of input services (CENVAT credit of excise duty paid on building material cannot be availed.)
40,000
Net service tax payable 1,02,140
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(c) The Finance Act, 2013 has introduced an amnesty scheme for service tax assesses known as „Service Tax Voluntary Compliance Encouragement Scheme‟ to encourage the service providers as well as service receivers - liable to pay service tax under reverse charge - who are either stop filers, non-filers or non-registrants or who have not disclosed their true liability in the returns filed by them to pay their tax dues without payment of interest and penalty. The salient features of the scheme are: 1. Any person who is liable to pay tax for the period 01.10.2007 to 31.12.2012, but has not paid
the same till 01.03.2013 would be eligible for claiming the benefit of this scheme. However, the following persons would not be allowed to declare their tax dues under VCES: a person to whom any notice or order has been issued before 1st March 2013. a person who has filed the returns disclosing his true liability and not discharged the
service tax amount shown in the same. a person whose tax dues pertain to a issue for which a notice has been served or an
order has been passed in the previous period. a person against whom an inquiry or investigation in respect of non/short levy or
non/short- payment of service tax has been initiated by way of search of premises or summons or requiring production of accounts, documents or other evidences and such inquiry/investigation is pending as on 01.03.2013.
a person against whom an audit has been initiated and such audit is pending as on 01.03.2013.
2. The defaulter is required to make a truthful declaration of all his pending tax dues (from October 1, 2007 to December 31, 2012) on or before 31.12.2013. However, if the Commissioner has reasons to believe that the declaration made by a declarant under VCES was substantially false, he may serve a show cause notice within one year from the date of declaration.
3. At least half of the declared tax dues need to be paid by December 31, 2013. The remaining half can be paid by: June 30, 2014 without interest; or by December 31, 2014 with interest @ 18% from July 1, 2014 onwards. The amount so paid would be non-refundable.
4. On compliance with all the prescribed requirements, the declarant will be granted immunity from interest (as specified), penalties and other proceedings. The proceeding under VCES would be final and cannot be reopened by any forum.
5. If the declared tax dues are not paid either in part or in full, such dues will be recovered along with interest as per the provisions of section 87.
6. The tax-payers will need to settle their dues for the period after December 31, 2012 as per the provisions applicable under the present law.
(d) The key features of FTP are –
1. Free Export-Import: Export-Import is free unless specifically regulated by the provisions of the Policy or any other law for the time being in force.
2. Restrictions for strategic and health reasons: There are restrictions on exports and imports for various strategic, health, and other reasons. If the goods are not banned, the government can give a permission/ license for specific reasons.
3. Export Promotion Schemes: Exports are promoted through various promotional schemes. 4. Duty exemptions, drawbacks and rebates available: To provide for tax free exports, the
taxes on exports are either exempted or adjusted or refunded on both outputs and inputs, through schemes of Duty Exemption, Duty Refund (Drawbacks and Rebates).
5. Free import of capital goods for exports: Even capital goods can be imported at NIL duty for the purpose of exports under the scheme of EPCG.
6. Special Schemes for EOU: For units undertaking to export all their production, there are special schemes so that they can avoid taxes at every stage under the scheme of EOU.
7. Deemed Exports: In certain cases imports get duty exemption/concession for certain special purposes. In such cases, to enable domestic suppliers compete with the international suppliers, the supplies of domestic suppliers are treated as deemed exports.
(e) Duty free allowances allowed to Mr. Raj are as follows – 1. Under Rule 3, goods eligible for General free allowance are:
used personal effects (excluding jewellery); and other articles (other than those mentioned in Annexure I) upto `35,000
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2. Under Rule 5, Duty free allowance of used household articles upto `12,000, and professional equipments up to `40,000 is allowed.
3. Duty free allowance in case of jewellery up to `50,000 shall be allowed since his stay abroad is for more than one year.
Accordingly, the total customs duty payable by Mr. Raj shall be as follows (amount in `)
Used personal effects like clothes etc. Nil
Camera 45,000
Jewellery 75,000
Used household articles 20,000
Professional equipments 40,000
Laptop Computer Exempt
Total 1,80,000
Less: Total allowance (i.e., `35,000 `12,000 `40,000 `50,000) 1,37,000
Value of goods on which duty is payable 43,000
Customs duty @ 36.05% (inclusive of EC and SHEC) 15,502
Ans. 2
(a) Assessable Value and Excise duty in hands of 'M/s. Max’: 'M/s.Max' is a job worker. In this case- 1. The intermediate product manufactured by 'M/s. Max' is neither sold directly by M/s. Moni at
the job worker 'M/s. Max' premises nor it is transferred to any other place for being sold. Hence, clause (iii) of Rule 10A is applicable and the valuation is to be done as per the foregoing rules (i.e. Rules 4 to 10);
2. Since the element of sale is absent i.e. plastic jars are not sold, hence, the only Rule that covers this contingency is Rule 8. However, Rule 8 applies only if the excisable goods are not sold by the assessee "(here, 'M/s. Max‟) but are used for consumption by him (here, 'M/s Max' or on his behalf) in production or manufacture of other articles. Plastic jars is neither used by 'M/s. Max' nor on 'M/s. Max' behalf. It is used by M/s. APPL (being other unit of M/s. Moni Ltd.) in packing of hair oil. Hence, Rule 8 also doesn't apply for valuation in the hands of job worker M/s. 'M/s Max'.
3. Consequently, the valuation shall be as per judgment in Ujagar Prints v. UOl [1989] 38 ELT 535 (SC) as follows (amounts in `) –
Cost of raw material supplied to the job-worker 'M/s Max' 25,000
Transportation cost of raw material from the principal manufacturer - M/s. Moni premises to the job worker 'M/s. Indian Ex' premises
200
Processing charges of job-worker (cost and profit, both, of the job-worker) 1,400
Total assessable value 26,600
Excise Duty @ 12.36% 3,288
Note: Job-worker 'M/s. Max' premises will be treated as deemed "factory-gate of removal" and hence, transportation expenses of plastic containers from job worker 'M/s.Max' premises to the place of M/s. APPL (being other unit of M/s. Moni Ltd.) will not be included.
(b) Computation of value of taxable service and service tax: (amounts in `) -
Total Receipts of the year 2,50,00,000
Less: Receipts of 'Gyan nagar' an industrial training institute (ITI) affiliated to the National Council for Vocational Training (NCVT), not liable to service tax, since the same is covered in negative list.
12,00,000
Less: Receipts of 'Edu care' a vocational education provider affiliated to Sector Skill Council formed under National Skill Development Corporation (NSDC) has been made exempt with effect from 10-09-2013. [Entry 9A of Notification No. 25/2012]
18,00,000
Less: Receipts of 'Gyan Skill Centre' an industrial training centre (ITC) affiliated to the State Council for Vocational Training, Rajasthan, not liable to service tax, since the same is covered in negative list.
20,00,000
Less: Receipts of 'Vission', an institute, registered with Directorate General of Employment and Training (DGET), Union Ministry of Labour and Employment, running a Modular Employable Skill Course (MESC)
10,00,000
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approved by the National Council of Vocational Training - Not liable to service tax, since the same is covered in negative list.
Less:Receipts of 'Scinart' a Commercial coaching institute providing commercial coaching in the field of arts and science shall be liable for service tax.
Liable for service-tax
Less: Receipts of 'Commerce concepts' a Commercial coaching institute providing coaching in the field of commerce shall be liable for service tax irrespective of the fact that a certificate was awarded to each trainee after completion of the training.
Liable for service-tax
Less: Receipts of Gurukul school providing education up to higher secondary shall not be liable for Service tax.
60,00,000
Less: Receipts of 'Play Kids' school providing education up to primary level i.e. `80 lakhs is not liable to service tax. However, receipts from renting of premises by the school to commercial coaching centre shall be liable for service tax since w.e.f. 01-04-2013; the exemption provided in relation to the auxiliary educational services provided by an educational institution has been withdrawn. Hence the same shall be taxable.
80,00,000
Taxable Value 50,00,000
Service Tax thereon @ 12% 6,00,000
Add: EC and SHEC @ 3% 18,000
Total Service Tax payable thereon 6,18,000
(c) The aforesaid points have been discussed below –
1. Emergency power of Central Government to increase or levy export duties [Sec. 8]: Where the Central Government is satisfied that in respect of any article, whether included in Second Schedule or not, - The export duty leviable thereon should be increased or an export duty should be levied,
and Circumstances exist which render it necessary to take immediate action, Then, the Central Government may, by notification in Official Gazette, direct an amendment of the Second Schedule so as to provide for increase or levy of export duty on that article.
2. Emergency power of Central Government to increase import duties [Section 8A]: Where in respect of any article included in the First Schedule, the Central Government is satisfied that,- The import duty leviable thereon u/s 12 of the Customs Act, 1962 should be increased;
and Circumstances exist which render it necessary to take immediate action, it may, by notification in the Official Gazette, direct an amendment of the First Schedule so as to provide for an increase in the import duty leviable on such article to such extent as it thinks necessary. However, the Central Government shall not issue any notification for substituting the rate of import duty in respect of any article as specified by an earlier notification, unless such earlier notification has been approved with or without modifications.
Ans. 3 (a) The fact of the case is similar to the case decided by supreme court : Usha Rectifier Corpn. (I)
Ltd. v. CCEx., New Delhi 2011 (263) E.L.T. 655 (S.C.) The Supreme Court observed that once the assesse had themselves made admission regarding the development of testing equipments in their own Balance Sheet, which was further substantiated in the Director‟s report, it could not make contrary submissions later on. Moreover, assessee‟s stand that testing equipments were developed in the factory to avoid importing of such equipments with a view to save foreign exchange, confirmed that such equipments were saleable and marketable. Hence, the Apex Court held that duty was payable on such testing equipments. So based on the above judgment of supreme court, in present case assessee‟s contention is wrong. The process of developing testing equipments amounts to manufacture.
(b) The issue was already decided by the High Court in case of Wipro Ltd. where the High Court observed that nature of the services was such that they were rendered seamlessly, on continuous basis without any commencement or terminal points. Since the calls were received and attended to in the call centre on a continuous basis, it was impossible for the appellant to not only determine the date of export but also anticipate the call so that the declaration could be
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filed “prior” to the date of export. The High Court noted that the appellant was also required to describe, value and specify the amount of service tax payable on input services actually required to be used in providing taxable service to be exported. The High Court opined that except the description of the input services, the appellant could not provide the value and amount of service tax payable as any estimation was ruled out by the use of the word “actually required” and the bill/invoice for the input services were received by the appellant only after the calls were attended to. Further, the High Court also observed that one-to-one matching of input services with exported services was impossible since every phone call was export of taxable service but the invoices in respect of the input-services were received only at regular intervals, viz. monthly or fortnightly etc. Thus, the High Court was of the view that in the very nature of things, and considering the peculiar features of the appellant's business, it was difficult to comply with the requirement “prior” to the date of the export. Furthermore, the High Court elaborated that if particulars in declaration were furnished to service tax authorities within a reasonable time after export, along with necessary documentary evidence, and were found to be correct and authenticated, object/purpose of filing of declaration would be satisfied. Decision of the case: The High Court, therefore, allowed the rebate claims filed by the appellants and held that the condition of the notification must be capable of being complied with as if it could not be complied with, there would be no purpose behind it. So, based on above judgment, Info Corp Ltd. should be granted rebate claims. Department shall not deny it.
(c) Similar issue was decided by High Court in case of Wringley India Pvt. Ltd. v. Commr.of Cus.(Imports), where it was held that the appellant had made deliberate misdeclaration of the value of the imported goods and misguided the Customs Department as even after getting direction to get valuation from local chartered engineer, it was not disclosed that valuation had already been done at load port. Further, it was also not the importer‟s case that they did not have in their possession the certificate of load port Chartered Engineer. Even after obtaining the valuation certificate from the local valuer, the appellant had no regrets. In fact, the valuation so done by the local Chartered Engineer was readily accepted by the appellant as evident from the letter issued by them to the Customs Department and the subsequent payment made by them. The High Court thus inferred that there was clear mis-declaration of value by the appellant and as per section 111(m) of the Customs Act, the department was asked to confiscate the goods so imported. Relying on the above judgment of honourable high court, here contention of the department is perfectly valid.
Ans. 4 (a) In case CCEx v. Cadila Healthcare Ltd, similar question was decided by high court where it
was observed that the activity of testing and analysis of the trial batches was in relation to the manufacture of final product as unless such trial batches were tested and approval from the regulatory authority was obtained, the final product could not be manufactured. The High Court did not find any merits in the contention of the department that CENVAT credit was not admissible in respect of the technical testing and analysis services availed in respect of the product at trial production stage as the goods had not reached the commercial production stage. It was more so as the trail batches were removed on payment of excise duty and thus, CENVAT credit of service tax paid in respect of such services could not be denied. As regards the commission paid to foreign agents, the High Court observed that there was nothing on record to indicate that the foreign agents were actually involved in any sales promotion activities like advertising which was covered in inclusive part of definition of input service. The High Court further elaborated that neither were such services used directly or indirectly, in or in relation to manufacture of final products or clearance of final products up to place of removal nor were they analogous to illustrative activities mentioned in the Rule 2(l) viz., accounting, auditing, etc. Here The Court held that technical testing and analysis services availed for testing of clinical samples prior to commencement of commercial production were directly related to the manufacture of the final product and hence, were input services eligible for CENVAT credit. With respect to the services provided by foreign commission agents, the High Court held that since the agents were directly concerned with sales rather than sales promotion, the services provided by them were not covered in main or inclusive part of definition of input service as provided in rule 2(l) of the CENVAT Credit Rules, 2004. Studying the above case law, view taken by the department is correct.
(b)
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1. High court has decided similar question in case of Mayo College General Council v. CCEx. (Appeals). Here the High Court held that when the petitioner permitted other schools to use their name, logo as also motto, it clearly tantamount to providing „franchise service‟ to the said schools and if the petitioner realized the „franchise‟ or „collaboration fees‟ from the franchise schools, the petitioner was duty bound to pay service tax to the department. Considering the judgment of High Court, here contention of the Megha college is not valid. Services provided by them shall be considered as franchise service and liable to service tax.
2. In case of CCE & ST v. Adecco Flexione Workforce Solutions Ltd. 2012 , same issue was held by The Karnataka High Court. The court held that the authorities had no power to initiate proceedings for recovery of penalty under section 76 when the tax payer paid service tax along with interest for delayed payments promptly. As per section 73(3), no notice shall be served against persons who had paid tax with interest; the authorities can initiate proceedings against defaulters who had not paid tax and not to harass persons who had paid tax with interest on their own. If the notices were issued contrary to this section, the person who had issued notice should be punishable and not the person to whom it was issued. Based on the above judgment of the Karnataka High Court, we can say that initiation of the proceedings by the department is not valid.
(c) In one of the case of Atherton Engineering Co. Pvt. Ltd. v. UOI 2010 the Court noted that if a product undergoes some change after importation till the time it is actually used, the classification will not be effected 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 (Brine Shrimp eggs) remained the same. The Court opined that if an embryo within the egg is incubated in controlled temperature and under hydration, a larva is born. This larva does not assume the character of any different product. Its nature and characteristics are same as the product or organism which is within the egg. Based on above observation, the court decided that the Brine Shrimp eggs containing embryo 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. Thus, the Court accepted the classification sought by the assessee. Contention of the Revenue will not be held good, based on the above judgement.
Ans. 5 (a) The penal provisions for non obtaining registration is as under –
1. Fine and Imprisonment : As per Section 9(1)(a) of the Central Excise Act, 1944 any person who fails to obtain registration when he is so required to do so shall be punishable –
Condition Punishment
The duty leviable on excisable goods exceeds `50,00,000. [Amended by finance Act, 2013, w.e.f 10-05-2013. Prior to amendment it was `30,00,000]
Imprisonment for a term, which may extend to 7 years and with fine. (However, in absence of special and adequate reasons to the contrary to be recorded in judgment of the Court, such imprisonment shall not be for less than 6 months.)
In any other case Imprisonment for a term extending to 3 years or with fine or with both.
2. Confiscation and penalty [Rule 25 of the Central Excise Rules, 2002]: Where any
manufacturer or producer engages in manufacture, production or storage of any excisable goods without having applied for registration certificate, as required under section 6 of the Act, then, all such goods shall be liable to confiscation. Moreover, such manufacturer or producer shall also be liable to a penalty not exceeding- the duty on such excisable goods, or `2,000, Whichever is greater.
3. Opportunity of being heard: Such order of confiscation and penalty shall be passed only after giving the assessee an opportunity of being heard.
(b) Penalty for offences by director, etc., of company [Section 78A] [Inserted by Finance Act, 2013 w.e.f 10-05-2013]: The relevant provisions are discussed as under –
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1. Penalty up to `1 lakh can be imposed: The new section 78A makes a director, manager, secretary or other officer of the company personally liable to a penalty upto `1 lakh in case of certain specified contraventions committed by the company. Such penalty would be leviable if the director, manager, secretary or other officer of the company was in charge of, and was responsible to, the company for the conduct of business of such company at the time of commitment of any of the specified contraventions and was knowingly concerned with such contravention.
2. Specified contraventions: The specified contraventions are – evasion of service tax; or issuance of invoice, bill or, as the case may be, a challan without provision of taxable
service in violation of the rules made under the provisions of Chapter V; or availment and utilisation of credit of taxes or duty without actual receipt of taxable service
or excisable goods either fully or partially in violation of the rules made under the provisions of Chapter V; or
failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due.
(c) Sale of Unutilized Material: The provisions are as under – 1. Disposal of unutilised material: In case an EOU / EHTP/ STP/ BTP unit is unable to utilize
goods and services, imported or procured from DTA, it may be – transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit Such transfer from EOU/ EHTP/
STP/ BTP unit to another such unit would be treated as import for receiving unit; or disposed off in DTA with approval of Customs authorities on payment of applicable
duties and submission of import authorization; or Exported.
2. Disposal of Capital goods: Capital goods and spares that have become obsolete or surplus, may be exported, transferred to another EOU / EHTP / STP / BTP / SEZ unit or disposed off in DTA on payment of applicable duties. Benefit of depreciation, as applicable, will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreciation allowed.
3. In case of Destruction of goods- No duty payable: No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/ waste/ remnants/ rejects are destroyed within unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
4. Special provisions for textile sector: In case of textile sector, disposal of left over material/ fabrics up to 2% of CIF value or quantity of import whichever is lower, on payment of duty on transaction value, may be allowed, subject to certification of Central Excise/ Customs officers that these are leftover items.
5. Disposal of Packing material: Disposal of used packing material will be allowed on payment of duty on transaction value.
(d) Computation of customs duty payable -
Cost of machinery inclusive of accessory (FOB) (See Note) US$ 10,000
Add: Cost of insurance US$ 100
Add: Air freight (restricted to 20% of FOB) US$ 2,000
Total US$ 12,100
Total (in Indian`) US $ 12,100 × `40 (being the exchange rate) ` 4,84,000.00
Add: Agency commission ` 4,500.00
CIF value ` 4,88,500.00
Add: Landing charges (@ 1% of CIF value) ` 4,885.00
Assessable value ` 4,93,385.00
Add: Basic Customs duty (10% of assessable value) [A] ` 49,338.50
Total for Additional duty of Customs leviable under section 3(1) ` 5,42,723.50
Add: Additional duty of Customs u/s 3(1) equal to excise duty @ 8% [B] ` 43,417.88
Add: Education cess and SHEC @ 3% of [A] [B] [C] ` 2,782.69
Total for Additional duty of Customs u/s 3(5) ` 5,88,924.07
Add: Additional duty of Customs u/s 3(5) @ 4% ` 23,556.96
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Total imported cost (rounded off) ` 6,12,481
Total customs duty payable = [A] [B] [C] [D] (rounded off) ` 1,19,096
Working Notes: 1. As per Accessories (Conditions) Rules, 1963/ accessories and spare parts compulsorily
supplied with main implements are chargeable at the same rate as applicable to main machine. Therefore, such accessories shall also be chargeable with duty at the rate applicable to the machinery i.e. @ 10% ad valorem.
2. Though actual air freight is US $ 3,000, it is limited to 20% of FOB value of goods as per Rule 10(2) of Customs Valuation Rules.
3. Agency Commission, which is incurred in India, is not regarded as buying Commission and therefore will be added to determine the CIF value.
Ans. 6 (a)
Computation maximum refund eligible u/s 5 of the CENVAT Credit Rules, 2004: (`)
1. NET CENVAT Credit taken CENVAT credit on inputs and input services Credit reversed under Rule 3(5C) (Note that credit of capital goods is not included)
2,80,000
2. Export Turnover of goods (only goods cleared without payment of duty are included)
6,00,000
3. Export turnover of services (advance received towards services to be provided/exported after the current relevant period shall not be included, hence : `2,50,000 `50,000)
2,00,000
4. Total Turnover:
Total of all excisable goods (exports exempted dutiable) `26,00,000
Export turnover of services (as computed above) Value of other services `4,00,000
Value of inputs removed as such under Rule 3(5) `30,000 30,30,000
5. Maximum refund [(Item (2) Item (3)) ÷ Item (5)] Item (1) 73,927
(b) As per the provisions of Finance Act, 1994 –
1. Mr. Adarsh is not liable to pay service tax as service tax is leviable on the services provided or to be provided for a consideration. Mr. Adarsh has performed an activity without consideration and any activity without consideration does not come within the ambit of definition of "service". In this case passengers are under no obligation to pay any amount for listening to him nor have they engaged him for his services. If Mr. Adarsh is called Mumbai to perform in an award show for `50,000, then this activity would come within the ambit of definition of "service" as it becomes an activity for a consideration. Resultantly, this activity would be liable to service tax.
2. Service tax is not leviable in this case as in order to be service, an "activity has to be carried out for a consideration. Therefore, fine being the legal consequence of Mr. Raju's action is not in the nature of consideration for an activity.
3. In this case Mr. Rajnikant has given guarantee on behalf of company which was not in course of his employment, hence such activity amounts to service. Such activity will be liable to service tax. In this case Company will be liable to pay service tax on reverse charge basis.
4. Any amount paid for not carrying out a competing business would be liable to be taxed as it would be considered as being paid for providing the service of forbearance to act. Hence, non competing fees of `15,00,000 received by Mr. Parag will be liable for service tax.
5. Since service becomes taxable on an agreement to provide a service such forfeited deposits would represent consideration for the agreement that was entered into for provision of service. Hence, the amount of `50,000 forfeited by K Resort Ltd. will be liable to service tax.
6. Mr. Nayan is engaged in evaluation of answer books not in capacity of employee. Hence the consideration received for evaluation of such answer books will be liable for service tax.
7. To constitute service, there should be an immediate and not remote connection between activity and consideration. Consideration may actually be payable at a later point of time but linkage should be immediate. Here, there is no immediate connection and thus it is not a service.
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(c) Computation of the amount of fine:
Declared CIF value of Opthalmic rough blanks @ $ 1 per piece $1000
Rate of exchange 1$ `45
`
CIF value in rupee terms (1,000 45) 45,000.00
Add: Landing charges (1% of CIF value) 450.00
Total Assessable value 45,450.00
Add: Basic customs duty @ 35% [1] 15,907.50
Add: EC and SHEC (3% of basic customs duty) [2] 477.23
Total cost to importer 61,834.73
Market value @ `100 per piece (1000 100) 1,00,000.00
Profit margin (Market Value - Total cost to the importer) 38,165.28
Fine equal to 50% of margin of profit [3] 19,082.64
Total amount payable by party to clear the consignment [(1) (2) (3)] 35,467.36
Maximum fine that can be imposed under section 125: The maximum amount of fine that can be imposed under Section 125 of the Customs Act, 1962 is equal to Market value of the imported goods Less Amount of duty i.e. `1,00,000 `16,384.73 `83,615.27.
Ans. 7 (a)
Computation of value of clearances in the financial year 2013-14 (`in lakhs) :
1. Value of clearances of inputs as such under Rule 3(5) of Cenvat Credit Rules, 2004 on which Cenvat Credit has been taken. [WN-1]
-
2. Value of clearances of excisable goods bearing brand name of foreign company which is assigned in favour of Abha Ltd. [WN-2]
110
3. Value of clearance as licensee of goods carrying the brand name of another person upon full payment of duty [WN-3]
-
4. Value of clearance of waste and scrap which were exempt from duty [WN-4] 30
5. Value of clearances of plastic containers for packing of pickles produced by them under brand name of Nilons Pickles. [WN-5]
30
Total value of clearances 170
Working Note: 1. As per Circular No. 57/88, dated 27-10-1988 in case inputs on which Cenvat credit has been
taken are removed as such, there value shall not be included in value of clearances of `400 lakhs. Since the same have not been manufactured by the assessee.
2. In case if trade mark of foreign company is assigned in favour of assessee, then assessee becomes the owner of such trade mark and exemption in respect of clearances made under such brand name will be available, hence the same shall be included in determination of value of clearances of `400 lakhs.
3. Since the said goods are manufactured in brand name of another person, hence the same are not eligible for exemption and the value of the same shall not be included in determination of Rs.400 lakhs.
4. Clearances of waste and scrap shall be includible in value of clearance for determination of
`400 lakhs even if the same are exempt from duty.
5. Clearances of plastic containers bearing the brand name of others is included provided that such plastic containers are meant for use as packing materials by the person whose brand name such goods bear. Hence, clearances of plastic containers bearing the brand name of Nilons Pickles would be included.
Conclusion: Since the value of clearances for home consumption does not exceed `400 lakhs in the financial year2013-14, Abha Ltd. is eligible to claim the benefit of exemption under Notification No. 8/2003-CE, dated 01-03-2003 in the financial year 2014-15.
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(b) The point of taxation shall be determined as under -
Invoice No.
Value of service
(`)
Reason / Remarks Point of taxation
Rate of tax
Service tax (`)
1. 20,00,000 Service is provided before change in effective rate of tax,
invoice issued after change in effective rate of tax,
the payment has been received after change in effective rate of tax,
POT shall be earlier of date of invoice or date of payment.
05-04-2013 12% 2,40,000
2. 10,00,000 Service is provided before change in effective rate of tax,
invoice issued prior to such change in effective rate of tax,
the payment is received after change in effective rate of tax,
POT shall be date of invoice.
25-03-2013 10% 1,00,000
3. 15,00,000 Service is provided before change in effective rate of tax,
the payment is received before change in effective rate of tax,
invoice issued after change in effective rate of tax, POT shall be date of payment.
30-03-2013 10% 1,50,000
4. 20,00,000 Service is provided after change in effective rate of tax,
invoice is issued before change in effective rate of tax,
the payment is received before change in effective rate of tax,
POT shall be earlier of date of invoice or date of payment.
28-03-2013 10% 2,00,000
5. 10,00,000 Service is provided after change in effective rate of tax,
invoice is issued after change in effective rate of tax,
the payment is received before change in effective rate of tax,
POT shall be the date of invoice.
04-04-2013 12% 1,20,000
6. 15,00,000 Service is provided after change in effective rate of tax,
the payment is received after change in effective rate of tax,
invoice is issued before change in effective rate of tax,
POT shall be date of payment.
08-04-2013 12% 1,80,000
Total 9,90,000
Add: EC and SHEC @ 3% 29,700
Total Service tax 10,19,700
(c) Option to pay fine in lieu of confiscation [Section 125]:
Redemption fine: Whenever confiscation of any goods is authorized by the Act, the officer adjudging may give an option to pay fine in lieu of confiscation as under,- 1. The proper officer may in case of prohibited goods or shall in case of other goods, give
an option to the owner of such goods to pay such redemption fine. 2. The said option is given to the adjudged person i.e. the owner or, where such owner is not
known, the person from whose possession or custody such goods have been seized. 3. Maximum amount of Redemption fine: The amount of redemption fine cannot exceed,
The market price of the confiscated goods less the import duty chargeable thereon.
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MARKS ALLOCATION SHEET
Que. No.
Sub point No.(if any)
Name of Chapter Description of Concept Mark Allocation
Total Marks
1 (a) Exception & Demands Brief introductory para 1
1 (a) Exception & Demands 1. Issuance of Notice four points 1
1 (a) Exception & Demands 2. Two para , Each of 0.5 Mark 1
1 (a) Exception & Demands 3. Compliance of notice 1
1 (a) Exception & Demands Consequence of failure 1 5
1 (b) Services Tax Declared service
8 points, Each point of 0.5 Marks for right treatment
4
1 (b) Services Tax Declared service
Abatement and tax calculation 1 5
1 (c) Amendment VCES (1) with all subpoints 2
1 (c) Amendment (2), (3) Each 1 2
1 (c) Amendment Any two form (4), (5), (6) Each of 0.5 1 5
1 (d) Foreign trade policy Features : -
1 (d) Foreign trade policy (1)Free Export – Import 1
1 (d) Foreign trade policy (2)Restrictions for strategic and health reasons
1
1 (d) Foreign trade policy (4)Duty exemptions, drawbacks and rebates available
1
1 (d) Foreign trade policy (7)Deemed Exports 1
1 (d) Foreign trade policy Any two points from remaining, each of 0.5 marks
1 5
1 (e) Baggage / Postal Rule 3 1
1 (e) Baggage / Postal Rule 5 1
1 (e) Baggage / Postal Allowance for jewellery 1
1 (e) Baggage / Postal Computation 2 5
2 (a) Valuation Excise Point (1) 1
2 (a) Valuation Excise Point (2) , 2
2 (a) Valuation Excise Point (3) and calculation 2 5
2 (b) Negative list services Right treatment of Eight matters specified in question should be evaluated as follows
2 (b) Negative list services Point 1, 2, Each 1 Mark 2
2 (b) Negative list services Point – 3 0.5
2 (b) Negative list services Point – 4, 5, 6 Each of 1 Mark 3
2 (b) Negative list services Point 7, 8 Each of 0.5 Mark 1
2 (b) Negative list services Tax calculation at last 0.5 7
2 (c) Classification types of duty
Emergency power of central government to increase or levy export duties
1.5
2 (c) Classification types of duty
Emergency power of Central Government to increase import duties
1.5 3
3 (a) Basic concept Reference of case 0.5
3 (a) Basic concept Analysis of fact & judgement of SC 2
3 (a) Basic concept Decision 0.5 3
3 (b) POP – ST Observation of court and analysis 5.5
3 (b) POP – ST Conclusion 1
3 (b) POP – ST Reference of case 0.5 7
3 (c) Illegal import Reference of the case 0.5
3 (c) Illegal import Analysis of fact 3.5
3 (c) Illegal import Conclusion , Decision 1 5
4 (a) Cenvat References of case 0.5
4 (a) Cenvat Analysis of case 2.5
4 (a) Cenvat Decision of court & conclusion 2 5
4 (b) (I) Basic ST References of case 0.5
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4 (b) (I) Basic ST Analysis of case 2
4 (b) (I) Basic ST Conclusion 1.5 4
4 (b) (II) Demand- Adjudication ST References of case 0.5
4 (b) (II) Demand- Adjudication ST Analysis of case 2
4 (b) (II) Demand- Adjudication ST Conclusion 0.5 3
4 (c) Consideration customs References of case 0.5
4 (c) Consideration customs Observation 1.5
4 (c) Consideration customs Conclusion , Decision 1 3
5 (a) General Process Fire and imprisonment 2
5 (a) General Process Confiscation and penalty 2
5 (a) General Process Opportunity 1 5
5 (b) Procedure in ST Penalty up to `1 lakh can be imposed 2
5 (b) Procedure in ST Specified contraventions 3 5
5 (c) Foreign Trade Policy Disposal of unutilised material 1.5
5 (c) Foreign Trade Policy Disposal of Capital goods 1
5 (c) Foreign Trade Policy In case of Destruction of goods 1
5 (c) Foreign Trade Policy Special provisions for textile sector 1
5 (c) Foreign Trade Policy Disposal of Packing material 0.5 5
5 (d) Valuation customs Cost of insurance, Air freight, commission, Landing (Each right amount 0.5 Mark)
2
5 (d) Valuation customs Basic duty 3(1), 3(5) cess calculation 2
5 (d) Valuation customs Working Note 1 5
6 (a) Cenvat Credit For right calculation of NET CENVAT 1
6 (a) Cenvat Credit For right calculation of Export services 1
6 (a) Cenvat Credit For right calculation of Total Turnover 1
6 (a) Cenvat Credit For right calculation of Maximum refund 1 4
6 (b) Basic For right treatment of each of seven matters specified in question (1 marks each )
7 7
6 (c) Seizure, confiscation For right calculation of cost to importer 1.5
6 (c) Seizure, confiscation For right calculation of Total amount payable
1.5
6 (c) Seizure, confiscation For right calculation of Maximum fine under section 125
1 4
7 (a) SSI- exemption Right treatment of 56 matters specified in question shall be evaluated by allocating 1 mark for each one
5 5
7 (b) POT For Each right treatment of 6 matters specified in question – 1 Mark for Each 1
6
7 (b) POT Last cess calculation 1 7
7 (c) Seizure, confiscation Three point each of 1 Mark 3 3
