Interactive workshop
on
Central Excise, Customs
& Service Tax
by
swamy associates
your Rights during Raids !!!
• What is a Search
• It is necessary that you, the person
being searched, know the law and
procedure relating to a search. Such
knowledge-base helps you safeguard
your legal rights.
Your Rights During a Search
Never forget that by searching your
premises the officers are carrying out an
official duty and are, therefore, bound by
certain rules and regulations that are
meant not only to further their official
purpose but also to safeguard your rights
and interests.
• It is important to keep it in mind that the
only purpose of their visit is to look for
and collect evidences of violations.
The Raiding officers have no right to:
• Mess up with your daily activities like
production, sale or clearance;
• Stop you from communicating with your
legal advisor, business partners, clients,
friends or relatives;
• Carry out their search in a surreptitious
manner without allowing you or your
employee to see what they are doing;
• Execute their search without identifying
themselves individually so as to prevent
any complaint of a misconduct;
• Prevent you or your employees from
leaving the premises. (However, while
leaving you might be required to give the
phone number or the address of your
destination, if asked for, so that they can
contact you in case a clarification is
required)
CENTRAL EXCISE
SECTION 2 - MANUFACTURE
 Section 2(f)(i) - any process incidental
or ancillary
 Section 2 f (ii) - Deemed manufacture
- section / chapter notes
 Section 2 f (iii) - affixing/alteration of
RSP , etc
SECTION 4 - VALUATION
SECTION 4(i)(a) - TRANSACTION VALUE
(w.e.f 1.7.2000)
 SALE
 PRICE IS THE SOLE CONSIDERATION
 BUYER TO BE UNRELATED
 DELIVERY @ TIME & PLACE OF REMOVAL
Includes any amount paid / payable during the sale
or even anytime thereafter
SECTION 4(i)(b) – VAL. RULES
RULE 4 - COMPARABLE GOODS
FREE SAMPLES / FOC CLEARNCES
PRO – RATA VALUE ON COMPARABLE GOODS
IDMA vs UOI
2008 (222) E.L.T. 22 (Bom.)
SECTION 4(i)(b) – VAL. RULES
RULE 5 - FRIEGHT & INSUARANCE
CCE, NOIDA vs ACCURATE METERS LTD
2009 (235) E.L.T. 581 (S.C.)
Circular No. 827/4/2006-CX., dated 12-4-2006
EQUALISED FRIEGHT & PROFIT ON FRIEGHT
SECTION 4(i)(b) – VAL. RULES
RULE 6 - ADDITIONAL CONSIDERATION
AMORTISATION
NOTIONAL INTEREST ON ADVANCES
METAL BOX INDIA vs CCE, MADRAS
1995 (75) E.L.T. 449 (S.C.)
NEXUS - EXPLANATION 2
SECTION 4(i)(b) – VAL. RULES
RULE 7 - DEPOT CLEARANCES
NORMAL TRANSACTION VALUE
Highest aggregate quantity @ nearest time
SECTION 4(i)(b) – VAL. RULES
RULE 8 - CAPTIVE CONSUMPTION
110% OF COST OF PRODUCTION (CAS -4)
SECTION 4(i)(b) – VAL. RULES
• [10A. Where the excisable goods are produced
or manufactured by a job-worker, on behalf of a
person (hereinafter referred to as principal
manufacturer), then,• (i) in a case where the goods are sold by the
principal manufacturer …
• (ii) in a case where the goods are not sold by the
principal manufacturer…
• (iii) in a case not covered under clause (i) or (ii),
SECTION 4 A
Requirement under both :
Standards of Weights and Measures Act
& notification u/s 4A mandatory
EXPORT BENEFITS
Exports without payment of duty
Exports under claim of rebate.
Protection of Cenvat Credit.
DEPB/Drawback/EPCG/Adv. Auth
JOB WORK
Notification 214/86.
Rule 4 (5) (a) of CCR, 2004.
180 DAYS TIME LIMIT SAVE TOOLS,DIES, ETC
CENVAT CREDIT on job work
INTERNATIONAL AUTO vs CCE
2001 (135) E.L.T. 657 (Tri. - Del.)
MISCELLANEA
INTEREST ON SUPP. INV
CCE, PUNE vs SKF INDIA
2009 (239) E.L.T. 385 (S.C.)
11AC PENALTY MANDATORY
DHARMENDRA TEXTILE PROCESSORS
SSI BRAND NAME – GRASIM
2005 (183) E.L.T. 123 (S.C.)
CUM DUTY – MARUTI UDYOG
2002 (141) E.L.T. 3 (S.C.)
SERVICE TAX
Basic Features
Statutory provisions.
Levy on service provider
- Exceptions.
Levy on realisation including Advances
Classification of Service
 Specific description than general description.
 Essential character.
 Which occurs first in the definition.
NO VIVISECTION - DAELIM INDS
2003 (155) E.L.T. 457 (Tri. - Del.)
VALUATION
 Gross amount.
 Cum - tax.
 Abatements.
 Notification 12/2003.
VALUATION
 Services rendered free. – No ST
 Consideration in kind. – COMPARABLE OR
COST
 Reimbursement of expenses.
Upto 18.04.2006 – No liability.
From 19.04.2006 – Concept of pure agent.
Malabar Management
PROCEDURES IN SERVICE TAX
 Issue of show cause notice.
 Adjudication.
 Appellate remedies:
Commissioner (Appeals) (90+90)
CESTAT
High Court / Supreme Court
Procedures in Service Tax
 Registration – Centralised Registration.
 Issue of invoice.
 Maintenance of records.
Procedures in Service Tax
 Payment of service tax.
- Due date.
- Advance payment.
- e payment.
- Self adjustment – if service not rendered.
- Provisional payment.
- Self adjustment of excess payments.
 Filing of return – ST 3.
- Due date / Half yearly.
- Revised return.
- Fine for delayed return.
Penalties in Service Tax.
 Sec. 76 – Delayed payment of S.Tax.
 Sec. 77 – General Penalty.
 Sec. 78 – Suppression, etc.
 Sec. 80 – Power of waiver.
 Rule 7 C – Fine for delayed return.
• Refunds in service tax
• 41/2007-ST and 17/2009-ST
• Rule 5 Refund for exporters
The sweet sixteen services
• Rule 6 (5) of CCR, 2004
Certain Important Services.
Business Auxiliary Service.
 Promotional activities.
 Customer care services.
 Procurement of goods or services.
 Production or processing.
 Provision of service on behalf of client.
 Manufacture – excluded.
 Notification 8/2005.
Commercial / Industrial
construction Service.
Exclusion for roads, airports, railways
transport terminals, bridges, tunnels,
dams and ports.
67 % Abatement.
FOC MATERIALS NOT TO BE INCLUDED
ERA INFRA
2008 (11) S.T.R. 3 (Del.)
Construction of Residential Complex
Service.
 More than 12 units..
 Personal use - exempted.
SUB CONTRACTORS NOT LIABLE TILL
23.08.2007
SUNIL HITECH
Consulting Engineering Service.
 Foreign Technological transfers.
Novinon Ltd. VS CCE 2006 (3) STR 397
 To cover software too.
Customs House Agents Service.
Erection, Commissioning and
Installation Service.
Franchise Service.
Intellectual Property Service.
Management Consultant
Service.
Manpower Recruitment /
Supply Agencies.
Goods Transport Agency Service.
 Reverse Charge.
 Abatement.
 Exemption.
 Payment mode.
 No SSI exemption.
Renting of Immovable Property.
Support Services for Business.
Works Contract Service.
 Re-classification.
 Composition Scheme.
 Vice of Notification 1/2006.
 Diebold Systems (P) Ltd Vs CCE
2008 (9) STR 546.
Export of Service and Import of Service.
INDIAN NATIONAL SHIP OWNERS ASSN
2003 (155) E.L.T. 457 (Tri. - Del.)
IMPORT OF SERVICES – REVERSE CHARGE
CENVAT CREDIT
Basic Features
 Concept of Cenvat credit.
 Landmarks – 1986, 1994 & 2004.
 Cenvat Credit Rules, 2004.
Applicability
 Manufacturers.
 Service providers.
Certain Terms.
 Input.
 Capital goods.
 Input Services.
 Input Service Distributor.
 First / Second stage dealer.
Cenvattable Duties / Taxes
 Basic Excise Duty.
 CVD.
 NCCD.
 Education CESS.
 Addl. Duty of Customs – Sec. 3(5).
 Service Tax and CESS thereon.
Utilisation and Restrictions on Utilisation
 Payment of Excise duty.
 Payment of Service tax.
 Other payments.
 Cross utilisation.
Other Conditions.
 Capital goods – 50 % restriction.
 Depreciation / Cenvat Credit.
 2.5% depreciation on removal of capital goods.
Other Conditions.
 Removal for job work.
 Write off.
 Service Tax Credit - Pay and use.
 Documents for availing credit.
Rule 6 Algebra.
 Position upto 31.03.2008.
 Position from 01.04.2008.
Rule 6.
 Protection to certain clearances.
 Protected Services.
Certain Common Disputes…
 Credit for mobile phone.
India Rayon Industries Ltd. Vs CCE
2006 (4) STR 79.
 Credit for outdoor catering.
CCE Vs GTC Industries.
2008 – TIOL – 1634.
Certain Common Disputes…
 Credit for outward transportation.
ABB Ltd - 2009 (15) S.T.R. 23 (Tri. - LB)
Stayed by Karnataka HC.
 Master Circular and recent
amendments.
CUSTOMS
• Valuation of imported goods
• Inherent contradictions between
‘Deemed Value’ concept of Section 14
and ‘Transaction Value’ concept of
Valuation Rules.
• Reconciliation by Tribunal decisions
and Supreme Court judgment in Eicher
Tractor case.
• Ispat Industries relating to Barge charges
• J.K. Corporation relating to Royalty
• Effect of the two Judgments
– ‘Deemed Value’ concept of the Act will
prevail over ‘Transaction Value’ concept
of the Rules.
• Main elements in Explanation to Rule 10A
– Not a method of determination of value.
– Illustrative reasons which might lead to
doubts.
– Positive assertion to accept value, when
satisfied.
Section 14
• Complete alignment with Transaction
Value concept of the Rules.
• Important elements of Valuation Rules
conceptually captured in the Section.
• Mandates framing of Export Valuation
Rules.
• Covers non-dutiable goods as well.
• Two Explanations added in erstwhile Rule 9
– One regarding Royalty related to post importation process
– Other regarding Cost of Transportation
relating to barge charges, ship
demurrage charges etc.
• Explanation added to erstwhile Rule 10A.
• Controversies about valuation of export
goods
– Whether erstwhile Sec. 14 applicable for duty
free export goods.
– Contradictory judicial pronouncements.
• Amended Sec 14 – No clause regarding
dutiable goods
• It also provides for framing rules for
valuation of export goods.
• Format similar to that of import
valuation rules
• Rule 2 provides definition for ‘Goods
of like kind and quality’ ‘Transaction
Value’ and ‘ Related Persons.
• Rule 3 – Transaction Value Method
subject to Rule 8 (Rejection of
Declared Value)
• Rule 4, 5 & 6 are alternative methods of valuation.
• Rule 4 - Comparison Method - Main Elements.
– Comparison with ‘Transaction Value’ of goods of like kind
and quality.
– Exported at or about the same time.
– To other buyer in same destination country.
– To other buyer in another destination subject to certain
adjustments.
• Rule 5 - Computed Value Method – Main
Elements
– Cost of Production / processing.
– Charge for the Design or Brand
– Profit
• Rule 6 - Residual Method
– Importance of Proviso ‘Local Market Price
may not be the only basis
• Rule 7 - Format of Declaration.
• Rule 8 - Rejection of Declared Value.
– Counterpart of Rule 10A.
– Clarification through Explanation
• Not a method of valuation.
• Illustrative Reasons which could lead to doubts.
• Positive assertion to accept declared value, if satisfied.
THANKS