EXEMPTION TO SPECIAL ECONOMIC ZONE FROM SERVICE TAX
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In exercise of the powers conferred by Section 93(1) of the Finance Act, 1994 read with Section 95(3) of Finance Act, 2004 and Section 140(3) of Finance Act 2007 and in supersession of Notification No. 40/2012-Service tax, dated 20.06.2012 the Government by Notification No. 12/2013-Service tax, dated 01.07.2013 gave exemption to the services on which service tax is leviable under Section 66B of the Finance Act, 1994, received by a Unit located in a Special Economic Zone ('SEZ' for short) and Developer of SEZ ('Developer' for short) and used for the authorized operation from the whole of the service tax, education cess and secondary and higher education cess levied thereon. This notification came into effect from 01.07.2013.
The exemption is provided as detailed below:
Instead of availing exemption or claiming refund the SEZ unit is having the option to avail CENVAT credit on the specified services in accordance with the CENVAT credit Rules, 2004.
Conditions
The following are the conditions prescribed in this Notification are as follows:
Erroneous refund
Where any sum of service tax paid on specified services is erroneously refunded for any reason whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the rules made there under, as if the recovery of service tax is erroneously refunded.
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Showing posts with label Articles. Show all posts
Showing posts with label Articles. Show all posts
09 July 2013
EXEMPTION TO SPECIAL ECONOMIC ZONE FROM SERVICE TAX
02 January 2010
Drunken exemption to Alcoholic Beverages
The article is written by:
CA Pradeep Jain,
Anjali Bihani
Neetu Sukhwani
Entry 84 of the Union List of the Schedule VII read with clause 1 of Article 246 of the Constitution of India empowers Central Government with exclusive power to make laws in respect of Duties of excise on goods manufactured or produced in India except alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics etc., Thus, the Central Government does not have power to levy Central Excise duty on Alcoholic liquors. So Chapter 22 of the Central Excise Tariff which covers Beverages, Spirits & Vinegar excludes "Alcoholic liquor for human consumption" through Chapter note; leading to conclusion that alcoholic beverages are non excisable goods.
As nothing was leviable under the Central Excise Act in respect of alcoholic beverages; the power in this respect being vested with State, government resorted to Finance Act, 1994 in order to compensate loss of revenue by somehow bringing it under the purview of taxable services. Better to have service tax in lieu of no excise revenue. A beginning step towards this was made by issuing Board Circular 249/1/2006 dated 27.10.2008 levy of service tax on production of alcoholic beverages on job work basis thereby clarifying that if the Contract Bottling Units CBUs undertook complete process of manufacture of alcoholic beverage under the `contract bottling arrangement' as described above then such activity would not fall under the taxable service, namely the BAS. However, in case the activity undertaken by the CBU falls short of the definition of manufacture (such as activity of `packing' or `labelling' alone) then such activity would fall within its ambit and would be charged to service tax.
Moreover, the Hon'ble M.P. High Court in case of MAA SHARDA WINE TRADERS versus UNION OF INDIA [2009 (15) S.T.R. 3 (M.P.)] has held that the bottling of alcoholic beverages amounts to manufacture and as such the service tax is no applicable. It was held as under:-
Packaging service - Bottling - Manufacture - Bottling of liquor - Whether bottling of liquor amounts to manufacture or only packaging so as to attract Service tax - Statutory definition of packaging activity excluding manufacturing process as defined in Section 2(f) of Central Excise Act, 1944 - Manufacturing process not necessarily includes excisable goods but also includes process incidental or ancillary to completion of manufactured product - Dissection of tender conditions, invoices and pricing by Division Bench decision in 2006 (3) S.T.R. 723 (M.P.) not correct - Bottling is part of manufacturing process - C.B.E. & C. Circular clarifying manufacturing process in respect of bottling and bottling taken out of Service tax net - Statutory stipulation that liquor to be sold in bottles - Packaging and bottling of liquor being covered under manufacture, not liable to Service tax - Section 65(76b) of Finance Act, 1994 - Section 2(f) ibid. [paras 2, 15, 17, 31, 32, 33]
Further, Service tax is levied under Section 66 of the Finance Act, 1994 on taxable service namely `business auxiliary services' specified in sub-clause (zzb) of clause 105 of section 65 of the Finance Act. BAS basically covers those activities which are in relation to promotion or marketing or sale of goods, customer care service, procurement of goods or services, etc. but job work also comes under its scope because of the amended clause which reads "production or processing of goods for, or on behalf of, the client.
The service tax can be levied only when job work does not amounts to manufacture of goods but if the job work amount to manufacture then the service tax is not payable. Here, the word `manufacture' has been used rather than `production or produce'. Produce word has a wider meaning because it covers manufacture, make, create, cause to happen or exist in its scope of meaning.
Earlier there was no condition that to avail exemption or to escape from service tax liability, the process should result in manufacture of excisable goods but through the amendment in the Budget, it was cleared that exemption would be entitled to such process which would result in manufacture of excisable goods. Thus, non excisable goods were kept out of scope of exemption. Alcoholic beverages as non excisable goods remained under the clutches of service tax liability. This was also clarified by TRU letter also. The relevant part of TRU letter read as under:-
"Modification in Business Auxiliary Service (BAS) [section 65(19)]: It may be recalled that production or processing of goods for or on behalf of a client falls within the purview of this service. However, if any such activity amounts to manufacture within the meaning of section 2(f) of the Central Excise Act, the same is excluded from its purview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of `excisable goods'. Both the words/phrases i.e. `manufacture' and `excisable goods' would have the same meaning as defined under the Central Excise Act. The impact of this change would be that even if a process of manufacture is undertaken for the client, but the resultant product does not fall under the category of excisable goods, such as alcoholic beverages, the service tax would be attracted. Certain other goods which would also fall under BAS on account of the proposed change would be kept outside the tax net by way of exemption notification, to be issued at the appropriate time. This levy came into effect from the date notified by the Government i.e. September 1, 2009."
Thereafter the budget was passed by Rajya Sabha and Lok sabha and approval was granted by the president to the budget. Thus, the budget was enacted. The service tax was applicable on job work of non excisable goods from September 1, 2009 though it amounted to manufacture. Thus, the intention of the Government to impose service tax on alcoholic beverages have come true.
But later on the exemption was given to the alcoholic beverages through Notification No. 39/2009-Service Tax dated 23rd September, 2009.
The Notification reads as below:
"In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service specified in sub-clause (zzb) of clause 105 of section 65 of the Finance Act, provided by a person ( hereinafter called the `service provider') to any other person ( hereinafter called the `service receiver') during the course of manufacture or processing of alcoholic beverages by the service provider, for or on behalf of the service receiver, from so much of value which is equivalent to the value of inputs, excluding capital goods, used for providing the same service, subject to the following conditions, namely:-
a) that no Cenvat credit has been taken under the provisions of the Cenvat Credit Rules, 2004;
b) that there is documentary proof specifically indicating the value of such inputs; and
c) where the service provider also manufactures or processes alcoholic beverages, on his or her own account or in a manner or under an arrangement other than as mentioned aforesaid, he or she shall maintain separate accounts of receipt, production, inventory, dispatches of goods as well as financial transactions relating thereto."
The exemption notification was applicable from 23 Sept. 09 onwards. Thus, the service tax was applicable for the period from 1.09.2009 to 23.9.09, service tax was levied on manufacture or processing of alcoholic beverages.
But the Government did not intend to levy the service tax during this period also and hence the retrospective exemption was given for the period September 1, 2009 to September 22, 2009 through Notification no. 43/2009-Service Tax dated 2nd December, 2009 which reads as below :
" Whereas the Central Government is satisfied that a practice was generally prevalent regarding levy of service tax ( including non-levy thereof ), under section 66 of the Finance Act, 1994 ( 32 of 1994) (hereinafter referred to as the Finance Act), on taxable service namely `business auxiliary services' specified in sub-clause (zzb) of clause 105 of section 65 of the Finance Act provided by a person ( hereinafter called the `service provider') to any other person ( hereinafter called the `service receiver') during the course of manufacture or processing of alcoholic beverages by the service provider, for or on behalf of the service receiver, and that such services being a taxable service were liable to service tax under the said sub-clause (zzb) of clause 105 of section 65 of the Finance Act with effect from 1 st day of September 2009, which was not being levied according to the said practice during the period commencing from the 1 st day of September, 2009 and ending with the 22nd day of September, 2009;
Now, therefore, in exercise of the powers conferred by section 11 C of the Central Excise Act, 1944 (1 of 1944), read with section 83 of the Finance Act, the Central government hereby directs that the service tax payable on the said taxable service, namely `business auxiliary service' provided by the service provider to the service receiver, during the course of manufacture or processing of alcoholic beverages by the service provider, for or on behalf of the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of such business auxiliary service provided during the aforesaid period. (F. No. 332/17/2009 Ц TRU)"
The Exemption Notification no. 39 /2009 has made alcoholic beverages free from service tax liability from 23.9.09 onwards that means before this, they were under the scope of service tax liability along with the other non excisable goods but due to other retrospective exemption notification no. 43/2009, only alcoholic beverages got benefit of exemption. Other non excisable goods are still under the scope of service tax.
The government has not considered all aspects properly while adding the condition that the process should result in manufacture of excisable goods so as to bring non excisable goods under Service Tax net through the amendment. All non excisable goods have come under the ambit of service tax. This amendment had affected all kinds of non excisable goods which was not intended by the government at the time of bringing the amendment. Non excisable goods like handicraft products, electricity, etc. are in the same position because no notification has been there except for alcoholic beverages.
The scenario truly reflects ambiguous functioning of the government. The Government functions like this i.e. amendments are done; notifications are issued etc. without considering outcomes of the same. If the suggestions of all concerned persons were taken before imposition then this valuable time of Parliament, all concerned officers would not have been wasted and rather would have resulted in a more orderly framework of legislation requiring less alteration. Earlier it was done for levy of transport of goods by rail and later on it was done for alcoholic beverages. The Hindi proverb rightly fits for the same "реЭрд╛рдХ рдХреЗ рддреАрди рдкрд╛рдд" or "рдХрд╛рддрд╛ рдкреАрддрд╛ рд╕рдм рдХрдкрд╛рд╕ рд╣реЛ рдЧрдпрд╛."
Before parting we can say that as it is truly said that "the name has its own impact", the same has been proved in the situation given above. The name "ALCOHOL" had left its drunken impact on the Government functioning which resulted in retrospective exemptions on Alcoholic Beverages. The situation connotes that in this complete scenario of introducing the liability of tax and thereafter bringing a retrospective exemption on alcoholic beverages the Government behaved like a drunken men who don't know what he is doing and what was to be done.
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30 November 2009
Johnny and Service Tax Refund Part - V
By:
-CA. Pradeep Jain
Siddharth Rutiya
Visit us at: www.capradeepjain.com
In continuation of previous articles, structuring complicatedness involved in getting the refund claim under GTA service, Port services, Technical testing and analysis services and Specialized cleaning services, we in this article are unveiling the problems existing in the Service tax refund mechanism under Insurance Services (Section 65[105][d]). This is the fifth article in the series wherein the complete scenario is being elaborated with the means of humorous poems and conversation between Johnny (an assessee) and his father but the main motive is to bring out the problems faced by exporters.
Johnny and Jill went up the hill, to get the refund order
Johnny came back with a lack
And Jill came hopeless after.
The assesses claiming refund orders under Insurance services are experiencing enormous complexities in getting their refund orders passed on vague and futile justifications that not only are annoying and irritating the assessees but also deprives away the faith of assessees on the refund mechanism designed by the Government. Such reasons on which the department is refusing the refund claims on the said services are being written out hereunder as follows: -
Johnny-Johnny! Yes papa!
Got the refund?
No Papa,
Telling lies?
No Papa,
What's the reason?
This papa: -
Johnny says: I went to the department to get the refund for Insurance service availed by me in relation to export of goods, but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -
The details of taxable value and service tax payable thereon are not mentioned. The documents issued by the insurer (including re-insurer) for payment of insurance premium does not specify the value of taxable service and the amount of service tax liability in the Insurance premium cover note. Further the refund claim was not accompanied along with the declaration document as regards the same. This is one of the pre conditions for availing the benefit of refund claim.
Johnny's View:
The details as regards the documents evidencing value of taxable service and service tax thereon are simply a formal requirement. However, the declaration and proposal document as required by you contains the details of the taxable value and the service tax levied thereon which evidences the payment of service tax on insurance services, and the same is enclosed along with the refund claim. Further, as this service is related to the export of goods the refund should be granted.
Johnny says: I went to the department next day again with the corrections and further supporting but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -
The Insurance policy cover note issued by the insurer (including re-insurer) for payment of insurance premium is not a valid document for refund claim and it does not specifically relates to export of goods. Even the documents are not in the name of exporter i.e. the assessee. Hence, this construe that the insurance services were not availed by the exporter in respect of goods exported and therefore the refund is rejected.
Johnny's View:
The insurance services availed from the insurer are specifically related to the goods which can be evidenced by the Marine declaration issued by the insurer. Although the insurance cover note doesn't specify the details of goods but the said declaration contains the details of vessel and the description of goods alongwith the amount insured. The same is enclosed along with the refund claim application. Hence the allegation that it doesn't relates to export of goods is futile.
The allegation on the remaining controversy as regards the name of exporter on the documents issued by the insurer is vague in its entirety. The cover note of the insurance premium policy specifically mentions the name of exporter. Thus, the complete scenario clearly picturizes that the service of insurance availed by us was directly related to the exports made by us and there is nothing which leads to distrust of this fact. Further, the payment details enclosed along with the refund claim supports this allegation further.
Johnny says: I went to the department next day again with the further corrections but department rejected saying: -
Johnny-Johnny go away,
You won't get refund anyway.
It has following more flay: -
The insurance policy taken by assessee is an open Marine Cargo Policy and it doesn't specifically relate to the goods exported. Further the amount of service tax charged in the invoice is related to the complete policy premium and it can't be linked to the export goods sent separately.
Further, the invoices issued by the Insurance agency do not fulfill all the requirements specified under Rule 4A like category of service, Description of service, valid Invoice Number, Service tax rate, Service tax registration number and other alike things. In continuation it is alleged that your argument that these are rectifiable defects and you have amended the same is not acceptable. As the document should be proper and valid document.
Johnny's view: -
The view taken by the department is incorrect. The insurance policy taken is an open Marine insurance policy wherein we deduct the value of the consignment sent on export from the balance amount of sum insured and the remaining balance is carried forward for rest of the consignments to be dispatched in future. Hence, we are claiming the proportionate amount of service tax refund calculated on the amount of value of consignment and total policy amount. Thus, there is no difficulty in deriving at the service tax amount and department should allow the refund claim on same.
At the last, the view taken by the Department is stringent in applying the legal language as provided under Rule 4A, whereas the department should adopt a liberal view in this regard, more to in the case of Rule 4A of Service tax rules requirements. Non compliance of the requirements specified under Rule 4A, does not lead to a severe impact and there should be a practice on the part of departmental authorities to avoid allegations if the Rule 4A is not complied in its entirety. Henceforth, the allegation of the department is futile for disallowance of refund claim.
Fruitless again & again;
Johnny now in grief and pain!
Refund order now a dream;
His efforts have downstream!
Via this article the sole endeavor is to picturize the problems faced by assesses in getting the refund order as against the Insurance services. With this entertaining and rhythmical article we summarize that the present situation and mental state of assesses alleging refunds against export of goods is alike to the situation of Johnny as pointed out in the poem.
There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article……..
23 November 2009
Johnny and Service Tax Refund Part - IV
Johnny and Service Tax Refund Part - IV
By:
CA. Pradeep Jain
Siddharth Rutiya
Visit us at: www.capradeepjain.com
To prolong the series of the articles on Refund claims to exporters we here under this article are expressing the miserable situation of exporters claiming refund claims for service tax paid on services used in export of goods. This is the fourth article in a row of this series of articles. In the previous three articles we had elaborated the difficulties faced by the assessees in getting the refund claim under GTA service, Port services and Technical testing and analysis services.
In this fourth article we are attempting to present the grounds on which departmental authorities are disallowing the refund claims as related to Specialized cleaning services (namely disinfecting, exterminating, sterilizing or fumigating of containers) availed by the exporters (Section 65[105][zzzd]). This complete state of affairs is humorously picturisead by the way of poems and conversation between Johnny (an assessee) and his father. This Endeavour is just to bring out the problems faced by exporters.
Johnny and Jill went up the hill, to get the refund order
Johnny came back with a lack
And Jill came hopeless after.
The assesses claiming refund orders under Specialized cleaning services are facing vast difficulties in getting their refund orders passed on pointless and unimportant justifications that not only are harassing the assessees but also deprives away the faith of assessees on the refund mechanism. These enormous reasons on which the department is refusing the refund claims on the said services are being projected hereunder as follows: -
Johnny-Johnny! Yes papa!
Got the refund?
No Papa,
Telling lies?
No Papa,
What's the reason?
This papa: -
Johnny says: I went to the department to get the refund for Courier service but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -
The refund claim was not accompanied along with the written agreement as regards the said service. This is one of the pre conditions for availing the benefit of refund claim.
Johnny's View:
The requirement of written agreement is simply a formal requirement that can be avoided as it is a fact that if there are any statutory requirements of the Foreign law for specialized cleaning of containers, then we the assessees are unable to evidence the same to your good honour and hence there can't be any written agreement in such respect. But as this service is related to the export of goods the refund should be granted.
Further, it is a set philosophy that no exporter will carry out the Specialized Cleaning service until and unless there is a requirement of same from the foreign buyers. This further clarifies the situation and makes it clear that the said requirement of submitting the written agreements is just a presupposed condition which can be avoided. But the department does not agree. Even it was argued that this requirement has been dispensed with new set of Rules effective from 06.07.2009. This has been down on our representations. This shows the intention of the Government. It is laid down principle that the beneficial notifications should have retrospective effect. But the department does not agree and says that it is clearly written in the notification that it is applicable from the date of notification and as such the requirement is relaxed from 06.07.2009 only.
Johnny says: I went to the department next day again with the corrections but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -
There is no evidence from the enclosures of the refund claim and other documents that the refund of Specialized cleaning service as claimed by you is accredited by a competent statutory authority. This is a specific requirement in the notification. As you have not enclosed the certificate and it seems that the Specialized cleaning services as availed by you is from an agency not accredited by the competent statutory authority to provide such specialized cleaning. Even the relaxation from this condition is also applicable from 06.07.2009. Now, the agency is having its office in other city and as such it will take time to get certificate does not hold good in the era of fast communication. Moreover, your argument that fumigation done by this agency is acceptable to foreign countries does not hold good when there is specific requirement in the notification then you should produce the certificate.
The refund claims are allowed in respect of such service only when these are provided by a person who is validly accredited by the competent statutory authority and the said services are used in export of goods. This must be further evidenced by a valid certificate which must be enclosed along with the refund claim.
Johnny says: I went to the department next day again with the further corrections but department rejected saying: -
Johnny-Johnny go away,
You won't get refund anyway.
It has following more flay: -
The invoices issued by the Specialized cleaning agency do not fulfill all the requirements specified under Rule 4A like category of service, Description of service, valid Invoice Number, Service tax rate, Service tax registration number and other alike things. The debit note issued by agency without service tax registration and category of service are not valid duty paying document and as such the refund is not admissible. Further, your argument that these are rectifiable defects and you have amended the same is not acceptable. As the document should be proper and valid document.
Johnny's view: -
The view taken by the Department is stringent in applying the legal language as provided under Rule 4A, whereas the department should adopt a liberal view in this regard, more to in the case of Rule 4A of Service tax rules requirements. Non compliance of the requirements specified under Rule 4A, does not lead to a severe impact and there should be a practice on the part of departmental authorities to avoid allegations if the Rule 4A is not complied in its entirety. Henceforth, the allegation of the department is futile for disallowance of refund claim.
Fruitless again & again;
Johnny now in grief and pain!
Refund order now a dream;
His efforts have downstream!
By the virtue of this scenario picturiazed above the exclusive attempt is to bring into lime light the problems faced by assesses in getting the refund order as against the cleaning services. To represent the whole situation and to make it somewhat rhythmatic we have graced the article with humorous poems and conversation between Johnny and his father.
There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article……..
14 November 2009
Brand Name for Packing Industry: - All is well that ends well
Prepared by: - CA. Pradeep Jain
Sukhvinder Kaur, LLB(FYIC)
visit us : www.capradeepjain.com
Introduction: -
SSI exemption has been granted to boost the small scale industries. Exemption is granted from payment of basic excise duty and from special duty of excise on clearances of specified value of goods. The specified value as well as the limit of exemption is fixed vide Notifications which are issued from time to time. SSI exemption was granted initially vide Notification No. 175/1986-CE, dated 01.03.1986. At present the Notification in force granting SSI exemption is Notification No. 8/2003-CE, dated 01.03.03 and as amended.
The dispute involved: -
SSI Exemption is granted subject to fulfillment of certain conditions which are prescribed in Notification no. 8/2003. One of the conditions prescribed is that the SSI exemption will not be applicable to specified goods bearing a brand name or trade name of another person, irrespective of the fact whether such brand name was registered or not contained in Para 4 of the Notification. However, exceptions are also provided to this condition such as goods cleared as `original equipment', goods bearing brand name or trade name of KVIC or if such goods were manufactured in factory located in rural area. The exceptions in the Notification read as follows:-
"4. The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases: -
(a) ………
(b) ………
(c)…………
The definition of `brand name or trade name' is given in Explanation to Para 5 which reads as follows:
Explanation.- For the purposes of this notification,-
(A) "brand name" or "trade name" means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person;
Thus, the Notification is denying SSI exemption to units which are manufacturing goods which have a brand name/trade name of another person. This has lead to a lot of litigation.
The Apex Court in the case of M/s Kohinoor Elastic Pvt. Ltd. [2005 (188) ELT 3 (SC)] held that the benefit of SSI Exemption is not available to the goods bearing a brand name/ trade name of the customer, manufactured by a SSI unit, as per the orders of the customer, for further use by the customer in the manufacture of his final product. The said unit was manufacturing elastic tape and affixing the brand name of his customer who was manufacturer of undergarments. This was done as per specific instructions of the customer.
Issue of the SSI manufacturers: -
The SSI manufacturers who are engaged in manufacture of flexible packing material like plastic bags, corrugated boxes etc, were printing/affixing the brand name of the customers whose goods are to be packed therein, were being denied the benefit of SSI exemption. The said manufacturers contended that this was not a use of brand name of another person by them.
It was contended that the packaging material will definitely contain the brand name of some other party as it is to be used by that other party for packing their final product. However, the SSI exemption cannot be denied merely on these grounds as this sale is not in course of normal trade and the goods are to be specifically used by the buyer booking the order. The Board has, also, interpreted the like cases in favour of the assessees.
Amendment of Notification No. 08/2003-CE: -
Several representations were made by the Trade and Industry against the stand of the Department that printing on packing material will amount to use of brand name of other person. Although it does not sound logical but the language of notification was such that it lead to such a confusing situation.
The Board, ultimately, amended the Main Notification No. 8/2003-CE by Notification No. 47/2008-CE dated 1.09.08. With this amendment, exemption was granted to specified goods which were in the nature of packing materials. The relevant clause (e) of Para 4 is reproduced here under:
"(e) Where the specified goods are in the nature of packing materials, namely, printed cartons of paper or paper board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps, crown corks, metal labels."
Further, the exemption granted to specified goods in the nature of packing materials was limited to clearances upto Rs 90 lakhs for the remaining part of financial year 2008-09. The relevant clause is reproduced as under:-
"4B Notwithstanding anything contained in the preceding paragraphs, the exemption in respect of goods specified in clause (e) of paragraph 4, contained in this notification, shall be restricted to rupees ninety lakhs for the remaining part of the financial year 2008-09."
The said amendment is effective from 1st of September, 2008. But this has also lead to certain problems. One of the problem was that the exemption granted only to printed cartons of paper or paper board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps, crown corks, metal labels. But this notification has not included the packaging material (i.e. material for primary packing) like the products of polymers units - pouches and plastic bags. The use of the word `namely' had also restricted the scope of packing materials which were eligible for SSI exemption under Notification No. 8/2003- CE.
Again the representation was made to the Ministry of Finance. The Board has once again considered the representation of the industry and amended the basic SSI Notification 8/2003-CE (cited supra) by the Notification No. 2/2009- C.E. dated 11.02.2009 and plastic bags were added in the above list. But still some packing materials were not added to the list and the printed laminated rolls were added in the budget by Notification No. 9/2009-C.E. dated 07.07.2009. Thus, the Board has considered the submission of Trade and Industry and amended the notification on their representation.
The after situation: -
As already stated, the amendment only brought relief to certain extent but also raised certain other problems. One such problem was handled by Board by amendment in the notification. But the other problem was raised by the department. They said that the exemption granted to specified goods in the nature of packing materials had been granted from 1st of September, 2008. This meant that the SSI exemption has been granted from 1st of September, 2008 and not from 1.03.2003 when Notification No. 8/2003- CE was made effective. Consequently, the SSI units manufacturing packing materials of the nature mentioned above have been made liable to pay duty from 1.03.2003 till 1.09.08.
Thus, the Demand for duty could be raised from such SSI units which had not paid duty by claiming the SSI exemption under Notification No. 08/2003-CE. This could have led to a lot of issuance of show cause notices all over the country. This is due to the fact that the entire SSI industry manufacturing packing materials was not paying the duty and was claiming exemption.
Section 11C Notification: -
This has led to a number of representations from the packing material industries all over India once again. The Board has power to issue retrospective exemption under Section 11C of Central Excise Act if there is duty on certain product and general practice of industry is such that they are not paying duty during that period.
Now, the Board has once again considered the representation of the industry and issued Notification No. 24/2009-CE (NT) on 21.10.09 granting Section 11C exemption to SSI units manufacturing packing materials, namely printed cartons of paper or paper board, metal containers, high density polyethylene woven sacks, adhesive tapes, stickers, pilfer proof caps, crown corks, metal labels; Plastic Bags and Printed laminated rolls. The exemption from payment of duty has been granted on the said goods manufactured by a unit where the manufacturer had affixed the specified goods with a brand name or a trade name of another person who is not eligible for grant of exemption under the relevant Notification. The exemption is granted with retrospective effect. Thus, the issue has been settled and SSI manufacturers of packing material have got the relief from the Board.
Before parting: -
Thus, the SSI units who were affixing brand name or trade name of another on the packing material, Plastic Bags and Printed laminated rolls have been finally granted relief which was not only long awaited but was well fought by the SSI manufacturers. Also, the Board has also played a very positive role in granting the exemption to end this issue. The complete period of this issue has been very cumbersome but it is famous proverb- "All is well that ends well."
03 November 2009
IndianCAs: Johnny and Service Tax Refund Series
Hello Members,
CA Pradip jain has written really good humorous articles on Service Tax Refunds. Its really interesting reading for a CA who always see the boring lengthy texts of Laws and Acts. There are three articles in this series and posted to our blog IndianCAs. You can access as below by clicking the link, and don't forget to write your comments if you have anything to say on that:
Johnny and Service Tax Refund - Part I:
Johnny and Service Tax Refund - Part II:
Johnny and Service Tax Refund - Part III:
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Johnny and Service Tax Refund Part - III
By:
CA. Pradeep Jain
Siddharth Rutiya
Visit us at: www.capradeepjain.com
In continuation of the series of previous two articles, elaborating the difficulties in getting the refund claim under GTA service and Port services, we in this article are attempting to present the problems existing in the Service tax refund mechanism under Technical testing and analysis Services (Section 65[105][zzh]). This complete state of affairs is humorously picturisead by the way of poems and conversation between Johnny (an assessee) and his father. This Endeavour is just to bring out the problems faced by exporters.
Johnny and Jill went up the hill, to get the refund order
Johnny came back with a lack
And Jill came hopeless after.
The assesses claiming refund orders under Technical testing and analysis Services are facing enormous complexities in getting their refund orders passed on futile and negligible grounds that not only harass the assessees but also deprives away the faith of assessees on the refund mechanism. These enormous reasons on which the department is refusing the refund claims on the said services are being projected hereunder as follows: -
Johnny-Johnny! Yes papa!
Got the refund?
No Papa,
Telling lies?
No Papa,
What's the reason?
This papa: -
Johnny says: I went to the department to get the refund for Technical Testing and analysis service but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -
You have not submitted the written agreement as regards the said service. This is a prerequisite for availing the benefit of refund claim.
Johnny's View:
This is just a means of requirement that can be neglected as it is a fact that if there is any statutory requirements of the Foreign law for technical testing and analysis then we the assessees are unable to bring out the same to your good honour and hence there can't be any written agreement in such respect. But as this service is related to the export of goods the refund ought to have been granted.
Further, this is a set philosophy that no exporter will carry out the technical testing and analysis service from a third party until and unless there is a requirement of same from the foreign buyer's point of view. This further clarifies the situation and makes it ample clear that the said requirement of submitting the written agreements is just a presupposed condition which can be avoided. But the department does not agree.
Johnny says: I went to the department next day again with the corrections but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -
The date of technical testing and analysis report of the samples are post dated from the dates on which the export goods were sent to the buyer. Hence, this construe that the samples were sent prior to the date of Technical testing and analysis report and as such this service availed by the exporter is not in respect of goods exported and therefore the refund is rejected.
Johnny's View:
The dates of testing report is post dated as regards the date of consignment of goods to the buyer because the goods after being tested were sent to the buyer and as it was assured on our part in respect of quality of the goods that the same will clear out all the testing we sent the goods to the buyer. This was due to the fact that there was urgent need of the buyer. We normally take out the sample from the consignment and keep it for 6 months for any future claims. We took out the sample and sent the consignment and then send it to concerned lab for testing. The test report has come before the consignment reach the foreign buyer. Thus, the complete scenario clearly picturizes that the service of technical testing and analysis availed by us was directly related to the exports made by us and there is nothing which leads to distrust of this fact. Further, the correlation with export is established from the fact that the Service tax invoice has reference of Report. The report has reference of Batch number. That batch number also appears in shipping bill. Thus, it is clearly established that the technical testing and analysis service is taken for this particular consignment only.
Johnny says: I went to the department next day again with the further corrections but department rejected saying: -
Johnny-Johnny go away,
You won't get refund anyway.
It has following more flay: -
The invoices issued by you do not fulfill all the conditions specified under Rule 4(a) like category of service, Description of service etc. and in addition to this the batch number written in the invoice do not match with the batch number as is specified in the technical testing and analysis report. This further leads to the conclusion that the testing and analysis work carried out is no way connected with the goods exported and as such the refund is disallowed.
Johnny's view: -
Firstly, the Department is interpreting the legal language very strictly whereas the department should be liberal in this aspect, more to in the case of Rule 4A of Service tax rules requirements. Non compliance of the Rule 4A is not of great concern and there should be a practice to avoid allegations if the Rule 4A is not complied in its entirety.
Furthermore, the department's contention that the batch numbers do not match with those specified in the testing report is also no great concern. Just on the behalf of the Batch number it can't be interpreted that the testing and analysis services weren't used in respect of export of goods. These batch numbers are entered manually in the invoices and there are great chances of errors in this respect. Henceforth, the allegation of the department is futile for disallowance of refund claim.
Fruitless again & again;
Johnny now in grief and pain!
Refund order now a dream;
His efforts have downstream!
Via this article the sole endeavor is to picturise the problems faced by assesses in getting the refund order as against the Technical testing and analysis services. To represent the whole situation and to make it somewhat rhythmatic we have graced the article with humorous poems.
With this entertaining and rhythmical article we summarize that the present situation and mental state of assesses alleging refunds against export of goods is alike to the situation of Johnny as pointed out in the poem.
There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article……..
01 November 2009
Johnny and Service Tax Refund Part - II
Johnny and Service Tax Refund Part - II By: - CA. Pradeep Jain Siddharth Rutiya Visit us at : www.capradeepjain.com In continuation of previous article, elaborating the difficulties in getting the refund claim under GTA service, we in this article are unveiling the problems existing in the Service tax refund mechanism under Port Services (Section 65[105][zn]). This complete scenario is being elaborated with the means of humorous poems and conversation between Johnny (an assessee) and his father but the main motive is to bring out the problems faced by exporters. Johnny and Jill went up the hill, to get the refund order Johnny came back with a lack And Jill came hopeless after. Presently, assesses are claiming refund orders under Port Services are experiencing vast intricacies in getting refunds. The refunds claimed by the assessees as against their exports are their Rights but are being refused by the departmental authorities on various arguments which are of no significance and worth less. The various reasons on which the department is refusing these refund claims on the said services are highlighted as under: - Johnny-Johnny! Yes papa! Got the refund? No Papa, Telling lies? No Papa, What's the reason? This papa: - Johnny says: I went to the department to get the refund for Port service but department said: - Johnny-Johnny go away, Come again another day. Your refund order has following Flay: - The refund claimed by you is regarding port charges of ICD and as per the law refund is allowed for "Service provided by a port or any person authorised by the port in respect of the export of said goods". Further the port charges of ICD are not eligible for refund as they aren't covered under the said service as because of the definition of Port. The definition of port reads as under: - ""port" has the meaning assigned to it in clause (q) of section 2 of the Major Port Trust Act, 1963". And Major Port Trust Act, 1963 defines the term port as: - ""Port" means any major port to which this Act applies within such limits as may, from time to time, be defined by the Central Government for the purposes of this Act" The analysis of these definitions of "port" as given here above doesn't include ICD and henceforth the refund order is not to be allowed. Johnny's View: - I told that ultimately the goods are to be exported through port only and as such the refund should be granted to us. We have also given the list of the shipping bills along with the ports. But you (the department) do not agree. You say that the goods are exported through ICD and not through the port and as such service tax claimed by you are not port charges. Hence the refund cannot be granted to me. Johnny says: I went to the department next day again with the corrections but department said: - Johnny-Johnny go away, Come again another day. Your refund order has following more flay: - I had availed duty drawback in respect of shipping bills in terms of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. Johnny's View: - But my contention was that we are also claiming rebate claim. We pay the duty on FOB value of goods. The rebate claim is given to us by the department on FOB value as reduced by Port charges, Outward Freight, CHA Charges and Insurance charges. Henceforth, the value under consideration for Rebate claim doesn't includes these values and no rebate is given on it. On the other hand Drawback as given under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 is limited to the scope of duty/tax paid on inputs and input services. Thus, here again the department is taking contention that Drawback will not be allowed on such Port charges as these are not input services and have been availed after the manufacture of final product. The Department is taking two way contention one while giving rebate they are denying the same on Port Charges alleging that these aren't includible in transaction value and on the second part they are disallowing the refund of service tax alleging the Drawback has been claimed and drawback rates includes these input services. Thus, if Department is taking two way contentions. But the department said that the value under Central Excise is different from the value under drawback rules. The drawback is sanctioned on FOB value and as such these input services are included while fixing the drawback rates. The department said that if we are taking two stands then you are also taking two stands in replying the same. When we sanction rebate claim then you say that these are includible in transaction value and rebate should be sanctioned on FOB value but when claiming refund you say that these are not input services and as such these are not included in fixing drawback rates. Johnny says: I went to the department next day again with the further corrections but department rejected saying: - Johnny-Johnny go away, You won't get refund anyway. It has following more flay: - The service tax invoice issued to you is being issued by the shipper and not by the Port authorities. These shippers are being registered under Business Auxiliary Services or Business Support Services. These services aren't specified under the list of services eligible for refund against export. Thus, the refund order is disallowed on such ground. Jonny told them that the port authorities do not bill us directly but it is billed to shippers and they bill to us. But the nature of expenses clearly tells that these are incurred at the port. The terminal handling charges and other related charges are clearly incurred at port. Fruitless again & again; Johnny now in grief and pain! Refund order now a dream; His efforts have downstream! Although the article is ornamented with humorous poems but the key motive is to bring into light the intricacies involved in the refund orders. With this entertaining and rhythmical article we summarize that the present situation and mental state of assesses alleging refunds against export of goods is alike to the situation of Johnny as pointed out in the poem. There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article…….. |
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