India: Indirect Tax Newsletter - September 15, 2012

Last Updated: 12 December 2012

CUSTOMS & INTERNATIONAL TRADE

Customs

The Central Board of Excise & Customs ("the CBEC") Circular No. 24/2012-Cus dated September 5, 2012

The CBEC has made 'e-payment' of customs duty mandatory for importers registered under Accredited Clients Programme and importers paying customs duty of one lakh rupees or more per Bill of Entry with effect from September 17, 2012.

FTP & Environment

RK Machine Tools (P) Ltd. Vs. Union of India [2012-TIOL-714-HC-DEL-EXIM]

The High Court of Delhi held that sale of goods to foreign tourists can be taken as 'deemed exports' and covered under the scheme of Advance Licenses in the same manner as under Duty Replenishment Licenses ("REP Licenses"). The Court observed that there is no stipulation that 'deemed exports' by sale to foreign tourists would only be covered under REP Licenses and not Advance Licenses or any other licenses. The Court further observed that under REP Licenses and Advance Licenses, objective is to claim duty free import of certain raw materials, which are utilized for manufacture of export goods. The main objective of both REP Licenses and Advance Licenses is to earn foreign exchange, which is achieved even when sales are made to foreign tourists. Thus, 'deemed exports' cannot be restricted to REP Licenses only.

CENTRAL EXCISE, SERVICE TAX, VAT & GST

Central Excise

CCE Vs. Fiat India Pvt. Ltd. [2012-TIOL-58- SC-CX]

The questions before the Supreme Court were whether the price declared by assessee below the cost of manufacture can be regarded as "normal price" for the purpose of excise duty in terms of Section 4(1) (a) of the Central Excise Act, 1944 ("the Excise Act"), and whether sale of cars by assessee at a price lower than cost of manufacture in order to compete and penetrate market can be regarded as an extra commercial consideration? The Supreme Court held that price of cars was not normal price as the same was not based on manufacturing cost and manufacturing profit, but was fixed at a lower price to penetrate market. The Supreme Court also held that price charged from customer was not sole consideration because main reason for assessee to sell cars at a price lower than manufacturing cost and profit was to penetrate market and this would constitute extra commercial consideration and not sole consideration. Therefore, assessee was asked to pay differential duty.

Tata Motors Vs. Union of India [2012-TIOL- 721-HC-MUM-CX]

The High Court of Mumbai quashed point No. 7 in the CBEC Circular No. 643/34/2002-CX, dated July 1, 2002 ("the Circular") whereby it has been clarified that where assessee sells motor vehicles to a dealer (buyer) at a given price and dealer in turn sells the said motor vehicles to a customer at a price with dealer's margin including pre delivery inspection charges ("PDI charges") and after sales service charges, then, assessable value for payment of excise duty shall include PDI charges and after sales service charges. The High Court observed that in terms of Section 4(3)(d) of the Excise Act, PDI and free after sales services charges can be included in the transaction value only when they are charged by assessee to buyer.

Service Tax

CCE Vs. Pearl Insulation [2012 (27) STR 337 (Kar.)]

The question before the High Court of Karnataka was whether assessee was liable to pay interest on Cenvat credit availed on inputs attributable to manufacture of exempted goods even after reversal of the same. The High Court relied on the judgment in the case of CCE Vs. Bill Forge Pvt. Ltd. [2011-TIOL-799-HC-CX] and held that interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when the same is due and payable. Levy of interest is on actual amount, which is withheld and extent of delay is paying tax from due date. Interest cannot be claimed from the date of wrong availment of Cenvat credit but from the date Cenvat credit is utilized wrongly. Hence, no interest is payable in this case.

VAT / GST

GST one step closer to final approval [NDTV Profit, September 11, 2012]

The GST Bill is nearing final approval after the Attorney General of India answered the constitutional queries raised by the Chairman of the Parliamentary Standing Committee on Finance ("the Standing Committee"). The chairman of the Standing Committee asked whether or not Parliament and State Legislative Assemblies have the option to not approve proposal mooted by the Finance Minister of India who presides over the GST Council ("the Council"). In his response, the Attorney General said it is certainly open to Parliament to not approve any recommendations but it does not mean the Council's recommendations will have no value. The Council will make recommendations, but ultimate prerogative lies with Parliament and Legislative Assemblies.

Report on one law for excise, service tax by end of September [The Indian Express, September 14, 2012]

In the Budget 2012-13, former Finance Minister, Pranab Mukherjee had announced setting up a study team for examining the possibility of a common tax code for service tax and central excise, which could be adopted to harmonise the two laws for a Central GST legislation. In furtherance of that, the CBEC is likely to submit a report on common legislation for the two Central levies by the end of September. Once report is submitted, comments from stakeholders would be invited.

Circular No. CC No. 24 CCT's Ref. No.A II(2)/292/2012 dated September 6, 2012

The Commissioner of Commercial Taxes, Andhra Pradesh has directed to take penal action against all dealers who issue Form C for purposes other than those notified under Section 8(3) of the Central Sales Tax Act, 1956.

Notification No. F.7(433)/Policy-II/VAT/ 2012/585-595 dated September 5, 2012

The Commissioner, Value Added Tax, Government of NCT of Delhi has directed that details of Invoice and Goods Receipt Note in respect of all goods purchased / received as stock transfer from outside Delhi shall be submitted by the dealers online, using their login id and password, before goods physically enter boundary of Delhi. This Notification shall come into force with effect from the October 1, 2012

Circular No. 18 of 2012-13 F.7/ (444)/Policy/VAT/2012/607-613 dated September 7, 2012

The Department of Trade and Taxes, Government of NCT of Delhi has introduced facility for online issue of Central Declaration Forms 'C', 'F' and 'H' on website of the Department www.dvat.gov.in. This is a fully automated facility with no human interface required from the Department's side.

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