November 2016 Newsletter

FOREIGN TRADE POLICY
CIRCULARS
Circular
No. 50/2016-Customs
 
All industry rate of Duty
Drawback
The revised AIR Rate of Duty Drawback is notified which came into force from 15th Nov 2016.

(Refer: Article)

CASES
Duty Drawback Toyo Ink India Pvt. Ltd. Vs CC New Delhi 2016 (11) TMI 138

Issue:

Benefit of Duty Drawback under All Industry Rate by converting free shipping bills to DBK Shipping bills under Circular No.36/2010 -CUS. Benefit was denied on the ground that goods could not be physically examined without giving opportunity of being heard.

Decision:

Held that benefit cannot be denied on the ground that goods could not be physically examined. Matter remanded back directing to give sufficient opportunity of personal hearing.

SERVICE TAX
NOTIFICATIONS
Notification No.46 47 48 and 49/2016-ST dated 9th Nov 2016

Service Tax on Cross Border B2C OIDAR Services w.e.f 1st
December 2016

Amendments are made to the provisions of Service tax for levying service tax on online services received in India from a service provider in non-taxable territory.

 

It is applicable only for B2C transactions whereas tax for B2B are levied under RCM. (Refer: Article)

CIRCULARS
Circular No.202/12/2016-ST dated 9th Nov 2016  

FAQs for levy of Service tax on B2C cross border OIDAR Services.

In pursuant to the notification for levy of service tax on OIDAR services received in India from a service provider in non-taxable territory a clarificatory circular is released with FAQs in this regard. (Refer: Article)
CASES
Availment of CENVAT Credit M/s LG Electronics India Pvt Ltd Bharat Bhushan Sharma Manager v.CCE Noida 2016 (11) TMI 21

Issue:

Whether CENVAT credit can be disallowed and whether interest & penalty can be imposed on the ground that the service provider failed to pay the Service tax.

Decision:

It was held that it is impractical for the assesse to go behind the records of service provider to check whether he has paid the service tax. The conditions under CCR 2004 is complied. Hence the order for disallowance of CENVAT Credit and imposition of interest and penalty is set aside.

CENVAT credit on input
services
Commissioner of ST Bangalore v. Qwest Telecom Software Services Pvt Ltd 2016 (11) TMI 109

Issue:

Whether CENVAT Credit can be allowed on Air Travel Tickets used for travelling of engineers to render services at customers place.

Decision:

It was held that Air travel by software engineers are valid input services as it relates to business activity. CENVAT is allowed.

Exemption Lykes Line Ltd. v. Commissioner of Service Tax Mumbai-I 2016 (11) TMI 192

Issue:

Whether department is right in denying exemption under Notification No.12/2003 – ST dated 20.06.2003 for not complying the condition of board circular.

Decision:

It was held that substantive benefit under notification cannot be denied on the ground that conditions of board circular is followed. The procedure to claim must be part and parcel of notification.

CENTRAL EXCISE
CASES
Not registered at the time of availing CENVAT credit Ultra Tech Cement Ltd v. CCE 2016 (12) TMI 18

Issue:

The CENVAT credit (of Company 1) was disallowed by lower authority on the ground that the company is not entitled for availing credit during the unregistered period consequently credit was transferred to Company 2 on demerger and subsequently transferred to the appellant on merger.

Decision:

The decision in the appellant’s own case cited by the appellant has held that credit availed on MS items used for fabrication/erection of capital goods was admissible. Following the propositions laid in the appellant’s own case it was held that the denial of credit is unjustified.

Determination of Assessable
value does not include
Escorts Limited v. CST Delhi – 2016 (11) TMI 344

Issue:

Dispute in relation to inclusion of certain expenses (pre-delivery inspection expenses free services provided to customers after sales training providing to customers labour involved on replacement parts advertisement for vehicles storage at the dealer’s end repair of vehicles and outward handling of vehicles) incurred by the dealers in the assessable value of duty payable.

Decision:

Relying on SC decision it was held that the expression “in connection with sale of goods” would only mean that but for payment of additional amount the sale of the goods would not take place. It concluded that the PDI charges free service after sale charges would not be included in the assessable value and the same was dismissed.

Clearance of defective and
rejected goods
Dutt MultimetalsPvt. Ltd. v. CCE – 2016 (11) TMI 1329

Issue:

In the ER-1 return they were reflecting 98% of their production as prime quality CTD bars and rounds whereas in the commercial sale invoice the said goods were being cleared as defective. Whether the raw material supplier was only selling cenvatable invoices without supply of goods to the appellant?

Decision:

It was held that the appellant needed the raw material for the production of their final product (whether defective or not) and if as per the Revenue such material has not been received by them from the raw material supplier they were not in a position to manufacture the final product. Appeal allowed.

Removal of Capital Goods
after use
Kirloskar Batteries Private Ltd v. CCCE – 2016 (11) TMI 475

Issue:

Amount equivalent to CENVAT credit availed in respect of capital goods cleared after use shall be paid.

 
Decision:

Rule 3(5) of CCR 2004 states that “When inputs or CG removed as such from the factory the manufacturer shall pay an amount equal to the CENVAT credit availed on such removal”. Therefore it was held that the appellant was not required to pay an amount equal to credit availed while removing capital goods after use.

Definition
of Manufacture
CCE v. M/s Metro Appliances Ltd. And Others – 2016 (11) TMI 504

Issue:

1.Whether defective fans received under rule 173-H when scrapped and dismantled and parts thereof stored separately in heaps can be identified as fan?2.Whether assembly of dismantled parts or fan / new part amounts to manufacture u/s.2(f) of Central Excise Act 1944?3.Whether replacement of defective fan by a new one does not establish the fact that the party was evading duty by removing excisable goods in the guise of repaired one?

Decision:

1.It is not disputed that defective fans were received for service or repair. Dismantled parts independently cannot be identified as fan.

2. When defective fans which had been dismantled are reassembled after removal of defective parts repaired and replaced as new one by reusing remaining workable parts it is a case of mere repair and service and the same will be amount to manufacture.As question (1) & (2) stands negative (3) automatically should be answered negative.

Duty liability on Delivery
charges and on goods cleared from the terminal to COCO.
Hindustan Petroleum Corporation Ltd. v. CCE – 2016 (11) TMI 857

Issue:

1. Whether delivery charges after collected from the buyers shall be liable to duty?

2. Duty paid goods are cleared from the terminal to the “Company owned company outlets (COCO)” that was not the place of removal when no further levy of duty is made. Can duty be imposed on the same?

 
Decision:

1.Once there was clearance of duty-paid goods any further charges for delivery thereof under separate contract shall not form part of the assesable value.

2. From 14.05.2003 “Place of removal” includes “A depot premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory”. As the case falls before 14.05.2003 it did not cover such transaction within its ambit.

Circulars
Circular No. 1050/38/2016 – CX:

Combined Annual Return Form for Central Excise and Service Tax.

In view of impending implementation of GST it has been decided that the Central Excise and Service Tax Annual return shall not be required to be filed for the year 2015-16 which is due to be filed by 30.11.2016. After implementation of GST Annual Return for non-GST goods only may be required.
CUSTOMS
NOTIFICATION
Notification No. 134/2016-Customs (N.T.)

Enactment of Deferred
Payment of Import Duty Rules 2016.

These Rules permit the Importers certified under Authorized Economic Operator Programme as AEO (Tier-Two) and AEO (Tier-Three) to make deferred payment of duty of Customs.

These also elaborate on the mode of payment due date of payment applicability of deferred payment etc. to be made by the “eligible importer”.

“Eligible importer” is that importer who has received the approval from the proper officer for clearing the goods for home consumption.

CIRCULARS
Circular No. 52/2016-Cus

Enactment of Deferred
Payment of Import Duty Rules 2016.

Every importer certified as AEO-T2/AEO-T3 shall obtain ICEGATE Login for obtaining benefits.

For availing the benefit of deferred payment every AEO-T2/AEO-T3 should nominate a nodal person for authenticating all the customs related transactions on behalf of the AEO.

Circular No. 55/2016-Customs

Reducing/eliminating
printouts in Customs Clearance

Reasons:

GAR7 Forms/ TR-6 challans – ICEGATE on its e-Payment Gateway provides a list of all unpaid Challans for viewing & printing and can support Payment transactions.

TP Copy: 

Trans-shipment permit can also be printed by the carrier in his offices; where the ICDs/CFSs and the gateway port are not interconnected manual copy or printing of TP copy may continue.

Shipping Bill:

a. Detailed copy of the Shipping Bill is not required by the Authorised Dealer. It is enough if a summary copy is printed.

b. CBEC provides copies of digitally signed Shipping Bills to DGFT.

c. The data of Shipping Bill is integrated with EDPMS (Export Data Processing and Monitoring System) of RBI.

CASES
Order of Appellate
Authority Disobeyed.
Asan Mohamad Jailabudeen v. The Assistant Commissioner of Customs 2016 (11) TMI 304

Issue:

Whether the AC without obtaining any stay order regarding the confiscated goods of the Petitioner is valid when the Appellate authority passed an order to release the same after paying Redemption fine and Penalty?

Decision:

The Written petition was dismissed off on the ground that the mere filing of an appeal against the order of the appellate authority and the pendency of the said appeal cannot be shown as sufficient grounds for not giving effect to the order of the Commissioner of Customs (Appeals).

The Apex Court has also stated in certain judgments that filing an appeal does not operate as stay and therefore the goods detained should be released as per the appellate order.

The court finally opined that mere filing of the revision against the order of appellate authority would not empower the respondent to deny release of the goods in question and the respondent have not given any proper explanation as to why no stay order has been obtained against the order of the Commissioner of Customs.

Waiver of interest Essar Steel Vs. CBEC 2016 (11) TMI 556

Issue:

Whether the case of the Appellants despite paying nearly 50% of the duty demanded and having the litigation process since
1996 fall under the parameters of proviso to Section 61 (2) of Customs Act to get waiver of Interest?

Decision:

The court opined and held that since the Act does not specify the exceptional circumstances which attract the purview of Section 61 (2) the Appellants case has to be seen if it is worthy of receiver a waiver. Therefore the court observed that if the goods had not been auctioned the petitioner would have had the benefit of the goods and the amount already paid by them would come to nearly 50% of the duty demanded. By making payment of the remaining amount they could have retained the goods.Today the payments made by them to the tune of about 75 lakhs is in addition to the goods that they have lost. Therefore this case fits to fall under the purview of the first proviso to Section 61(2) we do not know which other case would fall. Therefore the Writ Petition is allowed and the impugned demand is set aside with no order regarding refund of the amounts already paid by them.

Interpretation of a
Notification w.r.t. Limitation Period.
Verifone India Sales Pvt. Ltd. v. CC 2016 (11) TMI 677

Issue:

Whether the refund claim made by the appellants after the finalisation of the assessment under the Notification No. 102/2007-CUS dated 14/09/2007 is valid or not wherein it is also time barred?

 
Decision:

The Tribunal relied on the precedents from various High Courts and observed that the right of claim refund only accrues to the importer once sale is Complete. To uphold a limitation period starting from the date of payment of duty as prescribed in the amending notification would amount to allowing commencing of limitation period for refund claim before the right of refund even accrued. The High Court held that imposition of a period of limitation for the first time without statutory amendment through a notification therefore could not prevail. Therefore the Tribunal allowed the refund claims filed by the appellants despite them being time barred.

Rejection of Refund Claim Bharat Electronics Limited v. CC 2016 (11) TMI 852

Issue:

Whether the rejection of refund claims filed by the assessee for the reason that on the basis of the duty exemption certificate the bills of entry cannot be reassessed in terms of Section 149 of the Customs Act is justified or not?

Decision:

The Tribunal observed that Section 27 of the Customs Act has been amended w.e.f 8.4.2011 to the effect that reassessment of the Bill of Entry is no longer a condition precedent for granting refund under this Section. After this date there is no need for reassessing the import bills of entry for grant of refund. The procedural requirement prescribed under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 1996 though was not completed at the time of import stands subsequently satisfied.

The Tribunal held that the substantial benefit cannot be denied to the assessee. However before grant of such refunds the other requirements of Section 27 needs to be looked into and subject to the satisfaction only the refunds can be paid and therefore remanded back the matter and disposed off the case.

Confiscation of imported
goods- Second hand machine
Porritts & Spencer (Asia) Ltd v. CC 2016 (11) TMI 1147

Issue:

Whether the confiscation ordered by the adjudicating authority on the ground that imported goods are parts of second hand machine already imported therefore it requires licence for import and clearance of the same since they are assessed independent of each other.

Decision:

Even though the part of the second hand machine were imported at one port and the rest imported at another port that will not make both the consignment as separate consignment. In terms of Interpretation Rule 2(a) if complete machine is presented unassembled or disassembled it has to be classified under classification of particular machine and not as parts. In the present case even though the second hand machine has been imported and cleared from two different ports but both consignments put together comprises of one second hand machine which is covered under Rule 2(a) of General Rules for Interpretations the present consignment has to be classified under classification of machine and not as a part. Hence no licence is required for clearance of such goods.

Therefore the Tribunal set aside the confiscation order by holding that the consignment in the present appeal is nothing but part and parcel of the machine as a whole and could not be classified and assessed as independent part hence no licence is required.

TNVAT
CASES
Applicability of Section-19(20) of TNVAT Act George Enterprises Vs Assistant Commissioner (CT) 2016 (11) TMI 84

Issue:

Whether the application of Section-19(20) of the TNVAT Act is prospective or retrospective in nature.

Decision:

The Madras HC has placed reliance on the of Jayam& Co. vs. Assistant Commissioner &Anr. [2016 (9) TMI 408 – SC] and upheld the vires of section-19(20) of the TNVAT Act. It held that it can give only prospective effect and not retrospective effect from January 2007.

Power to accept C & F declaration form Arvind Remedies Ltd Vs Assistant Commissioner (CT) 2016 (11) TMI 260

Issue:

Whether the respondent would be entitled to accept the C and F declaration forms after the assessments are completed.

Decision:

The Madras HC relied upon the SC decision in A.P. vs. Hyderabad Asbestos Corporation Ltd. [1994 (4) TMI 302] and upon circular dated 28.02.2001 which empowers the Assessing Authorities to revise the assessments u/s 55 of the TNGST Act which is in a parimateria with section 84 of the TNVAT Act on furnishing of declaration forms.

TRANSFER PRICING
CASES
Adjustments AgilisysIT Services India Pvt. Ltd. Vs ITO Mumbai 2016 (11) TMI 962

Issue:

Addition of notional interest onthe outstanding debtor balances made by the AO with AE.

Decision:

The notional interest calculated @LIBOR + 200 basis points is reduced from the margin earned by the assesseethe entity level margin will reduce from 21.29% to 21.17% and if the notional interest calculated @ 6.19% as taken by the AO is reduced from the marginof assessee the entity level margin would reduce from 21.29% to 19.65%. It is pointed out that in both the situations the reduced margin of assessee is higher than the margin of the comparable concerns accepted by the TPO (8%) and therefore the transactions with the AEs can be accepted to be at ALP and no separate adjustment is required to be made.

Grindwell Norton Ltd. Versus Addl. CIT 2016 (11) TMI 367

Issue:

Disallowance made u/s 14A inrespect of interest expenditure.

Decision:

The representative for theassessee referred to the Balance sheet to point out that the Share capitalplus Reserves and Surplus amounts to 318.21 crores as against investment of41.65 crores to point out that sufficient interest-free funds are available to cover the level of investments in question.Under these circumstances in our view the disallowance of 455230/- out of interest expenses by applying the provisions of Rule 8D(2)(ii) of the Rules is unjustified and is hereby set-aside.

DCIT Vs Technimont ICB Ltd. 2016 (11) TMI 383

Issue:

TPO while passing the transferpricing order has applied entity level benchmark.

Decision:

DRP has followed the Tribunal’s order in assessee’s own case for the AY 2006-07 and 2008-09 while granting the relief wherein it has been directed that TPO should consider the segmental evidence submitted by the assessee. Since the operating margin is based on audited segmental financials submitted by the assessee wherein the assessee has earned and shown profit margin at 7.81% as against margin earned by the comparable companies of 8.3% as computed by the TPO himself in pursuance of DRP’s direction which falls within the Arm’s length price range of ± 5%. In any case also even if entity level margins of 6.47% and the margin earned by the comparable companies at 8.3% (as per the DRP’s direction) is taken into consideration the ld counsel before us has pointed out that then also it falls within the variation of +/- 5%.

DCIT Vs Yodlee Infotech Pvt. Ltd. 2016 (11) TMI 1356

Issue:

RPT filter application

Decision:

Where the DRP has applied 0% RPTfilter and as per the settled position of law the RPT filter should beapplied at 15%.The tribunal set aside the order of the AO and restored back the matter to the file of the AO for a fresh by applying RPT filter of 15%.

Transport Corporation of India Ltd. Vs ACIT 2016 (11) TMI 245

Issue:

Disallowance of Employees StockOption Expenses.

Decision:

The revenue authorities denied thededuction of INR 6048569/- towards ESOP expenses because of the revised return not being filed by the assessee. However the assessee filed a letterdated before the AO claiming the said expenses. For AY 2011-12 the above wasnot allowed by the AO on the plea that such claim can only be made through arevised return and not by way of a letter. Following the decision of Delhi HCin the case of Principal CIT Vs. Western India Shipyard Ltd. [2015 (10) TMI539] we remit the issue to the file of the AO to accept the letter filed by the assessee for claiming the ESOP expenses and decide the issue inaccordance with law after providing reasonable opportunity of hearing to the assessee. Accordingly allowed for statistical purposes.