INDIRECT TAX UPDATE - JUNE 2004
Madhukar
N Hiregange
FCA,
DISA(ICA)
INDIRECT TAXATION
1. A uniform cess of
2% is also expected across all the indirect tax levies.
Comment: This may not be conducive with complications
being introduced especially in the case of service tax
where assessees are still to get a grip.
SERVICE TAX
2. Expectations from
the Budget: The budget 2004 is expected to bring about
an increase in the number of services covered. A Rs.5/10
Lakhs blanket exemption limit may also be on the cards
to ensure that small service providers are provided relief.
The service tax credit rules are expected to be clarified
and credit made a little easier and even cross sectoral
credit available on inputs of goods as well as services.
3. Erection, Commissioning
and Installation under Consulting Engineers: It has
been clarified that erection commissioning and installation
would not be liable under consulting engineers services.
However commissioning and installation services would
be liable under the specific category w.e.f 1.7.2003.
{CBEC Circular No. 79/9/2004 _ ST Dt. 13.5.2004}
CENTRAL EXCISE
4. Expectations from the
Budget _ The number of concessions and exemptions is expected
to be reduced to broad base of the levy. The powerloom
sector is expected to be provided some relief either by
doing away with the levy itself or increasing the limits
to Rs.100 Lakhs. Exemption which are in vogue which need
to be continued would be for a time period after which
the products would be liable for excise duty. The tax
planning route of job work may see a change with the concept
of " first point sale" coming into the valuation
rules.
5. E-filing of Returns-
The optional facility of filing the returns for the month
ending/ quarter ending June 30th has been put
in place. Every assessee (manufacturer / dealer) who has
been allotted the 15 digit registration number can apply
for this facility to their jurisdictional Assistant/ Deputy
Commissioner of Central Excise. After verification an
initial password will be allotted and communicated. Subsequently
the assessee can access the website: exciseandservicetax.nic.in
and proceed to file the returns electronically. { CBEC
Circular no. 791/24/2004- CX dt 1.6.2004 168 ELT T-12}
Comment: This is one more move to reduce the interaction
of the assessee with the officers and would certainly
reduce the transaction cost of excise.
6. Manufacture- Repair
of Compressors- The repairing of defective compressors
is carried out by replacing stators. The process of shaping,
varnishing and backing to fit into the compressor brings
into existence `stators'. Therefore a process of manufacture
and to that limited extent the liability under excise
exists. {Tecumseh Products India Ltd. Vs CCE 2004 (167)
ELT 498(SC)} Comment: Though repair activity per se
does not amount to manufacture, the manufacture of any
part which is captively consumed in the repair would be
an activity liable for excise duty. In this day of cenvat
credit being widely available, the assessee may invoice
the same and charge the repair activity separately. The
repair charges would be liable under service tax.
7. Dutiability of Immovable
property- Hydraulic Mudguns and Tap Hole Drilling Machine.
Assembly and erection of machine at site on specially
made concrete platforms of 25 feet height. Considering
the weight and volume as well as process of erection to
make it functional and the fact that the same could not
be shifted without first dismantling and re erecting at
another site. The same is immovable property. { TTG Industries
Ltd. Vs CCE 2004 (167 ) ELT 501 (SC)} Comments: This
judgement clearly sets out some criterion, which should
settle many pending disputes.
8. SSI Exemption- Available
to Related companies: The concept of related person
is for the purpose of valuation where the sale price of
the related person is reckoned for the purpose of valuing
the goods removed to him. As long as the brand name is
not common and they have separate existence they would
be admissible for the exemption. {CCE Vs Hira Cement (T)
2004 (168) ELT 283}.
9. SSI Exemption- Rural
Area: In the absence of Government notification declaring
village as Urban, it has to be considered as rural area.
Even a village included in notified metropolitan area
maybe a rural area. { Karunya Matha Social Centre Vs CCE
(T) 2004 (168) ELT 226 }
10. Return of duty
paid goods- Rule 16(3): The detailed procedure in
various circumstances of receipt of goods for repair and
their subsequent usage and return has been examined and
set out. { CCE Mysore TN no. 21/2004 dt 11.5.2004 168
ELT T-16} Comment: However the Trade Notice seems to
travel beyond its clarificatory nature and sets
out that the duty credit would not be available if the
goods received are not eventually cleared. This may create
a plethora of problems for the industry instead of solving
any problems.
11. Export Incentive-
Goods manufactured/ processed using excisable goods procured
without payment of excise duty under notification 43/2001
are to be exported under bond without payment of duty.
Rebate claim for duty paid on finished export goods would
not be admissible. { Notification 10/2004 CE (NT) dt 2.6.2004}
Comment: This particular provision would lead to hardships
especially for the Garment exporters who procure part
of the materials without payment of duty and part on payment
due to the short cycle time available.
12. Samples removed
for testing in R&D section within the factory:
The removal within the factory compound is not liable
as the same is not removed from the factory. { Manali
Petrochemcials Ltd. Vs CCE 2004 (167) ELT 434 (T)}
13.
Inputs wasted in initial stages of production: The
inputs wasted in the initial stages of manufacturing due
to faulty mixing or negligent act is eligible for cenvat
credit. Erstwhile Rule 57D. { CCE Vs Pepsico Holding Ltd.
2004 (168 ) ELT 74(T)}
