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H&A IDT Share - November 2012<br />
Highlights<br />
Job Work under Central Excise<br />
Res Judicata<br />
Workshop in Bangalore – Cenvat Credit, Reverse Charge &<br />
Joint Charge - December 22, 2012<br />
Workshop in Hyderabad - Cenvat Credit, Reverse Charge &<br />
Joint Charge – January 05, 2013<br />
Contents<br />
Job work under Central Excise<br />
Res Judicata relating to taxation matters<br />
Seminar in Bangalore – Cenvat Credit, Reverse and Joint<br />
Charge – on December 22, 2012<br />
In News<br />
Recent judicial decisions<br />
Training Corner<br />
Bangalore Seminar brochure<br />
Contact:-<br />
<strong>Hiregange</strong> & <strong>Associates</strong><br />
#1010, 1 st floor, 26 th main,<br />
(Above Corporation Bank)<br />
4 th ‘T’ Block, Jayanagar,<br />
Bangalore 560 041<br />
Website – www.hiregange.com<br />
Branch Office:-<br />
"Basheer Villa"<br />
H.No.8-2-268/1/16/B,<br />
2nd Floor, Sriniketan Colony,<br />
Road No.3, Banjara Hills,<br />
Hyderabad-500 034<br />
(For private circulation to clients of <strong>Hiregange</strong> &<br />
<strong>Associates</strong> and Chartered Accountants only)
Job Work Under Central Excise<br />
Job work is one of the important aspects that a<br />
manufacturer registered under Central Excise<br />
should be familiar with not just because it enables<br />
him to plan his processes in order to optimise the<br />
benefits available under the Central Excise Act,<br />
1944 but would also enable him to cut costs on his<br />
manufacturing. This is so as the processes which<br />
pose problems or which are not cost effective at<br />
his end [ due to economies of scale] can be subcontracted<br />
or delegated to another manufacturer<br />
or processor who is referred to here as the job<br />
worker. Many a time, the job worker may be more<br />
efficient both in terms of the quality and cost as<br />
compared to the main manufacturer due to<br />
pursuance of core competencies. Most of the big<br />
manufacturers in fact make very good use of this<br />
concept and assign processes to more than one<br />
vendor which enables them to cut down on<br />
manufacturing costs.<br />
In the context of the Central Excise law, job work<br />
has been defined under Rule 2(n) of the Cenvat<br />
Credit Rules, 2004 to mean processing or working<br />
upon of raw material or semi-finished goods<br />
supplied to the job worker, so as to complete a<br />
part or whole of the process resulting in the<br />
manufacture or finishing of an article or any<br />
operation which is essential for aforesaid process<br />
and the expression “job worker” shall be construed<br />
accordingly. It is vital to note here that the process<br />
undertaken by the job worker on the goods that<br />
are supplied to him for job work, may or may not<br />
amount to manufacture.<br />
If one were to go by the definition of the term “job<br />
work”, it is evident the raw materials have to be<br />
supplied by another person. In Prestige<br />
Engineering India Ltd v CCE Meerut, (1994 (09) LCX<br />
0110), the Supreme Court held that when the job<br />
worker contributed his own material to the goods<br />
supplied by the customer and engaged in<br />
manufacturing, the activity was not one of job<br />
work. However, minor additions by the job worker<br />
would not take away the fact that the activity was<br />
one of job work.<br />
Job Work and Manufacturing<br />
Since excise duty is on ‘manufacture’, duty liability<br />
arises only when the goods are manufactured<br />
during job work. The test as to whether the<br />
process amounts to manufacture or not would be<br />
determined by analyzing whether a new article<br />
having a distinctive name, character or use<br />
emerges or not from the said process in …………<br />
……. accordance with the decision of the Honorable<br />
Supreme Court in Delhi Cloth and General Mills Co.<br />
Ltd Vs UOI (1962(10) LCX 0001). Where the goods<br />
are manufactured during job work, the job worker<br />
would be liable to pay duty of excise on the goods<br />
so manufactured unless the principal manufacturer<br />
who has supplied him the goods for job work,<br />
furnishes a declaration under Notification 214/86<br />
dated 25.03.1986 which exempts goods<br />
manufactured by a job worker from duty of excise<br />
provided the said goods after job work are<br />
returned to the principal or cleared for export or<br />
cleared for home consumption on payment of duty<br />
of excise. Where the goods are returned to the<br />
principal, the principal should either clear it on<br />
payment of duty or use it in his manufacturing<br />
process which should result in a dutiable product<br />
being manufactured. The declaration as stated<br />
above should be given to the Assistant<br />
Commissioner of Central Excise who has<br />
jurisdiction over the factory of the job worker.<br />
Job work & SSI exemption<br />
Notification 214/86 CE (NT) has another<br />
significance and that is where the job worker also<br />
avails the benefit of notification 8/2003 CE (NT)<br />
dated 01.03.2003, the job work done under this<br />
notification would not be included for the purpose<br />
of determining whether or not his turnover has<br />
exceeded the said limit of Rs. 150 lakhs for the<br />
purpose of determining duty liability if any or Rs.<br />
400 lakhs for the purpose of determining eligibility<br />
to exemption u/n 8/2003 CE in the subsequent<br />
financial year. If working under this notification<br />
then job work done of even 10 crores would not be<br />
subjected to duty of excise in the hands of the job<br />
worker.<br />
Job work – Central Excise v Service Tax<br />
Where the processing undertaken by the job<br />
worker does not amount to manufacture, the said<br />
job worker would be liable to service tax even<br />
under the new regime of service tax. The liability in<br />
terms of job work can arise where the processing is<br />
done for the client. However one should note that<br />
where the processing amounts to manufacture, the<br />
same would not be taxable under service tax as<br />
the same has been specifically included in the<br />
negative list and the liability if any would have to<br />
be studied under Central Excise. The entry in the<br />
negative list reads as ‘any process amounting to<br />
manufacture or production of goods’.<br />
PTO<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
2
Job Work Under Central Excise Contd..<br />
Therefore, the criteria is whether the process<br />
undertaken by the job worker amounts to<br />
manufacture or production or not. If the process<br />
amounts to manufacture, but the final product is<br />
either exempted by virtue of any notification or is<br />
nil rated, even then the said activity will be<br />
exempted under the new regime as the criteria is<br />
that the process undertaken by the job worker<br />
should amount to manufacturer production of<br />
goods which has been fulfilled.<br />
Where the job work does not amount to<br />
manufacture it would amount to a service and<br />
unless exempted would be liable to service tax.<br />
Job work & Cenvat Credit<br />
Cenvat credit can be availed on materials sent for<br />
job work as per rule 4(5)(a) of the Cenvat Credit<br />
Rules, 2004. It has to be established from the<br />
records, challans or memos or any other document<br />
produced by the manufacturer taking the Cenvat<br />
credit that the goods have been received back in<br />
the factory within one hundred and eighty days of<br />
goods being sent to the job worker. So<br />
maintenance of proper inventory accounting<br />
records, job work register, details of nature of<br />
processing undertaken and quantities received<br />
back along with scrap generated would gain<br />
importance. The movement should be under a<br />
challan giving the particulars as to the Rule under<br />
which the same is being sent. The challan would be<br />
in triplicate with two copies of the same<br />
accompanying the goods to the job worker who<br />
would return one copy with the goods being sent<br />
back to the principal after completion of the<br />
process. Where the goods are sent back in lots, he<br />
is free to send his own delivery challan with the<br />
goods and send back the original delivery challan<br />
received from the principal, with the final<br />
consignment being sent to the said principal.<br />
If the inputs or the capital goods are not received<br />
back within one hundred and eighty days, the<br />
manufacturer shall pay an amount equivalent to<br />
the Cenvat credit attributable to the inputs or<br />
capital goods by debiting the Cenvat credit account<br />
with the amount so attributable to the inputs or<br />
capital goods not received. But the manufacturer<br />
can take once again the Cenvat credit so debited<br />
when the inputs or capital goods are received back<br />
in his factory.<br />
The Cenvat credit shall also be allowed in respect<br />
of jigs, fixtures, moulds and dies sent by a<br />
manufacturer of final products to another ………..<br />
…… manufacturer for the production of goods or to a<br />
job worker for the production of goods on his behalf<br />
and according to his specifications. The restriction<br />
with regard to the requirement of receiving the goods<br />
back within 180 days from the date of sending would<br />
not apply to such tools, dies, fixtures and moulds.<br />
Valuation issues in job work<br />
One of the common issues confronting job workers<br />
paying duty of excise is that of valuation. Until<br />
recently the valuation had been in accordance with<br />
the decision of the Honorable Supreme Court in<br />
Ujagar Prints Ltd Vs Union of India (1989 (01)<br />
LCX0047) where the assessable value for the purpose<br />
of charging excise duty was said to comprise the<br />
value of raw materials supplied by the principal plus<br />
the conversion charges or job charges incurred by the<br />
job worker plus his profit margin. The margin of the<br />
principal on those goods manufactured by the job<br />
worker even if he merely traded in those goods was<br />
not to be subjected to duty of excise. But this position<br />
underwent a change from 01.04.2007 because of an<br />
amendment to the Central Excise Valuation<br />
(Determination of Price of Excisable Goods) Rules<br />
2000. A new Rule 10A was inserted in the said Rules<br />
which stipulates that where the goods are sold by the<br />
principal manufacturer from the factory of job<br />
worker, the value would have to be the transaction<br />
value of the goods so sold by the principal<br />
manufacturer. This will apply only when the principal<br />
manufacturer and the buyer of the goods are not<br />
related and price is the sole consideration for the sale<br />
and the goods are sold for delivery at the time of<br />
removal from the job worker's factory.<br />
In a case where the goods are not sold by the<br />
principal manufacturer at the time of removal of<br />
goods from the factory of job-worker, but are<br />
transferred to some other place from where the said<br />
goods are to be sold after their clearance from the<br />
factory of the job worker, the normal transaction<br />
value of such goods sold from such other place at or<br />
about the same time has to be adopted. This, in other<br />
words follows the principle of depot based valuation<br />
under Central Excise applicable where goods are<br />
cleared to depots of manufacturers and sold<br />
therefrom. Where such goods are not sold at or<br />
about the same time, then the normal transaction<br />
value of such goods at the time nearest to the time of<br />
removal of said goods from the factory of job-worker,<br />
is to be adopted. The cost of transport from the<br />
premises where from the goods are sold, to the place<br />
of delivery, would not be included in assessable value.<br />
- Team Hiregang & <strong>Associates</strong><br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
3
Res Judicata relating to taxation matters<br />
Introduction<br />
Finality to assessment facilitates the assessee to plan<br />
his affairs and to decide the business planning for<br />
long term strategies. The doctrine of Res Judicata is a<br />
potent tool in the hands of an assessee who wants to<br />
prevent the Assessing Officer from shifting his stand<br />
year – to – year on whimsical grounds.<br />
However, tax authorities feel that there is no finality<br />
to any assessment as the principle of Res Judicata is<br />
not applicable to tax proceedings.<br />
Meaning<br />
The word ‘Res Judicata’ is derived from Latin. It<br />
literally means, a thing adjudged. It is a rule that says<br />
a final judgment on the merits by a court having<br />
jurisdiction is conclusive between the parties to a suit<br />
as to all matters that were litigated or that could have<br />
been litigated in that suit. The principle of Res<br />
Judicata, in the eye of law, is that if on any facts<br />
and/or law, a particular decision is made, then<br />
subsequently if any suit on similar facts and/or law is<br />
to be decided between the same parties, it should be<br />
same as made earlier.<br />
As per The Law Lexicon “Res adjudicata” means “A<br />
matter adjudged; a thing judicially acted upon or<br />
decided; a thing or matter settled by judgment; a<br />
thing definitely settled by judicial decision, the thing<br />
adjudged”.<br />
This principle operates as a bar to try the same issue<br />
once over. The Apex Court in the case of Sulochana<br />
Amma vs. Narayanan Nair - (2002-TIOL-292-SC-MISC)<br />
held that this principle aims to prevent multiplicity of<br />
proceedings and accords finality to an issue, which<br />
directly and substantially had arisen in the former suit<br />
between the same parties or their privies, decided<br />
and became final, so that parties are not vexed twice<br />
over; vexatious litigation would be put to an end and<br />
the valuable time of the Court is saved. It is based on<br />
public policy as well as private justice.<br />
Res Judicata does not merely prevents future<br />
judgments from contradicting earlier ones, but also<br />
prevents them from multiplying judgments, so a<br />
prevailing plaintiff could not recover damages from<br />
the defendant twice for the same injury.<br />
Origin of Res Judicata<br />
"Res Judicata pro veritate accipitur" is the full Latin<br />
maxim which has, over the years, shrunk to mere<br />
"Res Judicata”.<br />
The concept of Res Judicata finds its evolvement from<br />
the English Common Law system, being derived from<br />
the overriding concept of judicial economy, …………..<br />
consistency, and finality. The rule of Res Judicata has<br />
a very ancient history it was accepted by the Romans,<br />
Hindu jurists, Mohammedan jurists and common<br />
wealth countries. It was known to Romans as ‘one<br />
suit and one decision was enough for any single<br />
dispute’. To the Hindu jurists res Judicata was known<br />
as ‘Purva Nyaya’ (former judgment)<br />
Basis of Res Judicata<br />
The doctrine of Res Judicata is based on three<br />
maxims:<br />
1. Nemo debet lis vaxari pro eadem causa (no man<br />
should be vexed twice for the same cause);<br />
2. Interest republicae ut sit finis litium (it is in the<br />
interest of the state that there should be an end<br />
to a litigation); and<br />
3. Re judicata pro veritate accipitur (a judicial<br />
decision must be accepted as correct).<br />
Pre-requisites for Res Judicata<br />
The pre-requisites which are necessary for Res<br />
Judicata are:<br />
1. There must be a final judgment;<br />
2. The judgment must be on the merits;<br />
3. The claims must be the same in the first and<br />
second suits;<br />
4. The parties in the second action must be the<br />
same as those in the first, or have been<br />
represented by a party to the prior action.<br />
Constructive Res Judicata<br />
‘Constructive' means ‘implied', “that which has not<br />
the character assigned to it in its own essential<br />
nature, but acquires such character in consequence<br />
of the way in which it is regarded by a rule or policy of<br />
law” (Black). If a matter which might or ought to have<br />
been raised in an earlier proceeding, is not raised, the<br />
principle of constructive Res Judicata applies.<br />
Source of Res Judicata in Indian Law<br />
Section 11 of The Code of Civil Procedure, 1908,<br />
defines “Res Judicata” as under:-<br />
“No court shall try any suit or issue in which the<br />
matter directly and substantially in issue has been<br />
directly and substantially in issue in a former suit<br />
between the same parties, or between parties under<br />
whom they or any of them claim, litigating under the<br />
same title, in a court competent to try such<br />
subsequent suit or the suit in which such issue has<br />
been subsequently raised, and has been heard and<br />
finally decided by such court.”<br />
From the Civil Procedure Code, the Administrative<br />
Law witnessed its applicability. Then, slowly but<br />
steadily the other acts and statutes also started to<br />
admit the concept of Res Judicata within its ambit.<br />
PTO<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
4
Res Judicata relating to taxation matters contd..<br />
Principle of Res Judicata in tax matters<br />
The general principle of law is that no one should<br />
blow hot and cold on the same set of facts to reach<br />
different conclusions / findings in different years. The<br />
need for consistency is as important for revenue<br />
authorities as it is expected from the assessee. The<br />
common understanding is that, notwithstanding the<br />
public policy behind the rule, it has no relevance to<br />
tax disputes. It is said that a finding or an opinion<br />
recorded by an authority or even by a court of law for<br />
one assessment year has no binding effect on the<br />
issues in subsequent assessment years.<br />
Views of High Court<br />
The Bombay High Court, in H.A. Shah and Co. vs. CIT<br />
(1956) 30 ITR 618 (Bom.) has held that “the principle<br />
of estoppel or res judicata does not strictly apply to<br />
the Income Tax authorities” and yet declared that “An<br />
earlier decision on the same question cannot be<br />
reopened if that decision is not arbitrary or perverse,<br />
if it had been arrived at after due inquiry, if no fresh<br />
facts are placed before the Tribunal giving the later<br />
decision and if the Tribunal giving the earlier decision<br />
has taken into consideration all material evidence.”<br />
In CIT vs. L. G. Ramamurthy (1977) 110 ITR 453<br />
(Mad.), the court laid down the principle that “…what<br />
is relevant is not the personality of officers presiding<br />
over the Tribunal but the Tribunal as an institution. If<br />
it is conceded that simply because of the change in<br />
the personnel who manned the Tribunal, it is open to<br />
them to a conclusion totally contradictory to the<br />
conclusion which had been reached by earlier officers<br />
manning the tribunal on same set of facts it will not<br />
only shake the confidence of the public in judicial<br />
procedure as such, but it will totally destroy such<br />
confidence…….that will be destructive of the<br />
institutional integrity itself”.<br />
Views of the Apex Court<br />
The Supreme Court in Amalgamated Coalfields vs.<br />
Janapada Sabha AIR 1964 SC 1013 have evinced a<br />
highly, balanced approach: “In considering this<br />
question, it may be necessary to distinguish between<br />
decision on questions of law which directly and<br />
substantially arise in any dispute about the liability for<br />
a particular year, and questions of law which arise<br />
incidentally or in a collateral manner … the effect of<br />
legal decisions establishing the law would be a<br />
different matter. If, for instance, the validity of a<br />
taxing statute is impeached by an assessee who is<br />
called upon to pay a tax for a particular year and the<br />
matter is taken to the High Court or brought before<br />
this Court and it is held that the taxing statute is valid,<br />
it may not be easy to hold that the decision on this<br />
basic and material issue would not operate as res -<br />
judicata against the assessee for a subsequent year”.<br />
In Radhasoami Satsang vs. CIT (1992) 193 ITR 321<br />
(SC) the Hon’ble Apex Court observed as under:<br />
“So far as the proposition of law is concerned, it is<br />
well settled and needs no further discussion. In<br />
taxation matters, the strict rule of res Judicata as<br />
envisaged by Section 11 of the Code of Civil<br />
Procedure, 1908 has no application. As a general rule,<br />
each year's assessment is final only for that year and<br />
does not govern later years, because it determines<br />
the tax for a particular period. It is, therefore, open to<br />
the Revenue/Taxing Authority to consider the<br />
position of the assessee every year for the purpose of<br />
determining and computing the liability to pay tax or<br />
octroi on that basis in subsequent years.”<br />
However, in an interesting comment, the Apex Court<br />
said, “We are aware of the fact that strictly speaking<br />
res judicata does not apply to income tax<br />
proceedings. Again, each assessment year being a<br />
unit, what is decided in one year may not apply in the<br />
following year but where a fundamental aspect<br />
permeating through the different assessment years<br />
has been found as a fact one way or the other and<br />
parties have allowed that position to be sustained by<br />
not challenging the order, it would not be at all<br />
appropriate to allow the position to be changed in a<br />
subsequent year”.<br />
Not pressing the ground<br />
There is no estoppel against law. No concession of<br />
law is permissible. An appellant having not pressed an<br />
issue before lower authorities, can still raise and<br />
agitate the same before the Tribunal-CIT vs. VMRP<br />
Firm (1965) 56 ITR 67 (74) (SC).<br />
Conflicting stands by revenue<br />
The revenue cannot take conflicting stands. It has got<br />
the assistance of technical persons and should be<br />
consistent. It cannot discriminate between the<br />
assessees. Seshasayee Paper and Boards Ltd. vs. CIT<br />
(2003) 260 ITR 419 (Mad.)<br />
Conclusion<br />
From the above discussion, it is evident that, as a<br />
general rule, Res Judicata does not apply in tax<br />
matters, be it direct tax or indirect tax. As apparent,<br />
we come across periodical show cause notices with<br />
respect to same assessee on the same matter.<br />
However, the principles of consistency, natural justice<br />
and comity apply. Based on these, the tax payers can<br />
be ascertained of certain aspects in their favour.<br />
Further, we can also understand that, the counter for<br />
Res Judicata can be appeal to a higher judicial forum.<br />
- Compiled by CA Dhanashree Prabhu<br />
Acknowledgements – ARTHA Study Circle<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
5
In News<br />
McDonalds’ soft serve should be classified as icecream<br />
for determining excise duty: Supreme Court -<br />
The Supreme Court has ruled that the 'soft serve' sold<br />
at McDonalds India's outlets should be classified as<br />
ice-cream for the purpose of determining excise duty,<br />
upholding the excise department's claim. The<br />
department had issued three show-cause notices to<br />
the fast-food restaurant chain for April 1997-March<br />
2000, saying 'soft serve' would attract the 16% duty<br />
plus an additional duty levied on ice-cream.<br />
McDonalds India (Ms/ Connaught Plaza Restaurant<br />
(Pvt) Ltd) had opposed the classification, leading to<br />
the dispute. In a judgement last week, the apex court<br />
ruled, "We are unable to accept the argument that<br />
since 'soft serve' is distinct from 'ice-cream' due to a<br />
difference in its milk fat content, the same must be<br />
construed in the scientific sense for the purpose of<br />
classification.“<br />
Source: The Economics Times<br />
FIU asked to track service tax evaders - The Financial<br />
Intelligence Unit (FIU), country’s nodal agency for<br />
gathering, analysing and disseminating information<br />
related to suspicious financial transaction, has been<br />
asked to work with the Directorate General of Central<br />
Excise Intelligence (DGCEI) to go after over 65,000<br />
non-filers of service tax returns, who have managed<br />
to escape the scrutiny of the government so far.<br />
Finance minister P Chidambaram has also asked the<br />
DGCEI “to make available some unique identifier” to<br />
track evaders of both the service tax and central<br />
excise duty.<br />
ITAT: Four new e-courts to be launched, hearing<br />
through video-conferences - The Income Tax<br />
Appellate Tribunal will launch e-courts in four cities<br />
from December 10 to facilitate hearing of cases via<br />
video-conferencing. The tribunal, a quasi-judicial<br />
body, has set up webcast facilities at Delhi, Mumbai,<br />
Nagpur and Ahmedabad, a first in the history of tax<br />
judiciary in India. In a note, ITAT said the e-courts will<br />
follow the procedures that are laid out for the bench<br />
for hearing appeals in an open court. "There is no<br />
difference in procedures except that the bench and<br />
bar are at different places connected electronically,"<br />
the note said.<br />
Source: The Economics Times<br />
Cadbury India probed over R213-cr tax evasion<br />
charge - Tax authorities have detected alleged tax<br />
evasion of Rs 213 crore by the Indian arm of<br />
confectionery multinational Cadbury, now owned by<br />
Kraft Foods, in two separate cases and have realised<br />
Rs 12.6 crore in one of the cases, minister of state for<br />
finance SS Palanimanickam said in the Rajya Sabha.<br />
“Two cases of tax evasion by Cadbury India Ltd have<br />
been detected by the Directorate General of Central<br />
Excise Intelligence during the years 2009-10 to 2012-<br />
13 up to October 31, 2012,” the minister said in reply<br />
to a question in the Upper House.<br />
Source: The Financial Express<br />
Carmaker Fiat India seeks review of Supreme Court<br />
order on excise duty payment - Carmaker Fiat India<br />
has sought review of a Supreme Court order directing<br />
it to pay about 360 crore as additional excise duty on<br />
sales of its Uno cars between 1996 and 2001. "We<br />
have filed a review petition," said V Lakshmi<br />
Kumaran, lawyer for Italian carmaker Fiat's Indian<br />
unit, without giving further details. The court had<br />
passed the order on August 29. The case pertains to<br />
Fiat's joint venture with Mumbai-based Premier<br />
Automobiles at the time. Fiat was importing<br />
completely-knocked-down kits of its popular Uno<br />
hatchback and selling them in the country below cost<br />
price. This prompted the tax authorities to levy the<br />
duty on the cost price of the company's Uno<br />
hatchbacks.<br />
Tax bumps ahead for diesel cars - At a time when<br />
diesel-powered vehicles have been driving sales in<br />
the country’s otherwise sluggish automobile market,<br />
the industry has been hit by a double whammy. First,<br />
a proposal to levy an additional annual road tax of up<br />
to Rs 50,000 on diesel sports utility vehicles. Second,<br />
a suggestion before the Supreme Court to impose an<br />
environment tax of 25 per cent (of the cost of the<br />
vehicle) on diesel vehicles to curb the growing levels<br />
of pollution in the Delhi-National Capital Region.<br />
These have raised concerns in the domestic<br />
automobile industry, battling slow sales and high<br />
interest rates and fuel prices. “On an average, diesel<br />
vehicles are tagged 20-23 per cent higher than exshowroom<br />
prices of petrol variants. Once Euro-V<br />
emission norms come into effect, vehicle prices<br />
would automatically rise Rs 40,000. If there are<br />
additional levies, it would certainly put<br />
manufacturers’ investments to increase diesel<br />
capacity in jeopardy,” said a senior industry<br />
executive.<br />
Old service specific accounting codes for payment of<br />
service tax restored - A list of 120 descriptions of<br />
services for the purpose of registration and<br />
accounting codes corresponding to each description<br />
of service for payment of tax has been provided. The<br />
description provided is only for the purpose of<br />
statistical analysis. The sub-head “other receipts” is<br />
meant only for payment of interest payable on<br />
delayed payment of service tax.<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
6
Recent judicial decisions<br />
INDIAN ACRYLIC LTD. VERSUS COMMISSIONER OF<br />
C.EXCISE, CHANDIGARH-II 2012 (28) S.T.R. 354 (TRI-<br />
DEL)<br />
Background: The appellant is a manufacturer of<br />
acrylic fibre, acrylic top etc. and were availing the<br />
facility of Cenvat credit of duty paid on inputs, capital<br />
goods and Service Tax paid on inputs services used in<br />
or in relation to manufacture of final products. The<br />
appellants are availing the services of foreign agents<br />
and were paying commission on said agents located<br />
outside India. They were discharging the Service Tax<br />
liability in respect of such commission paid to the<br />
foreign agents in terms of provisions of Rule<br />
2(1)(d)(iv) and (v). The lower authorities have denied<br />
the utilization of Cenvat credit availed by the<br />
appellant on the capital goods, for the purpose of<br />
discharging their Service Tax liability on the ground<br />
that the appellant cannot be treated as provider of<br />
taxable service. The stand of the Revenue is that after<br />
the deletion of Explanation appearing in Rule 2(p) of<br />
Cenvat Credit Rules, which conferred status of output<br />
service provider to an assessee, the assessee cannot<br />
be held to be provider of output services and<br />
appellants are not entitled to utilize the credit.<br />
Issue: The issue required to be decided in present<br />
appeal is as to whether the appellant can utilize the<br />
Cenvat credit so earned by them for discharge of<br />
Service Tax liability in respect of overseas commission<br />
agent.<br />
Decision: Utilization of Cenvat credit is in accordance<br />
with the law inasmuch as the Rule 2(r) of Cenvat<br />
Credit Rules conferred status of service provider to an<br />
assessee who paid the Service Tax as a recipient of<br />
service. If the appellant is the person liable to pay<br />
service tax, he would be deemed to be provider of<br />
taxable service by fiction of law and therefore, the<br />
service provided by him will be deemed to be output<br />
service under Rule 2(p) of the Rules. It is held that<br />
the appellant is entitled to utilize the Cenvat credit<br />
for discharge of Service Tax for the commission paid<br />
to the overseas agents.<br />
INDIA TRIMMINGS PVT LTD VERSUS COMMISSIONER<br />
OF C.EX. COIMBATORE 2012 (28) S.T.R. 401 (TRI<br />
CHENNAI)<br />
Background: The appellants are manufacturer and<br />
exporter. They have taken the services of GTA and<br />
paid commission to overseas service provider. No<br />
service tax was paid under reverse charge mechanism<br />
and on pointing out the same by the Department, the<br />
appellants paid service tax along with interest.<br />
Thereafter, the appellant was issued SCN for ……..<br />
…. appropriation of the amount of service tax and<br />
interest paid and proposing penalty u/s 78 of the<br />
Finance Act 1994. Counsel for the appellant<br />
submitted that they were under a bona fide belief<br />
that they are not required to pay service tax on above<br />
services as they were not a service provider and if at<br />
all they had paid service tax they would have entitled<br />
to take credit of the same and there will be a<br />
situation of revenue neutrality and therefore<br />
allegation of suppression is not sustainable.<br />
Reference was made to the case of Amman Steel<br />
Corporation Vs CCE, Trichy. Revenue contended that<br />
as the appellant is dealing with excisable and taxable<br />
service, they must be aware of law.<br />
Issue: The issue for consideration is that whether not<br />
showing the amount of GTA availed and commission<br />
paid from overseas by the appellant in their ST-3<br />
Returns and nonpayment of service tax on the same<br />
amounts to suppression and whether proposing<br />
penalty u/s 78 is sustainable in the above case.<br />
Decision: If appellant have paid the service tax they<br />
are entitled to credit of the same and in this view, it<br />
cannot be said that by suppressing the fact that the<br />
appellants are going to get extra benefit on account<br />
of suppression. Penalty u/s 78 was waived.<br />
COMMISSIONER OF CENTRAL EXCISE, JAIPUR<br />
VERSUS KEC INTERNATIONAL LTD. 2012 (28) S.T.R.<br />
399 (TRI DEL)<br />
Background: The respondent were engaged in the<br />
manufactuer of galvanized parts of transmission<br />
tower and lining falling under Chpater 73 of the<br />
Schedule to the Central Excise Tariff Act, 1985. The<br />
raw material for the said final product is billet and it is<br />
purchased from outside and sent directly to the<br />
factory of job worker who converts the same into<br />
angles and channels. Revenue’s contention is that<br />
Service Tax paid on GTA service received is not<br />
available to them as credit<br />
Issue: The issue in consideration is that whether<br />
cenvat credit can be availed on service tax paid on<br />
GTA as the raw materials were not brought into the<br />
respondents’ factory and are directly sent to the job<br />
worker.<br />
Decision: Held that billets are admittedly the raw<br />
material for the respondent’s final product and if the<br />
said billets are brought to the factory by the<br />
respondents and then sent to the job workers, there<br />
could be no dispute about the availability of credit of<br />
service tax paid on GTA service.<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
7
Training Corner<br />
Recently CA Roopa Nayak, CA Akbar Basha and CA<br />
Gaurav Shah conducted a training session in M/s<br />
Balakrishna & Co. The training program was very well<br />
appreciated by the qualified Chartered Accountants<br />
of the firm as well as the articled assistants.<br />
With the objective of holistic learning, we have come<br />
up with the training modules.<br />
Training Program for Chartered Accountants Firms<br />
This program would be conducted to enlighten and<br />
empower the Practicing Chartered Accountants in<br />
conducting the statutory, internal & tax audits<br />
wherein value additive suggestions to clients may get<br />
appreciation. This will be conducted at the respective<br />
offices of Chartered Accountants by qualified and<br />
skilled staff of <strong>Hiregange</strong> & <strong>Associates</strong>.<br />
Program Highlights<br />
• Focus on impact of indirect taxes during statutory<br />
audit, internal audit and other areas of practice<br />
• Use of case studies and practical aspects<br />
• To enlighten and empower the Practicing CAs in the<br />
field of Indirect Taxation<br />
• Program will be conducted at your respective office<br />
• Topics for the program will be of your selection<br />
from the Annexure<br />
• Programs will be conducted by qualified and<br />
experienced staff of <strong>Hiregange</strong> & <strong>Associates</strong><br />
Who are eligible for the program<br />
• Chartered Accountant company/firms at Bangalore<br />
who do not currently practice in the field of Indirect<br />
Taxation<br />
• Chartered Accountant company/firms at Bangalore<br />
who wish to enter the field but with sound<br />
fundamental knowledge of the subject or add this<br />
competency<br />
Proposed Modules are:-<br />
• Major aspects to be checked in the Statutory Audit,<br />
Internal Audit, Tax Audit having implications under<br />
indirect tax (IDT)<br />
• How to provide Value Addition to the auditee in<br />
Statutory/ Internal Audit with respect to IDT<br />
• Impact of Joint and Reverse Charge<br />
• Reconciliation between Excise / Service Tax returns<br />
to financials and other statutory returns.<br />
• Common errors made by assessee in Central Excise<br />
/ Service Tax.<br />
• How to fill Central Excise Returns & ST returns<br />
• Introduction on Central Excise viz.- Concept of<br />
manufacture, Levy of Excise duty, Classification of<br />
goods, Exemption, Valuation Implication, Exports.<br />
• Introduction on Service Tax viz.- Negative List, Levy<br />
of Service Tax, Exemption, Valuation aspects, Point<br />
of Taxation Rules, Place of Provision of Service<br />
Rules and Aspects related to filing of Returns.<br />
Training Program for Clients of <strong>Hiregange</strong> &<br />
<strong>Associates</strong><br />
Client Specific Training:<br />
This is for specific clients in specific areas such as<br />
Basic Accounting, Tax Planning and Impact of Indirect<br />
Taxes in their day-to-day working. This program<br />
would be conducted to enlighten and empower the<br />
finance team of the company in the field of Indirect<br />
Taxation.<br />
We have devised two approaches to this programme.<br />
• To conduct it at H&A premises fortnightly (on<br />
Saturdays)<br />
• To conduct it at your respective office (on the date<br />
and time mutually agreed)<br />
Program Highlights<br />
• Focus of indirect taxes in the effective day-to-day<br />
working.<br />
• Use of case studies and practical aspects<br />
• To enlighten and empower our Clients in the field<br />
of Indirect Taxation<br />
• Topics for the program will be of your selection<br />
from the Annexure<br />
• Programs will be conducted by qualified and<br />
experienced staff of <strong>Hiregange</strong> & <strong>Associates</strong><br />
Who are eligible for the program<br />
The Indirect Taxation Training Programs are<br />
exclusively for the Clients of <strong>Hiregange</strong> & <strong>Associates</strong><br />
Proposed Modules are:-<br />
• Introduction on Central Excise<br />
• Introduction on Service Tax<br />
• Availment of credit under Central Excise/Service<br />
Tax & VAT<br />
• Impact of indirect tax on cost<br />
• Means of ensuring maximum credit (CE/ST/VAT)<br />
• Accounting entries in Indirect Tax<br />
• Impact of Joint and Reverse charge to the entity<br />
• Filling of Excise Returns<br />
• Filling of New format of Service Tax returns<br />
• Common errors under Central Excise & Service Tax<br />
• Preventive measures to avoid common errors<br />
• Strengthening Internal Control with respect to<br />
Indirect Taxation<br />
• Reconciliation between Excise / Service Tax return<br />
with financials and other statutory returns<br />
• Point of Taxation Rules<br />
• Place of Provision of Service Rules<br />
• How to make a refund application<br />
For further information please contact<br />
CA Akbar Basha<br />
akbar@hiregange.com<br />
CA Dhanashree Prabhu<br />
dhanashreeprabhu@hiregange.com<br />
(For private circulation to clients of <strong>Hiregange</strong> & <strong>Associates</strong> and Chartered Accountants only)<br />
8
Workshop on<br />
“CENVAT CREDIT –<br />
UNDER NEW ST LAW”<br />
Saturday, 22 nd December, 2012<br />
Between 09 am & 06 pm<br />
@ Springs Hotel & Spa<br />
#19, H. Siddaiah Road, Bangalore – 02<br />
(Next to Urvashi Theatre and near BBMP pay & park)<br />
Similar seminar in Hyderabad will be held on January 05, 2013<br />
Contact :-<br />
<strong>Hiregange</strong> & <strong>Associates</strong><br />
# 1010, 1 st Floor, 26 th Main, (Above Corporation Bank)<br />
4 th ‘T’ Block, Jayanagar, Bangalore – 560 041<br />
Ph No. 4121 0703 / 2653 6404<br />
Web : www.hiregange.com<br />
CA. Prateek Marlecha– +91 99000 68911<br />
Email: prateekm@hiregange.com<br />
CA. Dhanashree Prabhu – +91 99000 68920<br />
Email: dhanashreeprabhu@hiregange.com<br />
(Only for CAs and clients of <strong>Hiregange</strong> & <strong>Associates</strong>)
Price is what you pay. Value is what you get. – Warren Buffet<br />
The benefit under CENVAT credit is the value we can add to our organisation. The<br />
changes brought about by the Finance Act, 2012 are varied and distinct. Not just basic<br />
tax laws, even the way we look at CENVAT benefits have changed. Value based<br />
business is the need of the hour. Keeping this in mind, we have designed this<br />
workshop to throw light on the value that appropriate<br />
can add.<br />
About the Workshop<br />
availment of CENVAT credit<br />
Come along with enthused spirits on 22 nd of December 2012 to ‘avail and utilise’ the<br />
benefits of CENVAT credit at Springs Hotel & Spa from 9.00 A.M. to 6.00 P.M. at<br />
workshop conducted by <strong>Hiregange</strong> & <strong>Associates</strong>.<br />
Snapshot of Schedule<br />
Start Duration<br />
Topic<br />
Speaker<br />
Time (in min)<br />
9.30 20 Registration<br />
9.50 10 Welcome Address<br />
10.00 90 Benefits under Capital Goods and Senior Partner, H & A<br />
inputs to manufacturers and service<br />
providers<br />
11.30 15 Tea Break<br />
11.45 75 Benefits under input services to Shri. Rajesh Kumar T. R.<br />
manufacturers and service providers<br />
1.00 45 Common errors and disputes in Shri. Rajesh Kumar T. R.<br />
CENVAT credit<br />
1.45 15 Panel Discussion<br />
2.00 60 Lunch Break<br />
3.00 90 Reverse charge vis a viz Place of Shri. Badrinath<br />
Provision of Service Rules<br />
4.30 15 Tea Break<br />
4.45 60 Joint charge – applicability and Smt. Roopa Nayak<br />
compliance<br />
5.45 15 Open House<br />
(Only for CAs and clients of <strong>Hiregange</strong> & <strong>Associates</strong>)
Featured Speakers<br />
Shri Rajesh Kumar T. R. - Apart from being a Chartered Accountant, he is a graduate<br />
in Law. Involved in providing strategic indirect tax consultancy and representation<br />
services. Also written many articles on Central Excise and Service tax published in<br />
various professional journals and co-authored many books. He is a visiting faculty for<br />
MBA course of M.P. Birla Institute for management Studies, Bangalore and<br />
Siddaganga School of Mangement, Tumkur.<br />
Shri. Badrinath N. R. - Apart from being a Chartered Accountant, he is also a Cost<br />
Accountant and specializes in Indirect Taxation. His area of expertise spans over<br />
Central & State levies which include Central Excise, Customs, Service Tax, Commercial<br />
Taxes and Foreign Trade. He is very closely associated with the subject specialization<br />
and has addressed the officers at Central Board of Excise and Customs, members of<br />
the ICAI and Institute of Internal Auditors. He is a faculty for Indirect Taxation at MATS<br />
School of Business and IT.<br />
Smt. Roopa Nayak - Is a Chartered Accountant by profession, qualified in 2008. Coauthor<br />
of books like Central Excise Made Simple (e-book & KSCAA publication),<br />
background material for Indirect Taxes Certificate Course, ICAI. She is an active<br />
contributor of articles to Peenya Industries Association and KSCAA.<br />
The workshop would be of special interest to:-<br />
Top level Company officials – For Strategic business decisions<br />
Middle level Company officials – For regular and day-to-day compliance<br />
Chartered Accountants in practice – To update their knowledge and<br />
educate their clients<br />
Fee structure<br />
Delegate Fee – Rs. 1,500/-<br />
For 3 or more delegates from the same organization fee – Rs. 1,250/- each<br />
Includes service tax applicable @ 12.36%<br />
The fee covers delegate kit, lunch and refreshments<br />
Kindly issue Cheque/DD in favour of “<strong>Hiregange</strong> & <strong>Associates</strong>”, payable at Bangalore<br />
(Only for CAs and clients of <strong>Hiregange</strong> & <strong>Associates</strong>)
Map & Directions<br />
For details regarding the venue contact :-<br />
Springs Hotel & Spa<br />
Mr. Suresh F&B Executive<br />
Ph no. +91 93420 50099<br />
For registrations contact :-<br />
<strong>Hiregange</strong> & <strong>Associates</strong><br />
# 1010, 1 st Floor, 26 th Main, (Above Corporation Bank)<br />
4 th ‘T’ Block, Jayanagar, Bangalore – 560 041<br />
Ph No. 4121 0703 / 2653 6404<br />
Web : www.hiregange.com<br />
CA.Prateek Marlecha– +91 99000 68911<br />
Email: prateekm@hiregange.com<br />
CA. Dhanashree Prabhu – +91 99000 68920<br />
Email: dhanashreeprabhu@hiregange.com