Udyog Tax News Flash

January 2014

Central Excise: No demands for extended period based on Fiat judgment on valuation: CBEC
The Supreme Court had held in the case of CCE v Fiat India Limited that the transaction value, which had been below the cost of manufacture of the product for over five years in their case, was not acceptable for the purpose of calculating excise duty. The Court was of the view that the consideration of penetration of the market, which dictated such a price, took the transactions out of the category in which price was the sole consideration for the sale, and thus enabled application of methods of valuation other than transaction value. Consequent to this judgment the field formations of central excise considered the manner of its implementation for other assessees, and references were made to the CBEC in this connection. The CBEC has issued circular no. 979/03/2014 dated 15 January 2014 in which it has answered the issues raised, as follows: Is transaction value is to be rejected in all cases where it is lower than manufacturing cost? Answer: No; the Supreme Court itself, in the Fiat judgment, has cautioned against this. By what procedure is the department to identify cases in which transaction value is to be rejected? Answer: It is the assessees responsibility to assess and pay the duty correctly. Verification may be carried out at the time of audit, by looking at factors like percentage of loss, period for which the loss-making price is maintained, reasons for it, whether it is contrary to business practice, and whether it has led to erosion of the companys capital. Manufacturing costs may be verified using CAS-4 standards. The Commissioner will decide whether a special cost audit is required. Can the extended period of limitation be applied for demands based on the judgment, for the period prior to the date of the judgment? Answer: No, not if the judgment is the sole basis for the demand. However, it can be applied for demands for the period after the judgment. The circular can be perused at: http://cbec.gov.in/excise/cx-circulars/cx-circ14/979-2014cx.htm

Central Excise: amendments relating to inputs/capital goods cleared as such

The central government has issued notification 1/2014-CE(NT) dated 8 January 2014 to make certain amendments in the Cenvat Credit Rules 2004. These are as follows. In Rule 3

Explanation after sub-rule (5B) shall be omitted. (This provided for the manner of recovery of amounts. Actually, it is shifted, with some modification, to the end of sub-rule 5C, as seen below.) Sub-rule (5C) is amended to provide that credit of input services is reversed (in addition to credit on inputs) in cases of remission of duty on the final product Two Explanations are added after sub-rule (5C). The first one provides that the amounts to be reversed/paid under sub-rules (5), (5A), (5B) and (5C) must be paid by the 5th day of the following month. The second Explanation provides that if the amounts are not paid, they will be recovered in the manner provided under Rule 14 for recovery of credit wrongly taken The notification can be seen at http://www.cbec.gov.in/excise/cx-act/notfns-2014/cx-nt2014/cent012014.htm

Service tax: amendment to exemption for sports sponsorship

The central government has issued notification number 1/2014-ST dated 10 January 2014 to modify serial number 11(a) of mega exemption notification 25/2012-ST. This had exempted sponsorship for events organised by a national sports federation or its affiliated federations, where the participating teams or individuals represent any district, state or zone. The exemption has now been extended to cover such events where the teams or individuals represent their country. The amending notification 1/2014-ST can be seen at http://www.servicetax.gov.in/notifications/notfns-2014/st01-2014.htm

Service tax: CBEC clarifies on resident welfare associations

Some doubts were raised on the taxability of amounts collected by residents welfare associations from their members. The CBEC has clarified that (i) the full amount paid by any member who pays over Rs 5000 a month to the association is taxable; (ii) the threshold exemption of Rs 10 lakhs is available to the association; (iii) bills in the name of the individual residents, paid by the association and collected from them, can be deducted as pure agent amounts; (iv) the association may use Cenvat credit for the payment of service tax. The circular can be seen at http://www.servicetax.gov.in/circular/st-circular14/st-circ-175-2014.htm

Service tax: rice is not an agricultural commodity, says Finance Minister

Storage of agricultural commodities is not a taxable service by virtue of being on the negative list. The Central Warehousing Corporation had made a reference to the Finance Ministry to confirm its understanding that storage of rice was not taxable. See http://cewacor.nic.in/Docs/ser_tex_rice_fci_121112.pdf It is reported that the Ministry of Finance has not accepted this understanding and has conveyed that milled rice is not an agricultural commodity and that its storage will be taxable. A report on this can be perused at http://www.deccanchronicle.com/140118/news-businesstech/article/riceprice-rise-due-service-tax

Customs: Anti-dumping duty on caustic soda from China extended

Anti-dumping duty had been imposed on caustic soda from Peoples Republic of China, vide notification 137/2008 dated 26 December 2008, which was valid for five years. The central government has now issued notification 3/2014-Customs (ADD) to extend the validity of the duty on caustic soda from Peoples Republic of China up to 25 December 2014, as the DG Anti-Dumping has undertaken a review in the matter of continuation of the duty under section 9A(5) of the Customs Tariff Act 1975. The notification 3/2014-Customs (Anti-Dumping) dated 16 January 2014 can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/csadd2014/csadd03-2014.htm

Customs: Anti-dumping duty on caustic soda from Korea extended

Anti-dumping duty had been imposed on caustic soda from Korea RP, vide notification 95/2011-Customs dated 3 October 2011, which was valid up to 25 December 2013. The central government has now issued notification 4/2014-Customs (ADD) to extend the validity of the duty on caustic soda from Korea RP up to 25 December 2014, as the DG Anti-Dumping has undertaken a review in the matter of continuation of the duty under section 9A(5) of the Customs Tariff Act 1975. The notification 4/2014Customs (Anti-Dumping) dated 16 January 2014 can be seen at

http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/csadd2014/csadd04-2014.htm

Customs: Anti-dumping duty on nonyl phenol from Chinese Taipei re-imposed

Anti-dumping on nonyl phenol from Chinese Taipei, originally imposed under notification 94/2007-Customs and extended under notification 39/2012-Customs, has now been re-imposed for a further period of five years by issue of notification 5/2014-Customs dated 16 January 2014. This notification can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/csadd2014/csadd05-2014.htm

Customs: tariff values notified

The CBEC has notified tariff values for specified items under section 14 of the Customs Act 1962, under notification 2/2014-Customs (NT) dated 15 January 2014. The tariff values of all the oils and oleins have been lowered. The tariff value of brass scrap has been increased. The tariff value of gold in respect of which the benefit of entries 321 and 323 of notification 12/2012Customs has been availed has been increased to USD 407 per 10 grams, while the tariff value of silver in respect of which the benefit of entries 322 and 324 of notification 12/2012-Customs has been availed has been increased to USD 663 per kilogram. The value of areca nuts remains unchanged. The notification 2/2014-Customs (NT) can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/csnt2014/csnt02-2014.htm

Customs: exchange rates notified

The CBEC has notified exchange rates of nineteen specified currencies for customs purposes under section 14 of the Customs Act 1962 by issue of notification 3/2014-Customs (NT) dated 16 January 2014. The rates are effective from 17 January 2014. The US dollar is now notified to exchange at INR 62.10 for imported goods and INR 61.10 for export goods. For the pound sterling the rate is INR 102.15 for imported goods and INR 99.90 for export goods. The notification 3/2014-Customs (NT) can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2014/csnt2014/csnt03-2014.htm

Udyog has been successful in integrating iTAX with following the ERPs

SAP E.C.C. 6.0 MFG-QAD eB 2.1 BPCS BAAN FP 7

SAGE Accpac ERP 100 v 5.6 ABAS Adage Oracle

Updated and written by Radha Arun [radha.arjuni@gmail.com], Consultant to Udyog Software (India) Ltd.
Udyog Software (India) Ltd. www.udyogsoftware.com Phone: 022-67993535 Email: ca-service@udyogsoftware.com | sales@udyogsoftware.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.