Notification v circular, excise v customs: Factory sealing of containers Notification 19/2004-CE(NT) provides the procedure for exporting goods under claim for rebate of excise duty under Rule 18 of the Central Excise Rules 2002. The said notification provides an option to the manufacturer-exporter, under paragraph 3(a)(i), to either self-seal his consignment at the factory or have it sealed by the central excise officers. On the other hand, administrative circulars of the CBEC require that exports under ‘free shipping bills’ (in which no export incentives are claimed) are to be self-sealed by the exporter. In a circular dated 8 September 2011 the CBEC has again reiterated that “the facility/ option of examination and sealing of export containers by the Central Excise Officers at the place of dispatch is available to both manufacturer- exporters (except when the export is on free Shipping Bill) and merchant-exporter in respect of the goods exported in terms of Rule 18 or 19 of the Central Excise Rules, 2002.” See http://cbec.gov.in/excise/cx-circulars/cx-circulars-11/952-2k11cx.htm.

1. UDYOG TAX NEWS FLASH
24 -NOVEMBER 2011
Customs & Exports
Self-assessment in customs – more
New drawback rates from 1 Oct 2011 responsibility on the importer or
The new drawback schedule has been exporter
notified vide notification 68/2011- Electronic declaration of imports or
Cus(NT) dated 22 September 2011 and exports has been part of the EDI system,
takes effect from 1 October 2011. and there were regulations under which
Noteworthy about this year‟s drawback such declarations were accepted. Now a
rates is that they come into effect after the new set of regulations is proposed, in line
withdrawal of DEPB. The new drawback with self-assessment. The new draft
schedule was discussed at an interactive regulations, now up on the CBEC site, are
session organized by the Federation of commensurate with the general trend
Indian Export Organisations (FIEO) with towards shifting the responsibility to the
officials of the customs department and importer / exporter. The form of
officials of the Directorate-General of declaration is much longer and asks for
Foreign Trade on September 28 at Delhi much more information from the importer
and September 29 at Mumbai. The then / exporter. See the draft circular at
Chairman of the CBEC, S.Dutt-Majumdar, http://www.cbec.gov.in/draft-circ/draft-
explained at the meeting that the ad hoc electronicbill.htm
element that was part of the DEPB rate has
been taken away, but at the same time a
cushion has been provided so that
exporters do not suffer.
Among the queries raised and resolved in
the session, as per the FIEO report on it, is
a longtime bugbear, that is, the issue of
simultaneous availment of duty drawback
with rebate in central excise. As reported,
it was clarified that “drawback of customs
component can be claimed simultaneously
with rebate of excise duty paid on goods
exported after availment of Cenvat credit.
This is so because drawback relates to the 100% Complete
customs component only whereas the
rebate is for excise duty paid on goods Packaged Software for
exported. However DOR will clarify the
matter.” (DOR= department of revenue) 100% EOU
See FIEO News, October 2011 volume, at
http://www.fieomail.org/uploads/files/131
8583894ibfg5tpl6af2i51uoosvgcn1312Inte
ractive.pdf
Udyog Software (India) Ltd (www.udyogsoftware.com) Phone: 022-67993535
Email: 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.
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2. UDYOG TAX NEWS FLASH
24 -NOVEMBER 2011
Customs & Exports sealing means dealing with the customs
officers at the port of export. An assessee
Notification v circular, excise v customs: explained his preference to me as “lower
Factory sealing of containers cost of transaction”. (The department may
Notification 19/2004-CE(NT) provides the talk of self assessment and no dealing with
procedure for exporting goods under claim customs officers, but self-admittedly the
for rebate of excise duty under Rule 18 of rate of interdiction by customs remains
the Central Excise Rules 2002. The said high. See CBEC Circular 39/2011-Cus
notification provides an option to the dated 2 September 2011 at
manufacturer-exporter, under paragraph http://cbec.gov.in/customs/cs-circulars/cs-
3(a)(i), to either self-seal his consignment circulars11/circ39-2k11-cus.htm,
at the factory or have it sealed by the particularly paragraph 4 thereof.)
central excise officers. On the other hand,
administrative circulars of the CBEC
require that exports under „free shipping
bills‟ (in which no export incentives are
claimed) are to be self-sealed by the
exporter. In a circular dated 8 September
2011 the CBEC has again reiterated that
“the facility/ option of examination and
sealing of export containers by the Central
Excise Officers at the place of dispatch is
available to both manufacturer- exporters Combo of Indirect Tax
(except when the export is on free
Shipping Bill) and merchant-exporter in Integratable with Any ERP
respect of the goods exported in terms of
Rule 18 or 19 of the Central Excise Rules, Modules of iTAX
2002.” See http://cbec.gov.in/excise/cx-
circulars/cx-circulars-11/952-2k11cx.htm.  Excise
The circular has in effect nullified the  Service Tax
option given by the notification, without
bothering to amend or rescind the
 VAT and CST
notification. Normally it is understood that
notifications must take precedence over
administrative circulars. It would be well  TDS & e-TDS
for the CBEC to follow the notification or
else amend it. The CBEC may also like to  EOU
take note of the underlying reasons why
exporters prefer sealing by the central  SEZ
excise officers over self sealing. Self-
Udyog Software (India) Ltd (www.udyogsoftware.com) Phone: 022-67993535
Email: 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.
Page 2

3. UDYOG TAX NEWS FLASH
24 -NOVEMBER 2011
Service Tax including service received by a
person based in India from a
Import of service taxable only from 18 person based outside India (-
April 2006 paraphrased).
The department has finally conceded that The sum of these provisions could only
service tax was not payable on services mean that if a person received taxable
received outside India before 18 April service in India from a person outside
2006. Many demands of service tax had India, the recipient was liable to pay
been issued for the period June 2005 to service tax on it.
April 2006, on services received by Indian
entities outside India. Now the CBEC has
clarified that “the service tax liability on
any taxable service provided by a non
resident or a person located outside India,
to a recipient in India, would arise w.e.f.
18.4.2006.” See
http://www.servicetax.gov.in/st-circulars- Udyog has been successful
home.htm. Below we look at the history
and the future implications of this circular. in integrating iTAX with
Recapitulating the legal provisions, it is following erp
seen that
› Rule 2(1)(d) of the Service Tax  SAP E.C.C. 6.0
Rules 1994 was amended in
August 2002 to include the  MFG-QAD eB 2.1
recipient of services from a non-
resident in the definition of „person  BPCS
liable to pay service tax‟.
› Thus from August 2002 a person
 BAAN FP 7
who purchased services from a non
resident was liable to pay service
tax thereon – if such tax was  SAGE Accpac ERP
payable at all.
› Section 64 of the Finance Act 1994 100 v 5.6
defines the jurisdiction of the Act
as being the whole of India  ABAS
excluding Jammu & Kashmir.
› In June 2005 section 65(105) of the  Adage
Finance Act 1994 was amended to
insert an „explanation‟, by which  Oracle
„taxable service‟ was explained as
Udyog Software (India) Ltd (www.udyogsoftware.com) Phone: 022-67993535
Email: 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.
Page 3

4. UDYOG TAX NEWS FLASH
24 -NOVEMBER 2011
However, the department took the June person liable to pay the tax. This may give
2005 amendment to mean that section 64 scope for a fresh round of litigation!
could be overridden by a mere
„explanation‟ in a definition clause of
„taxable service‟ and thereby service Marriage is a social event – for the
performed and received outside India purpose of shamiana or mandap service
could become taxable in India. This issue The taxable services of mandap keeper and
of situs of service was the point of pandal or shamiana contractor cover
contention in many cases. Most famously, provision of mandap or shamiana services
in the Indian National Shipowners for official, social or business functions.
Association case, the department sought to There was much debate in this context on
levy service tax on services received by whether a marriage is a religious event or a
ships in ports outside India. The Bombay social one. To end the controversy, the
High Court struck this down [2009 (14) enactment was amended by inserting an
ELT 289 (Bom)], and the decision was „explanation‟ in both the clauses to say
maintained by the Supreme Court [2010 that for the purpose of the clause „social
(17) STR J57(SC)]. It was clearly held that function‟ includes marriage. This
till section 66A was enacted into the amendment was challenged as
Finance Act 1994, there was no legislative unconstitutional in the Delhi High Court
sanction for taxing a service that was both on the ground that a Hindu marriage is a
performed and received outside India, sacrosanct and sacred religious function.
even if the recipient was based in India. The High Court dismissed the petition
with the observation that Hindu marriage
The CBEC has accepted this position. In per se had not been declared to be a social
fact, the CBEC has done more than accept function; the explanation was only for the
the judgments gracefully. By loose purpose of the particular clause. The case
wording of its circular it has conceded is reported as All India Tent Dealers
more than was perhaps intended, as can be Welfare Organisation v Union of India,
seen by a comparison of what the courts 2011 (24) STR 385 (Del).
held and what the circular clarifies on that Update Written By Radha Arun,
basis. Courts have held that service
Consultant To Udyog Software ( India) Ltd
provided outside India was not taxable
before 18.4.2006. However the CBEC has
clarified that any service provided by a Visit
non resident to a person in India was non- www.udyogsoftware.com
taxable. This covers service provided in Call us on
India by a non resident, which is taxable
under normal provisions and for which 9320124365
Rule 2(1)(d) of the Service Tax Rules or
1994 defines the recipient of service as the 022-67993535
Udyog Software (India) Ltd (www.udyogsoftware.com) Phone: 022-67993535
Email: 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.
Page 4