Flip flop on ban on cotton exports The Ministry of Commerce banned export of cotton on 5 March 2012. The ban covered even exports against contracts already registered with the Ministry. The reason cited was that exports have already exceeded the target of 8.4 million bales. Accordingly, the CBEC issued circular no. 6/2012-Customs dated 6 March 2012 (http://cbec.gov.in/customs/cs-circulars/cs-circ12/circ06-2012-cs.htm) to its customs formations, instructing them that the export is prohibited, that there will be no transitional arrangements, and that the details of all consignments already handed over to customs for export must be reported. However, upon receiving clarification from the DGFT under its Circular No. 58(RE-2010)/2009-14 dated 09-03-2012, the CBEC issued another circular 7/2012-Customs dated 9 March 2012 (http://cbec.gov.in/customs/cs-circulars/cs-circ12/circ07-2012-cs.htm) instructing its customs formations to allow export of consignments in respect of which ‘let export’ orders were issued upto 2400 hours on 5 March. Finally the DGFT withdrew its ban, by notification no. 106 (RE-2010)/2009-14 dated 12 March 2012. However it requires all registrations to be subjected to re-scrutiny. The ban had evoked strong protests from growers and ginners in the domestic sector, but had been welcomed by the textile industry. Reports can be seen at http://www.thehindu.com/business/Economy/article2967460.ece.

1. UDYOG TAX NEWS FLASH
9th MARCH 2012
Flip flop on ban on cotton exports
The Ministry of Commerce banned export of cotton on 5 March 2012. The ban covered even exports against
contracts already registered with the Ministry. The reason cited was that exports have already exceeded the
target of 8.4 million bales. Accordingly, the CBEC issued circular no. 6/2012-Customs dated 6 March 2012
(http://cbec.gov.in/customs/cs-circulars/cs-circ12/circ06-2012-cs.htm) to its customs formations, instructing
them that the export is prohibited, that there will be no transitional arrangements, and that the details of all
consignments already handed over to customs for export must be reported. However, upon receiving
clarification from the DGFT under its Circular No. 58(RE-2010)/2009-14 dated 09-03-2012, the CBEC issued
another circular 7/2012-Customs dated 9 March 2012 (http://cbec.gov.in/customs/cs-circulars/cs-
circ12/circ07-2012-cs.htm) instructing its customs formations to allow export of consignments in respect of
which ‘let export’ orders were issued upto 2400 hours on 5 March. Finally the DGFT withdrew its ban, by
notification no. 106 (RE-2010)/2009-14 dated 12 March 2012. However it requires all registrations to be
subjected to re-scrutiny.
The ban had evoked strong protests from growers and ginners in the domestic sector, but had been
welcomed by the textile industry. Reports can be seen at
http://www.thehindu.com/business/Economy/article2967460.ece.
Anti-dumping duty on polyester yarn extended
The central government has issued notification 15/2012-Customs dated 5 March 2012 extending, till 20
August 2012, the anti dumping duty on fully drawn or fully oriented yarn / spin draw yarn / flat yarn of
polyester, originating in, or exported from, Indonesia, Republic of Korea, Malaysia and Chinese Taipei. The
duty was originally imposed vide notification 15/2007-Customs dated 20 February, 2007. Notification
15/2012-Customs can be seen at http://cbec.gov.in/customs/cs-act/notifications/notfns-2012/cs-
add2012/csadd-15-2012.htm.
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 1

2. Daily list of imports and exports – Rules amended
The Publication of Daily List of Imports and Exports Rules have been amended by notification 18/2012-
Customs dated 5 March 2012. The amended Rules provide for publication of daily lists of imports and
exports by port, airport, inland container depots and land customs stations (instead of only by ports, as
hitherto). Also, the particulars to be published have been changed, by deleting name of steamer and
introducing unit quantity code and customs classification. The notification 18/2012-Customs can be seen at
http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2012/cs-nt2012/csnt18-2012.htm.
Classification: no fixed test: SC
The Supreme Court considered an issue of classification of an iodine-based cleansing solution which was also
used as a surgical scrub. The proportion of iodine in the product was miniscule; Revenue contended that for
this reason it was classifiable as a detergent. The manufacturer, on the other hand, had classified it as a
medicament, on the ground that it was a prophylactic.
The Court went through the Tribunal’s assessment of facts and agreed with it that the product was a
prophylactic, in that it was primarily used for prevention of disease in human beings. According to the
literature and the instructions on the labels, it was used for
pre-operative cleaning of hands by surgeons and also pre-
operative cleaning of patients. The department accepted
that it was an antiseptic. The Court also took note of the fact
that in the case of medicinal ingredients the proportion in
the product may be low because a larger use may be harmful
for the human body; and on this basis observed that the
quantity of a medicament used in a particular product will
not be a relevant factor.
The Court made some instructive remarks on the issue of
classification:
 There is no fixed test for the classification of a
taxable commodity. The ‘common parlance’ test and
the ‘commercial usage’ test are the most common.
 However there can be no static parameter for the
correct classification of a commodity.
 The functional utility and predominant or primary
usage of the commodity must be taken into account,
apart from the understanding in common parlance.
 A commodity cannot be classified in a residuary
entry, when there is a specific entry, even if such
specific entry requires the commodity to be
understood in the technical sense.
 The combined factor that needs to be taken into
account for the classification of the particular
product under consideration in the case are the
composition, the product literature, the label, the
character of the product, and the use to which the
product is put. The miniscule quantity of the www.udyogsoftware.com
prophylactic ingredient is not a relevant factor.
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. The case is reported as CCE v Wockhardt Life Sciences Limited, 2012-TIOL-24-SC-CX.
CBEC clarifies regarding branded jewellery
An excise duty of 1% was imposed on branded jewellery, in the Finance Act of 2011. The CBEC had issued
letter no. B-1/3/2011-TRU dated 25 March 2011, in which, inter alia, it clarified that if the packaging of the
product bore a brand name, this made the jewellery taxable as branded jewellery. It has now, without
exactly admitting that it was wrong, ‘modified’ the letter of 25 March 2011 to clarify that excise duty is
attracted only if the brand name is indelibly marked or affixed on the article itself. This letter dated 2 March
2012 issued from F.No. 354/38/2011-TRU is, however, not to be found on the CBEC website. It can be
viewed at http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=11518.
Excise duty on ready-mix concrete
Excise duty at the rate of one per cent without Cenvat relief was levied on ready-mix concrete under the
budget of 2011. An exemption for concrete manufactured at site is extant, under notification 4/97-CE;
however the CBEC had earlier clarified by circular 368/1/98-CX dated 6 Jan 1998 that the two are distinct
products. Ready mix concrete is covered by Indian Standards specification IS 4926-1978, while concrete
manufactured at site is covered under IS 456-1978. The exemption under notification 4/97-CE is not
available to ready mix concrete even if manufactured at site, according to CBEC circular 315/31/97 dated 23
May 1997. However, in a recent stay order in the case of Simplex Infrastructures, the Tribunal at Mumbai
has held that prima facie the exemption is available to ready mix concrete manufactured at site. The order is
reported as 2012-TIOL-298-CESTAT-MUM.
Residential complex – taxability of construction service
There is much confusion on what is taxable and what is excluded, in the taxable service of construction of
residential complex. The exclusion, as per section 65(91a) of the Finance Act 1994, is for a person who (i)
constructs a complex by directly engaging another person for designing or planning the layout; and (ii) uses
it personally as a residence (which includes renting it to somebody who uses it as a residence). What about a
person (including corporate person) who constructs a complex for personal residential use by engaging the
services of a civil contractor? One would think that it is not
excluded. But in the case of contractors for Tamil Nadu Visit
Police Housing Corporation Limited, the contractors sought
www.udyogsoftware.com
the exemption as “personal use”; and the Tribunal waived
pre-deposit and remanded the matter for consideration of Call us on
this plea. The case is reported as Sima Engineering 9320124365
Constructions, S. Rajangam, Marimuthu Gounder and Sons, or
TM Saravanan and S. Kadirvel v CCE Trichy, 2010-TIOL-
022-67993535
1734-CESTAT-MAD, and has been followed by the same
bench recently in an identical matter of a contractor for the
same entity. Update Written
By Radha Arun,
Consultant To
Udyog Software ( India) Ltd
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