Price reduction for late delivery: conflicting views on excise value Background: Where excise duty is charged as a percentage of the value of the goods, there are two methods of determining the assessable value. For goods that are under MRP and notified for the purpose of MRP-based assessment under section 4A of the Central Excise Act, there is no difficulty in arriving at assessable value. For other goods, the ‘transaction value’ is the value for assessment, as provided in section 4 of the Central Excise Act. Transaction value means the price actually paid or payable for the goods.

1. UDYOG TAX NEWS FLASH
1st JANUARY 2012
Update 1st Jan
AP High Court continues stiff stand on pre-deposit
The AP High Court has held that pre-deposit can be ordered without hearing the appellant. The case
before it was WP 12189 and 12218 of 2011 filed by Sanghi Polymers and its Vice-President against
pre-deposits of 50% and 10% respectively of the disputed amounts ordered by the Commissioner
(Appeals) without granting a personal hearing. The court‟s reasoning was that the order-in-original
(which was under appeal before the appellate Commissioner) had considered all the contentions of
the appellant. Further, the court agreed with the
government counsel that merits were not relevant at
pre-deposit stage. The court followed precedent
judgments, including the case of Union of India v
Jesus Sales Corporation, 1996 (83) ELT 486 (SC), in
which the Supreme Court had observed that right of
hearing before disposal of an appeal does not include
right of hearing before disposal of stay application.
The issue of stay was discussed in these columns
earlier in …
Service tax filing date extended again, to 6 January
iTAX is combo of Indirect
Glitches in electronic filing of service tax returns
continue to trouble the assessees. The CBEC has Taxation For Gobal &
considerately issued order no. 3/2011 dated 29
December 2011, further extending the last date for e- Local ERP’s vendors or
filing of return for the half year April-September
2011. The due date as per statute was 25 October; it customers who desire a
was extended to 26 December by a CBEC order, as
reported in this column earlier. The latest order fixes local taxation modules
the last date for filing as 6 January 2012. The reason
recorded is that “assessees are facing problems in for their ERPs
electronic filing of returns due to various reasons.”
The order can be seen at
http://www.servicetax.gov.in/notifications/notfns-
2k11/st-odr03-29dec11.htm
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Phone: 022-67993535, Email: sales@udyogsoftware.com
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or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is
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2. Amendments to anti- money-laundering law on anvil
The government tabled the Prevention of Money-Laundering (Amendment) Bill, 2011, in the Lok
Sabha on Tuesday, to amend the Prevention of Money-Laundering Act 2002. The main features of
the amendments are
› The law will be linked with the corresponding law of other countries, and will provide for
transfer of proceeds of offences committed in India;
› The definition of money-laundering is being expanded; now it will include concealment,
acquisition, possession and use of the proceeds of crime as criminal offences;
› Even without conviction, the proceeds of crime can be attached and confiscated, if it is
proved that there was money-laundering and that the property was involved in the crime;
› The directors and employees of reporting entities like banks, financial institutions and
intermediaries will have more powers and responsibilities and will be accountable under the
law;
› The limit of Rs 5 lakhs as fine will be removed;
› Appeal from a decision of the Tribunal will lie to the Supreme Court (instead of High Court,
as at present).
Action against money-laundering assumes greater significance in the present global scenario of
terrorism-linked money transfers. A paper published by the Asian Development Bank in 2008
mentioned the figure of money laundered annually at an estimated 3 to 5 per cent of global gross
domestic product. (See http://beta.adb.org/publications/countering-money-laundering-and-financing-
terrorism-implementing-adbs-policy.) This has made it imperative for nations to coordinate their
laws and their efforts to curb the menace.
Price reduction for late delivery: conflicting views on excise
value
Background: Where excise duty is charged as a percentage of the
value of the goods, there are two methods of determining the
assessable value. For goods that are under MRP and notified for
the purpose of MRP-based assessment under section 4A of the
Central Excise Act, there is no difficulty in arriving at assessable
value. For other goods, the „transaction value‟ is the value for
assessment, as provided in section 4 of the Central Excise Act.
Transaction value means the price actually paid or payable for the
goods.
Case: Against this background it was seen in the case of CCE v
Victory Electricals (Misc Order 396/2011 dated 18.8.2011 of
Bangalore bench of CESTAT in E/251 to 253/2009) that an
assessee made supplies under a tender, and one of the conditions
of the tender was that the price would be reduced by a maximum
of 5% if there was delay in supply. The assessee paid excise duty
on the value originally agreed, but the payment was reduced by
the customer in terms of this clause, and the excise duty was also
correspondingly reduced. The assessee claimed refund of the
differential amount. The department rejected the claim, holding
that the amount deducted from the price was in the nature of a
penalty and did not result in reduction of the transaction value. In
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. appeal, the Bangalore bench of the Tribunal found that different benches of the Tribunal had taken
different views on similar issues. It therefore referred the case to a larger bench to resolve the matter.
Supporting structures are not components of capital goods: no credit
The Supreme Court, in the case of Saraswati Sugar Mills, 2011 (270) ELT 465 (SC), held that
supporting structures for machinery are not „components‟ of machinery for which Cenvat credit is
available. Therefore, when an assessee purchases steel and other raw material and fabricates such
structures for captive use in the factory, no credit of the excise duty paid on the material is available.
Though given in the context of the old Modvat rules, this judgment has relevance for pending
matters under the Cenvat Credit Rules 2004. Credit on raw material for supporting structures was
specifically excluded by an amendment to the definition of „inputs‟ in July 2009. However a Larger
Bench of the CESTAT held, in the case of Vandana Global Ltd v CCE, 2010 (253) ELT 440, that
even before the July 2009 amendment no credit was available on such items. The Supreme Court
judgment cited above dashes hopes of relief from that quarter. Now only limitation can serve to
mitigate the damage for assessees with show cause notices pending against them on this issue.
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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