UNOIN BUDGET-2009

UNION BUDGET 2009-10

CA. PRADEEP JAIN

7/6/2009

CENTRAL EXCISE: -

1.) Changes in rate of Excise duty: -

Chapter	Product	Change	Remarks
27	motor spirit commonly known as petrol intended for sale with a brand name	from ‘6% + Rs 5 per litre’ to a specific rate of Rs 6.50 per litre. Therefore, total excise duty of Rs. 14.50 per litre.	S.No.17 of the Notification No. 4/2006-CE
27	High speed diesel oil intended for sale with a brand name	from ‘6% + Rs 1.25 per litre’ to a specific rate of Rs 2.75 per litre. Therefore, total excise duty of Rs 4.75 per litre.	S.No.19 of the Notification No. 4/2006-CE
27	special boiling point spirits	reduced to 14%.	S.No. 15 of notification No. 2/2008-Central Excise
2710	Naphtha	reduced to 14%.	Notification No. 18/2009-CE
29	pure terephthalic acid (PTA)	increased from 4% to 8%	S.No. 52C of the notification No. 4/2006-C.E
29	dimethyl terephthalate (DMT)	increased from 4% to 8%	S.No. 52D of the notification No. 4/2006-C.E
29	Acrylonitrile	increased from 4% to 8%	S.No. 52E of the notification No. 4/2006-C.E
32	ink used in writing instruments	increased from 4% to 8%	S.No 68A of the Notification No. 4/2006-C.E
39	polyester chips	increased from 4% to 8%	S.No. 80A of the Notification No. 4/2006-C.E
40	Heat resistant latex rubber thread	increased from 4% to 8%	S.No. 82 of the notification No. 4/2006-Central Excise
40	Heat resistant rubber tension tape	increased from 4% to 8%	S.No. 82A of the notification No. 4/2006-Central Excise
43	Raw, tanned and dressed fur skins	increased from 4% to 8%	S.No. 86 of the notification No. 4/2006-Central Excise
44	Sheets for veneering for plywood, similar laminated wood and other wood, of thickness not exceeding 6 mm	increased from 4% to 8%	S.No. 86B of the notification No. 4/2006-Central Excise
44	particle board, oriented strand board, Fibre board and similar board of wood or other ligneous materials	increased from 4% to 8%	S.No. 87 of the notification No. 4/2006-Central Excise
44	Fibre board of wood or other ligneous materials	increased from 4% to 8%	S.No. 87 of the notification No. 4/2006-Central Excise
44	Plywood, veneered panels and similar laminated wood	increased from 4% to 8%	S.No. 87B of the notification No. 4/2006-Central Excise
44	Flush doors	increased from 4% to 8%	S.No. 87C of the notification No. 4/2006-Central Excise
44	articles of wood, other than articles of densified wood	increased from 4% to 8%	S.No. 1 of the notification No. 10/2006-Central Excise
48	folders, file covers, manifold business forms & other articles of stationery, of paper or paperboard (except notebooks and exercise books )}	increased from 4% to 8%	S.No. 2 of the notification No. 10/2006- Central Excise
48	paper and paperboard labels	increased from 4% to 8%	S.No. 3 of the notification No. 10/2006-Central Excise
54	manmade filament yarn falling under headings 5402, 5403 and 5406	increased from 4% to 8%	S.No 1 of notification No. 5/2006-CE
55	manmade fibres (tow and staple fibres) falling under headings 5501 to 5507	increased from 4% to 8%	S.No 2 of notification No. 5/2006-CE
	textile goods made of pure cotton, not containing any other textile material.*	from nil to 4%.	Notification No 29/2004-CE
	textile goods, made of manmade fibre/yarn or natural fibres/yarn other than cotton i.e. beyond the fibre/yarn stage.**	increased from 4% to 8%	Notification No. 59/2008- CE
68	goods in which not less than 25% by weight of fly ash or phosphogypsum or both have been used.	increased from 4% to 8%	S. No.9 of notification No. 5/2006- Central Excise
68	articles of mica	increased from 4% to 8%	S. No.8 of notification No. 10/2006- Central Excise
68	solid or hollow building blocks, including aerated or cellular light weight concrete block and slabs	increased from 4% to 8%	S. No.9 of notification No. 5/2006- Central Excise
69	ceramic tiles, manufactured in a factory not using electricity for firing the kiln	increased from 4% to 8%	S. No.13 of notification No. 5/2006- Central Excise
71	articles of jewellery, on which brand name or trade name is indelibly affixed or embossed on the article of jewellery itself	reduced from 2% to ‘nil’	S. No.26 of notification No. 10/2006- Central Excise
73	LPG Gas stoves	increased from 4% to 8%	S.No. 36 of the notification No. 5/2006-Central Excise
84 & 85	electronic milk fat tester and electronic solid non-fat (SNF) tester	increased from 4% to 8%.	S. No. 19 of notification No. 6/2006-CE
84 & 85	MP3/ MP4 or MPEG 4 players with or without radio/ video reception Facility	increased from 4% to 8%.	S. No 21 of notification No. 6/2006-CE
87	motor vehicles of heading 8702 and 8703 having engine capacity exceeding 1999cc	reduced from 20% + Rs.20,000 per unit to 20% + Rs.15,000 per unit.	S.No.41A of notification No. 6/2006- Central Excise
87	petrol driven motor vehicles for transport of goods except dumpers of tariff item 8704 10 90	reduced from 20% to 8%	S. No.44 of notification No. 6/2006- Central Excise
87	chassis of such petrol driven vehicles	reduced from 20% + Rs.10,000 per chassis to 8% + Rs.10,000 per chassis	S. No. 51A has been inserted in notification No. 6/2006- Central Excise
90	contact lenses	increased from 4% to 8%.	S. No. 23 of notification No. 59/2008-CE
90	parts of drawing and mathematical instruments, used in the manufacture of drawing and mathematical instruments	increased from 4% to 8%.	S. No. 58 of notification No. 6/2006-CE
95	playing cards	increased from 4% to 8%.	S. No. 24 of notification No. 59/2008-CE
96	all goods (except specified brooms) classified under heading 9603 of the Central Excise Tariff like paint brushes, shaving brushes, toothbrushes etc	increased from 4% to 8%.	S. No. 75 of notification No. 6/2006-CE
96	slide fasteners and parts thereof classified under heading 9607	increased from 4% to 8%.	S. No. 75A of notification No. 6/2006-CE

*However, the said goods would be exempt from excise duty subject to non availment of Cenvat credit on input. [Notification No 30/2004-CE refers]. Thus, the exemption will be optional. Those opting to pay duty @ 4% will be eligible to avail Cenvat credit. The applicable rates for CVD purposes will be 4%.

**However, the said goods would continue to be fully exempt from excise duty subject to non-availment of Cenvat credit on inputs. [Notification No 30/2004-CE refers]. A manufacturer, who takes credit of the duty paid on inputs, would be required to pay duty on the final product. The applicable rates for CVD purposes will be 8%.

2.) Concessions and Exemptions:

The following concessions/ changes have also been made:

i. Full exemption from excise duty has been provided to goods falling under Chapter 68 manufactured at the site of construction for use in construction work at such site. This was demand of the construction industry. Earlier it was available to goods manufactured from specified material but now it is exempted from duty if these are manufactured at site and erected at site. But the dispute on the definition of “site” and “marketability” will continue. This ambiguity was reflected in the case of AFCONS INFRASTRUCTURE LTD. [2008 (232) E.L.T. 274 (Tri. - Del.)] in which partial stay was granted on the view given that since the girders are manufactured as a part of the contract and are tailor-made for a particular location and are of no use for other buyers, they are not excisable goods. However, it was held in the case of ASIAN TECHS LTD. [2005 (189) E.L.T. 420 (Tri. - LB)] that since the girders are capable of being transported from one place to another, they are capable of being marketed and hence chargeable to excise duty. Moreover, in the case of GEO TECH FOUNDATIONS & CONSTRUCTION [2008 (224) E.L.T. 177 (S.C.)] this issue of marketability was being raised but the appeal was rejected on the grounds of it being time barred and hence the marketability issue was not considered.

ii. Recorded smart card and tags are exempt from excise duty. A condition has been added to this exemption so that it would be available only if the manufacturer does not avail of Cenvat credit of the duty paid on inputs for these goods.

iii. Articles of jewellery on which brand name or trade name is indelibly affixed or embossed (branded jewellery), have been fully exempted from excise duty. The increase in custom duty on gold and silver will set off the same.

iv. Full exemption has also been provided to EVA compound manufactured on job-work basis for further manufacture of footwear.

3.) SSI Exemption:

There is no change either in the exemption limit or the eligibility limit for the small scale exemption. Under para 4(e) of Notification No. 8/2003-CE dated 01.03.2003, specified items that are in the nature of packaging material are excluded from the purview of the brand name restriction. This dispute has arisen due to Apex court decision in case of Kohinoor Elastic. This matter has been represented by us and amendment has come. But still we are trying for 11C notification. One more item viz. ‘printed laminated rolls’ has been added to this list with immediate effect. As a consequence, manufacturers of printed laminated rolls bearing the brand name of another person and fulfilling the conditions of the notification would be entitled to full exemption from excise duty for their first clearances of this item (for home consumption) not exceeding Rs. 150 lakh during the remaining part of this financial year i.e. 2009-10.

4.) Miscellaneous:

‘Inputs’ which are eligible for availing Cenvat credit shall not include cement, angles, channels, CTD or TMT bar and other items used for construction of shed, building or structure for support of capital goods. This means that earlier it was included. A lot of litigation on this score and matter has been referred to Larger bench in case of Vandana Global. This amendment does not have retrospective effect. Thus, it will mean that earlier it was included and this is the reason it has been excluded. But the department will lose this case due to this amendment. This was seen by us when the service tax on commission on lottery services was introduced. It was held that earlier it was not taxable and as such tax has been imposed on the same.[Notification No. 16/2009-CE (NT) refers].

Rule 6(3) of the Cenvat Credit Rules, 2004 is being amended to prescribe that a manufacturer of both dutiable and exempted goods using common inputs, who does not maintain separate accounts, shall pay an amount equal to 5% of the total price of the exempted goods instead of 10%.[Notification No. 16/2009-CE (NT) refers]. We have pleaded this matter on many forums. Our article on this issue was published in Excise Law Times. Thank God, this anomaly has been removed. The rate of reversal @ 10% was good when the duty was 16%. But when the rate of Central Excise duty is 8% then reversal @ 10% is not understandable. You will take credit on inputs @ 8% on its value and reverse the cenvat credit @ 10% on value of exempted goods. This was absurd position. This has been rectified.

Power of High court :- Recently the Apex Court of India has given the verdict in case of Hongo (India) Pvt. Limited that High Court does not have power to condone the delay in filing of appeals. This power has been vested in High Courts to condone the delay in filing appeals, applications and memorandum of cross objections if sufficient cause is shown.

Classification of Betel nuts:- The Highest Court of India has given verdict in case Crane Betel nut powder works that the process of adding or mixing Cardamom, copra, menthol, spices, sweetening agents or any other ingredients other than lime, katha or tobacco to betel nut does not amount to manufacture. To nullify the same, it is specifically excluded from Chapter 8 and a note has been inserted in Chapter 21 to term this process as manufacture. The parliament has power to nullify the acts of judiciary. This will have immediate effect.

Rule 9 A(2) provides for compounding of offences. Certain type of offence and circumstances has been excluded from the preview of compounding provisions.

Rule 14A provides for cost audit for valuation of finished goods and Rule 14AA provides for the cost audit of inputs when the credit is taken is more than normal by a unit. Cost accountants were eligible for conducting such audit. Now, Chartered Accoutant are also eligible for doing the same. This is good opportunity for CAs.

Rule 23A has been amended to provide that Advance Authority constituted under Section 28 F of Custom Act will be eligible to deal with cases under Central Excise as well.

Notifications relating to Compounded levy for induction furnace units have been amended retrospectively. This is great weapon in the hand of parliament.

One more important amendment from the point of view of assessee has come. Department seizes the documents while making the case but only few documents are relied upon in show cause notice. Rest of the documents should be returned to party within a month. There was Board circular also on this issue. But now it is incorporated in the Act itself. But issue of show cause notice also takes a considerable time. Moreover, there is always proviso below the Rule. Here also, the commissioner can retain these documents on giving reasons in writing.
SERVICE TAX: -

1.) New Services Added: -

Transport of Goods through Rail:

Now service tax is imposed on goods transported by railways including Government railways, whether in containers or otherwise.

Transport of Coastal Goods; and Goods transported through Inland water:

Coastal goods (as defined under the Customs Act) and transport of goods through National Waterways, and inland waters are proposed to be brought under tax net.

Legal Consultancy Service:

Any consultancy, advice or technical assistance provided in any discipline of law is proposed to be subjected to service tax. However, the tax would be limited to services provided by a business entity to another business entity. At last, the Government has agreed that the services are being provided by the Lawyers. But individuals providing services will be exempt from service tax. Similarly, if it is provided to an individual then also it will be exempt from service tax. But mind it association of person or group of person is included in definition of “Business entity”. But we need not to bother. Lawyers are capable enough to litigate on such issues.

Cosmetic and Plastic Surgery service:

Now Service tax is proposed to be taxed on cosmetic surgery and plastic surgery undertaken to preserve or enhance physical appearance or beauty. This time woman will be angry with FM. Custom duty on gold and silver. Contact lenses are dearer. Now, it is proposed to impose the service tax on Cosmetic and plastic Surgery. Thank God. Michal Jackson did not live in India otherwise he has to pay the huge service tax. This has another aspect also. At last, the Doctors have come in the ambit of service tax.

2.) Alteration in scope of existing taxable services :

Changes in Business Auxiliary Service (BAS) [section 65(19)]:

Now if any process of manufacture is undertaken for the client, where the resultant product does not fall under the category of excisable goods, then, the service tax would be attracted. The word “Excisable goods” have been added. The definition of “Excisable goods” will be debateable issue. But it is mainly amended to cover alcoholic beverages. A lot of litigation is going on this issue and many tribunal decisions have waived the pre-deposit on this issue and asked the assessee to deposit the amount. Still a final decision on the matter has to come. But the Government intended to make it more specific.

Stock-broker Service [section 65(105)(a)]:

The word Sub-broker has been removed from the present definition of a stockbroker [section 65(101)] thus the sub-brokers have been excluded from the purview of service tax. As per SEBI guidelines also, the sub brokers cannot raise the invoice and as such the service tax was not payable by them. Moreover, it was revenue netural also. Whatever the service tax paid by sub broker, it was available as credit to main broker. So, he was paying only differential tax only. Now, he has to pay the total amount.

Information Technology Software Service [section 65(105)(zzzze)]:

Definition has been amended by replacing the word ‘acquiring’ by the word ‘providing’, with retrospective effect from 16.05.2008. Government can do anything with retrospective effect. But the cost to assessee is not known to them.

Excise duty exemption is also provided to packaged software subject to condition that it is equivalent to excise duty payable on that portion of the value which represents the consideration paid or payable for transfer of right to use such software. This has been done with a view to reduce double taxation but clarifications needed from Board on this count also.

3.) Other changes:

Service tax procedure regarding revision of orders under Section 84 amended to make it in line with the central excise procedure. Now there is no power of revision of order. Only appeal is to be filed. This is welcome step to streamline the rules.

Services received by Goods Transport Agents (GTAs) from other service providers (such as warehouse keeper, cargo handlers, C&F agents) during the movement of goods, en-route were exempted by virtue of notification No. 1/2009-ST dated 05.01.2009. Now said exemption has been given effect retrospectively. This shows that “Union is Strength”. The Transport association has power to halt the country and they get the benefits. You can see exemption with retrospective effect.

4.) Amendments in Rules (pertaining to service taxpayers):

Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007:

Now composition scheme would be available only to such works contracts where the gross value of works contract includes the value of all goods used in or in relation to the execution of works contract whether received free of cost or for consideration under any other contract. This condition would not apply to those works contracts, where either the execution of works contract has already started or any payment (whether in part or in full) has been made. Now the charm of works contract is losing. When it was introduced, it has service tax rate of 2% and that too with Cenvat credit on input services and capital goods. The service tax in Commcercial or residential construction activity was around 4% after 67 % abatement. Moreover, free supply material was not included. But the rate was increased to 4%. On other side, rate of other services was reduced but it remained at same level. It was costlier as rate under commercial or residential construction was 3.33% only. Now, the benefit of service tax of Free supply material has taken away. On the contrary, the High Court of Delhi has ruled that the service tax on free supply is not imposable under commercial construction services. As such, the charm of Work Contract is going away. Only plus point available is that the credit of input services and capital goods. Before this budget, it was demanded that the rate of service tax under composition scheme under Works contract should be reduced but on the contrary, the service tax on free supply material is also imposed. Moreover, the value of contract is to be declared initially only.

CENVAT Credit Rules (pertaining to service tax)

Service providers taking service tax credit, if they write off fully or where provision to write off has been made in the books of account then they shall pay an amount equivalent to such CENVAT credit taken. Similar provision was available for manufacturers but not for service providers. It has been given.

Rule 6(3) exempts services, using common inputs or input services, but opting not to maintain separate accounts to pay an amount of 8 per cent of the value of exempted service. Such rate has been reduced from 8 per cent to 6 per cent. The manufacturer has to pay 5% and service providers at 6%. If one calculate, very less credit is taken by service providers but they have to reverse more.

5.) Exemptions:

Private bus operators, who operate buses on specific inter-state or intra-state routes, operating undertaking point-to-point transportation of passengers in a vehicle bearing contract carriage permit is being fully exempted from service tax.

The inter-bank transactions of purchase or sale of foreign currency, when undertaken by scheduled banks, is being exempted.

Federation of Indian Export Promotion Organization (FIEO) and twenty-one specified export promotion councils sponsored by the Department of Commerce or by the Ministry of Textiles are being exempted from the levy of service tax

*Exemptions mentioned above under the heading “Exemptions” would come into force immediately

6.) Changes in the scheme for refund of service tax to the exporters of goods:

Following two services have been exempted, if they are used for export of goods and where the liability to pay the tax on such services is on the exporter himself, on reverse charge basis, -

(i) Transport of goods by road, from the place of removal to any ICD, CFS, port or airport; or from any CFS or ICD to the port or airport; and

(ii) Services provided by a foreign commission agent for procuring orders.

Modified Refund Scheme

New scheme is essentially trust based i.e. refund is to be granted on self-certification/certification by Chartered Accountant. But it should result in refund of service tax and not one more step in increasing the complications. A detailed analysis of the same will be provided on this issue.

Comments

UNOIN BUDGET-2009

Comments

Post a Comment

Query