We are a company dealing with cutting of hot/cold rolled coils into sheets and strips. We were under the belief that such an activity amounts to manufacturing under central excise and so, we paid excise duty on the same and also availed Cenvat credit of input, capital goods and input services. Later, we came to know that cutting of coils into sheets/ strips does not amount to manufacture. Please clarify whether we need to reverse Cenvat credit already availed on activities not amounting to manufacture, though excise duty on the said activities has been paid.
The Central Board of Excise & Customs has recently issued a circular on irregular availment of Cenvat credit on certain activities not amounting to manufacture. It is clarified that where an assessee has paid excise duty on final product and availed credit on inputs, capital goods and input services used in making of such product, but subsequently it is held that excise duty is not chargeable, then the assessee should approach the central government for issue of appropriate notification for regularisation of the Cenvat credit already availed on activities not amounting to manufacture, as they have paid excise duty on the said activities.
However, please note that if you are carrying on activities of cutting of coils into sheets for or on behalf of another person (who is the owner of the goods), you will be liable to service tax under the category of business auxiliary service, as the process is question does not amount to manufacture. In such a case, you should pay service tax on the same and thereafter, would be eligible to avail Cenvat credit on the capital goods and inputs used by you on further activities. However, service tax will not apply if you are carrying on such process on goods purchased by you.
We are a consulting firm engaged in conducting feasibility studies and market research for companies intending to set up business in India. We pay service tax under the taxable service category of ‘market research agency services’. We recently conducted a feasibility study for a foreign company, and delivered our report to its office located outside India through e-mail. We understand that to qualify as ‘export’, the market research services need to be wholly or partly performed outside India. However in our case, the research was conducted entirely within India. Would the provision of services still qualify as export?
Under the Export of Service Rules, 2005 (‘Export Rules’), for the provision of market research agency’s services to qualify as ‘export’, the following conditions need to be satisfied: i) the services must be wholly or partly performed outside India; ii) the such supplies, full Cenvat credit is available on inputs and input services even though excise duty is not leviable on the finished goods. Accordingly, in your case, no reversal of Cenvat credit should be required.
We deal with import of medical equipment and sell them to hospitals in India. We have recently been approached by a customer who wanted to purchase certain equipment from us on ‘high-seas’ basis, and import the same into India. In our case, the goods would be sent to us by air and we have been informed that the document of title, ie. the airway bill is non-negotiable and they cannot be endorsed in favour of another buyer. Please advice us how to sell goods to our customer on high-seas basis.
In case of high-seas sales, transfer of title to goods can take place only through an endorsement of documents of title by the original buyer to a subsequent buyer. Bills of lading, railway receipts and lorry receipts are valid documents of title. In case of goods transported by air, transfer of title by endorsement of airway bills is not possible since the same are non-negotiable. However, in numerous cases, it has been held that the delivery order issued by the bank in pursuance of airway bill is a document of title to the goods and its endorsement to the subsequent buyer by the importer should amount to transfer of document of title to the goods. Accordingly, in your case, high-seas sale may be effected in respect of goods transported by air by endorsing any of the above-mentioned documents. services must be provided from India and used outside India; and (iii) the consideration for services must be received in convertible foreign exchange. In recent cases of the tribunal involving clinical trials which have the same conditions for export, it has been held that in case the agreement between the service provider and its client clearly stipulates that the service provider is required to deliver its report to the client’s premises or personnel located or based outside India, the agency’s contractual obligations would not be satisfied until the report is delivered to the client outside India. Accordingly, the delivery of the report outside India would form part of the scope of services to be performed by the agency. In such a situation, delivery of the report outside India can be construed as part performance of services outside India. So, in your case, even though the research activity was conducted within India, the delivery of the report to the client outside India would be considered as part performance of services outside India. Hence, service tax should not be chargeable in this case, subject to fulfillment of other conditions prescribed under the export rules.
We manufacture of iron and steel products in Delhi. We have recently supplied goods to a unit located in a SEZ in Haryana. We are aware that supplies to a SEZ unit are exempt from excise duty. Please clarify whether we are required to reverse proportionate Cenvat credit availed in respect of inputs and input services used in our manufacture?
Under the Cenvat Credit Rules, 2004 (CCR), where the finished goods are exempt from excise duty, the manufacturer is required to either reverse proportionate Cenvat credit availed in respect of inputs and input services used in the manufacture of exempt goods, or pay 5% of the sale turnover of exempt goods. However, in case of supplies to SEZ units (even SEZ developers from December 31, 2008), 100% export oriented units, electronic hardware/ software technology park, United Nations or other international organisations for their official use, the manufacturer is not required to comply with any of the above requirements.
Source : Financial Express