We are manufacturing several models of excavators and import components to manufacture them. The specifications of parts are different for each model. It is very difficult to foresee the requirements at the time of filing advance authorisation but we are required to declare the specifications. Once we declare and get the authorisation, we run into difficulties at the time of Customs clearance in matching the actual specifications of imports with the specifications given in the advance authorisation. This means quite a lot of paperwork and many times, we have to clear on duty payment and look for ways to get duty drawback. Is there a way out?
You may examine whether annual advance authorisation or duty free import authorisation schemes will meet your requirements. Under both the schemes, the specifications, quality, grade etc. are required to be mentioned only for specified sensitive items. There are advantages and disadvantages under both the schemes, which you may evaluate but your basic requirement not to commit on the specifications of the components you want to import will be met in respect of non -sensitive items. You may refer to Para 4.24 A (i) and Para 4.55.5 of the Handbook of Procedures, Vol. 1 for list of sensitive items under the schemes.
We receive some components in cartons and after unpacking, we dispose of the cartons. Essentially these are waste paper for us but we are able to get some payment from buyers of such waste. The excise department now says that we must pay duty on it as the Section 2 (d) of Central Excise Act, 1944 has been amended through the Finance Act, 2008 to deem any articles capable of being sold as ‘marketable’. Can you please clarify?
The amendment that you have referred to settles the argument regarding whether the goods are marketable. But, marketability is not enough to make the goods excisable. ‘Manufacture’ is an essential ingredient. In the case of West Coast Industrial Gases [2003 (155) ELT 11 (S.C.)], the Supreme Court held that the process of emptying drums does not amount to manufacture.
Based on the judgment, the Central Board of Excise and Customs (CBEC) clarified (Circular no. 721/37/2003-CX dated 6.6.2003) that no duty shall be payable and no reversal of credit is also warranted on waste package /containers used for packing inputs, on which credit has been taken, when cleared from the factory of the manufacturer availing Modvat/Cenvat credit.
Can we take credit of service tax on freight paid for sending the goods to job-worker and bringing the goods back?
The services on transportation of goods to job-worker and bringing back the goods are essential in the manufacture of final products before they are removed from the factory for sale either directly to the customer or through the depot. Such services are used ‘in or in relation’ to the manufacture of final products and so will squarely fall within the definition of ‘input services’.
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