Giving proof of export

SME CHATROOM/ The central excise authorities will accept any sales tax form as proof.

We are an SSI and we clear our goods for exports under the simplified scheme for export through merchant exporters. We are having a problem that the merchant exporter does not want to give us copies of any export documents for the fear that we will come to know about the foreign buyer or the prices.

At the same time our excise authorities say that unless we give proof of exports the clearances will be treated as domestic clearances and counted for determining the exemption limit of Rs 1 crore. Kindly advise us a way out.

Para 4.1.2 of Part III of Chapter 7 of the Manual of Supplementary Instructions issued by CBEC says :

"In the case of export through Merchant-exporter the document prescribed by Sales Tax Department will be accepted as the proof of export. Sales made by manufacturer of the goods' to the merchant exporter which ultimately are exported are exempt from Central Sales Tax. The Sales Tax Department issues booklet to the merchant exporters containing serially numbered H-Forms/ST-XXII form or equivalent Sales Tax form. After the goods have been exported by the merchant exporters, the latter issues these forms to the manufacturers of the goods. The merchant exporters in turn have to account all these serially numbered forms to the sales Tax Department by furnishing a proof that the goods have been exported out. These proofs are in the from of presentation of the Shipping Bill duly completed by the customs, bill of landing, foreign exchange remittance certificates etc. The liability of the manufacturers to the Central Sales Tax gets discharged only when they submit these forms to the Sales Tax Department. It is, therefore, seen that indirectly exports get accounted for through the issue of H-form or ST-XXII Form. Thus, photocopy of H-form or ST-XXII Form or any other equivalent Sales Tax form duly attested and stamped by the manufacturer or his authorised agent will be accepted for purpose of proof of export."

In view of the above, your central excise authorities will accept any Sales Tax form as proof of export.

I have a query regarding availability/ utilisation of Cenvat Credit by a Trading Company.

A company, being primarily a trading company( trading comprising more than 90% of its turnover), also renders certain taxable output services for which service tax is levied.

Is the company eligible for availing Cenvat credit up to 20% of its service tax liability in respect of service tax paid on administrative services such as telephone , insurance, audit fees, professional services etc., where such services are not used/ consumed exclusively for the purpose of providing the taxable output service and are used both for trading and providing of service. Also separate accounts are not maintained for the input services used to provide the taxable output services.

As per Rule 2 (I) (i) of Cenvat Credit Rules 2004, 'input service' means any service provided by a service provider for rendering output service. Thus you can take full credit of whatever service tax you pay on input service received on or after 10th September 2004 for rendering output service. However, direct nexus has to be there between the input service and output service. As per Rule 4 (e) of the said Rules, you can also utilise the credit in full for payment of service tax on any output service.

Since you are unable to precisely say how much of what input service is directly used for rendering the output service and you do not maintain separate accounts, the logical relief ought to be a suitable allocation of common services that you avail for trading and for providing output service based on say a cost accountant's certificate. Then it should be possible for you to avail credit in respect of certain portion of input services and utilise the credit for payment of service tax on output service. This proposition, however, has not been specifically allowed or tested legally.

Trading involves sales of goods i.e. transfer of property and so, is not an output service. You may examine whether you are rendering any other exempted service. As per Rule 2 (e) of the Cenvat Credit Rules, 2004, "exempted services" means taxable services, which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act, 1994.

In case you are rendering taxable output service as well as exempted output service and you opt not to maintain separate accounts, you, as the provider of output service can utilise credit only to extent of an amount not exceeding twenty per cent. of the amount of service tax payable on taxable output service, as per Rule 6 (3) (c ) of the Cenvat Credit Rules, 2004.

I understand that EOU can make 50% of its FOB value sales as DTA sales after due permission from respective DC.(Development Commissioner). Is it correct or without DC's permission just on intimation basis Three Star EOU can make DTA sales?

As per Para 6.39.9 of the Handbook of Procedures (HOP), in respect of DTA sale of finished products in terms of para 6.8(a) by a status holder, permission will not be required from the Development Commissioner or the jurisdictional Central Excise authority. However, prior intimation thereof needs to be given.

The CBEC Circular no. 12/2005-Cus. Dated 04.03.2005 gives effect to these provisions and Para 2 (H) of the said circular reads as under : "(i) The para 6.39.9 of the HOP as amended by the Public Notice no. 50/2004-2009 dated 24th January of the Department of Commerce prescribes DTA Sale of finished products as per para 6.8(a) by eligible EOUs shall not require permission of Development Commissioner or Jurisdictional Deputy/Assistant Commissioner of Customs/Central Excise and instead unit shall be required to send prior intimation.

(ii) In this respect your attention is invited to Circular No. 88/98-Cus Dated 2.12.98 whereby it has been decided that sale into DTA can be made by the manufacture himself subject to his recording of each transaction in the records prescribed by the Board/Commissioners or their private records approved by the commissioners. Further, Rule 17 of the Central Excise Rules, 2002 provides that EOU can clear the goods on payment of duty. Therefore EOUs are not required to take permission from the jurisdictional customs/central excise authority for DTA sale of goods. The units may sell the goods on payment of duty as per the conditions and entitlements as specified in Foreign Trade Policy.

(iii) As eligible EOUs are not required to take permission for DTA sale of finished goods up to their entitlement and subject to fulfilment of conditions as mentioned in para 6.8(a) of the Foreign Trade Policy from Development Commissioner, permission of the Development Commissioner for DTA sale shall not be insisted, instead the copy of intimation to the Development Commissioner may be scrutinised, wherever required."

As per Para 1 of the above circular (not quoted) EOUs having status holder certificate under the Foreign Trade Policy shall be eligible for the said Fast Track Clearance Procedure. Therefore, it is not necessary for you to take permission for the Development Commissioner.

From now on SME-related queries will appear every Wednesday on the Accent Pages. TNC Rajagopalan will answer questions from readers on SME-related issues pertaining on taxes, exim policies or registrations/reservations, etc. Due to a technical glitch, the ID smequeries@business-standard.com was not receiving mails. The error has been rectified and readers can now send mails.