Deduct duty on scrap sold

CHATROOM

Central Excise authorities can deduct the duty on scrap sold and not the sale value of the scrap.

We have filed an application for fixation of brand rate of duty drawback against export of our engineering product. In the process of manufacture, some machining scrap is generated, which we sell in the market for a nominal amount. Our Central Excise authorities say that the amount we get on sales of scrap has to be deducted from the drawback amount. We want to know if this is correct.

For determining the brand rate of duty drawback, first, the duty incidence amount should be computed on all the raw materials, including the reasonable amount of waste and if any such waste is sold, then the average amount of duties on such waste so sold should be deducted.

So, your Central Excise authorities can deduct the duty on scrap sold and not the sale value of the scrap. This issue has been specifically dealt with through a lucid example in the CBEC Circular no. 89/2003-Cus. dated 6th October2003.

We have appointed a lead manager in India to raise funds mainly through External Commercial Borrowing. The lead manager has availed services of some parties abroad, whose bills have been raised on us and we have paid them. Now, the authorities have served a notice asking us to pay service tax on those payments. Are we liable?

The services rendered by the parties are in the nature of merchant banking services covered under Banking and Finance Services in clause (iii) of Section 65 (12) of Finance Act 1994. You may also refer to CBEC letter no. B/11/1/2001-TRU dated 9.7.2001.

Since the service provider is located abroad and the service recipient is located in India, the service tax liability has to be discharged by the service recipient, as per Section 66 A of the Finance Act, 1994, read with Taxation of Services (Provided from outside India and Received in India) Rules, 2006.Therefore, in my opinion, you cannot escape the service tax liability.

We had booked shipping space for 20 containers and cleared the cargo through the customs. The shipping company issued 'on board' Bill of Lading for 20 containers but actually took on board only 18 containers. Our customer from Dubai complained non-receipt of 2 containers and then only we came to know about what the shipping company has done. When we took up the matter, the shipping company said that they will put the containers in the next vessel. Now, the customer does not want the two containers and we want to take the containers back from the port. Please clarify the procedures to us.

First of all, you can maintain a claim and suit against the shipping company because they can issue a 'on board' bill of lading only after the goods have actually gone 'on board'.

Regarding the customs formalities, you may ask the concerned Assistant Commissioner for permission to take the two containers 'back to town'. Please refer to Public Notice no. 42/2007 dated 30.10.2007 issued by Mumbai Customs.