Subject: Budget- 2000- Changes in Finance Bill- Clarifications- reg.
I am directed to say that the Finance Bill, 2000, as passed by the Parliament, has been enacted as Finance Act, 2000 on 12th May, 2000(Act No. 10 of 2000). In this context it may be mentioned that certain clauses of the Finance Bill 2000, have been amended and the amended clauses appear as relevant sections in the Finance Act, 2000. Clauses 74 to 113 to the Finance Bill, 2000, relating to indirect taxes have now been renumbered as section 78 to 117 of the Finance Act, 2000.
1. Clause 90 of the Finance Bill, 2000, in terms of which section 4 of the Central Excise Act was sought to be replaced by a new section has now become section 94 of the Finance Act, 2000. It would be noticed that there are certain amendments which have now been made in the revised text of Section 4. The revised text is reproduced below:
‘(I) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall-
1.in a case where the goods are sold by the assessee, for delivery at
the time and place of removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;
2. in any other case, including the case where the goods are not sold be the value determined in such manner as may be prescribed.
(2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section.
1. For the purposes of this section,-
1. “assessee” means the person who is liable to pay the duty of excise under this Act and includes his agent;
2. persons shall be deemed to be “related” if-
1. they are inter-connected undertakings;
2. they are relatives;
3. amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or
4. they are so associated that they have interest, directly or indirectly, in the business of each other.
Explanation- In this clause-
1. “inter-connected undertakings” shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956;
1. “place of removal” means
1. a factory or any other place or premises of production or manufacture of the excisable goods;
2. a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
from where such goods are removed;
1. “transaction value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organisation expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.’
1. As mentioned in the section, new section will come into force from 1/7/2000. The term “place of removal” has been defined as in the existing section4, but does not include a depot or other similar premises. The definition of “related” persons has also been change. The revised definition, being based on an already existing definition in the Monopolies and Restricted Trade Practices Act, 1969 and the Companies Act, 1956 would have the advantage of the interpretation based on several case laws.
1. Definition of “transaction value” has also been modified to make it more transparent. Any amount paid by the buyer himself or on his behalf to the assessee by reason of, or in connection with the sale, would form part of the transaction value. Any amount that is charged or recovered from the buyer on account of factors like advertising or publicity, marketing and selling Organisation expenses, storage and outward handling etc., will also be part of the transaction value are includible in the computation of “value” under the existing section 4. As such, the definition of transaction value does not seem to be divergently wider in content and scope from the interpretation of “value” under existing section 4. The definition of “transaction value” should help set at rest any doubt regarding amounts that are charged or recovered from the buyer in respect of specific kind of operations done by the assessees. In essence, whatever is recovered from the buyer by reason of, or in connection with the sale, whether payable at the time of sale or at any other time is included in the transaction value.
2. The amount of duty or tax which is payable but has not been actually paid shall be deductible from transaction value. For instances, any amount of sales tax which is not paid by the assessee at the time of sale transaction but is allowed to be deferred under the sale tax scheme is allowed to be deducted for the purposes of transaction value.
3. Clause 93 of the Finance Bill, 2000, has now become section 97 of the Finance Act, 2000. There is some change in the sense that anew sub-section (a) has been added. This is purely on account of drafting change and the substantive intention to give retrospective validity to the show cause notices that are issued in cases involving approval of classification list or price list remains unchanged.
4. Clause 107 of the Finance Bill, 2000, has become section 111 of the Finance Act, 2000. However, the retrospective effect to Notification No. 44/99-CE, dated 29.12.1999 has now been given on and from 2.12.1997.
5. Clause 108 of the Finance Bill, 2000, has become section 112 of the Finance Act, 2000. There is drafting change in the section. However, there is no change in the intended policy to disallow the credit of duty paid on HSD with retrospective effect from 16.3.1995. Necessary action will now be taken under section 112 to recover the pending dues and the amount of dues recoverable in your Commissionerate on account of HSD may kindly be intimated within a month’s time.
6. Clause 112 of the Finance Bill,2000, relating to service tax has become section 116 of the Finance Act,2000. There is, however, a change, in that the retrospective effect in respect of the service tax applicable to services rendered by goods transport operators and clearing and forwarding agents would be effective from 16.7.1997 to 16.10.1998. Necessary action may be taken in respect of the provisions of section 116 of the Finance Act, 2000.
7. There is some change in the 2nd Schedule of the Finance Bill. These changes relate to increasing the tariff rate of basic customs duty on,-
8. goods falling under sub-heading Nos. 0207.13, 0207.14, 1601.00 and 1602.32 of the First Schedule to the Customs Tariff Act, 1975(relating to poultry meat and preparations) from 35% to 100% ad- valorem.
9. coffee falling under sub-heading nos. 09011.11,0901.21, 0901.22 and 0901.90 of the First Schedule to the Customs Tariff Act, 1975 from 15% less 13 paise per kg. Respectively; and
10. tea falling under sub-heading Nos. 0902.10, 0902.20 and 0902.40 of the First schedule to the Customs Tariff Act, 1975 from 15% (Standard rate) or 15% less 26 paid per kg. (Preferential rate) to 35% or 35% less 26 paid per kg. respectively; and
1. coal falling under sub-heading Nos. 2701.11 and 2701.19 of the First Schedule to the Customs Tariff Act, 1975 from 15% to 25%.
1. The 3rd Schedule to the Finance Bill, 2000, has been amended. The tariff rate of excise duty on marble slabs and tiles falling under sub-heading Nos. 2504.21 and 2504.31 of the First Schedule to the Central Excise Tariff Act, 1985, has been revised to 16% ad valorem. It may, however, be added that the effective rate of excise duty (CENVAT) under these sub-heading continue to be Rs. 30 per sq. meter Notification No. 38/2000-CE, dated 12.5.2000 refers. However, the additional duty of customs (CVD) for these two sub-headings will henceforth be 16% ad valorem. Necessary action may, therefore, be taken on the import of the marble slabs and tiles to charge the CVD @ 16% w.e.f. 12.5.2000.
9. A preferential rate of duty equal to 50% of the normal rate was prescribed for 15 million kgs of tea( per calendar year) imported from Sri Lanka vide Notification No. 26/2000-Customs, dated 1.3.2000. Such imports were, therefore, chargeable to a preferential basic duty of 7.5% ad valorem. Even though the basic duty applicable to tea has now been enhanced to 35%, as mentioned above, the preferential rate of basic duty for 15 million kgs of Sri Lankan tea is being maintained at 7.5% ad valorem Notification No. 60/2000-Cus. Dated 12.5.2000 has been issued for this purpose.
10. The basic rate of effective customs duty on non-cooking coal has been raised to 25% irrespective of whether such non-cooking coal falls under any of the sub-heading 2701.11, 2701.12 or 2701.19 with effect from 12.5.2000. (Notification No. 59/2000-Cus. Dated 12.5.2000 refers).