TNC Rajagopalan: Turnover calculation

Goods for export need not be considered in the exemption limit.

We are management consultants and pay service tax as service providers. Can we take Cenvat credit of service tax paid on mobile telephone calls?

CBEC had issued Circular no. 59/8/2003 (F.No.B3/7/2003-TRU) dated 20.06.2003, clarifying that credit of service tax on mobile phone calls can not be taken. This circular has not been withdrawn or superseded by any other circular and many central excise officers in the field take a view that the same position holds even today.

 

The point, however, is that the above circular was issued on the basis of legal position valid at that point of time. Rule 3 (6) of the Service Tax Credit Rules, 2002 said that service tax credit on the service provided in relation to telephone connection shall be allowed only, in respect of such telephone connections which are installed in the premises from where output service is provided.

 

The Service Tax Credit Rules, 2002 have been superseded by new Cenvat Credit Rules, 2004, with effect from 10th September 2004, where a similar provision is conspicuous by its absence. Therefore, it can be said that the above circular has lost its relevance.

 

The new Cenvat Credit Rules 2004 allow credit of service tax paid on any input service used by a provider of taxable service for providing output service. So, I am of the view that you can take credit of the service tax paid on mobile telephone calls if there is no doubt that the input services were used for providing management consultancy service.

 

I would suggest that to be on safe side, the mobile phone be registered at the address of the firm or company providing the output service in the name and designation of the executive using the same and the bills may be settled by the firm or company.

 

We had opened a letter of credit favouring our supplier of capital goods. We have received a bill of lading showing some other party as consignor. Can we reject the documents received under the letter of credit as discrepant?

 

As per Article 31 of the Uniform Customs and Practices for Documentary Credits, 1993 Revision (ICC Publication no. 500), unless other wise stipulated in the credit, banks will accept a transport document, which indicates as the consignor of goods a party other than the beneficiary of the credit. Therefore, you cannot reject the documents as discrepant only on the grounds that the bill of lading shows a party other than beneficiary as the consignor or shipper.

 

We are an SSI unit and working under the exemption limit of Rs 1 crore. We have, however, filed the necessary declaration after crossing the Rs 40 lakh limit during the current year. We have now received an export order from a merchant exporter and we expect repeat orders. We may even get export orders to be executed in our own name. We expect that after we execute the export orders, we will cross the exemption limit during the current year. Is there any way to exclude the export turnover and stay within the exemption limit? Do we have to follow any special procedures for exports?

 

The exemption limit of Rs 1 crore is available for goods that you clear for home consumption in a year. Goods that you clear for exports need not be considered for arriving at the exemption limit of Rs 1 crore. For not reckoning the exports made by units availing exemption under notification no. 8/2003-CE dated 1.3.2003, a special simplified procedure has been prescribed by the Central Board of Excise and Customs through Circular no. 212/46/95-CX dated 20th May 1996.

 

Under the simplified procedure, you may obtain the declarant code number from the central excise authorities. In case you have not been allotted a declarant code, you may indicate on the relevant invoice the date of filing the declaration. You may clear the export goods from your factory under your own printed invoices bearing printed serial numbers for the purpose of clearances for home clearances as well as exports. The printing of serial numbers can be done by use of franking machines. The invoice must contain particulars of the description of goods, name and address of the buyer, destination, value, progressive total of the value of goods cleared for home consumption from the beginning of the financial year, vehicle number and date and approximate time of removal of the goods.

 

The declarant code number must be mentioned on the clearance documents. The invoice must be pre-authenticated by you as manufacturer or your authorised agent. In the case of export through merchant exporters, you must mention at the top "Export through merchant exporters" and the importer exporter code number of the merchant exporter. In case of direct exports in your own name as the manufacturer exporter, you may mention at the top 'For export" and mention your own importer exporter code number.

 

You, as manufacturer, may maintain a simple account of production and clearance. Entries may be made only on the days when there is production or clearance and the entries may be made at the end of the day or before commencement of production on the following day. You will have to file a quarterly statement to the jurisdictional Range Superintendent containing various particulars as per Annexure 'A' to the circular.

 

As proof of exports, you must as the manufacturer exporter submit duly attested photocopy of shipping bill (EP copy) bearing the particulars and date of clearance document under which the goods are cleared from the factory of production, having endorsement on its reverse by the Customs of the particulars of the mate's receipt no. (wherever applicable), name of ship/flight no. of the aircraft"”by which good were exported out, date of export and EGM number/airway bill number (wherever applicable).

 

Besides, duly attested copies of bill of lading and foreign exchange remittance certificate must also be submitted. In case of exports through merchant exporters, documents prescribed by sales tax department such as Form H or ST-XXII may be submitted. The proof of exports must be submitted to the Range Superintendent within six months from the date of clearance.

 

The Range Superintendent will maintain manufacturer-wise records on the basis of quarterly returns and proof of exports submitted by the manufacturer from time to time in order to ascertain that the clearances for exports and proof exports are duly accounted for and in case of failure on the part of exporter to submit proof of exports, initiate necessary action.

 

In case your clearances for home clearances plus clearance for exports for which proof of exports were not furnished within six months exceed the exemption limit of Rs 1 crore, you must take Central Excise registration and follow the ARE1 procedure. Till then, you can continue to clear the goods for home consumption without duty payment under exemption notification no.8/2003 dated 1.3.2003 up to the limit of Rs 1 crore and also clear the export goods without duty payment under simplified procedures as per CBEC circular no. 212/46/95-CX dated 20th May 1996.

 

You may also refer to Part- III of Chapter 7 of CBEC Manual of Supplementary Instructions, 2001 for details.