'Tax is payable on service provided by Indian entity to foreign affiliate'

Against machinery imported 10 years back under the EPCG scheme, we have not fulfilled our export obligation. We have sold the imported machines as scrap. The Customs have enforced our bank guarantee. They are still asking us to pay duty and interest, but our unit is closed and we have no money to pay. What action can Customs take and what do we do now?

If the Customs have recovered only part of the duty and interest due by encashing the bank guarantee, they can ask you to pay the balance and if you don't pay, initiate recovery proceedings that can include recovery as land revenue. On your part, if you can deposit even part of the dues, you can approach the Settlement Commission.

We, an Indian company, have a subsidiary in the US. Will the subsidiary be required to charge service tax to its Indian clients? Can the Indian clients deduct TDS on the invoices of our subsidiary? If we provide any service to our subsidiary, are we required to charge service tax?

Assuming that the services in question are taxable and that your subsidiary is a distinct legal entity, for any service given by it to any Indian entity, the service receiver is liable to pay service tax under reverse charge mechanism. The Indian entity must deduct TDS on its payments to the foreign entity. For any services provided by you to your subsidiary, if the same falls under export of services, no tax is leviable.

Our excise rebate claims for supplies to SEZ are being denied on the grounds that we have not filed a bill of export. We have not claimed any export incentives. The SEZ Customs have certified on the ARE-I that goods have been admitted in full in the SEZ. How can we convince our authorities and get the rebate?

You can refer them to the decision of the Revisionary Authority in RE: KEI Industries Ltd. [2014 (313) ELT 895 (GOI)], wherein the order says, "The fundamental condition for granting rebate of duty paid on exported goods is that duty-paid goods are exported. The said fact is not in dispute in this case. The substantial benefit of rebate claims cannot be denied for only lapse of not filing Bill of Export which is a procedural lapse of technical nature as held by Hon'ble Supreme Court judgment in the case of UOI v. Suksha International - 1989 (39) ELT 503 (SC) and in the case of Mangalore Chemicals and Fertilizers Ltd. v. DCCE - 1991 (55) ELT 437 (SC).

Therefore, government holds that the rebate claim is rightly held admissible in this case by Commissioner (Appeals). You may take note that the same order says, "However applicant cannot be allowed to continue repeating the said lapse and keep on claiming rebate of duty paid on exported goods. If the said lapse is repeated the benefit of rebate under Rule 18 of Central Excise Rules, 2002 will be liable to be rejected."