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Safeguard Duties under Customs

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Safeguard Duties under Customs
By: Surender Gupta
January 25, 2007
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The Customs Tariff Act, include various provisions for giving relief to the domestic producers against injury caused to them by imports.  These provisions are aimed at offsetting the adverse effects of increased imports, subsidized imports or dumped imports & imports from Peoples' Republic of China. Provisions for Safeguard Duties have been prescribed under section 8B and 8C of the Customs Tariff Act, 1975.

An affect party may make a request for imposition of safeguard duty if he feels that hes trade is being injured due to imports. However, the benefit of these provisions have been availed in very rare cases either due to unawareness of these provisions or lack of resources.

You can find the general overview of the safeguard duties under Customs under Chapter 01 - Custom Special Duties - e-book section.

We welcome your feedback and suggestions on this issue.

Central Excise and Service Tax


i) Section 12A - Price of goods to indicate the amount of duty paid theron.

This Section requires every person who is liable to pay duty of excise, to indicate in all the documents relating to assessment, the amount of such duty which will form part of the price at which such goods are to be sold.

This is possible only when the price is final and there will not be any increase or decrease in the price at later date based on the contract between the manufacturer and the buyer.

When the price is on provisional basis, it is not possible to indicate the amount of duty which will form part of the price at which such goods are to be sold.

Proper amendment required in this Section when the price of the goods are not final at the time of clearance irrespective of the fact whether the assessee opt for provisional assessment or not.

ii) Section 35A (3) - Power of remand to Commissioner (Appeals)

The remand power to be included in this Section to enable the Commissioner to remand any case which involves verification of records, re-quantification of the duty amount etc.

iii) National Tribunal: Appearance through Authorised Person (Clause 13 of chapter II of the National Tribunal Act, 2005:-

This Section allows the party to authorize Chartered Accountants or legal practitioners or any person duly authorized by him to present his case.

The Act does not mention any prescribed qualification for "any person duly authorized person". It means any person even without any basic graduation can also appear before the National Tribunal.

Whereas, Section 35Q of the CE Act prescribes the qualification for the authorized person to appear before a Central Excise Officer or the Appellate Tribunal. These Appellate forums are lower in rank than the National Tribunal. National Tribunal is going to hear the appeal arises out of Order passed by Tribunal.

National Tribunal is equal to High Court. Hence, the Government should come out with amendment to prescribe the qualification for the authorized persons (other than Advocate and Chartered Accountants) OR Government to import the provisions of Section 35Q for the said purpose


i) Rule 8 to include "Amount of credit reversed on removal of inputs and capital goods as such" as the Departmental officers are treating the same as not covered under rule 8 and the duty to be paid on each removal

ii) Rule 12 : Filing of Annual Financial Information to be removed as the entire details are available in Balance sheet

iii) Rule 16: Time limit to be fixed for return of processed goods. Further, whether credit to be retained in case the goods become scrap in process - amendment is required

iv) Rule 18: Rebate on duty paid on finished goods when exported by Merchant exporter from his duty paid stock. Presently, this is allowed only for manufacturers for goods cleared directly from the factory for export. Merchant exporter to apply to Board for permission. The power to delegate to Commissioner

v) Rule 19 - Merchant Exporter - amendment required to execute a single bond before the AC/Dc of his Head Office jurisdiction for procurement of goods from various parts of the country and for export from various ports. Filing of proof of shipment before whom bond is executed


i) Input Service definition to include "Freight on outward transportation" also when the same is absorbed by the manufacturers treating the same as "activity relating to business"

ii) Input service Distributor - When service is availed by Head Office and the invoice also in the name of Head Office, but payment is directly made by Factory, clarification required whether factory can take credit as the payment is made by them directly or it should be routed through distributor invoice.

iii) Rule 5 - Removal of inputs as such - Instead of the word "amount equal to the credit availed", the word "amount of duty credit taken" may be substituted to avoid litigation whether the same is payable on each removal or on or before 5th of next month treating the same as duty under Rule 8 o CE Rules. In respect of removal of capital goods after put in to us - the word "duty on the written down value as per the books of accounts" may be substituted. Presently, the department is demanding the full credit to be reversed based on the wordings in Rule 5 "amount equal to the credit availed". If the entire credit is to be reversed, then the purpose of cenvat scheme i.e. 'avoiding the cascading effect' has no meaning.

iv) Rule 6 - Sub rule (6) to include "goods manufactured and cleared by job worker availing exemption under Notification 214/86 dated 25.3.86". The Dept. may demand 10% reversal of credit on the value of such goods cleared under the said exemption notification

v) Rule 6 - sub rule (3)(b) The manufacturer now pay 10% on the gross value. Earlier it was 8% when service tax credit was not available. This is an additional burden to assesses who are not availing any service tax credit. The Dept. may have dual rate - 8% reversal when no service tax credit is availed and 10% when service tax credit is availed.

vi) Amendment required not to treat this 10% value as duty to recover under Sec 11D of the CE Act

vii) Rule 6 - sub rule (5) allows full credit on certain services when the same is used for both taxable and non taxable services. The Dept to amend the clause (c) of sub rule 3 (i.e. credit restriction to 20% of the tax payable on output service) to give effect the following:

a. 100% credit can be availed on items covered under sub rule (5)

b. 20% limit is restricted only to the remaining input services that are not covered under sub rule (5)

vii) Rule 9 Documents and Accounts -

a. to include supplementary invoice issued by first stage dealer / II dealer on any differential duty passed on to them by the manufacturer

b. to include supplementary invoice issued by the service provider

c. to include the invoice issued by "Deemed service provider - i.e Service availer in the case of GTA" when they pay service tax and collect the same from the customer along with actual freight to enable the customer manufacturer to avail credit

vii) Rule 9A - ER5 and ER6 return to be scrapped

D) Valuation Rules:-

Rule 6 -clause iv of explanation : clarification to the effect the drawings are design drawings and not specification or technical drawings given by the buyer to the manufacturer to produce goods according to his specification. The Dept. insist for inclusion of all drawings value in the Transaction value


i) Activities that are attracted Excise Duty as "Manufacture" are to be out of service tax: Example: Supply of Beverages (coffee, tea, coco etc) through automatic vending machine installed at various places of customer. Dept wants to demand service tax on "Out door catering". On the other hand the same is excisable under CE Act but exempted vide Notification 6/2002.

ii) Goods Transport Agency: The tax can be collected annually based on the total freight value claimed by the manufacturer as expenses in their books of accounts instead of collecting monthly.

Further, in some cases the transporter himself collected service tax in his bills and paid to the Dept though legally they are not supposed to: The rule should be amended to exclude such payments from the liability on the person who avails such services

iii) Valuation on Manpower Recruitment and Security services should be only on the value after abatement of actual expenses incurred such as salary, PF ESI etc which are statutorily paid by him to the employees. The tax should be only on the net commission

iv) One year grace period for all new levy from interest and penalty to make the assessee and the Department to understand and to get further clarification.

v) Rule 4 of ST Rules - Centralised Registration to be delegated to Chief Commissioner

vi) Rule 4A invoice to be issued within 14 days of receipt of advance or completion of service. Now the assessee has to issue two invoices - one for advance received as per Rule 4A and another for accounting this as income from services as business activity in general for the purpose of income tax. To amend suitably to adjust the service tax paid on advance invoice in the regular invoice.

vii) Service Tax Distributor - clarification required how to distribute when multiple factory locations are there.

viii) Tax on Advance Payment:- Tax is payable by 5th of next month by cash as the service provider can not adjust any input tax credit. He will earn input tax credit only later. There is an imbalance in credit and output tax. It is suggested to either avoid tax on advance or to allow 50% payment on advance and the remaining 50% after completion of service.

ix) Construction Services: Instead of monthly payment, the tax can be collected only on the total value on annual basis based on their sales shown in balance sheet.

x) Appeal to Tribunal (Fees to be reduced for Service tax appeal) sub section (6) of Section 86 to be amended suitably as most of the service providers are individuals and small firms. For demand value upto 2 lakhs a nominal fee of Rs. 250/- may be fixed and further exemption from fees for stay peition and other miscellaneous petitions for such value.


By: Surender Gupta - January 25, 2007



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