4%1 Ti. /Circular NO. 02/2016-CCEIII

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1 311T4T =1-TWq-111 COMMISSIONERATE OF CENTRAL EXCISE & SERVICE TAX AHMEDABAD-III CUSTOMS HOUSE, 3WT-41-aftWRiNEAR.ALL INDIA RADIO,.ic1 SIT AHMEDABAD NAVARANGAPURA, Tele: / Fax %1 Ti. /Circular NO. 02/2016-CCEIII f474/sub: Forwarding of Circular No. 1014/2/2016-CX, 1015/3/2016-CX, 1016/4/2016-CX, 1017/5/2016-CX, 1018/6/2016-CX, 1019/7/2016CX. A copy of Circulars No 1014/2/2016-CX dated , 1015/3/2016-CX dated , 1016/4/2016-CX dated , 1017/5/2016-CX dated , 1018/6/2016-CX dated , 1019/7/2016-CX issued by Government of India, Ministry of Finance, Department of Revenue is enclosed herewith for information, guidance and necessary action please. The circular is self-explanatory. TTI-ft S ul T1-c1/ '-16H4 cr) 3TRIT-d- c1)) 3TO't-9-R-QA- f v11) 311:r-4 TT4-11 arm- 14 All JDC/JAC of C.Ex., Ahmedabad-III are directed to bring this to the notice of all officers under their charge. ativve N-R-3 t-1-)1.. IV/ /MP / f I N-A ct) 3-T14-Thit, 31-61T4`l IK-3 cf), fal-ittfrzf I c.f) Tit ct) 3ITTH 0-11LIN T1-11 Ohl chi,) 4 -ra Copy to: Administrative Officer (ADM), C.Ex., H.Q., A'bad-III, for circulation of this Circular as per mailing list of Department. 2. The Superintendent, System, H.Q., C.Ex. Ahmedabad to upload on website.

2 Circular No.-1014/2/2016-CX Dated the 1 st February, 2016 F. No. 6/14/2014-CX.I (Pt.) Government of India Ministry of Finance Department of Revenue Central Board of Excise & Custom *********** New Delhi, dated the 1 st February, 2016 To Principal Chief Commissioner/ Chief Commissioner / Principal Commissioner of Central Excise and Customs (All) Web-master, CBEC Madam/Sir, Subject: Inclusion of show cause notice s issued in relation to levy of CVD on vessels imported for breaking in the "Call-Book"-reg. References have been received in the Board from trade and field formations in relation to Judgement of Hon ble High Court of Gujarat passed in SCA No of 1995 filed by M/s Shivam Engineering Company and others reported as [2014-TIOL HC-AHM-CUS]. A SLP has been filed by the department in Hon ble Supreme Court against this order. 2. In the said judgement, Hon ble High Court has held that duty under Central Excise Act, 1944 can be levied, if the article has come into existence as a result of production or manufacture. Articles which are not produced or manufactured cannot be subjected to levy of excise duty. On the import of like article, no additional duty can be levied under section 3(1) of the Customs Tariff Act, Since the vessels and other floating structures for breaking-up are not manufactured in India, no excise duty is leviable and consequently no additional duty under Section 3(1) of the Customs Tariff Act, 1985 can be levied on import of such goods. The reason for such conclusion by Hon ble High Court is that when articles which are not produced or manufactured cannot be subjected to levy of excise duty, then on the import of like articles no additional duty can be levied under the Customs Tariff Act. 3. In view of above said judgement, trade are following two different practices as enumerated below and are being issued Show cause Notices according to the practice they follow:-.

3 (i) Show Cause Notices have been issued to importers who are not paying CVD demanding CVD from them as department has appealed against the order of the Hon ble High Court of Gujarat. (ii) Show Cause Notices for wrong availment of CENVAT credit have been issued to those importers who are paying CVD voluntarily and taking CENVAT credit and utilising the same for payment of Central Excise duty liability arising due to breaking of vessels. 4. The problem faced by the trade due to issue of Show Cause Notices in either situation has been examined in Board and it has been decided that all Show Cause Notices issued for non-payment of CVD [refer para3(i) above] shall be kept in call book till the SLP filed by the department in the Hon ble Supreme Court is decided. 5. Show Cause Notice denying Cenvat Credit of CVD paid voluntarily by the importers at the time of import is not warranted. It is well settled position in law that a buyer may avail Cenvat Credit, if supplier has paid duty. In this regard following case law may be referred- CCE vs. CEGAT2006 (202) ELT 753(Mad HC DB), CCE vs Ranbaxy Labs Ltd. [2006(203) ELT 213(P&H HC DB)], Commissioner of Central Excise, Chennai-I vs CEGAT, Chennai reported as [2006(202)ELT.753(MAD.)]. Credit is accordingly admissible for duty paid voluntarily. 6. Thus, once the importer has paid CVD on import of ship, Cenvat Credit of that CVD cannot be denied for payment of Central Excise duty on breaking of that ship. Show Cause Notices already issued for denying Cenvat Credit may be decided in light of these instructions and in future such Show Cause Notices may not be issued. 7. Also vide Notification No. 1/2016- Central Excise(N.T.), dated in the CENVAT Credit Rules, 2004, in rule 3, in sub-rule (1), in clause (vii), the proviso has been omitted. 8. Proviso to rule 3(1)(vii) of CENVAT Credit Rules, 2004 was inserted vide Notification No. 3/2011-Central Excise(NT), dated In the breaking of ships, products of section XV(base metals and articles of base metal) are obtained which are deemed to be manufactured as provided in section note 9 of Section XV of the First Schedule to the Central Excise Tariff Act, 1985.On the other hand, a number of used serviceable articles such as pumps, air conditioners, furniture, kitchen equipment, wooden panels etc. are also generated. These are generally sold as second hand goods by ship breaking units but no excise duty is payable as they do not emerge from a

4 manufacturing process. At the same time, ship breaking units are allowed to avail full credit of additional duty of customs paid on the ship when it is imported for breaking. This anomaly was resulting in excess utilization of CENVAT credit. Rule 3 of the CENVAT Credit Rules, 2004 was accordingly amended to prescribe that Cenvat credit shall not be allowed in excess of 85% of the additional duty of customs paid on ships, boats etc. imported for breaking. 9. Further, amendment in Rule 6 of CENVAT Credit Rules, 2004 was carried out in budget of 2015, to provide that now credit is required to be reversed even for nonexcisable goods produced as byproducts in the process of manufacture of excisable goods. This amendment has brought non-excisable goods and exempt goods at par and no credit is now available on either of them. The explanation inserted in Rule 6 is as follows:- Explanation1- For the purpose of this rule, exempted goods or final products as defined in clause (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. 10. At present there is a conflict regarding reversal of credit in relation to nonexcisable goods which emerge during breaking of ship viz. whether restriction/reversal of credit needs to be done under proviso to rule 3(i)(vii) of CENVAT Credit Rules, 2004 or under rule 6 of CENVAT Credit Rules, To resolve the conflict, the provision restricting CENVAT credit to 85% under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 has been deleted. Consequently ship breaking units would be entitled to avail 100% credit of the CVD paid with effect from but would also be required to follow provisions of rule 6 of CENVAT Credit Rules, 2004 with effect from This beneficial amendment of deleting proviso to rule 3(i)(vii) of CENVAT Credit Rules, 2004 has been done retrospectively with effect from , that is the date from which reversal of Cenvat Credit for non-excisable goods was provided in rule 6 of Cenvat Credit Rules, Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board. Hindi version follows. Yours faithfully (Santosh Kumar Mishra) Under Secretary to the Government of India

7 Circular No. 1016/4/2016-CX F.No. 96/18/2016-CX.1 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs ********* New Delhi, dated the 29 th February, 2016 To Principal Chief Commissioner / Chief Commissioner of Central Excise (All), Principal Chief Commissioner / Chief Commissioner of Central Excise and Service Tax (All), Principal Commissioner of Central Excise, Service Tax (All), Web-master, CBEC Madam/sir, Subject : Registration of two or more premises as one registrant in Central Excise -reg Notification No. 36/2001-Central Excise (NT), dated has been amended vide Notification No. 19/2016-Central Excise(NT), dated to provide that if two or more premises of the same factory are located in a close area, these premises are within the jurisdiction of a Central Excise Range and the process undertaken there are interlinked and the units are not operating under any of the area based exemption notifications, the Commissioner of Central Excise, may, subject to proper accountal of the movement of goods from one premise to other and such other conditions and limitations, as may be prescribed, allow single registration.

8 2. In light of the above, sub-paragraph (1) of paragraph 3 of Circular No. 586/23/2001-CX dated the 12 th September, 2001, and instructions in paragraph 3.2 of Chapter 2 (Registration) of Central Excise Manual of Supplementary Instructions, 2005, stands amended accordingly. 3. This circular shall come into force from 1 st of March, Difficulties faced, if any, in implementation of the Circular may be brought to the notice of the Board. Hindi version follows. The trade, industry and field formations may suitably be informed. Santosh Kumar Mishra Under Secretary to the Government of India

9 Circular No. 1017/5/2016-CX To F.No. 96/18/2016-CX.1 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs ********* New Delhi, dated the 29 th February, 2016 Principal Chief Commissioner / Chief Commissioner of Central Excise (All), Principal Chief Commissioner / Chief Commissioner of Central Excise and Service Tax (All), Principal Commissioner of Central Excise, Service Tax (All), Web-master, CBEC Madam/sir, Subject : Certificate evidencing payment of Central Excise duty - Regarding. I am directed to refer to the Boards circular 620/11/2002-CX, dated wherein facility of issuing of Certificate as proof of payment of Central Excise duty was extended to Small Scale Industry. References have been received from Trade for extending this facility of issuing Certificate as proof of payment of Central Excise duty to all categories of industries. 2 These representations have been examined and it has been decided that benefit of Circular No.620/11/2002-CX dated shall be extended to the entire industry as a matter of trade facilitation

10 3. This circular shall come into force from 1 st of March, Difficulties faced, if any, in implementation of the Circular may be brought to the notice of the Board. Hindi version will follow. Trade, industry and field formations may suitably be informed. Santosh Kumar Mishra Under Secretary to the Government of India

11 Circular No. 1018/6/2016-CX F. No. 96/54/2014-CX.1 Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs New Delhi, dated the 29 th February, 2016 To, Principal Chief Commissioners/Chief Commissioners of Central Excise (All), Principal Chief Commissioners/Chief Commissioners of Central Excise & Service Tax (All), Principal Commissioner of Central Excise, Service Tax (All), Web-master, CBEC Sir/Madam, Subject: - Withdrawal from prosecution in Central Excise cases older than 15 years involving duty less than rupees five lakhs.- reg. CAG submitted its report regarding administration of prosecution and penalty in Central Excise and Service Tax wherein regarding withdrawal of old cases of prosecution, it noted that though the discretion to allow withdrawal of prosecution ultimately rests with the Court, it is the department s responsibility to ensure periodic monitoring of the status of long pending cases as to ensure that cases which in the opinion of the department merit withdrawal are being brought to the notice of the Court

12 alongwith all supporting facts at the proper time in terms of Sections 257 and 321 of CrPC The issue has been examined. The present limit for arrest and prosecution in Central Excise cases is Rupees one crore which was made effective vide Circular No. 1010/17/2015-CX dated Earlier, the limit for launching prosecution was Rs.25 Lakhs, which came into effect vide letter F.No. 208/31/97-CX6 dated Taking into consideration this increase in the limit for prosecution over a period of time, expenditure involved in continuing with old prosecution and equivalent value of the present threshold limit of rupees one crore in the past, it was decided to collect information on prosecution pending in courts for more than fifteen years where the duty involved is less than rupees five lakhs. On the basis of the reports received, it was found that there are 288 cases older than fifteen years, involving duty of rupees five lakh or less. In these 288 cases, the total amount of duty evasion involved was found to be Rs.2.31 crore, which comes to an average of Rs. 80,000/- per case. 3. Provisions relating to withdrawal of prosecution are contained in Section 257 and Section 321 of the CrPC. Further, in the case of Sheo Nandan Paswan Vs. State of Bihar and Others, (1983) 1 SCC 438, Hon ble Supreme Court noted, while examining the scope of Section 321, four grounds for seeking withdrawal from prosecution. Out of these four grounds, two relevant grounds for Central Excise are as under:- (i) Inexpediency of the prosecution for reasons of State and Public Policy, and (ii) Adverse effects that the continuance of the prosecution will bring to the public interest in the light of the changed situation.

13 4. In the light of the legal provisions under section 257 and 321 of the Code of Criminal Procedure 1973, and the judgement of the Hon ble Supreme Court, it appeared that Central Excise cases involving duty amount less than Rs. five lakhs and undergoing prosecution in the courts for more than fifteen years may be considered for withdrawal from prosecution. Accordingly, these cases where evasion of Central Excise duty is less than Rs. 5 lakh and pending in court for more than 15 years were brought to the notice of the Competent Authority suggesting that withdrawal from prosecution would be desirable in these cases on the following grounds: 4.1 Present limit for arrest and prosecution in Central Excise is Rupees one crore. This enhanced limit of one crore was prescribed on Before this date, the limit since 1994 was rupees twenty five lakhs. The present enhanced monetary limit indicates a liberal policy of the government in relation to prosecution. If this limit is interpolated to a value fifteen years back, it would be higher than Rupees five lakh. Therefore, it would be reasonable to conclude that the equivalent cases, of the cases under consideration, would not undergo prosecution today, 4.2 Withdrawal from prosecution would be in conformity with the policy of the Government to reduce litigation in taxation, 4.3 Expenditure involved in continuing with such prosecution may not be commensurate with the result likely to be achieved, 4.4 The Human resources saved can be redeployed to garner more revenue for the exchequer.

14 4.5 Withdrawal of such cases would send a positive message to the manufacturing sector in which policy of Make in India is being actively pursued. 5. After due consideration, it has been decided with the approval of the competent authority to recommend filling of application before the Hon ble Court to withdraw from prosecution of the cases where evasion of Central Excise duty is less than Rupees five lakhs and prosecution is pending for more than fifteen years. Chief Commissioner shall give direction to the Central Excise Officer in the concerned Commissionerate to request the Public Prosecutor to file an application requesting the Court to allow withdrawal from prosecution in accordance with law. It may be noted that on filing of such applications, it is for Hon ble Courts to finally decide whether or not to pursue the prosecution. 6. Attention is also invited to the circular no. 1010/17/2015-CX dated on withdrawal from prosecution where quasi-judicial proceedings on identical facts have failed. Appropriate action as per this Circular may be taken where necessary. 7. Application should also be moved for withdrawal from prosecution against the conoticees in a case, where the prosecution, against the main noticee is proposed to be withdrawn, as the grounds for withdrawal of prosecution would apply equally to the conoticees. 8. On examination of specific cases, if there are more grounds available for discontinuation of prosecution proceedings, the same may be incorporated in the application before writing to the Public Prosecutor to file the application. On the other hand, if there are valid grounds available for continuation of the prosecutions

15 proceedings, the same should be examined by the Chief Commissioner and where it is proposed to continue with prosecution, it should be brought to the notice of the Central Excise wing in the Board with necessary justification. 9. This shall come into force from 1 st of March, Difficulty, if any, in the implementation of the circular should be brought to the notice of the Board. Hindi version will follow. (Santosh Kumar Mishra) Under Secretary to the Government of India

16 F. No. 96/18/2016-CX.I Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs Circular No. 1019/7/2016-CX To New Delhi, dated the 29 th February, 2016 Principal Chief Commissioner / Chief Commissioner of Central Excise (All), Principal Chief Commissioner / Chief Commissioner of Central Excise and Service Tax (All), Principal Commissioner of Central Excise, Service Tax (All), Web-master, CBEC Madam/sir, Subject: Change in rate of interest on goods warehoused for export, when cleared to DTA- reg. Kind attention is invited to Board s Circular No. 581/18/2001-CX, dated , specifying conditions, procedures, class of exporters and places under sub-rule (2) of rule 20 of Central Excise (No. 2), Rules, 2001 for Central Excise who can avail facility of export warehousing. 2. Paragraph 10.3 in the said circular deals with liability of interest on goods, warehoused for export, when diverted for home-consumption. In the said paragraph 10.3, for the words, symbols and figures, 24% per annum ", the words,

17 symbols and figures, 15% per annum ", shall be substituted. The change would bring down the rate of interest to fifteen per cent. per annum. 3. This circular shall come into force on Field formations may be suitably informed. Receipt of this Circular may please be acknowledged. Hindi version will follow. (Santosh Kumar Mishra) Under Secretary to the Government of India

Amendments made in Indirect-Tax Law. Amendments relating to Central Excise

Amendments made in Indirect-Tax Law Amendments relating to Central Excise 1. Amendment of section 3A In the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), in