GOVERNMENT OF INDIA

MINISTRY OF FINANCE AND COMPANY AFFAIRS

DEPARTMENT OF REVENUE

OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, CHENNAI - I

Minutes of the first meeting of RAC for Organized Sector and Small Scale Sector held on 16.6.2005

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          The first meeting of the Regional Advisory Committee for the organized and Small Scale Sector was held under the Chairmanship of Shri K.C. Singh, Commissioner of Central Excise, Chennai-I Commissionerate at 3.00 p.m. on 16.6.2005.  The following members attended the meeting.

Organized Sector

The following officers also attending the meeting: -

2.0.  At the outset, Chairman welcomed all the members.  Chairman informed that two points had been received for discussion but they could not be circulated among the members in advance.  He informed that 20 days notice will be given for convening the meeting in future so points can be sponsored a week in advance by members and the agenda with comments of the department could be circulated among members two days before the meeting.  The points sponsored were then taken up for discussion.

Point No. I Relevant date for charging interest on differential duty due to price escalation or variation clause:

(Sponsored by Shri S. Guruviah)

          When there is an escalation or price variation clause in the contract and the manufacturer realizes the differential sale value much after the original clearance, a doubt has been raised as to what should be relevant date for the purpose of charging interest.

Decision:

          Initiating the discussion the Chairman opined that in the case of contracts containing escalation or price variation clause, normally the assessees should opt for provisional assessment and in such cases, interest is chargeable from the date of original clearance. The same analogy was naturally applicable to cases where the assessee could not formally opt for provisional assessment because there was no escalation clause in the contract, but prices varied after clearance.  The members opined that in majority of the cases negotiations were taking place much after the supply of goods and it was after protracted discussion the buyers agreed for price increase and that the supplier could raise supplementary invoice for the increase in price and the differential duty only after finalisation of the price negotiations. Thus the buyer knows the differential price only after the acceptance of the increase in price and, therefore, legally interest cannot be charged from the date of original clearance. Members explained that the interest, if charged from the date of original clearance will be penal, particularly for small scale units, as the interest amount is not reimbursed to them by the buyers.  Therefore, the members requested that the issue may be addressed to Board for issue of suitable clarification.  It was decided to refer this point to the Board along with the views of the Members for suitable clarification.

Point No.II:

Re-classification of Express Cargo Service as Goods Transport Operators’ Service:

(Sponsored by Shri K. Guruswamy)

          The member has raised a question as to whether Express Cargo Service, which was originally clarified to be covered by Courier Service can be re-classified as Goods Transport Operators Service now.  He was of the opinion that Express Cargo Service was classifiable under the Goods Transport Operator Service as it is more appropriate considering the similarity and the nature of the activity carried out by them.

Decision:

Express Cargo Service is classifiable under Courier Service for the reason that delivery is essentially made door-to-door in a time bound manner.  In the case of conventional goods transport, no such pre-condition with regard to time and delivery is normally stipulated.  However, the above point is being forwarded to

Commissioner of Service Tax, Chennai as he is the jurisdictional authority for issue of clarification in matters relating to Service Tax.

2.1   Chairman, thereafter, asked the members whether there were any other points to be discussed.  The following points were sponsored on the spot and decided as under: -

Point No.III:  Eligibility to take credit of Service Tax paid on outward freight by the manufacturer of finished goods:

(Sponsored by Shri P.R. Sudhakar)

          Service Tax is paid on outward freight by the manufacturer of finished goods as a deemed service provider. The member, therefore, raised the question as to whether a manufacturer is entitled to take Cenvat credit of the service tax paid on such outward freight in view of the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004. There is one view that  Service tax paid on the transportation charges incurred upto the place of removal could be taken as Cenvat Credit while, the other view is that all the manufacturers who are deemed service providers could take Cenvat credit of Service Tax paid on the outward freight as it is provided at the time of removal. 

Decision:

In the absence of full details of the issue, proper discussion could not be made.  Therefore, the Chairman requested the members to furnish full details of the issue along with the documents used for payment of service tax so as to examine the issue in detail and to arrive at a proper decision.

Point No. IV:  Difficulties in filing of ER4 Statements:

(Sponsored by Shri T.G.Srinivasan)

Member expressed that he is facing difficulties in filling various columns of ER4 statement in the case of multi locational units and depots.  He requested for abolition of ER4 statements as no useful purpose was served by such return/statements.

Decision:

The Chairman explained the background of prescribing ER4, ER5 and ER6 returns and emphasized the relevance and usefulness of such returns.  However, he requested the members to pinpoint the exact areas of difficulties in preparation of the return so that it could be discussed in the next meeting.

3.  The Chairman briefed the members about the proposed Help Centres, supplying each member a copy of the Trade Notice issued by the Chief Commissioner in this regard.  He requested the members to give wide publicity of this facility among their constituent members.  

4.       This being the first RAC meeting, opportunity was also taken to constitute the Public Grievance Committee (PGC).  It was heartening to note that four members came forward on their own to be the members of PGC.  The Chairman stated that official communication by way of a Trade notice about the Constitution of PGC would be issued separately.

5.                 The meeting ended with Vote of thanks.

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