CA Final Group II : Indirect Tax Laws – November 2008
This Paper has 28 answerable questions with 0 answered.
Total No. of Questions — 9] [Total No. of Printed Pages — 3
Time Allowed : 3 Hours Maximum Marks : 100
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions
PART — A
1. (a) How will the assessable value under the subject transaction be determined under section 4 of the Central Excise Act, 1944? Give reasons with suitable assumptions where necessary.
Contracted sale price for delivery at buyer’s premises Rs. 9,00,000
The contracted sale price includes the following elements of cost:
- Cost of drawings and designs
- Cost of primary packing
- Cost of packing at buyer’s request for safety during transport
- Excise duty
- VAT (Sales tax)
- Freight and insurance charges paid from factory to ‘place of removal’
- Actual freight and insurance from ‘place of removal’ to buyer’s premises Rs.
(b) Following transactions took place in the factory of JKA Ltd:
(i) An imported consignment of raw materials was received vide bill of entry dated 2.12.07 showing the following customs duty payments:
Basic customs duty Rs. 25,000; Additional duty (CVD) Rs. 20,000; Special additional duty Rs. 5,800.
(ii) A consignment of 1,000 kg of inputs was received. The excise duty paid as per the invoice was Rs. 10,000. While the input was being unloaded, 50 kg were damageed and were found to be not usable.
(iii) A vehicle containing machinery was received. The machinery was purchased through a dealer and not from the manufacturer. The dealer’s invoice no. 925 dated 3.4.07 marked ‘original for buyer’ certified that the excise duty paid by the manufacturer of machinery was Rs. 24,000. The dealer is registered with the Central Excise Authorities.
(iv) Some inputs for final product were received. These were accompanied by a certified Xerox copy (photo copy) of invoice no. 286 dated 15.1.08 indicating that excise duty of Rs. 6,400 had been paid on inputs. The original or duplicate copy of invoice was not traceable.
Indicate the eligibility of CENVAT credit, in each case, under the CENVAT Credit Rules, 2004 with explanations where necessary.
(c) CTL Ltd. has a manufacturing unit situated in Lucknow. In the financial year 2006–07, the total value of clearances from the unit was Rs. 450 lakh. The break up of clearances is as under:
(i) Clearances worth Rs. 50 lakh of certain non–excisable goods manufactured by it.
(ii) Clearances worth Rs. 50 lakh exempted under specified job work notification.
(iii) Exports worth Rs. 100 lakh (Rs. 75 lakh to USA and Rs. 25 lakh to Nepal).
(iv) Clearances worth Rs. 50 lakh which were used captively to manufacture finished products that are exempt under notifications other than Notification No. 8/2003–CE dated 1.3.2003 as amended.
(v) Clearances worth Rs. 200 lakh of excisable goods in the normal course.
Explain briefly, the treatment for various items and state, whether the unit will be eligible for the benefits of exemption under Notification No. 8/2003–CE dated 1.3.03 as amended for the year 2007–08.
2. (a) M/s Ganga Marketing supplies 12 bottles of mineral water in a single package to Speed Airways (airline company).
Maximum retail price was printed on the package. However, individual bottle of 200 ml. each did not carry such maximum retail price (M.R.P) as these were to be distributed to the passengers by the airline company and not intended for resale. M/s Ganga Marketing pays duty of excise assessing the goods under section 4 of the Central Excise Act, 1944.
The Department has taken a view that the package of 12 bottles is not a wholesale package. The airline company itself is the ultimate consumer. Hence, the package of 12 bottles itself is a â€˜retail packageâ€™ and duty is payable on the basis of MRP under section 4A of the Central Excise Act, 1944.
Examine briefly, with the help of decided case law, if any, whether the stand taken by the Department is correct in law.
(b) M/s Om Processors, a job worker, was engaged in the processing of manmade fabrics received from the principal supplier. The job worker (assessee) had undertaken to discharge all the duty liabilities under the Central Excise Act, 1944. The assessee received manmade fabrics on declaration from the principal supplier that the said fabrics had polyester content below 70%; processed the same and cleared the processed fabrics claiming the benefit of concessional rate of duty available to manmade fabrics containing polyester below 70%. On the basis of chemical examination by the Department, it was found that the fabrics contained polyester in excess of 70% and thus would attract higher rate of duty. A show cause notice was issued invoking the extended period of limitation under section 11A of the Central Excise Act, 1944 demanding differential duty and penalties on the ground of mis–declaration on the part of the assessee. Briefly discuss, with reference to decided case law, whether the stand taken by the Department is correct in law. 5 (0)
(c) M/s Raj Fibres had filed an appeal to the High Court on Aug. 11, 2008 under section 35G of the Central Excise Act, 1944 aggrieved by an order passed by the Appellate Tribunal. The order appealed against was received by the assessee on Jan. 1, 2008. The High Court dismissed the appeal petition on the ground that the same had been filed beyond the period provided for filing an appeal under section 35G of the Act and the court had no power to condone the delay. M/s Raj Fibres urged before the High Court that the provisions of the Limitation Act, 1963 should be made available and the delay in presenting the appeal ought to be condoned. State briefly, with reference to decided case law, if any, whether the High Court could condone the delay in presenting the appeal pursuant to the provisions of the Limitation Act, 1963 as urged by M/s Raj Fibres. 5 (0)
3. (a) Discuss briefly, whether excise duty is attracted on the excisable goods manufactured in the following cases: 2×5=10
(i) In the State of Jammu and Kashmir; (0)
(ii) By or on behalf of the Government (0)
(b) What is the period of provisional attachment of property during the pendency of any proceeding under section 11A or section 11D of the Central Excise Act, 1944? (0)
(c) Under what circumstances, the rebate of excise duty paid on exported goods can be granted to the exporter in case of export of good to Nepal?
Note – Rebate of excise duty paid on exported goods is granted to Government of Nepal. (0)
(d) If a manufacturer manufactures various products, can he avail CENVAT credit on some products and exemption under Notification No. 8/2003–CE dated 1.3.03 on some other products? (0)
(e) Briefly discuss, the residual penalty under rule 27 of the Central Excise Rules, 2002. (0)
4. (a) Calculate the VAT liability for the period Jan. 1, 2007 to Jan. 31, 2007 from the following particulars:
Inputs worth Rs. 1,00,000 were purchased within the State. Rs. 2,00,000 worth of finished goods were sold within the State and Rs. 1,00,000 worth of goods were sold in the course of inter-State trade. VAT paid on procurement of capital goods worth Rs. 1,00,000 during the month was at 12.5%. If the input and output tax rate in the State are 12.5% and 4% respectively and the central sales tax rate is 3%, show the total tax liability under the State VAT law and under the Central Sales Tax Act.
(b) Calculate the net service tax payable under the provision of rule 2A of the Service tax (Determination of Value) Rules, 2006 relating to determination of value of services in the execution of a works contract from the following particulars:]
(vi) Gross amount for the works contract (excluding VAT)
Value of goods and materials sold in the execution of works contract
CENVAT credit on (ii) above
Service tax paid on input services
CENVAT credit on capital goods issued in the provision of works contract service
Service tax rate Rs.
Make suitable assumptions and provide explanations where required.
5. (a) XYZ Co. was involved in the services of unloading of coal from wagon tipping system, stacking/reclaiming of coal to stacker reclaimer system and feeding of coal to boiler bunkers through conveyer system. The Department had taken a view that the charges received be XYZ Co. for such activity were taxable under the category of ‘cargo handling services’ in terms of section 65(105) (zr) read with section 65(23) of the Finance Act, 1994. M/s XYZ Co. claimed that the services rendered by it cannot be brought under ‘cargo handling service’ as it is engaged only in the handling of coal from railway wagons to the required destination of the thermal power station wherein machines are used with the aid of some manpower.
Briefly explain, with reference to relevant provisions and case law, if any, whether the stand taken is correct in law. 5 (0)
(b) M/s Krishna Computer Colour Lab. is in the business of developing and printing of colour photographic films. It develops the negatives supplied by the customer and provides positive prints as per the order placed by the customer. The Department has demanded service tax on the entire amount charged from the customers without deduction of any amount towards cost of materials.
The assessee’s contention is that no service tax could be charged on the material content since service tax is only a tax on services and not on goods. Therefore, the assessee has sought to bifurcate the gross receipts on account of processing of photographs into the portion attributable to goods and those attributable to services so that service tax could be paid with respect to the value of service alone in their case.
Briefly explain, with regard to decided case law, if any, whether the stand taken by M/s Krishna Computer Colour Lab. is correct in law.
6. (a) State whether the following are taxable under the provisions of the Finance Act, 1994 relating to service tax:–
(i) Services provided in connection with the management of an organization by a management consultant having no professional qualification.
(ii) Advance payment received from the service recipient by a person rendering construction services under section 65(105) (zzzh) of the Act..
(b) State briefly, whether the following persons are liable to apply for registration under the Finance Act, 1994 and the Service Tax (Registration of Special Category of Persons) Rules, 2005 and if so, from which date:
(i) An input service distributor who starts his business with effect from 1st January, 2008.
(ii) A provider of taxable service under an unregistered brand name of another person.
Aggregate value of taxable services was Rs. 6,00,000 up to 31.3.08.
(c) Write a brief note to explain the impact of VAT on lease transactions. 4 (0)
(d) Illustrate with an example, whether inter–State purchases liable to central sales tax are eligible for input credit and explain the effect of the same on inter–State transactions. 4 (0)
(e) Who are not eligible for composition scheme under the VAT regime? Discuss briefly. 4 (0)
7. A consignment of 800 metric tonnes of edible oil of Malaysian origin was imported by a charitable organization in India for free distribution to below poverty line citizens in a backward area under the scheme designed by the Food and Agricultural Organization. This being a special transaction, a nominal price of US$ 10 per metric tonne was charged for the consignment to cover the freight and insurance charges. The Customs House found out that at or about the time of importation of this gift consignment there were following imports of edible oil of Malaysian origin:
6. Quantity imported in metric tonnes
780 Unit price in US $ (CIF)
The rate of exchange on the relevant date was 1 US $ = Rs. 43.00 and the rate of basic customs duty was 15% ad valorem. There is no countervailing duty or special additional duty. Calculate the amount of duty leviable on the consignment under the Customs Act, 1962 with appropriate assumptions and explanations where required.
8. M/s IES Ltd. (assessee) imported certain goods at US $ 20 per unit from an exporter who was holding 30% equity in the share capital of the importer company. Subsequently, the assessee entered into an agreement with the same exporter to import the said goods in bulk at US $ 14 per unit. When imports at the reduced price were effected pursuant to this agreement, the Department rejected the transaction value stating that the price was influenced by the relationship and completed the assessment on the basis of transaction value of the earlier imports i.e. at US $20 per unit under rule 4 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007, viz transaction value of identical goods. State briefly, whether the Department’s action is sustainable in law, with reference to decided cases, if any. 5 (0)
9. (a) Explain briefly, the significance of Indian customs waters under the Customs Act, 1962. 2×5=10 (0)
(b) Section 14 of the Customs Act, 1962, with effect from 10.10.2007, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 are now fully compatible. Explain with a brief note. (0)
(c) Can warehoused goods be transferred from one warehouse to another under the Customs Act, 1962? (0)
(d) What is the minimum and maximum rate or amount of duty drawback prescribed under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 made under section 75 of the Customs Act, 1962? Explain with a brief note. (0)
(e) Briefly discuss, the procedure for confisc