NEW DELHI: The tax department has asked officers not to
pursue Show Cause Notices (SCNs) issued to the ship breaking industry for
non-payment of Countervailing Duty (CVD) till the matter is decided by the
Supreme Court.
The bone of contention between the industry and the
revenue department is whether ship breaking is a manufacturing activity and can
excise duty be levied on it.
"... it has been decided that all Show Cause
Notices for non payment of CVD... shall be kept in call book till the SLP
(Special Leave Petition) filed by the department in the Supreme Court is
decided," said a notification of Central Board of Excise and Customs (
CBEC).
As per the notification, ship breaking units would be
entitled to avail 100 per cent credit of the CVD paid with effect from March 1,
2015.
The Gujarat High Court in the Shivam Engineering
Company case had held that "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 the Customs Tariff Act can be levied on
import of such goods".
The High Court judgement was based on the presumption
that when articles which are not produced or manufactured can't be subjected to
levy of excise duty, then on the import of like articles no additional duty
(CVD) can be levied under the Customs Tariff Act.
CVD is imposed on imports to balance the price of the
same product of domestic producers and the price of foreign producers.
Commenting on this, Nangia & Co Senior Manager
Tanushree Roy said the notification is a welcome step as it "removes the
anomaly existing in the Cenvat Credit Rules 2004 which denied/ reduced the
benefit of cenvat credit for the assesses".
It would also restrict further litigation in the matter
till the SLP is disposed off by the Supreme Court, Roy added.
Source: economic
times. 07 February 2016
http://articles.economictimes.indiatimes.com/2016-02-07/news/70421144_1_cvd-excise-duty-excise-and-customs
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