CA Final - Group II : Indirect Taxes - November 2010

CA Final - Group II • Indirect Taxes • November 2010

This Paper has 35 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7]	[Total No. of Printed Pages — 8
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, his answers in Hindi will not be valued.

Q.No. 1 is compulsory.

Attempt any five questions from the remaining six questions.

Marks

(a)

XYZ & Co., a SSI unit manufactures different products and the value of clearances for the financial year 2008–09 is given below:

	Product	AA	AB	AC
(Rs. in lakhs)
(i)	Clearance for home consumption.	55	40	60
(ii)	Captive consumption in the manufacture of excisable goods	100	80	60
(iii)	Export to U.S.A.	90	80	Nill
(iv)	Export to Nepal	50	40	39
(v)	Job work done under notification 214/86–C.E.	55	30	60
(vi)	Goods manufactured in rural area with brand name of others.	45	35	35

The unit seeks your advice as to whether they are eligible for SSI exemption for the year 2009–10.

Explain the basis for your conclusions.

(0)

(b)

(i)

Indicate the central excise authorities who can accept bonds executed for various purposes and obligations of exporter in respect of bond acceptance while filling in ARE–1 form.

(0)

(ii)

What is the meaning of “normal transaction value” according to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000?

(0)

(c)

From the particulars given below, find out the assessable value of the imported goods under the Customs Act, 1962:

US $
(i)	Cost of the machine at the factory of the exporting country	10,000
(ii)	Transport charges incurred by the exporter from his factory to the port for shipment	500
(iii)	Handling charges paid for loading the machine in the ship	50
(iv)	Buying commission paid by the importer	50
(v)	Freight charges from exporting country to India.	1,000
(vi)	Exchange rate to be considered:1 $ = Rs.45.

(0)

(d)

How do you classify a taxable service, which is, prima facie classifiable under more than one sub–clauses of clause (105) of Section 65 of Finance Act, 1994?

(0)

(e)

Who are the Service tax assesses required to compulsorily deposit service tax through internet banking?

(0)

(a)

BCD Auto Parts Ltd. is manufacturing rail assembly front seat, adjuster assembly slider seat, rear lock assembly used in motor vehicles for fitment along with seats. Assessee classified the items under Chapter heading No.8708 – parts and accessories of motor vehicles of the Schedule to Central Excise Tariff Act, 1985. Department’s contention is that goods manufactured are integral parts of seats and hence have to be classified under chapter heading No.9401.00 –seats.

Examine whether contention of the department is correct by referring to case law, if any, and principles for classification of goods.

(0)

(b)

Examine whether the rules for interpretation of tariff schedules applicable to classification of goods are also applicable to interpretation of exemption notification or to determine the eligibility of goods for exemption under an exemption notification.

(0)

(c)

AB Exim Ltd. exported a full container load of readymade shirts. Teh goods were inspected, samples were drawn and container was sealed by Central Excise Officers and container was allowed to be loaded by customs after ensuring that seal on the container was intact. However, while filing shipping bill, by mistake declaration that drawback is being claimed was not made. AB Exim Ltd. has approached for advice. What will be your advice?

(0)

(d)

An importer filed bill of entry after 60 days of filing Import General Manifest. The Deputy Commissioner of Customs imposed a penalty of Rs.10,000 by endorsement on the bill of entry. Since importer wanted to clear the goods he paid the penalty. Can penalty be imposed for late filing of bill of entry? Examine the issue in the light of relevant statutory provisions.

(0)

(e)

Examine whether manufacture of non–excisable goods for or on behalf of a client attracts levy of service tax or not.

(0)

(a)

M/s. R & Co. Ltd. have cleared their manufactured final products during April, 2010 and the duty payable is Rs.2,40,00 plus education cesses as applicable. Given below are the details of excise duty payable by them during the month at the time of purchase of goods:

		Rs.
(i)	On inputs (RM)	1,00,000	(Invoice for excise duty of Rs.20,000 paid was received by the assessee on 4–5–2010)
(ii)	On input service	20,000
(iii)	On welding electrodes for repairs and maintenance of capital goods	5,000
(iv)	Fuel (excluding HSD/Petrol)	5,000
(v)	Storage Tank	8,000
(vi)	Tubes and Pipes (used in the Factory)	14,000
(vii)	Air–conditioner for the office of the Factory Manager	12,000

Note: All the above payments are exclusive of education cesses as applicable.

Find the total duty payable by the assessee for the month of April, 2010 after taking into account the Cenvat credit available.

(0)

(b)

What are the provisions relating to effective date of notifications issued under Section 25 of Customs Act, 1962?

(0)

(c)

Who are the resident persons eligible to file an application for advance ruling under the Customs Act, 1962?

(0)

(d)

Compute value of taxable service under “ intellectual property service” using the details given below:

		Rs.
(1)	Royalty for providing designs and patents @ 5%	20,00,000
(2)	Lumpsum royalty for permanent transfer of trademark	25,00,000
(3)	Royalty under brand licensing arrangement for use of brand name	15,00,000

(0)

(a)

Pinkcity Zinc Ltd.(PZ Ltd.) was engaged in the manufacture of lead and zinc concentrates. At the time of carrying out the physical stock taking, some shortage of stock was found. According to PZ Ltd., the shortage was due to de–bagging, shifting or concentrates, seepage of rain water, storage and loading on trucks. PZ Ltd. applied for remission of duty under rule 21 of the Central Excise Rules, 2002. Revenue claimed that the shortage could have been avoided or minimized by the assessee, as these were neither due to natural causes, nor due to unavoidable accident. Thus, the prayer for remission was declined.

You are requested to examine the validity of the Revenue’s claim with the help of decided case law.

(0)

(b)

Duty demand of Rs.10 lakhs in terms of an order in original dated 25–2–2009 against XYZ Ltd. with interest as applicable on the ground of clandestine removal of the products manufactured by the assessee in the month of June, 2008. Penalty equal to duty demanded was also imposed. On an appeal filed by XYZ Ltd., The Commissioner (Appeals) required assessee to deposit an amount of Rs.5 lakhs as pre–deposit which was duly deposited on 3–6–2009. The case against XYZ Ltd. was finally decided and duty demand of Rs.3,20,000 was confirmed and penalty was set aside on 30–6–2009. XYZ Ltd. filed a refund claim on 15–9–2009. Refund was sanctioned on 10–12–2009. Calculate the amount of refund admissible.

(0)

(c)

M/s. Pipli Imports Ltd. imported certain goods, which were unloaded in the customs area on 01–10–2010. When order for clearance was passed by proper officer on 05–10–2010, it was found that there was some pilferage o such goods. As the imported goods were in the custody of port trust, the Department demanded duty from the custodian under Section 45(3) of the Customs Act, 1962, on such pilferage. The port trust denied such demand contending that it was not an approved custodian falling under Section 45 but possession of goods by it was by virtue of powers conferred under the Major Port Trust Act, 1963. Hence, it is not liable for customs duty on pilfered goods.

The importer has also asked the custodian to make good the loss of goods.

Examine, whether the demands made by the Department and importer are justified in law, referring to decided case law.

(0)

(d)

Is Cenvat credit of service tax paid in relation to renovation or repair of premises of provider of output service admissible? Give reasons.

(0)

(a)

How value of samples which are distributed free as part of marketing strategy, or as gifts or donations or distributed as physicians’ samples have to be determined according to the latest circular issued by Central Board of Excise & Customs? Indicate whether procedure requires a change when products are notified for MRP based assessment.

(0)

(b)

Write a brief note on taxable event for levy of excise duty. Quote the relevant Supreme Court decision.

(0)

(c)

Importer BOPP Ltd. imported two consignments of ethyl alcohol which were allowed to be cleared for home consumption on execution of a bond undertaking to produce license within a month. Since appellants failed to fulfill the obligation, proceedings were initiated which culminated in confiscation of the goods under Section 111 (d) of the Customs Act, 1962 and imposition of penalty on the importer under Section 112(a) of Customs Act, 1962. Examine the correctness of the decision in terms of statutory provisions.

(0)

(d)

Give description of the goods which have been fully exempted from additional customs duty under Section 3(5) of the Customs Tariff Act, 1975(i.e. 4% special C.V.D.)

(0)

(e)

Penalty under Section 78 of Finance Act, 1994 is mandatory when demand for service tax evaded has been confirmed on the ground of suppression, misdeclaration, fraud, collusion, etc. and no authority other than High Courts/Supreme Court has the power to waive the penalty. Examine the correctness of this statement.

(0)

(a)

M/s. Cool and Kool Ltd. has two units, one in Jaipur and another in Delhi. Jaipur unit manufactures condensing units which are cleared to Delhi unit on payment of appropriate excise duty. Delhi unit procures cooling units manufactured locally and combines the same with such condensing units. After conducting quality control test and affixing the brand name, the Delhi unit clears the complete units along with pipe kits, electrical cord, remote control, etc. The Department contends that the process being carried out by Delhi unit amounts to manufacture as it is not a mere process of assembly. Whereas, the assessee argues that putting together various duty paid articles in a carton with a brand name to be marketed as ‘air conditioner’ is not manufacture. No process is involved except that all the items are put together in one box.

Explain, with the help of decided case law, Whether the contention of the Department is correct in law?

(0)

(b)

Indicate heading under which excise audit procedure is explained in EA–2000.

(0)

(c)

Section 26A of Customs Act, 1962 provides for refund of import duty paid if goods are found defective or not as per specifications. Discuss the conditions governing such refund in brief.

(0)

(d)

“Service tax is leviable on hire purchase finance transaction”.

Discuss the validity of the above statement.

(0)

Answer any four out of sub–questions (a) to (e):

(a)

(i)

Section 13 of Central Excise Act, 1944 relates to power to arrest. According to this Section, who has the power to arrest and subject to what conditions?

(0)

(ii)

What is the meaning of “Fund” according to Section 2(ee) of Central Excise Act, 1944?

(0)

(b)

Explain the procedure for warehousing of excisable goods removed from a factory or a warehouse.

(0)

(c)

(i)

Examine the validity of the statement “Commissioner of Central Excise (Appeals) can enhance the amount of duty demanded or fine in lieu of confiscation or penalty while deciding appeal filed by an assessee”.

(0)

(ii)

For the purposes of valuation of taxable service, what is the meaning of a ‘pure agent’?

(0)

(d)

On the package, received as a post parcel from abroad, contents are indicated as calculators valued at Rs.1,000. However, when the parcel was opened, it was found to contain ten mobile phones valued at Rs.2,50,000. A show cause notice has been issued to the importer proposing to confiscate the goods and impose penalty on the importer. Examine the legality of action proposed in terms of statutory provisions under Customs Act, 1962.

(0)

(e)

State the points of difference between valuation of imported goods under Customs Act, 1962 and imported service under Finance Act, 1994 and valuation of imported goods and services, as per relevant Accounting Standard.

(0)

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