Excise duty reliefs sought

By Our Special Correspondent

CHENNAI, May 12. Changes in rules regarding levy of duty on domestic tariff area (DTA) sale of the final product as also scrap by export-oriented units have affected their viability, according to Mr. R. Veeramani, President of the Confederation of 100 per cent export-oriented units (CEU).

Taking part in a discussion session with the Chairman of the Central Board of Excise and Customs (CBEC), Mr. Sukumar Shankar, organised by the Southern India Chamber of Commerce and Industry (SICCI) here on Friday, Mr. Veeramani said there was little justification in asking the EoUs to pay 50 per cent of the higher of the two duties, namely, excise duty and customs duty, for DTA sale of items produced with indigenous raw material.

Also, in the case of manufacturers whose imported input like cotton was exempt from customs duty, this requirement placed them in a particularly disadvantageous position in respect of DTA sales, he said.

Representatives of the hire purchasing and leasing industry said levy of service tax on operating leases could make sense inasmuch as the lessor had substantial control over ownership and was exposed to the risks and benefits arising from ownership of the leased equipment but there was no rationale behind including financial leases in service tax.

Operators of financial leases should be exempt from service tax as done in the case of banks, they said.

``The hire purchase and leasing industry is facing the death knell, being subject to interest tax, income tax, sales tax (namely, tax on deemed sales levied by State governments) and now (from July 1, 2001), service tax'', the representatives said.

They said the accounting standards issued recently by the Institute of Chartered Accountants of India (ICAI) eliminated the distinction between leasing and banking.

A memorandum submitted by SICCI on the occasion sought extension of CENVAT credit to heavy equipment like trawlers, earthmovers, forklift, cranes and conveyors, deployed outside the manufacturers' premises for captive purposes.

Otherwise, it said, the objective of introduction of VAT would be defeated. Abuses of such relief could be checked by enforcing the ``nexus'' theory for capital goods installed outside the registered premises.

Several issues on operation of the CENVAT scheme in the case of inter-unit transfers were highlighted by industry representatives at the meeting.

They sought amendment/clarifications for excise rules so that in cases of transfer of capital goods and inputs between units of assessees, the valuation would be the same at which the transferring unit received its supplies.

SICCI called for extension to supportive manufacturers of jigs and fixtures the facility for removal of dies and moulds, jigs and fixtures without disturbing the CENVAT credit as was available to main manufacturers with effect from April 2000.

A representative of small-scale industry sought exemption to SSIs (as receivers of transport services) from retrospective validation of Sec. 16 and 17 of the Finance Act 2000 (effected following a court ruling),in as much as the SSIs had in any case been exempted from service tax at the material time November 16, 1997, till June 1, 1998.

Addressing the meeting, Mr. Sukumar Shankar said details regarding operation of service tax in the case of hire purchasing and leasing had not been finalised.

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