News Flash Indirect Tax

Udyog Software (India) Ltd.

15/09/2014



This document contains a brief summary of the latest updates related to Indirect Taxes

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Central excise: Lemonade v lemon-based drink

The issue before the CESTAT, Mumbai, in E/1465/2011 of Hindustan Coca Cola Beverages v CCE Thane was
whether Minute Maid Nimbu Fresh, manufactured by by diluting lemon juice concentrate with treated water,
is a lemonade (2202 1020), as per the departments classification, or fruit pulp- or fruit juice-based drinks
(2202 9020) as per the appellants classification. Lemonade is a subcategory of waters, including mineral
waters and aerated waters, containing added sugar or other sweetening matter or flavoured. The appellant
contended that its product is neither a mineral water nor an aerated water and does not contain artificial
flavouring, and therefore could not be classified as a lemonade. It pointed to another product in the market,
called Dukes lemonade, which contained no lemon juice and only had artificial lemon flavouring, to say that
such products were called lemonade. The CESTAT was not convinced. It observed that just because Dukes
lemonade contained no lemon but was called a lemonade did not mean that the appellants product cannot be
called a lemonade. The word flavour includes both natural and artificial flavours. Lemonade is not defined
in the tariff, but the HS Explanatory Notes describe lemonade as drinking water, whether sweetened or not,
flavoured with fruit juices or essences or compound extracts, to which citric or tartaric acid are sometimes
added, and which is often aerated with carbon dioxide gas. In view of this the adjudication order and the
consequent demand for duty were upheld. The order dated 27 August 2014 is narrated in
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=21452
(Upon being posted on the CESTAT website it can be accessed with the case number given above.)


Customs: CVD not on ships for breaking up

The worlds largest ship-breaking yard is in Alang, Gujarat. Ships are brought here for breaking up, and at the
time of import the customs officers levy customs duty as well as CVD equal to excise duty on these ships. The
relevant entry in the central excise tariff is 8908, for which the description is vessels and other floating
structures for breaking up. The CVD on import of ships for breaking up was challenged in the Gujarat High
Court in Shivam Engineering Company v Union of India. The court observed that as ships for breaking up are
not manufactured in India, there could not be a levy of additional duty (CVD) to counterbalance excise duty
on the product as manufactured in India. Consequently the court ruled that no CVD is payable on the import
of ships for breaking up. The judgment, dated 11 June 2014, can be downloaded from
http://gujarathc-casestatus.nic.in/ with the following information: case type is special civil application,
case number is 10607 and case year is 1995.


Service tax collections up

Figures for the period April to August 2014 show an increase of 15% in service tax collection over the
corresponding period of the previous year. There is a slight increase in customs and central excise revenues
also. See the government press release at http://pib.nic.in/newsite/PrintRelease.aspx?relid=109603


Agreement with ASEAN on trade in services

India has signed the Indo-ASEAN Trade in Investments and Trade in Services Agreement agreement. The ASEAN
(Association of South East Asian Nations) includes South Korea, Indonesia, Thailand, Singapore, Malaysia,
Philippines, Vietnam, Myanmar, Brunei, Cambodia and Laos. The government press release on the agreement
can be perused at http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=3116


WTO: Jordan initiates safeguard investigation on paper imports

Jordan has notified the World Trade Organisation that it has initiated a safeguards investigation on writing and
printing papers of A4 size. The reason given is that there has been a sudden, sharp and significant increase in
the imports of the product in the period 2010 to 2013 and that there is sufficient evidence of injury to
domestic industry and the causality between the increased imports and the injury to industry. See
http://www.wto.org/english/news_e/news14_e/safe_jor_29aug14_e.htm, which gives a link to Jordans
notification. If the investigation confirms the prima facie view taken, Jordan could levy a safeguard duty on
all imports of the product.

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WTO: DG to hold intensive consultations next week on Bali implementation

From next week, the Director General of the WTO, Robert Azevado, will hold intensive and comprehensive
consultations with heads of delegations of member countries both on implementation of decisions taken at
Bali, and on the way forward for the Doha Development Agenda. See
http://www.wto.org/english/news_e/infocenter_e.htm.

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Content provided by:

Radha Arun
Consultants to Udyog Software (India) Ltd.
radha.arjuni@gmail.com

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