Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

Paper - 18 : Indirect Tax Laws and Practice

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

Paper – 18: Indirect Tax Laws and Practice

Full Marks : 100 Time allowed: 3 hours

The figures in the margin on the right side indicate full marks.
Working notes should form part of the answer.

Section - A

Answer Question No. 1 which is compulsory and any four from the rest of this section.

1. Choose the correct answer with justification/ workings wherever applicable: [7×2=14]
(i) When can credit for tax paid under reverse charge mechanism be taken?
(a) Same month in which payment of tax has been made
(b) Same month in which liability of tax has occurred
(c) Either of the above
(d) No credit is available

(ii) Mr. Ramesh sold goods to Mr. Suresh worth ` 9,00,000. The invoice was issued on 12th
September. The payment was received on 28th September. The goods were supplied on
18th September. The time of supply of goods will be:—
(a) 12th September
(b) 18th September
(c) 28th September
(d) None of the above

(iii) Rule 30 of the CGST Rules inter alia provides value of supply of goods or services or both
based on cost shall be ________% of cost of production or manufacture or the cost of
acquisition of such goods or the cost of provision of such services
(a) 100
(b) 110
(c) 125
(d) 150

(iv) Who can take input tax credit?

(a) Registered dealer not opting for composition scheme
(b) Unregistered dealer
(c) Registered dealer opting for composition scheme
(d) None of the above

(v) A registered person may not issue a tax invoice if the value of the goods or services or
both supplied is less than _____________ subject to such conditions and in such manner as
may be prescribed.
(a) ` 100
(b) ` 200
(c) ` 500
(d) ` 1,000

(vi) What is the rate of TDS under GST?

(a) 1%
(b) 2%
(c) 12%
(d) 18%

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

(vii) The e-commerce operator collecting tax u/s 52 shall file its monthly return in:
(a) Form GSTR 8 by 18th of the succeeding month
(b) Form GSTR 7 by 20th of the month succeeding the quarter
(c) Form GSTR 8 by 17th of the succeeding month
(d) Form GSTR 8 by 10th of the succeeding month

Answer:
(i) (a) Same month in which payment of tax has been made
Reason: ITC will be available in the month in which the tax under reverse charge
has been paid.

(ii) (a) 12th September

Reason: The time of supply of goods will be 12 th September, as the date of
invoice or payment whichever is earlier.

(iii) (b) 110

Reason: Rule 30 of the CGST Rules inter alia provides value of supply of goods or
services or both based on cost shall be 110% of cost of production or
manufacture or the cost of acquisition of such goods or the cost of provision of
such services.

(iv) (a) Registered dealer not opting for composition scheme

Reason: As per sec. 16, every registered person shall be entitled to take credit of
input tax charged on any supply of goods or services or both to him which are
used or intended to be used in the course or furtherance of his business and the
said amount shall be credited to the electronic credit ledger of such person.
However, registered dealer opting for composition scheme is not eligible for
availing input tax credit.

(v) (b) ` 200

Reason: As per sec. 31(3)(b), a registered person may not issue a tax invoice if the
value of the goods or services or both supplied is less than ` 200.

(vi) (b) 2%
Reason: 1% TDS is required to be deducted under both the CGST and the SGST
Act and therefore the total TDS to be deducted is 2%. In case of an inter-state
transaction, IGST would be levied and 2% TDS would be levied in this case as well.

(vii) (d) Form GSTR 8 by 10th of the succeeding month

Reason: The e-commerce operator collecting tax u/s 52 shall file its monthly
return in Form GSTR 8 by 10th of the succeeding month.

2.(a) What is the place of supply of online information and database access or retrieval service?
[7]
(b) A Ltd., a corn chips manufacturing company based in USA, intends to launch its products
in India. However, the company wishes to know the taste and sensibilities of Indians before
launching its products in India. For this purpose, A Ltd has approached ABC Consultants,
Mumbai, to carry out a survey in India to enable it to make changes, if any, in its products
to suit Indian taste.
The survey is to be solely based on oral replies of the surveyees; they will not be provided
any sample by A Ltd, to taste. ABC Consultants will be paid in convertible foreign
exchange for the assignment.

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

With reference to the provision of GST Law, determine the place of supply of the service.
Also, explain whether the said supply will amount to export of service? [7]

Answer:
(a) As per sec. 13(12) of the IGST Act, the place of supply of the online information and
database access or retrieval services will be location of recipient of service. However,
person receiving such service will be deemed to be located in taxable territory (i.e. India) if
any two of the following non-contradictory conditions are fulfilled:
(i) the location of address presented by the recipient of service via internet is in taxable
territory;
(ii) the credit card or debit card or store value card or charge card or smart card or any
other card by which the recipient of service settles payment has been issued in the
taxable territory;
(iii) the billing address of recipient of service is in the taxable territory;
(iv) the internet protocol address of the device used by the recipient of service is in the
taxable territory;
(v) the bank of recipient of service in which the account used for payment is maintained is
in the taxable territory;
(vi) the country code of the subscriber identity module (SIM) card used by the recipient of
service is of taxable territory;
(vii) the location of the fixed land line through which the service is received by the recipient
is in taxable territory.

(b) As per Sec 13(2) of the IGST Act, 2017 in case where the location of the supplier of services or
the location of the recipient of services is outside India, the place of supply of services
except the services specified in sub-section (3) to (13) shall be the location of the recipient
of services.
The given case does not fall under any of such specific situations and thus, the place of
supply in this will be determined under sec 13(2). Thus, the place of supply of service in this
case is the location of recipient of services i.e., USA.
As per sec 2(6) of the IGST Act, 2017 export of services means the supply of any services
when –
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in
convertible foreign exchange or in Indian rupees wherever permitted by the Reserve
Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of a
distinct person in accordance with Explanation 1 in section 8;
Since all the above 5 conditions are fulfilled in the given case, the same will be considered
as an export of service.

3.(a) What is GSTR-4A? What are the details that are required to be submitted in Form GSTR-4?
[6]
(b) Active Bank Ltd. furnishes the following information relating to services provided and the
gross amount received:

Particulars ` in Lakhs
Merchant Banking Services 10.00
Asset Management (including portfolio management) 5.00
Service charges for services to the Government of India 2.00
Interest on overdraft and cash credits 2.50
Banker to the issue 7.00
Locker rent 2.50

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Repayment of financial lease made by the customer to the bank ` 80 lakhs which includes
a principal amount of ` 50 lakhs.
Compute the value of taxable supply of services under ―Banking and other financial
services‖ as per the Central Goods and Services Tax Act, 2017 and also find the CGST and
SGST where rate of GST is 9% each.
Note:
Input Tax Credit availed by the bank on the asset which is given on financial lease. [8]

Answer:
(a) Form GSTR-4A contains the details of inward supplies received by composition suppliers from
registered taxable persons, debit/credit notes received, and tax deducted at source. This
statement is auto populated from Forms GSTR-1, GSTR-5 and GSTR-7 filed by other assesses.
While furnishing the return in Form GSTR-4, the assesse has to furnish the following details:
1. Invoice wise details of inter-State and intra-State inward supplies received from
registered and unregistered persons
2. Import of goods and services
3. Consolidated details of outward supplies
4. Debit and credit notes issued and received, if any
5. TCS Credit received
6. Consolidated statement of advances paid/adjusted
7. Amendment of outward supplies furnished in earlier returns

(b)
Statement showing GST liability of Active Bank Ltd.
Particulars ` in Lakhs
Merchant Banking Services 10.00
Asset Management (including portfolio management) 5.00
Service charges for services to the Government of India 2.00
Interest on overdraft and cash credits Nil
Banker to the issue 7.00
Locker rent 2.50
Financial lease (supply of service) 80.00
Taxable supply of services 106.50
CGST 9% 9.585
SGST 9% 9.585

4.(a) M/s. Kalyan Ltd., a registered person under GST, being a dealer dealing with second-hand
goods. M/s. Kalyan Ltd. supplies a used camera to a consumer in Chennai for selling price
of ` 20,000. The used camera (i.e. second hand) was purchased for ` 12,000 from a
registered dealer in Mumbai, on which CGST + SGST of ` 1,680 each was charged (i.e. GST
rate applicable to cameras is 28%).
M/s. Kalyan Ltd. charged IGST 28% on inter State supply.
Find the net GST liability in the following independent cases:
(i) if input tax credit availed.
(ii) if input tax credit not availed. [6]

(b) X Ltd. has following tax liabilities under the provisions of Act-
Sl. Particulars Amount (`)
No.
1 Tax liability of CGST, SGST/UGST, IGST for supplies made during 1,00,000
August 2017
2 Interest & Penalty on delayed payment and filing of returns
belonging to August 2017 20,000
3 Tax liability of CGST, SGST/UGST, IGST for supplies made during

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

September 2017 1,20,000

4 Interest & Penalty on delayed payment and filing of returns
belonging to September 2017 20,000
5 Demand raised as per section 73 or section 74 under CGST Act,
2017 belonging to July 2017 8,00,000
6 Demand raised as per the old provisions of Indirect Taxes 1,00,000
X Ltd. has ` 5,00,000 in Electronic cash ledger. Suggest X Ltd. in discharging the tax liability.
[8]
Answer:
(a) (i) Computation of Net GST liability in case of input tax credit availed:
Particulars Value in ` GST (`) Remarks
Output supply 20,000 5,600 IGST 28% on ` 20,000
Less: ITC 12,000
CGST 14% (1,680)
SGST 14% (1,680)
Net GST liability 2,240

(ii) Computation of Net GST liability in case of input tax credit not availed:
Particulars Value in ` 28 % IGST (`) Remarks
Output supply 20,000
Less: purchase price 15,360 ITC will form part of cost
Difference known as 4,640 1299.20 Charge GST on the margin
margin or profit earned on the
goods (` 4,640 x 28%)

(b) Balance in Electronic cash ledger can be used in the following manner to discharge tax
liability by X Ltd.
Particulars Amount (`)
Balance available in Electronic cash ledger 5,00,000
Less
Tax liability of CGST, SGST/UGST, IGST for supplies made during August 2017 (1,00,000)
Interest & Penalty on delayed payment and filing of returns belonging to (20,000)
August 2017
Tax liability of CGST, SGST/UGST, IGST for supplies made during September (1,20,000)
2017
Interest & Penalty on delayed payment and filing of returns belonging to (20,000)
September 2017
Demand raised as per section 73 or section 74 UNDER CGST Act, 2017 (2,40,000)
Balance in electronic cash ledger Nil

The balance amount of ` 5,60,000 towards demand raised under section 73 or section 74
under CGST Act, 2017 to be discharged before discharging liability of demand rose under
old provisions of Indirect Taxes.

5.(a) Write a brief note in respect of Assessment of Unregistered Person (u/s 63). [8]

(b) Under which circumstances, refund amount shall be paid to the applicant? [6]

Answer:
(a) Section 63 is applicable to unregistered persons i.e., persons who are liable to obtain
registration under Section 22 and have failed to obtain registration will come within scope of
operation of this Section. This provision also covers the cases whose registration was
cancelled as per section 29 (2) claiming of the GST Act. Section 29(2) of the Act covers 5
instances as follows:

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

1. A person who contravenes the provisions of this Act or Rules made thereunder;
2. A composition person who fails to furnish returns for 3 consecutive tax periods.
3. A person other than composition person who fails to furnish returns for 6 consecutive
months.
4. A person who has sought voluntary registration but has failed to commence business
within 6 months.
5. Where registration has been obtained by way of fraud, wilful misstatement or suppression
of facts.
This Section is applicable to unregistered taxable persons. In such cases, the proper officer is
required to give a reasonable opportunity of being heard to such persons before
proceeding to assess such person. The section begins with the phrase “Notwithstanding
anything to the contrary contained in section 73 or section 74”. It therefore appears that,
assessment under section 63 can be completed independent of section 73 and Section 74,
however, procedures contained in section 73 or 74 to the extent they are not inconsistent
with section 63 need to be followed, while completing the assessment on principles
governing best judgment assessment. Even though no return would have actually been filed
in such cases, the authority to pass such assessment order is extinguished on the expiry of 5
years from due date applicable for filing annual return for the year to which tax not paid
relates.

(b) As per sec. 54(8), the refundable amount shall, instead of being credited to the Consumer
Welfare Fund, be paid to the applicant, if such amount is relatable to:
1. refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input
services used in making such zero-rated supplies;
2. refund of unutilised input tax credit;
3. refund of tax paid on a supply which is not provided, either wholly or partially, and for
which invoice has not been issued, or where a refund voucher has been issued;
4. refund of tax in pursuance of sec. 77;
5. the tax and interest, if any, or any other amount paid by the applicant, if he had not
passed on the incidence of such tax and interest to any other person; or
6. the tax or interest borne by such other class of applicants as the Government may, on the
recommendations of the Council, by notification, specify.

6.(a)(i) M/s. Kamal Ltd. reduced the amount of ` 2,25,000 from the output tax liability in
contravention of the provisions of section 42(10) of the CGST Act, 2017 in the month of
January 2018 (vide invoice date 12.01.2018), which is ineligible credit at invoice level.
As a result a show cause notice issued Central Tax Department under section 74 of the
CGST Act, 2017 along with interest. M/s. Kamal Ltd. paid the tax and interest on 5th
March 2018. Find the interest liability if any? Note: ignore the penalty. [4]
(ii) Mr. Rohit is a Customs Broker issues an invoice for reimbursement of a few expenses and
for consideration towards agency service rendered to an importer. The amounts
charged by the Customs Broker are as below:
Sl. No. Component charges in invoice Amount in `
1 Agency income 12,000
2 Travelling expenses 7,000
3 Hotel expenses 11,000
4 Customs duty 60,000
5 Dock dues 3,000

Find the value of taxable supply of service in the hands of Customs Broker. [4]

(b) Distinguish between Section 65 (Audit by Tax Authorities) and Section 66 (Special Audit) of
the CGST Act, 2017. [6]

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Answer:
(a)(i) As per section 42(10) read with section 50(3) of the CGST Act, 2017 amount reduced from
the output tax liability in contravention of the provisions of section 42(7) shall be added to
the output tax liability of the recipient in his return for the month in which such
contravention takes place and such recipient shall be liable to pay interest on the amount
so added at the rate specified in section 50(3) of the CGST Act, 2017.
Therefore, applicable rate of interest is @24% per annum.
January month return due date is 20th of February 2018.

Interest = ` 1,923/- (` 2,25,000 x 24% x 13/365)

Note: from 21st February 2018 to 5th March 2018 = 13 days

(ii) Statement showing taxable value of supply of service:

Sl. No. Component charges in invoice Amount in ` Remarks

1 Agency income 12,000 Addable into the value
2 Travelling expenses 7,000 Addable into the value
3 Hotel expenses 11,000 Addable into the value
4 Customs duty Not addable Pure agent reimbursement
5 Dock dues Not addable Pure agent reimbursement
Total 30,000

(b)

Components Section 65 of the CGST Act, 2017 Section 66 of the CGST Act, 2017
Nature of Audit In this section, we have a In this section, we have a special
departmental audit audit
Conducted by It is conducted by officers of the It is conducted by Chartered
department authorized by the Accountant/Cost Accountant
commissioner nominated by the commissioner
Prior Notice Prior notice of 15 days is required No such notice/intimation is
required
Time for The conclusion of the audit is given The conclusion of the audit is given
conclusion of in 3 months, further extension of 6 in 90 days, further extension of 90
the audit months is allowed days is allowed
Audit Findings / Audit reports should be intimated Audit reports should be shown to
Report soon upon completion of the audit deputy/ assistant commissioner
The opportunity No specific provision Yes, where material gathered
of being heard during the audit is to be used in
any proceedings against the
auditee

7.(a) What is an E-way bill? Explain the circumstances under which E-way bill is not necessary to
generate. [7]

(b) Mr. A supplied goods to Mr. B for ` 2,00,000 plus GST 18%, vide Invoice No. 99 dated 5th
November 2017. Mr. B availed the ITC of ` 36,000 and confirmed in GSTR-2. However,
invoice no. 99 dated 5th November 2017 not reflected in GSTR-1, of Mr. A.
You are required to answer the following:
(i) When matching will takes through common portal of GSTN.
(ii) To whom discrepancy will be informed.
(iii) Time limit for rectification of discrepancy
(iv) Whether ITC is allowed to Mr. B, if Mr. A is not paid tax till 20thJanuary 2018.

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(v) Mr. B communicated the problem to Mr. A, who looks into the issue and rectified the
discrepancy and included invoice no. 99 in his GSTR-3 for January 2018 accordingly he
paid tax on 20th Feb 2018. If so Mr. B can reduce his liability? [7]

Answer:
(a) E-way bill is an Electronic Way bill for movement of goods to be generated on the E-way bill
portal. A GST registered person cannot transport goods in a vehicle whose value exceeds `
50, 000/- without an e-way bill that is generated on ewaybillgst.gov.in Alternatively, E-way bill
can also be generated or cancelled through SMS, Android App and by site-to-site
integration through API. When an E-way bill is generated, a unique E-way Bill Number (EBN) is
allocated and is available to the supplier, recipient, and the transporter.

In the following cases it is not necessary to generate E-way Bill:

(i) The mode of transport is non-motor vehicle
(ii) Goods transported from Customs port, airport, air cargo complex or land customs
station to Inland Container Depot (ICD) or Container Freight Station (CFS) for
clearance by Customs.
(iii) Goods transported under Customs supervision or under customs seal
(iv) Goods transported under Customs Bond from ICD to Customs port or from one custom
station to another.
(v) Transit cargo transported to or from Nepal or Bhutan
(vi) Movement of goods caused by defence formation under Ministry of defence as a
consignor or consignee
(vii) Empty Cargo containers are being transported
(viii) Consignor transporting goods to or from between place of business and a
weighbridge for weighment at a distance of 20 kms. accompanied by a Delivery
challan.
(ix) Goods being transported by rail where the Consignor of goods is the Central
Government, State Governments or a local authority.
(x) Goods specified as exempt from E-way bill requirements in the respective State/Union
territory GST Rules.
(xi) Transport of certain specified goods- Includes the list of exempt supply of goods,
Annexure to Rule 138(14), goods treated as no supply as per Schedule III, Certain
schedule to Central tax Rate notifications.

(b) (i) Matching will take place only after the due date of GSTR-3 for the month of
November 2017. In the given case matching will takes place after 20th December 2017.

(ii) Discrepancy is to be communicated by the common portal GSTN to supplier (i.e. Mr.
A) in the Form GST MIS-2.

(iii) Time limit for rectification is 20th January 2018 (i.e. Due date of filling FORM GSTR-3 for
the month succeeding the month in which the discrepancy is made available). Mr. A
should pay tax on it (as per Rule 71(4) of the CGST Rules, 2017).

(iv) Input tax credit of ` 36,000 shall be added to the output tax liability of Mr. B in his
return to be furnished in FORM GSTR-3 for the month succeeding the month in which the
discrepancy is made available (i.e. 20th Feb 2018) with interest @18%.

(v) As per section 42(7) of the CGST Act, 2017 Mr. B can reduce the amount from his
output tax liability and the interest paid will be refunded to his electronic cash ledger
account under section 42(9) of the CGST Act, 2017.

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Section – B

Answer Question No. 8 which is compulsory and any two from the rest of this section

8. Choose the correct answer with justification/ workings wherever applicable: [3×2=6]
(i) As per sec. 61, where any warehoused goods specified in sec. 61(1)(c) remain in a
warehouse beyond a period of ____ days from the date on which the proper officer has
made an order u/s 60, interest shall be payable @ 15%
(a) 60
(b) 90
(c) 45
(d) 30

(ii) What is the capital punishment u/s 132 for false declaration, documents, etc.
(a) Imprisonment for a term which may extend to 2 years
(b) Imprisonment for a term which may extend to 5 years
(c) Imprisonment for a term which may extend to 1 year
(d) Imprisonment for a term which may extend to 6 months

(iii) Only projects having a minimum investment of ` ______ in plant & machinery shall be
considered for establishment as EOUs
(a) 10 Crore
(b) 50 lakhs
(c) 5 Crore
(d) 1 Crore

Answer:
(i) (b) 90
Reason: As per sec. 61, where any warehoused goods specified in sec. 61(1)(c) remain
in a warehouse beyond a period of 90 days from the date on which the proper officer
has made an order u/s 60, interest shall be payable @ 15%

(ii) (a) Imprisonment for a term which may extend to 2 years

Reason: As per sec. 132, whoever makes, signs or uses, or causes to be made, signed or
used, any declaration, statement or document in the transaction of any business relating
to the customs, knowing or having reason to believe that such declaration, statement or
document is false in any material particular, shall be punishable with imprisonment for a
term which may extend to two years, or with fine, or with both.

(iii) (d) 1 Crore

Reason: Only projects having a minimum investment of ` 1 crore in plant & machinery
shall be considered for establishment as EOUs. However, Board of Approvals (BoA) may
allow establishment of EOUs with a lower investment criteria also.

9.(a) A commodity is imported into India from a country covered by a notification issued by the
Central Government under section 9A of the Customs Tariff Act, 1975. Following particulars
are made available:
CIF value of the consignment: US$ 30,000
Quantity imported: 500 kgs.
Exchange rate applicable: Rs 70 = US$1
Basic customs duty: 12 %
Social Welfare Surcharge @ 10%

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As per the notification, the anti-dumping duty will be equal to the difference between the
cost of commodity calculated @ US$80 per kg. and the landed value of the commodity as
imported.
Appraise the liability on account of normal duties and the anti-dumping duty.
Assume that only ‗Basic Customs Duty‘ (BCD) and Social Welfare Surcharge are payable.
IGST @12% is also be applicable. [8]

(b) A person makes an unauthorized import of goods liable to confiscation. After adjudication,
Assistant Commissioner provides an option to the importer to pay fine in lieu of
confiscation. It is proposed to impose a fine (in lieu of confiscation) equal to 50% of margin
of profit. From the following particulars calculate the amount of fine that can be imposed:
Assessable value ` 50,000, Total duty payable ` 20,000, Market value ` 1,00,000. Also
calculate the amount of fine and the total payment to be made by the importer to clear
the consignment. [4]

Answer:
(a) Statement showing landed value of imported goods and customs duties:
Particulars US $
CIF value 30,000
Value in `
Assessable value (i.e. 30,000 × ` 70) 21,00,000
Add: Customs duty 13.2% on Assessable value 2,77,200
Landed value (or value of imported goods) 23,77,200
Anti-dumping duty (` 28,00,000 – ` 23,77,200) 4,22,800
Market value of imported goods (500 kgs. x ` 70 x US $80) = `
28,00,000
Open Market Value 28,00,000
Add: IGST @12% on ` 28,00,000 3,36,000
Total 31,36,000

Total customs duty payable is ` 10,36,000 (i.e. 2,77,200+ 4,22,800+ 3,36,000)

Note: In cases where imported goods are liable to Anti - Dumping Duty or Safeguard Duty,
calculation of Anti - Dumping Duty or Safeguard duty would be as per the respective
notification issued for levy of such duty. It is also clarified that value for calculation of IGST as
well as Compensation Cess shall also include Anti - Dumping Duty amount and Safeguard
duty amount

(b) In the given case Assistant Commissioner intends to impose redemption fine equal to 50% of
margin of profit.
Total cost to importer = ` 50,000 + ` 20,000 = ` 70,000.
Margin of profit:
Market value – Total cost to importer = ` 1,00,000 – ` 70,000 = ` 30,000.
Hence, redemption fine will be ` 15,000 (@ 50% of ` 30,000). In addition, duty of ` 20,000 is
payable. Thus, importer will have to pay totally ` 35,000 to clear the goods from customs.

10.(a) Prabin has made an unauthorised import of 1,200 pieces of a product. Other particulars
are as under:
Total assessable value : ` 6,00,000
Total customs duty payable (all) : ` 1,44,000
Market price in India : ` 800 per piece
Customs authorities have confiscated the said goods and importer has been given an
option to get the said goods released on payment of a fine equal to 50% of margin of
profit. Compute –
(i) amount of fine payable; and

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(ii) maximum amount of fine u/s 125 of the Customs Act, 1962. [6]

(b) In the context of foreign trade policy, what do you understand by the term ―Standard
Input Output Norms (SION)‖? Mention the basic requirements for fixation/modification of
Standard Input Output Norms (SION)? [6]

Answer:
(a) (i) Computation of amount of fine
Particulars Amount (`)
Assessable value of goods 6,00,000
Add: Customs Duty 1,44,000
Total Imported Cost [A] 7,44,000
Market Value (` 800 × 1200) [B] 9,60,000
Margin of Profit [C = B – A] 2,16,000
Fine [50% of C] 1,08,000

(ii) As per sec. 125, fine shall not exceed the market price of the goods confiscated, less in
the case of imported goods the duty chargeable thereon. Thus, fine payable u/s 125
cannot exceed the following:

Particulars Amount (`)

Market Value of goods 9,60,000
Less: Duty 1,44,000
Maximum Fine u/s 125 8,16,000

(b) Standard Input Output Norms: Standard Input Output Norms or SION in short is standard
norms which define the amount of input/inputs required to manufacture unit of output for
export purpose. Input output norms are applicable for the products such as electronics,
engineering, chemical, food products including fish and marine products, handicraft, plastic
and leather products etc. SION is notified by DGFT in the Handbook, and is approved by its
Boards of Directors. An application for modification of existing Standard Input-Output norms
may be filed by manufacturer exporter and merchant-exporter. The Directorate General of
Foreign Trade (DGFT) from time to time issue notifications for fixation or addition of SION for
different export products. Fixation of Standard Input Output Norms facilitates issues of
Advance License to the exporters of the items without any need for referring the same to the
Headquarter office of DGFT on repeat basis.

For fixation / modification of Standard Input Output Norms (SION) following details are
required:
(i) Technical Details of the export product as per the details given in Appendix 33.
(ii) Chartered Engineer certificate certifying the import requirements of raw materials
in the format given in Appendix 32B.
(iii) Production and Consumption data of the manufacturer/supporting
manufacturer of the preceding three licensing years as given in serial no 3 of sub
section XII, duly certified by the Chartered accountant / Cost Accountant /
Jurisdictional Excise Authority.

11. (a) Which conditions are to be satisfied for claiming refund of import duty? [6]

(b) Examine whether benefit of Service Exports from India Scheme (SEIS) can be availed with
respect to notified services provided by service providers located in India in the current
financial year in the following independent cases:
(i) Net Foreign Exchange (NFE) earned by Mr. Raj, a service provider, in the preceding
financial year is USD 4,500.

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 Answer to MTP_Final_Syllabus 2016_Dec 2019_Set 1

(ii) X & Co., is a partnership firm, supplier of taxable services, has earned net foreign
exchange to the tune of USD 17,500 in the preceding financial year.
(ii) Mr. Roshan, a service provider, has earned net foreign exchange of USD 13,000 in
the preceding financial year. Out of this, USD 4,000 has been paid to Mr. Roshan through
the credit card of the foreign client.
Note: all the above services providers have an active IEC at the time of rendering
services. [6]

Answer:
(a) Importer who has actually paid the duty on import, which is not required to be paid alone, is
eligible to claim refund.
As per Section 26A of the Customs Act, 1962, duty paid on imported goods can be claimed
for refund on account of satisfying the following conditions:
(I) Goods are found defective: The goods are found to be defective or otherwise not in
conformity with the specifications agreed upon between the importer and the supplier
of goods:
Provided that the goods have not been worked, repaired or used after importation
except where such use was indispensable to discover the defects or non-conformity with
the specifications;
(II) Goods are easily identifiable as imported goods: The goods are identified to the
satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of
Customs as the goods which were imported;
(III) No drawback claim is made: The importer does not claim drawback under any other
provisions of this Act; and
(IV) Activities carried out after importation
(i) The goods are exported; or
(ii) The importer relinquishes his title to the goods and abandons them to customs; or
(iii) Such goods are destroyed or rendered commercially valueless in the presence of the
proper officer, in such manner as may be prescribed and within a period not exceeding
30 days from the date on which the proper officer makes an order for the clearance of
imported goods for home consumption under section 47.
Note:
(1) However, the period of 30 days may, on sufficient cause being shown, be extended
by the Commissioner of Customs for a period not exceeding three months.
(2) No refund under section 26 is allowed in respect of perishable goods and goods
which have exceeded their shelf life.

(b) (i) Mr. Raj is not eligible for SEIS Scheme as his net foreign exchange earnings are less than
USD 10,000 (minimum limit for individuals).

(ii) X& Co., being a partnership firm eligible for SEIS Scheme as their net foreign exchange
exceeds the limit of USD 15,000 (minimum limit for firms).

(iii) Foreign exchange earned through credit cards is counted for the purpose of computing
the limit of minimum net foreign exchange required for being eligible to SEIS Scheme. Thus,
Mr. Roshan is eligible for SEIS Scheme.

DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 13