Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
October 5, 2006
Subject : Instructions regarding Large Taxpayers Unit - reg.
The Finance Minister in his Budget Speech 2005-06 announced the proposal to set up Large Taxpayer Units (hereinafter referred to as LTUs) in the country, which would act as a single window facilitation centre for all large entities paying excise duty, corporate tax/income tax and service tax. Notifications No. 18/2006-CE(NT) to 22/2006-CE(NT) and 28/2006-S.Tax all dated 30th September 2006 have been issued providing jurisdictional authority for LTU and for making changes in the Central Excise Rules, 2002, Cenvat Credit Rules, 2004, and Service Tax Rules, 1994. The first LTU has been set up at Bangalore, and it has since commenced operation from 3rd October, 2006. For carrying out legislative changes to give effect to various provisions and facilities with regard to a large tax payer, a new rule 12 BB has been inserted in the Central Excise Rules, 2002, a rule 12 A has been inserted in the Cenvat Credit Rules, 2004, and similarly, rule 10 has been inserted in the Service Tax Rules, 1994. In this way, it has been ensured that the amendments carried out are to the required minimum extent.
2. In this context, the important changes made in the rules and procedures with regard to LTUs are briefly given below:
I. Receipt of Consent Form and its Acceptance:
On receipt of the consent form from the large taxpayer, the Chief Commissioner, LTU will get the said consent form verified, and if the eligibility conditions prescribed under the rule and the notification have been satisfied, the taxpayer will be informed by way of issue of an acceptance letter. The process of acceptance would not normally take more than 7 days. The large taxpayer will be eligible to avail the facilities like removal of intermediate goods without payment of duty provided under the rules from the date of receipt of the acceptance letter. Once a taxpayer acquires the status of LTU, the entire jurisdiction of central excise, service tax and income tax matters shall stand transferred to the said LTU in respect of all his manufacturing units, service providing premises, and other registered premises located throughout the country. Some of such activities are as given below: -
a) Filing of returns (Central Excise and Service Tax) – It is, however, clarified that as a transitional measure, the returns for the month of September, 2006 (to be filed in October, 2006) will be filed with the erstwhile jurisdictional officers and returns for the month of October, 2006 onwards shall be filed in the LTU.
b) Filing of refund/rebate claims
c) Audit, Adjudication and Appeals.
d) Filing of intimation, permissions.
e) Visit to units
f) Acceptance of proof of export.
The Chief Commissioner, LTU will intimate the jurisdictional Central Excise, Service Tax and Income Tax Commissioners regarding the transfer of the specified units from his jurisdiction to the LTU.
The Chief Commissioner, LTU will assign a Client Executive for each large taxpayer from among the Additional/Joint/Deputy/Asstt. Commissioner posted in the LTU either from the Income Tax or Central Excise Department. The said Client Executive will be the single point interface with the large taxpayer for any assistance, clarification, and grievance redressal.
III. Transfer of intermediate goods/inputs/capital goods:
Rule 12BB of the Central Excise Rules, 2002 and Rule 12A of Cenvat Credit Rules, 2004, provide that a large taxpayer may remove intermediate goods or inputs or capital goods from one registered unit to another unit without payment of duty or reversal of credit, provided the recipient unit uses the said goods for further manufacture of the finished goods and pay excise duty thereon. The said goods can be removed by the sender premises under an invoice or a transfer challan, which should contain all details as in case of an invoice except the value. However, the facility of such removal without payment of duty or reversal of credit is not permitted when the recipient unit is availing the benefit under specified area based exemption notification or where the sender premises is an EOU or a unit located in EHTP or STP. The rules in this regard may be studied carefully.
IV. Transfer of credit:
Rule 12A(4) of the Cenvat Credit Rules, 2004 provides an option to a large taxpayer to transfer Cenvat credit (of central excise duty or service tax) accumulated in one manufacturing unit or service providing unit to any of its other manufacturing or service providing units. Such transfer can be made by way of issue of a transfer challan containing the details as provided in the said sub-rule. The said transfer challan can be sent by fax or electronically by way of e-mail attaching the scanned copy of the challan to other unit for taking credit which should be followed by the original copy of the challan. However, the utilization of such credit is subject to limitations prescribed under rule 3(7)(b) of the CENVAT credit rules. Moreover, the credit cannot be transferred by units availing area based exemption notifications specified in the said rules.
V. Self-adjustment of excess duty paid:
Rule 12 BB of the Central Excise Rules, 2002 provides a facility that if a large taxpayer manufacturing excisable goods has paid at any time excess excise duty on account of arithmetical error, he would be permitted to adjust the said excess duty paid by him in the subsequent period. However, such adjustment is subject to the provisions of unjust enrichment and other applicable provisions of law.
VI. Duty payment:
As the e-payment facility has been provided for payment of central excise duty and service tax, large taxpayer may be requested to opt for e-payment as far as possible as it will reduce the compliance cost, and it will be beneficial for the department also for revenue reconciliation. However, in case of difficulties in e-payment, a large taxpayer is permitted to pay the duty (except in such cases of Service Tax where e-payment is mandatory) in the respective jurisdiction where the factories or service providing premises are situated or even in the jurisdiction of LTU, Bangalore. However, in order to ensure proper accounting of taxes paid by them, the large taxpayer should be directed to write the following details in their TR-6 challan in addition to the details presently being filled up:
“LTU Location Code” (location code
No. L-10000 is for LTU Bangalore). The present jurisdictional location
code is also required to be entered on the TR-6 challan where payment is made in
VII. Pending rebate/refund cases:
All the refund/rebate claims filed with the jurisdictional Central Excise and Service tax Commissionerate till the date of receiving the acceptance letter issued by the Chief Commissioner, LTU shall be processed by the jurisdictional Commissionerate only, and these will not be transferred to the LTU.
VIII. Export Procedures:
In the Approach Paper issued by the Department, it has been clarified that facility of self-sealing of export consignment is available to all the large taxpayers. Therefore, all the taxpayers are expected to avail this facility. However, in exceptional cases, where the taxpayer intends to avail the facility of sealing by the Central Excise officers or the Customs officers, they should apply for the same to the LTU who in turn will request the jurisdictional Commissionerate to depute the staff for supervising the sealing of export cargo. However, the processing of accepting the proof of export shall be carried out only in the office of the LTU. The Chief Commissioner, LTU is requested to prescribe a modified procedure to ensure smooth processing of export documents that in case of any difficulty in following the present export procedure and the said procedure will be sent to the Board for post-facto approval. However, in no case, export consignment should be held up for want of any procedural formalities.
In case of sealing by the jurisdictional officers, it is clarified that the jurisdictional officers, whether of Customs or Central Excise, will continue to render the services of sealing as earlier.
IX. Amendment in monthly returns (ER-1 return):
The existing ER-1 form is being modified in order to capture certain details in respect of a large taxpayer. The details which are required to the given only by a large taxpayer shall be separately indicated. A suitable notification is being issued. The new format of ER-1 return would be applicable from the month of October, 2006 that is to be filed in November, 2006.
Audit frequency norms have been fixed by the department for audit of units. However, a large taxpayer who is liable to be audited every year would not be ordinarily audited annually. The selection of a taxpayer for audit would be done based on ‘risk assessment’ taking into account various parameters. As far as possible, the audit of the head office and all the units will be conducted simultaneously. Dates for audit will be fixed in consultation with the large taxpayer.
All show cause notices pending adjudication, as on the date of issue of acceptance letter will be transferred to the LTU along with all connected case papers. Cases that are in the process of being adjudicated (i.e. where personal hearings have been conducted) will be decided by the jurisdictional adjudicating authority only.
All pending investigation cases as on the date of issue of acceptance letter will be completed by the jurisdictional Commissioner. However, investigation of these cases must be completed on priority basis and SCNs should be issued by erstwhile jurisdictional authorities. However, the SCN should be made answerable to appropriate authorities of the LTU who would undertake adjudication of these cases.
XIII. Arrears of revenue & cases pending with Appellate Authorities
The complete details of the arrears of revenue will be forwarded to the LTU by the respective Commissionerates. The case files are not to be merely forwarded, but individual details of each case alongwith the full history should be prepared and sent. Similarly, all cases pending before the Commissioner (Appeals), CESTAT, High Court, and Supreme Court should be transferred to the LTU with a self-contained note in each file. All further action in respect of these cases will be taken by the LTU. However, the present jurisdictional Commissionerates will provide all logistical support to defend the cases in the respective appellate and judicial forums.
XIV. Responsibilities of the jurisdictional Commissionerate
i) The present jurisdictional Commissionerate should prepare the assessee profile as per the Central Excise/Service Tax Audit Manual for each of the Central Excise and Service Tax assessee and forward the same to the LTU.
ii) All pending show cause notices, (except for which personal hearing has already been held) should be transferred to the LTU. Before forwarding the SCN, a corrigendum making the notice answerable to appropriate officer of LTU shall be issued by the jurisdictional Commissionerate.
iii) All files which are required to be transferred to the LTU should be numbered both in the note sheet side and correspondence side.
iv) For each of the pending case of arrears of revenue, the cases pending with the Commissioner (Appeals), CESTAT, High Court, Supreme Court, a note giving full facts of the case should be prepared for each case and then only the files should be transferred. In case of any time- bound matter like review of orders or filing of appeal or hearing of the cases in the Court, etc., the present jurisdictional Commissioner should handle the matters for the month of October, 2006, and thereafter, the cases should be transferred. For other time-bound matters, where the action is required to be taken in next one month, i.e., the month of November, 2006, the jurisdictional Commissionerate should send a d.o. letter explaining the relevant details of these cases.
v) The cases under investigation should be handled by the present Commissionerate only and after issue of SCNs, the case records should be transferred to the LTU. In cases, where records of a particular case is voluminous, the Commissioner, LTU may be consulted in advance as to whether these records are required be kept in the custody of present Commissionerate or to be sent to the LTU
3. The Chief Commissioner, LTU, and Commissioners LTU are expected to play a pro-active role in the administration of the LTU. In fact, the success of LTU depends to a great extent upon their approach in solving the problems at the initial stage. There may be some procedural issues that are likely to crop up while dealing with various activities of a large taxpayer. It is possible that some of the present procedures prescribed under various instructions or circulars cannot be followed in the case of a large taxpayer. In such cases, the Chief Commissioner is empowered to prescribe a modified procedure, as long as it does not affect the interest of revenue. He is also authorized to issue fresh instructions in this regard, and thereafter, the instructions can be sent to the Board for seeking post-facto approval.
4. It is once again emphasized that the LTU is a trade facilitative measure seeking to address and deliver appropriate solutions to the unique compliance issues that may arise. The mission of CBEC is to achieve excellence in the formulation and implementation of Service Tax and Excise initiatives by creating a climate for voluntary compliance by providing guidance and building of mutual trust. The establishment of LTU is a step in this direction. It is envisaged that this approach will improve India’s business climate, and will reassure the trade that their taxation related concerns would be dealt with in a fair and transparent manner. In view of this, the officers would be expected to innovate and adopt a taxpayer friendly approach in their day-to-day work.
5. The rules prescribed through notifications should be gone through carefully. In case, any difficulties are faced in implementation of any provision, the same may be brought to the notice of the Board immediately.