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Huge response to TIOL Seminar in Vizag

TIOL-DDT 1594
25.04.2011
Monday

A large number of assessees participated in the one day work shop on Budget Changes organized in Visakhapatnam by the Tax Law Research Group in association with Taxindiaonline.com. The Chief Commissioner of Vizag Zone, Mr. Chandrahas Mathur was the Chief Guest on the occasion. The participants raised various issues which were answered by the Chief Commissioner and the Commissioners of the Zone. Some of the issues raised during the seminar are:

1. We issued invoice for value of taxable service at Rs 90,000/- and service tax @10.3% on this amount. The recipient paid only the basic value of Rs 90,000/- and the service tax amount has not yet been paid by him. Do we need to pay service tax?

Yes. You are required to pay service tax on Rs 90,000/- by treating it as cum-tax value.

2. Show Cause notice was issued to deny the CENVAT Credit on services like security, outdoor catering service and chartered accountant service. Whether these services are eligible for credit.

Since the Show Cause notice was issued, the issue will be taken up in adjudication after due process of law.

3. We are manufacturers of excisable goods and are claiming refund of service tax paid on certain services like CHA etc, used for export of excisable goods under Notification No 17/2009 ST 7.7.2009. The departmental officers are insisting on proof of payment of service tax by the providers of service. Is it required under law?

Prima facie, you are not required to produce the challans of payment of service tax by the service provider. You can meet the jurisdictional Commissioner for any problem in getting the refund.

During post lunch session, a panel of experts from the consulting fraternity answered some other issues raised by the participants. Some issues are:

1. We have lot of CENVAT credit under basic excise duty. Can this be used for payment of education cess and SHE Cess?

There is no bar under the CENVAT credit rules on utilising the credit on basic excise duty for payment of Education Cess and SHE Cess. Only restriction is that the credit of Education cess and SHE Cess cannot be used for payment of basic excise duty.

2. After clearance of goods from the factory, there is an amendment to the price. We paid the differential excise duty by raising supplementary invoices. Do we need to pay interest also on such differential duty?

Yes. The dispute is settled in favour of revenue in case of SKF India Ltd .

3. Can we file a revised ER 1 return if there is any error in the earlier return filed with the department?

Though the rules expressly do not provide for filing revised return in case of central excise, unlike in service tax, a revised return can be filed as following the maxim, whatever is not prohibited under law is allowed.

4. Some of the service providers from whom we are receiving services are not charging service tax on the ground of small scale exemption, etc. Is the recipient of the service is also responsible if there are any violations by the service providers?

The service receiver is not responsible for any violations by service provider, except in exceptional cases like abetting the evasion. However, as an abundant caution, you can obtain an undertaking from the service provider that they are under any exemption, small scale or any other.

5. We are paying advance to the service provider who is required to pay service tax on such advances received. Can we avail CENVAT Credit of service tax paid on such advances paid?

Since the service has not yet been received, you are not entitled for CENVAT Credit of service tax paid on such advances.

6. We are an SEZ unit and are claiming refund of service tax paid on services not wholly consumed within the SEZ. Do we need to file ST 3 returns?

No. In terms of the Notification No 17/2011 ST, the developer or the SEZ unit is required to only obtain service tax code by applying in Form A 3 to the jurisdictional Assistant / Deputy Commissioner.

Come to me at any time convenient to you – Commissioner invites assessee

DURING our Vizag Seminar on Saturday, an assessee raised a rather complicated issue which needed detailed discussion. His jurisdictional Commissioner Ponnu Swamy, who was on the dais said, “You can come to me at any time convenient to you; we will sort out the issue.” His Chief Commissioner who was also present added that the Commissioner will also provide a cup of tea.

Very often, we find that it is very difficult to meet a Commissioner – in fact you can't even send in your card unless you answer correctly at least half a dozen questions posed by the all important PS and most often he would tell you that the Commissioner is very busy and advise you to meet the Additional Commissioner or the Superintendent.

But here is a Commissioner who has invited his assessee to meet him at the assessee's convenience and a Chief Commissioner who directs his Commissioner to offer a cup of tea to the assessee. Well, this is what democracy is all about. Larry Lipsher, addressing our Mumbai Seminar last month said that nowhere in the world he has seen Revenue officers answering questions from the Public in a seminar like this.

Inclusion of handling charges to Goods transport Agent in case of M/s Food Corporation of India – DGST's clarification

AN instance of avoidance of payment of appropriate Service Tax amount has been reported by the Central Excise Commissionerate, Rohtak to DGST. Brief details in this regard are as follows:

In respect of the transportation services provided by the contractors with regard to the transportation of the food grains stocks, M/s. Food Corporation of India (M/s. FCI) is paying Service Tax on 25% value of the said transportation charges (upon availing abatement of 75%) after availing the benefit of Notification No. 34/2004-ST dated 03.12.2004. However, M/s. FCI is paying Service Tax only on transportation charges and neither they nor other agencies make payment of Service Tax on Handling charges consisting of labour/loading and unloading charges even if the services of transportation as well as handling are provided by the same contractor. In view of the clarification given by the Board/Ministry vide Circular No. 104/07/2008/ST dated 06.08.2008. F. No. 334/4/2006-TRU dated 28.02.2006 (para 3.2 and 3.3) and F.No. 334.1/2006-TRU dated 29.02.2008 (para 3.2 and 3.3). M/s. FCI should have added the loading charges in the transport charges, wherever provided by the same contractor/agency, for determining the taxable value and accordingly discharged Service tax liability. As such, if loading/unloading charges are added into the transport charges, many bills may cross the exemption limit of Rs.750/-, on which no Service Tax has been paid by M/s. FCI.

To summarize the above, M/s. FCI should have included handling charges to the transport charges, wherever provided by the same contractor/agency. They have evaded Service Tax by not including the value of handling charges to the transport charges and wrongly availed the slab exemption of Rs.750/- per consignment under Notification No. 34/2004-ST dated 03.12.2004.

In this connection, DGST draws attention to its clarification issued vide letter F.No.V/DGST/88/GTA/01/08 dated 04.11.2008 pertaining to the availment of exemption under Notification No.34/2004-ST dated 03.12.2004, which may also be appropriately taken into consideration (see below for details of DGST's letter dated 04.11.2008).

DGST's Letter F.No.V/DGST/88-GTA/01/2010/464, Dated: 20th January, 2011

Availment of exemption under Notification No.34/2004 ST – DGST's clarification

DGST received a reference from the Commissioner, Central Excise & Customs Indore, seeking clarification on the availment of Notification No.34/2004 ST dated 03.12.2004 in respect of individual consignments transported by road by the Goods Transport Agency.

The officers of Central Excise, Indore Commissionerate noticed during the course of audit that service providers were availing of exemption from service tax in respect of individual consignments when freight amount did not exceed Rs.750/- even if the total freight of all consignments in a goods carriage was higher than Rs.1500/-. They were of the view that the exemption under clause (ii) of the Notification No.34/2004 ST dated 03.12.2004 was applicable only when a goods carriage transport consignment consisting of one or more consignments (packages) meant only for a single consignee and if the total freight for all their consignment meant for the only consignee was more than Rs.750/-, the exemption was not available under the said notification.

DGST examined the issue and is of the view that as per clause (i) of the said notification, if by a truck /carriage consignments were transported whose total freight did not exceed Rs.1500/-, then it will qualify for availment of the benefit of the notification supra irrespective of the freight charges of the individual consignments; and as per clause (ii) of the said notification, the freight amount in respect of a individual consignment being transported by a truck/carriage should not exceed Rs.750/- for the availment of the benefit of the notification supra, irrespective of the number of such individual consignments transported by a carriage and irrespective of the total combined freight amount charged in respect of all such consignments being in excess of Rs.1500/-. DGST is of the view that the two clauses of the notification provided two independent exemptions on account of the fact that these clauses have been separated by the word 'or' and not by 'and'.

DGST's above views were also communicated to Board vide letter of even number dated 31.07.2008 for clarification and it informs the field formations that the Board has confirmed /accepted these views vide endorsement dated 11.8.2008 made on the copy of said letter.

DGST's Letter F. No.V/DGST/88/GTA/01/08, Dated: 4th Nov, 2008

Corrections in Explanatory Notes issued along with Budget papers – TRU's Clarification

REFERENCE is invited to the Explanatory Notes to changes in Central Excise duties circulated along with budget papers. In para 61.2 of these notes, wherein changes in the excise duty rate on readymade garments and made up articles of textile were discussed, it has inadvertently been mentioned that the excise duty of 10% is being imposed on such goods without CENVAT credit facility.

TRU clarifies that CENVAT credit of the duty paid on inputs and capital goods as well as service tax paid on input services is available to the manufacturers of readymade garments and textile made ups. In case the liability to pay duty on these items rests with the person who gets them manufactured on job-work basis (merchant manufacturer), the facility of CENVAT credit would also be available to him. For this purpose, a suitable amendment has been made in the definition of 'manufacturer' or 'producer' appearing in clause (naa) of rule 2 of the CENVAT Credit Rules, 2004.

Also minor errors in some notifications [namely, 5/2011-CE, 6/2011-CE, 14/2011-CE, 7/2011-CE (NT), 21/2011-Cus., 25/2011-Cus. and 27/2011-Cus.] dated 01.03.2011 were observed. These have since been corrected and corrected versions of the notifications have been hosted on the CBEC website: www.cbec.gov.in. The Gazette copies of the notifications published on 01.03.2011 also reflect the correct versions of these notifications [Refer to TIOL-DDT 1575 March 24, 2011 for the Errata published by Directorate of Publicity and Public Relations, CBEC]

Central excise duty of 1% was imposed on vaccines (other than those specified under the National Immunization Program) by virtue of S. No.39 of notification No. 1/2011-CE dated 01.03.2011. The policy intent was to retain full exemption from excise duty on vaccines specified under National Immunization Program. In order to reflect this clearly, an entry prescribing full exemption for such vaccines has been inserted at S. No. 62AA of notification No. 4/2006-CE dated 01.03.2006. This amendment has been carried out by notification No.19/2011-CE dated 03.03.2011.

D.O.F.No.334/3/2011-TRU, Dated: 4th March, 2011

Jurisprudentiol - Tuesday's cases

Legal Corner IconIncome Tax

Income tax - expenses incurred on promotion of Pace Foundation for Fast Bowlers of Cricket - Can it be treated as equivalent to sponsorship of sport or akin to charity - It's charity, claim not allowable: ITAT

THE issues before the Tribunal are - Whether when assessee incures certain expenditure on promotion of Pace Foundation for fast bowlers of cricket, the same can be claimed as advertisement expenses for purpose of tyre-manufacturing business and whether such expenditure is akin to sponsorship of sports or charity. And the verdict goes against the assessee.

Central Excise

Central Excise - Valuation - Sale of paint booth - value of the hot air generator and filter blower supplied separately not required to be included in the assessable : CESTAT

THE appellants are engaged in manufacture of paint booth, on which appropriate duty of Excise stand paid by them. The said Booth is a complete commodity by itself and is actually being marketed by them without generator and filter. As their customers insist on for supply of generator and filter, they procure the same from the market and supply to their customers. The value of such bought out items cannot be included in the assessable value of paint booth and drying cabinet.

Central Excise

Requirement of section 37C of Central Excise Act, 1944 is to be taken as complied with by sending order-in-appeal by speed post at address given by assessee to department: CESTAT

WHEN the Stay application filed by the appellant came up before the CESTAT, the Revenue representative raised a preliminary objection about the maintainability of the appeal inasmuch as it is his contention that the appeal had been filed beyond the time-limit prescribed under the statute.

See our columns tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

Mail your comments to vijaywrite@taxindiaonline.com


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