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Service Tax - BAS - Processing of Agricultural Produce - CBEC Clarification

TIOL-DDT 1617
27.05.2011
Friday

AS per Notification No. 14/2004-ST dated 10.09.2004,

Taxable service provided to a client by any person in relation to the business auxiliary service , in so far as it relates to,-

++ procurement of goods or services, which are inputs for the client;

++ production or processing of goods for, or on behalf of, the client;

++ provision of service on behalf of the client; or

++ a service incidental or auxiliary to any activity specified in (a) to (c) above,

and provided in relation to agriculture , printing, textile processing or education, from the whole of service tax leviable thereon under section 66 of the said Finance Act:

is exempted.

Board has received a representation that field formations are not considering processing of tobacco involving threshing and drying of tobacco leaves and client processing of raw cashew involving roasting/drying, shelling and peeling of raw cashew, as in relation to agriculture.

Now the Board clarifies:-

Client processing which falls under business auxiliary service undertaken on the primary agricultural produce namely tobacco or raw cashew, does not result in any change in their essential character of tobacco or cashew.

In the light of the above principle

(i) process of threshing and drying of tobacco leaves and thereafter packing the same and

(ii) processing of raw cashew and recovering kernel ,

undertaken for, or on behalf of, the clients by processing units are covered by the expression “... processing of goods for, or on behalf of, the client.....and provided in relation to agriculture,...” appearing in the said notification.

Board further clarifies that:-

where the commission agents stationed abroad provide business auxiliary service to promote the export of rice, said business auxiliary service is covered by notification 13/2003-ST(as amended) because, the word ‘rice' is mentioned under the explanation to the term ‘agricultural produce', in the inclusive portion along with other items like cereals, pulses, etc.

Notification No. 13/2003-Service Tax exempts,

the business auxiliary services provided by a commission agent in relation to sale or purchase of agricultural produce from the service tax leviable thereon under section 66 of the said Act.

Explanation .

(ii) “agricultural produce” means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice , coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco.”

CBEC Circular No. 143/12/2011 - ST., Dated: May 26, 2011

Import of Apparel from Bangladesh - Customs Exemption - Quantity Increased

AS per Notification No. 51/2008, certain goods of the origin of Bangladesh are exempted from Customs Duty. This exemption, in respect of articles of apparel and clothing accessories, shall apply to a quantity of imports not exceeding 8 Million pieces in a Calendar year. Now this quantity of 8 Million pieces is increased to 10 Million pieces

Notification No. 42/2011-Cus., Dated: May 25, 2011

CBEC Cadre Restructure Cleared by Expenditure - More than 3000 New ACs

MAYBE the first issue that the CBEC Chairman took up immediately after his return from a foreign trip, was the much awaited (by officers) cadre review. He successfully got it cleared by the Expenditure Department and now the file will go the FM, DOPT and Cabinet. As Expenditure had approved the scheme, the other approvals will be a mere formality, which hopefully should not take a long time.

As per the proposal, the Chairman and Members of CBEC will no more be ex-cadre posts; they will be in-cadre! This should dispel any apprehension about any take-over of the Board by the IAS.

There will be 23 new posts of Principal Chief Commissioner in the HAG+ scale. There will be 72 Chief Commissioners compared to the existing 43. The strength of Commissioners is to be increased to 465 from the existing 295. There are 593 Additional Commissioner/Joint Commissioner posts which will swell to 1026.

At present there are 1550 Assistant Commissioner/Deputy Commissioner posts and this strength will go up to 4896 bringing in 3346. There is going to be 100 percent increase in the strength of Sr. PS, LDC, Drivers and Sepoy. The strength of the Head Havildar is to be increased to 4117 from 2139.

It's raining posts in CBEC - maybe the cadres will now be happy or are they still going to be frustrated?

FTP - Export of Gaur Gum to EU - Restriction withdrawn

BY Notification No. 47 (RE-2010)/2009-2014 of 18.05.2011, DGFT had stipulated that export of Gaur gum to European Union, would be allowed only if it was certified that the product does not contain Penta Chlorophenol (PCP) in any proportion on sampling done by the authorized representative of the competent authority.

Now the Notification No. 47 dated 18.05.2011, is rescinded with immediate effect. Thus, the earlier stipulation of Notification No. 50 of 06.07.2010 of allowing presence of upto 0.01 mg/Kg. of Penta Chlorophenol (PCP) in the consignments of Guar gum when exported to EU will continue to be valid.

Why had the notification to be withdrawn within 8 days of its issue?

Notification No. 49 (RE - 2010)/2009-2014, Dated: May 26, 2011

Water Pipes - Last Mile - Is it a proverb or a mathematical term used by Board to explain rationale of notification 6/2006-CE?

WE received this mail from a netizen -

I came across this sentence in the recent Board Circular 945/6/2011-CX , Dated: May 16, 2011 - “Thus, pipes which are used at the last mile to provide the consumer connection whose cost is either paid by the consumer or recovered from him do not form part of the project and will not be eligible for the exemption.

While reporting this Circular in the DDT-1611 issue, the author has questioned as to whether the best brains of the country needed to be wasted (vested) with such powers.

I for one was bedazzled not with the denial of the ‘micro' benefits which is always the norm adopted by the bureaucratic fiefdom but about the usage of the term “at the last mile”.

The Wikipedia describes the term ‘the last mile' thus -

++ The "last mile" or "last kilometer " is the final leg of delivering connectivity from a communications provider to a customer. The phrase is therefore often used by the telecommunications and cable television industries. Because the last mile of a network to the user is also the first mile from the user to the world in regards to sending data (such as uploading), the term " first mile " is sometimes used.

The Dictionary meaning of the term ‘last mile' is as under -

++ LAST MILE (noun): the last walk of a condemned person to the execution place

Since I felt that none of these descriptions best described the term “the last mile” referred to in the Board Circular dated 16 th May, 2011, I thought it would be prudent to interpret this ‘expression' in mathematical terms.

Suppose the length of the pipe used to supply water from the distribution network to the consumer is 10 miles (16 kms). Adopting the literal meaning of the term “the last mile” which benefit is sought to be denied by the Board, the length of the pipe for which the benefit of the notification 6/2006-CE would be available would be 10 minus 1 and which equals nine miles.

So, after all, it is "only one mile" for which the Board does not want any benefit of exemption to be extended.

DDT should in fact be grateful to these best brains for drafting this beneficial Circular.

Jurisprudentiol - Monday's cases

Legal Corner IconCentral Excise

Valuation - Merely because some of partners in partnership firm and some of Directors of public limited company are relatives, it cannot be alleged that partnership firm and public limited company are related u/s 4(3)(b) of the CEA, 1944 - CESTAT

RELATIONSHIP as defined in the Companies Act read with Central Excise Act applies to natural persons and not to impersonal bodies like corporations: MORE often than not when a Revenue formation trumpets about they having unearthed a massive ‘related-person-undervaluation' case or for that matter a ‘clubbing case', after the initial euphoria dies down, the case too dies a slow death at the hands of the Appellate Tribunal or in the higher forum. Simply because the Revenue had half-read the provisions of the Central Excise Act and was more than eager to jump to a conclusion in its favour. You cannot blame them too for the primary reason is that the Valuation sections in the Central Excise Act have never been read and understood in the manner they were meant to be.

Income Tax

Whether when assessee offers 'discount' to distributors of SIM cards and Recharge coupons under pre-paid service against advance received from them, such discount is to be construed as commission, liable to tax deduction at source u/s 194H - YES: ITAT

THE assessee company is engaged in the business of Cellular Mobile Phone Services in India. This Company with its Principal Office situated at Coimbatore, carried on the business of dealing with the branded products of the Company viz. mainly Starter Packs and Rechargeable coupons viz. SIM Cards and Prepaid coupons. The issue before the Tribunal is - Whether when assessee offers 'discount' to its distributors on SIM cards and Recharge coupons under pre-paid telecom service scheme against the advance received from them, it is to be construed as Commission, and thus, liable to TDS u/s 194H. And the verdict goes against the assessee.

Customs

A benefit denied to appellant by Government cannot be granted by Tribunal in equity or otherwise: CESTAT

CONSIGNMENT of raw materials such as polyurethane, SBR rubber granules, adhesives etc. required for processing and producing an athletic track is classifiable under CTH 40.05 and not 9506.00 and is not entitled for exemption under notification 109/94-Cus or 146/94-Cus

See our columns Monday for the judgements

Until Monday with more DDT

Have a Nice Weekend.

Mail your comments to vijaywrite@taxindiaonline.com

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Water pipes - last mile - DDT

Good work by the netizen.

Probably the Board is on its "LAST MILE".

Hopefully, the Board is reading this DDT snippet and would certainly rectify its gaffe at the earliest - at least before the coloured Cadre Restructuring balloons start waving in the breeze!

Posted by sachin deshmukh
 
 
 
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