Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com HRindiaonline.com
 
LOGIN
Forgot Password |  Register
Tuesday , July 29, 2014 | Updated : Jul 29, 15:55 IST
Income Tax    Customs    Excise    Service Tax    FEMA    DGFT    SEZ    Misc    Pitara    Budget   
About Us Contact Us Advertise
Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com
NEWS FLASH
 
PM asks scientists to take lab to field to boost farmers’ income HAL joins hands with Bangalore Business Chamber to set up Skill Development Council for aviation Sector Imports - Trade credits - RBI extends validity of all-in-cost ceiling up to Dec 31, 2014 (See Circular 16 in 'What's New') I-T - Whether amount written off by bank can be straightaway held as income from other sources: ITAT (See '2014-TIOL-482') CBI Court orders 5-yr RI to four Central Excise officers (See 'Mixed Buzz') CST - Whether Form C under CST is required to be issued for transfer of credit in DEPB passbook - YES: HC (See 'Breaking News') Textiles Panel projects USD 300 bn exports by 2025 (See 'Mixed Buzz') TIOL wishes All Netizens Eid Mubarak CX - Rule 6 - Cenvatted Furnace oil used to generate electricity & steam which is supplied to sister concern & HO - Corporate office is situated in registered premises & sister concern is 100% EOU - reversal of CENVAT credit not warranted: CESTAT (See 'Breaking News') Kanika Sands Transshipment Zone to be operationalised within a year: Minister (See 'Mixed Buzz') ST - appellant, an Apex Body of cooperative sugar mills exercises supervisory control over mills and monitors functions and receives 0.3% of sales turnover from each mill - not liable to ST: CESTAT (See '2014-TIOL-1358') SpiceJet flight gets delayed by five hours; DGCA asks airlines to refund full fare to pax CII seeks PM’s intervention in drug price fixing, alleging unilateral action by NPPA Govt imposes provisional anti-dumping duty on PTA, MTA and QTA (See Notification 36 'What's New') Australia Govt okays Adani’s coal mine project Income-tax (7th Amendment) Rules, 2014: Form No.3CA, Form No.3CB and Form No.3CD substituted (See Notification 33 'What's New') Australia Govt okays Adani’s coal mine project Imphal Airport Customs seizes 1.6 kg gold coming from Myanmar; One person arrested ST - Because there was separate contract for supply of transmission towers, it cannot be deduced that Service contract is pure labour contract - it is not merely nomenclature that should be seen - Service Contract is Works Contract: CESTAT (See 'Breaking News') Service Tax - Appeal - Pre-deposit - Pay or Perish? - High Court recalls its own order and remands case to CESTAT – Another Sad Stay Story (See 'DDT' Column)
 
Bookmark and Share
Service Tax - What is Export - Microsoft case goes to Third Member of CESTAT

TIOL-DDT 1733
16.11.2011
Wednesday

IT is a 256 Crore case and the issue is very simple. The wise men at the Board, the learned Commissioners, distinguished lawyers, the agonised assessees and even the Hon'ble Lordships have no real idea as to what constitutes export of services.

Microsoft India (Pvt) Ltd has entered into a “Market Development Agreement” with MO, Singapore under which the former will use its best efforts to further the interest of MO and maximize the markets for Microsoft products in India, Bhutan, Nepal and Maldives. For such service, Microsoft (India) Pvt Ltd will issue invoices in USD on MO Singapore. Microsoft (India) has been treating such income as export of service (under Business Auxiliary Service) and therefore has not paid any service tax on the income received.

It is the case of the Department that the service cannot be considered as export of service. The grounds taken are:

++ The services of marketing of Microsoft products rendered by MSIPL are performed and used in India for furtherance of business of Microsoft, Singapore;

The service tax is a destination based tax and particularly in case of exports, the place of performance of the service is very crucial for deciding whether the service is covered under export of service or not.

The Delhi Service Tax Commissioner confirmed a tax and penalty of Rs. 256 Crores on 23.09.2008. The CESTAT ordered a pre-deposit of Rs. 70 Crores. (2009-TIOL-1325-CESTAT-DEL) On appeal, the Delhi High Court did not find it a fit case for interference. (2009-TIOL-601-HC-DEL-ST)

The Tribunal was to give its final order last week, but now, there is a difference of opinion between the Member (J) and Member (T) and the matter has to be referred to a Third Member.

The Member (J) held that “meaning of export presupposes taking out of India to a place out side India; Article 286 (1) (b) of the Constitution explains what "export" means. Such concept was incorporated into Customs Act, 1962 in term of section 2(18) thereof. The activity of "taking out of India to a place outside India" is recognized test to hold an activity to be export. Activity relating to goods being equal to the activity relating to service, following "Principles of Equivalence", meaning of the term "export" recognized by Constitutional provision and tested by law relating to Central Sales Tax, Customs, Central Excise and Export and Import Policy …… .”

The Member (T) observed, “The word "export" in Article 286 in the Constitution is used with reference to goods. So is the case with definition of "export" in section 2 (18) of the Customs Act, 1962. It will obviously need some dovetailing in the context of export of service which issue has come up only after 1994. It is this dovetailing that is being achieved through Export of Service Rules, 2005 and the criteria laid down in the Rules are neither arbitrary nor inconsistent with any provision in the Constitution. The issue being dealt with in the Rules is that whether taking out of India should be decided with reference to the situs of the property or the situs of the activity or the situs of the person receiving the service. It is difficult to conceive of taking the service and crossing the border

The issue is very simple as explained by the Member (T) as, If a person does market promotion for a manufacturer located outside India for selling the goods in India after its import, the goods will be considered to be imported but the marketing services will be considered to be exported. Why can't we all understand this simple logic?

Anyway, now the matter has to go to the Third Member whose decision will be final as far as Tribunal is concerned.

Tribunal decision was pronounced on 9th November 2011 and we bring you this order today. Please see Breaking News

Please also see:

1. DDT 1181-24.08.2009

2. Export of Service : To deliver or to provide is the question?

3. DDT 1060 - 25.02.2009

4. Service Tax - Money Transfer from abroad - whether Export or Service rendered in India - Matter referred to Third Member: CESTAT

5. ST – Export of Services – Provision of marketing support services on behalf of client outside India not regarded as export of service if said services are consumed by ultimate clients located in India – Microsoft ordered to pre-deposit Rs 70 Crore: CESTAT

6. The 'real' and 'surreal' tax demands besiege Microsoft in India!

7. Microsoft – Export vs import of services – Rs 70 Crores pre-deposit confirmed – Not a fit case to interfere under writ jurisdiction: Delhi HC

Customs - Anti Dumping Duty on CD-Rs - Dead Notification Resurrected

IT has been a long time since we had an opportunity of reporting the legislative alchemy of the CBEC in giving life to lifeless notifications. We were under the wrong impression that Board has put a stop to resurrecting dead notifications. But they are back with this totally illegal manipulation.

By Notification No. 105/2006-Cus dated 6th October 2006, provisional anti dumping duty was imposed on imports of Compact Discs-Recordable (CD-Rs) originating in or exported from China PR, Hong Kong, Singapore and Chinese Taipei. By Notification No. 78/2007–Cus dated 29th June 2007, definitive anti dumping duty was imposed on these products with effect from the date of provisional imposition that is 6th October 2006. AND THIS EXPIRED ON 5TH OCTOBER 2011.

Now the Government has smuggled in an amendment by which the notification is made valid till 3rd October 2012 – more than a month after it expired! When the Board indulges in this kind of fraud, how can it expect the assessees to be perfect and honest?

Notification No. 100/2011-Cus, Dated: November 14, 2011

Customs - Tourist Baggage Rules - Amended

THE Government has amended the Baggage Rules, 1988. As per Appendix E, Sl. No. C of the Baggage Rules, ‘Tourists of Nepalese origin coming from Nepal or of Bhutanese origin coming from Bhutan' were not eligible for any free allowance. Now this item ‘c' is deleted thereby making Nepalese and Bhutanese tourists also eligible for the free allowance.

Notification No. 77/2011-Cus., (NT.), Dated: November 14, 2011

Tariff Value increased for Brass Scrap and decreased for Poppy seeds

GOVERNMENT has increased the tariff values of Brass Scrap (all grades) from USD 3951 to USD 4048 and decreased the tariff value of poppy seeds from USD 2120 to 2117

There is no change in the tariff value of other items.

Notification No. 78/2011-CUS (N.T.), Dated: November 15, 2011

Appeal Pending with Commissioner (Appeals) for more than 33 years

CAN you believe it? An appeal filed before the Commissioner (Appeals) in July 1978 is still pending. In the Stay Order, the appellant was asked to submit a bank guarantee. For 31 years, with or without any official reminders, the appellant was getting the validity of the bank guarantee extended. In 2009, the Central Excise Department encashed the Bank Guarantee. But what about the appeal? The appeal was and is still pending. Why? One reason could be that the files are missing as the jurisdiction of the Commissioner (Appeals) got changed frequently. And the appellant's counsel died and his office got burnt.

The appellant approached the High Court. “What is that a Court of judicial review can do in such a situation?”, asks the High Court observing, “ It is not very often we are called upon to adjudicate a rare case of this nature”.

We bring you this case today.

Jurisprudentiol – Thursday's cases

Legal Corner IconCentral Excise

Common registration for three units - Commissioner was not justified in retrospectively revoking common registration given by Assistant Commissioner: CESTAT

SHOW cause notices were issued alleging that the facility of common central excise registration was not available to them inter alia on the ground that unit I is geographically at a distance of about 1.5 km from Units No.II and III, unit No.II & III are separated by another unit, unit II and III are not interlinked since the final goods manufactured in one unit are not inputs/intermediate products for the other unit. Demands were proposed in respect of clearances of goods from unit I to unit II & III and the clearances made from unit II to unit III holding that exemption under Notification No.6/02-CE dt.1.3.02 (S.No.296) and later under Notification No.6/06-CE 1.3.06 (S.No.92) were not available for the clearances of goods not used within the same factory of production.

Income Tax

Whether when warehouse is necessary part of infrastructure required for CFS to be operational, it is to be treated as different from stand-alone warehoue facility and thus Sec 80IA benefits are available to such facility - YES, rules ITAT

AO observed that the assessee company carried on two activities, namely, operating a ‘Container Freight Station' and ‘Operating a bonded warehouse'. Commissioner of Customs Madras declared the premises of the assessee as ‘Customs Area' and appointed the assessee as custodians for cargo at ‘Container Freight Station'. While both the ‘Container Freight Station' and bonded warehouse are infrastructural facilities, only a ‘Container Freight Station' had been notified to be an infrastructural facility for the purposes of section 80IA(4)(i). AO further observed that the assessee itself had not carried out the activity of renting the warehouse but let out the warehouses and rental income was derived from warehousing.

Service

Grant of temporary status for daily wage labourers and casual labourers in central excise and customs department - CAT did not check whether it was really necessary for labourers to satisfy conditions required for granting temporary status: HC

IMPUGNED order of the Tribunal is set aside. Entire matter is remanded back to Tribunal for fresh consideration in accordance with law. All contentions urged are left open to be urged before the Tribunal. Parties to bear their own costs. Tribunal shall take up this matter expeditiously, as sufficient and valuable time has been spent prosecuting the matter before this Court. Till those contentious issues are decided by the Tribunal, if the respondents are in service as on today, their services shall not be dispensed with.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

Mail your comments to vijaywrite@taxindiaonline.com

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Mountain out of molehill

Relevant portion of Article 286 in The Constitution Of India reads as follows-
286. Restrictions as to imposition of tax on the sale or purchase of goods
(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India
(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause ( 1 )
Export of Service Rules, 2005 reads as follows- Sec 3. Export of taxable service–
(1) …………………
(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:-
(a) such service is provided from India and used outside India; and
(b) payment for such service [x x x] 3 is received by the service provider in convertible foreign exchange.
It clearly appears that the criteria laid down in the Rules are neither arbitrary nor inconsistent with any provision in the Constitution. As such the said provisions of constitution are mentioning only goods not the services. If the exports of service rules are taken as violative in view that services are not mentioned in constitution then whole service tax statute will also become violative. Perhaps that view is nothing but a mountain out of molehill.


Posted by A N
 
 
 
TIOL SEARCH
 
TIOL Mobile App
TIOL Subscriptions
 All-In-One Package
 Indirect Tax Package
 Income Tax Package
<< More Packages>>
 
   
             
Income Tax Customs Excise Service Tax FEMA DGFT SEZ Misc Pitara Budget
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • ITAT Cases
  • Instructions
  • Advance Ruling
  • Settlement
  • Other Case
  • Directorate of Income Tax (Systems)
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Safeguard Duty Notfn
  • Anti-dumping Notfn
  • Drawback Cases
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Excise Amendment
  • Clean Energy Cess Notfn
  • MISC Circulars
  • 37B Order
  • Commr.(A) Order
  • CESTAT
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Miscellaneous
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • 37B Order
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • RBI Circulars
  • Notifications
  • Circulars
  • Public Notices
  • Trade Notice
  • FTDR Amendment 2010
  • MISC
  • State Acts
  • Notifications
  • Instructions
  • Act 2005
  • Rules 2006
  • DGEP
  • State Policy
  • SC Cases
  • HC Cases
  • VAT Cases
  • Deputation Posts
  • Service News
  • The Insider
  • Transfer
  • Promotion
  • Recruitment Rules
  • Transfer Policy
  • Training Circulars
  • Service Cases
  • MISC
  • Pay Commission
  • Cadre Review
  • Budget Circular 2013-14
  • Union Budgets
  • Economic Surveys
  • Budget Speeches
  • Finance Acts
  • Finance Bill
  • TRU - D. O. Letter
  • A Taxindiaonline Website. Copyright © 2014 Taxindiaonline.com Pvt.Ltd. All rights reserved. | Powered by 4th Dimension