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Former IPS officer Sanjiv Bhatt jailed for 20 yrs for planing drugs to frame lawyerCentre receives Rs 18.5 lakh crore tax revenue upto Feb monthUN says Households waste across world is now at least one billion meals a dayExpert Committee on developing GIFT IFSC as 'Global Finance and Accounting Hub' submits report to IFSCAIndia, China hold fresh dialogue for complete disengagement on Western borders: MEADefence Production issues notification for re-organisation of DGQAThakur says India is prepared for 2036 OlympicsCBDT substitutes Form in ITR-5EV Revolution: Lessons for India to learn from US and China!London court green-signals auction of luxury apartment of fugitive Nirav ModiGovt consults RBI; finalises borrowing plan for first half of FY 2024-25Gadkari says Farmers’ protest is politically-motivatedVP calls upon women entrepreneurs to be 'Vocal for Local'America offers USD 10 mn bounty for information on ‘Blackcat’ hackers after UnitedHealth gets hitI-T- The order of the ITSC can only be reopened in cases of fraud or misrepresentation: HC8 persons including Hezbollah militants killed in Israeli strike on LebanonMacron pillories EU-South Africa trade deal; calls it ‘really bad’ in BrazilThailand’s Lower House okays Bill to legitimise same-sex marriageYellen warns China against clean energy dumpingMilky Way’s central black hole - Twisted magnetic field observedCus - Assessee has not proved beyond reasonable doubt that goods in question imported under air way bills/bills of entry were in fact filed by him and hence the only natural corollary available to Revenue is confiscation of same: CESTATSmall investors help Trump Media’s valuation skyrocket to USD 13 billionJustice Ritu Raj Awasthi joins as Judicial member of Lokpal
 
Reforms in Reporting Service - CBEC scraps 15 reports for its offices - why not extend it to the assessees too?

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2456
15.10.2014
Wednesday

IT is said that until recently, a report used to be sent by a Commissionerate to the Board/Ministry on the amount of duty foregone on the tobacco sent to England for making Cigars for the Prime Minister Winston Churchill!

Now the Board has decided to do away with fifteen reports it regularly receives from the field formations. A great contribution to the lofty aim of saving paper and reducing useless work!

There are several returns the assessees have to furnish which are totally useless and which nobody ever sees. Why can't the Board scrap some of them?

CBEC Instructions in F.No.354/156/2014-TRU, Dated: October 10, 2014

Service Tax on Foreign Remittance - CBEC U-turn?

TWO years ago there was a lot of commotion in India and abroad on the Government's alleged proposal to charge Service Tax on foreign remittance. Even Shashi Tharoor wrote to the Prime Minister urging him not to levy the tax and the Kerala Chief Minister was assured by the then Prime Minister Manmohan Singh that there was no such proposal. Amidst all that international confusion, CBEC issued Circular No. 163/14/2012-ST, clarifying that:

1. There is no service tax per se on the amount of foreign currency remitted to India from overseas.

2. In the negative list regime, ‘service' has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money.

3. As the amount of remittance comprises money, the activity does not comprise a ‘service' and thus not subjected to service tax.

4. In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India. In terms of the Place of Provision of Services Rules, 2012, such services are deemed to be provided outside India and thus not liable to service tax.

5. Even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India, in terms of Rule 3 of the Place of Provision of Services Rules, 2012.

Now, CBEC has superseded this Circular and clarifies that:

1. No service tax is payable per se on the amount of foreign currency remitted to India from overseas. As the remittance comprises money, it does not in itself constitute any service in terms of the definition of‘service' as contained in clause (44) of section 65B of the Finance Act 1994.

2. The Indian bank or other entity acting as an agent to MTSO (money transfer service operator) in relation to money transfer, facilitates in the delivery of the remittance to the beneficiary in India. The agent falls in the category of intermediary as defined in rule 2(f) of the Place of Provision of Service Rules, 2012.

3. Service provided by an intermediary is covered by rule 9 (c) of the Place of Provision of Service Rules, 2012. As per this rule, the place of provision of service is the location of service provider. Hence, service provided by an agent, located in India (in taxable territory), to MTSO is liable to service tax.

4. Service Tax would apply on the amount charged separately, if any, by the Indian bank/entity/agent/sub-agent from the person who receives remittance in the taxable territory, for the service provided by such Indian bank/entity/agent/sub-agent.

5. Sub-agents also fall in the category of intermediary. Therefore, service tax is payable on commission received by sub-agents from Indian bank/entity.

This issue was decided by the Tribunal by a majority decision in the Paul Merchants Ltd case - 2012-TIOL-1877-CESTAT-DEL.

Paul Merchants Ltd (PML) was an agent for Western Union to transfer money from abroad to India.And the Tribunal by majority held that this activity amounted to export and so there was no liability to pay Service Tax. Of course, this case pertained to the period prior to 1.7.2012, but the Tribunal had observed, "the recently framed Place of Provision of Services Rules, 2012, replacing to Export of Service Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, though differently worded and introducing further refinements in laying down the criteria for determining the place of provision of service (which in terms of Rule 3 is the place of recipient i.e. the place of consumption) follow the same principles as those behind the Export of Service Rules, 2005 and Service Import Rules."

So, the same logic is applicable even after 1.7.2012.

But suddenly, out of the blue, the Board has come up with the clarification that these are taxable activities.

This is sure to lead to a lot of agitation and litigation, especially in States like Kerala and Punjab where there are thousands of poor people getting foreign remittance from their relatives who do menial jobs in many foreign countries and even those poor people are not left out of the Service Tax net. This will certainly have political repercussions, with hardly any economic benefits.

CBEC Circular No. 180/06/2014-ST, Dated: October 14, 2014

Negative Growth in CE Revenue - 13% growth in ST

CBEC's Revenue collection for the first six months of the year stood at Rs. 2,41,811 crore, which is less than 40% of the Budget Estimate. Service Tax accounted for 77,000 Crores while Excise brought in 75,000 crores and surprisingly Customs was ahead with 89,000 crores.

Company Law - Clarification on Trust/Trustee as a partner in LLP

CLARIFICATIONS have been sought on whether a trust or a trustee representing a trust in the case of "Real Estate Investment Trust" (REIT) or "Infrastructure Investment Trust" (lnvITs) or such other Trusts set up under the regulations prescribed under the Securities & Exchange Board of India Act, 1992, can become a partner in an LLP.

The Ministry of Corporate Affairs clarifies that: that for the purposes of these trusts it is not barred for a trustee, being a body corporate, to hold partnership in an LLP in its name without the addition of the statement that it is a trustee.

MoCA General Circular No. 37/2014, Dated: October 14, 2014

Reorganisation of CBEC Field offices - Confusion starts TODAY

CBEC seems to have decided to go ahead with its massive overhaul of field offices with effect from today. Spend the next few days searching for your Central Excise/Service Tax offices, their addresses and the officers.

The Department hardly has any Inspector now - all the inspectors have become superintendents and all the superintendents remain there. You can't move around in Central Excise offices without dashing into a few superintendents.

Nearly 200 Commissioner level offices have been created without a single officer for them. Yesterday the Board issued a jurisdiction order for 247 Commissioners most of whom will hold additional charge of about 200 offices. And strange things happen - the Bhopal Appellate Commissioner will work from Raipur and hold additional charge of Bhubaneswar. ADG NACEN, Kanpur will have additional charge of Kolkata and Shillong.

At least 200 Additional Commissioners should get promotion to fill these posts, but Board is not able to promote a few Superintendents. But they have created all these offices to confuse the assessees. Why this hurry? Why can't this be done in a more organised way?

CBEC Office Order no. 189/2014, Dated: October 14, 2014

India Loses in WTO - US Chicks on their way?

India Loses in WTO - US Chicks on their way? THE WTO yesterday held that India's ban on products such as poultry meat, eggs and live pigs violated several global trade laws because they were imposed without sufficient scientific evidence that the products risked spreading avian flu.

By a Notification dated 19.07.2011, India had prohibited imports from the countries reporting Notifiable Avian Influenza (both Highly Pathogenic Notifiable Avian Influenza and Low Pathogenic Notifiable Avian Influenza), certain livestock products like domestic and wild birds (including poultry and captive birds);day old chicks, ducks, turkeys, and other newly hatched avian species etc.,

The American Press went overboard with the news with the US Trade Representative proclaiming that the WTO panel agreed with the U.S. case that India lacks any scientific basis to restrict U.S. agricultural products, including U.S. poultry products.

His website proudly claimed with the above picture, This victory affirms the Administration's commitment to ensuring WTO Members play by the rules, and that America's farmers, workers and businesses get the fair shot they deserve to sell Made-in-America goods under WTO rules.

India can appeal against this decision.

Jurisprudentiol - Thursday's cases

Legal Corner IconCentral Excise

CENVAT - Segregating defective Inputs and valuing them at lower rate for purpose of stock valuation is not equivalent to writing off value of inputs in books of account - no cause for reversal of credit: CESTAT

THE appellant is a manufacturer of automobile components and availed CENVAT credit. On receipt of inputs, the defective ones are segregated and returned to the suppliers but some inputs which have been issued for processing are rejected in machining process.

The appellant was asked to show cause as to why under the provisions of Rule 3(5B) of CCR, 2004 they should not reverse the CENVAT credit availed on such process rejection.

Income Tax

Whether if it is found that assessee has made purchases at abnormally high prices from a party that is not traceable, Revenue will have all legitimacy to reject books and tax gross profit on estimate basis - YES: ITAT

ASSESSEE is a registered firm engaged in the business as a wholesale dealer in Iron and Steel. During the course of assessment proceedings the AO observed that as against gross turnover of Rs. 44.89 crores the assessee had declared gross profit of Rs. 1.31 crores only which worked out to 2.93%. Since the gross profit disclosed by the assessee was very low, the AO made enquiries to ascertain the genuineness of claim of purchases. From the addresses of all the suppliers given by the assessee, the AO called for information u/s 133(6) from 34 suppliers.

THE issue before the Bench is - Whether if it is found that the assessee has made purchases at abnormally high prices from a party that is not traceable, the Revenue will have all the legitimacy to reject the books and tax the gross profit on estimate basis. And the verdict goes against the assessee.

Service Tax

ST - If laying of cables cannot be taxable service, adopting the same logic, laying of pipeline also cannot be construed as taxable service - Demand of Rs.7.62 crores set aside by CESTAT

THE appellant undertook manufacture and supply of pipes to Maharashtra Jeevan Pradhikaran and as per the contract apart from the supply of pipes they were also required to undertake the activity of laying, connecting, jointing pipeline for water supply projects till the stage of testing and commissioning of raw and pure water by pumping machinery.

It is the view of the department that the said activity is classifiable under “erection, installation and commissioning service"and accordingly a SCN was issued demanding Service Tax of Rs.7,62,26,657/- on the total contract value of Rs.75,36,01,409/- received by the appellants during the period from 2003-2004 to 2006-2007.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@tiol.in


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: restructuring

You are seeking postponement of restructuring all along. It is already delayed. Even with the snail's pace let it continue. Not everyone a Zutshi who did restructuring at a faster pace in 2002 on a 6-month extension from the Government after his regular retirement.

Posted by Napolean B
 
Sub: restructuring

Chaos has been created in the Department. And for such management of the Department the senior officers are going to be rewarded with promotions! In any other private firm the team would have sent packing for this kind of performance.

Posted by chandrasekaran KRISHNAMOORTHY
 
Sub: Eventless opening of new formations

Ref: TIOL-DDT 2456 dated 15-10-2014. The new formations have come into force with effect from 15-10-2014 on paper as a result of Cadre Restructuring. However, the Department has not been able to notify the postal addresses, telephone numbers, fax numbers and e-mail addresses of the newly created Commissionerates, Divisions and Ranges. The Department has neither issued any press release nor done any press briefing. The services of PIB or davp have not been utilized in this matter. There is no celebration on the occasion of opening of the new formations because the same have come up on paper only.
**Pankaj Jaroli


Posted by pankaj jaroli
 
Sub: One more returns to keep assessees busy

Forget doing away with useless returns. New Section 15A of the CE Act has introduced a new mammoth return, rather multiple returns to be filed not only by the assessees, but also by others who are not assessees. As Parkinson said, with bureaucracy work expands to fill time. While the PM wants others to make products in India, CBEC wants Indians to make more returns, which will not anyway be seen by anyone.

Posted by Gururaj B N
 
Sub: Service Tax on Foreign Remittance CBEC U-turn

The clarification issued by the Board from time to time seeks to further complicate the issue of service tax on the foreign remittance received in India from abroad. It is submitted that the in a transaction of foreign remittance, both foreign bank and Indian bank collects certain service charges. The moot question is regarding the leviability of service tax on such charges. It is submitted that the said services are classifiable under banking and financial services and are governed by Rule 9 of the Place of Provision of Service Rules, 2012. Accordingly, the place of provision of service will be the location of the service provider. Therefore, no service tax will be leviable on the charges collected by foreign bank but service tax is leviable on the charges collected by the Indian Bank from either the beneficiary in India or from the foreign bank. The situation is clear but unnecessary complexities have been added into it. Even the old circular wrongly applies Rule 3 of the Place of Provision of Service Rules, 2012 in case when Indian bank collects charges from the foreign bank because when there is Rule 9, the same would apply being specific and appearing later in the Rules. It is also being reported that almost all the exporters are being issued letters regarding payment of service tax on commission paid to foreign agents, foreign banks etc. without even appreciating the provisions prevalent in this regard. It is hoped that the statutory provisions are correctly interpreted by the demand issuing authorities so that unnecessary litigation is avoided.

CA PRADEEP JAIN


Posted by Pradeep Jain Jain
 

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