TIOL-DDT 2733
27 11 2015
Friday

IT has come to the notice of the Board that certain field formations have taken a view that all activities incidental to seed testing are leviable to service tax and only the activity in so far it relates to actual testing has been exempted in the Negative List.

After elaborate interpretation of the words in the Statute, Board clarifies that:

All testing and ancillary activities to testing such as seed certification, technical inspection, technical testing,analysis, tagging of seeds, rendered during testing of seeds, are covered within the meaning of testing as mentioned in sub-clause (i) of clause (d) of section 66D of the Finance Act, 1994.

Therefore, such services are not liable to Service Tax under section 66B of the Finance Act, 1994.

Circular   No.189 /8/2015-Service Tax., Dated: November 26 2015

Regional Advisory Committee (RAC) Decisions

SOME more decisions from the RAC meeting of Pune Central Excise Zone

Service Tax -Canteen Service - Company pays the whole amount and Service Tax to the canteen operator and later recovers 20% from employees - What is Service Tax liability?:

A factory provides the canteen facility to its employees. The factory pays to the canteen contractor the whole price including Service Tax. The factory later recovers 20% of the cost from its employees. Is Service Tax payable on this 20%?

To illustrate:

1. Amount paid to the contractor = 114 (100+14 Service Tax)

2. Amount recovered from employees = 22.80 (20% of 114)

In a recent meeting of the Regional Advisory Committee of Pune Zone, an assessee raised this ISSUE:

Where the canteen services are availed by a factory registered under Factory Act, the service tax is charged by the service provider under his invoice, which is paid by the Company. The expenses towards this service are shared by company and employee 80% by company and rest 20% by employee. However, on receipt of service provider's bill on which service tax is paid, the company pays 100% amount to the service provider and later on recover 20% from employee. In other words, it a sharing of expenses on which ST is paid . If this 20% amount is levied to service tax again, it will amount to payment of service tax at two stages. This not the intension of the Legislature.

Reply: The Department replied, "The business entity places order with the service provider to fulfill their own obligations of providing facilities to the employees, whether under any legal provisions or as courtesy or under some specific understanding with employees or their associations/ unions. Therefore, the business entities are required to bear the tax burden as charged by the service providers in the instant scenario. Further, if the business entity is recovering some amount from the employees towards provision of such services, then the business entity is actually providing such services to the employees. Therefore, service tax, if otherwise applicable, needs to be discharged by the business entity in terms of the provisions of Section 65B(44) of Finance Act, 1994.”

Service Tax - Can't a new cheque be issued in place of a lapsed cheque?:

Question: Company is an SEZ unit engaged in the business of providing Information Technology Software Services (ITSS). The Company claimed refund of unutilised CENVAT Credit on input services, for the period April 2012 to December 2012, under Notification no. 12/2013-ST.

The Service Tax Authorities sanctioned the refund. However, the refund cheques could not be deposited in the bank account of the Company due to change in the directors. In the meantime, the cheques expired.

Now, for more than a year, we are in constant follow up with the Service Tax Authorities for re-issue of time barred cheques. However, the said request is still pending.

Reply: In such cases, normal business practices can be followed. The authority who had issued the cheque in the first place can be approached for re-validation / re-issue of the cheque. Specific instances may be brought to the notice of jurisdictional Commissioner.

Scope of RAC Meetings:

An assessee raised issues pointed out by Audit. The Department observed;

All the issues queried above are those which have been raised by the Audit officers during the course of audit of the records of the assessee. RAC is not the appropriate forum to discuss and deliberate on the observations raised by Audit. This is a forum for taking up procedural matters which are causing inconvenience to public at large and not any individual organization or entity.

The observations raised by Audit are discussed in the MCM, which itself is another forum, before finalizing the Audit objections. The objections, if vetted by MCM will culminate into a Show Cause Notice, which will further undergo quasi-judicial proceedings. The appropriate procedure, in the event of issue of SCN would be to discuss the merits and demerits of the case before adjudicating authority.

Then, why can't they allow the assessees to be present in the MCM?

Nothing Illegal in Small Favours to Babus/ gifted journalists

"A senior official in Bastar wants an Innova to visit a temple in Gwalior from Delhi. If possible, please try to meet him in Delhi. According to sources, he may become Industry secretary.”

This is an internal email of a big corporate house.

Arranging a vehicle and a guest-house/hotel for a bureaucrat, accepting a recommendation for a job from a politician, making small presents to journalists, are all common activities for any major corporate house including PSUs. There are major PSUs arranging more than a hundred cars for various VIPs, every day in Delhi. We have thousands of gifted journalists, babus and Netas, who would not bat an eyelid for availing such services.

A major Corporate House told the Supreme Court yesterday that these are "common courtesies extended by corporate houses”. The Company says that there is no wrongdoing in giving gifts to people in public life or in the civil service since there has been no attempt to obtain undue favour. The PIL in the Supreme Court alleged an unholy nexus between the corporate with politicians, bureaucrats and journalists to promote its business interests.

Not only Corporate Houses, even Commissionerates have "protocol cells” to look after the comforts of visiting dignitaries, often at huge costs.

DDT 2414 - 11.08.2014 reported, "Officers should be careful while availing this kind of hospitality, for the CBI might be after them. Even assessees must be careful while extending the hospitality, for the CBI might be after them too..”

We reported an interesting case where the CBI had booked a case against a Chief Commissioner for availing the hospitality from an assessee by staying in the Sheraton Hotel, Delhi and getting a car booked by an assessee. The assessee was also booked. However, both the assessee and the officer were acquitted by the trial court as the prosecution failed to prove the case beyond reasonable doubt. But they had to go through the ordeal of a CBI investigation and a court case for about four years!

GST can be India's Brahmastra

"GST can be a "Brahmastra” for the Indian economy against a very difficult global economic scenario, affected by demand slowdown, uncertain geo-political situation after the Paris terror attacks, and an unprecedented crash in vital commodities.”, says the new President of Assocham, Sunil Kanoria. He believes that GST will harmonise indirect taxes by doing away with multiplicity of taxes. It will also reduce cost of production, which will be then passed on to consumers, thus lowering inflation. More striking would be the display of a political unity and the will to rise up to national cause. That will be a great positive for revival of investment, both domestic and international, something most needed at this point of difficult international times.

Everybody seems to be eagerly waiting for the GST without realizing the demon lurking in the dark.

CENVAT Credit and Swachh Bharat Cess - Writ filed

IT is learnt that a writ has been filed in the Delhi High Court challenging the validity of the FAQ issued by the Board on Swachh Bharat Cess. The FAQ stating that CENVAT credit will not be given is challenged on the ground that the FAQ is contrary to the provisions of the Finance Act, 2015.

It seems the High Court has given notice to the Government and stayed coercive action.

Until Monday with more DDT

Have a nice weekend.

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