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E payment of Service Tax mandatory

22 09 2006

Please see TIOL-DDT 431 21 08 2006 – “Service Tax – mandatory payment of Service Tax for major assessees – Board keeps it a top secret” where we questioned, If the Board wants to make e-payment mandatory, why can’t it issue a notification publicly instead of making the DGST write DO letters? Or is the DGST an independent authority that it decides for the Board?

Board has now issued the notification. The Notification stipulates that the assessee, who has paid service tax of rupees fifty lakh or above in the preceding financial year or has already paid service tax of rupees fifty lakh in the current financial year, shall deposit the service tax liable to be paid by him electronically, through internet banking.

The notification is out, but where is the procedure? How to go about it? Immediately after TIOL published the notification, I was bombarded with phone calls from worried assessees anxious about the procedure. I didn’t know whether to be proud or sad when an assessee told me that when he called up his Service Tax Superintendent to find out how to make e payment, the officer told him to contact Taxindiaonline.  Yet another assessee told me that a Joint Commissioner whom he called up wanted him to visit his office to get the details. “How can I give it on phone, man?”, the Joint Commissioner is said to have told the assessee. “If I can pay the tax online, why can’t I get the information on line?”, wondered the assessee. A representative of a very popular TV channel (which is a sort of a super cop catching corrupt government officers) told me that he also called up a senior officer who asked him to come to the office to get the information. Yet another assessee told me that an officer told him, “we held a seminar, why didn’t you attend it?”. This poor assessee was not aware of the seminar!

E-payment is really comfortable and convenient, but should it be done with such undue haste? Why can’t the government give a little time for the system to be understood? Now the next payment is to be made latest by 5th of October. Now to make the electronic payment, the assessee has to open an account with the designated bank, get money deposited there and get a username and password. All this will take at least 15 days. How then are they going to fulfill the requirement of e-payment by October 5th? Should the Board go out of the way to complicate matters? And what should be done when the computer of the assessee or the bank does not work or the net is down or the site is not available for maintenance? Is there an alternate mechanism? Nobody seems to have thought over these problems. 

Anything to do with computers, the department had always managed to put the cart before the horse. In the early nineties when the department wanted to go for a massive computerization, first the air conditioners arrived and not knowing where to put them, the senior officers grudgingly allowed them to be installed in their rooms. Then the computer tables and chairs arrived. Nobody knew where to put them. Then again the senior officers grudgingly agreed to use them as lunch tables in their rooms. Then the computers arrived and there were neither rooms nor tables to put them in or on. Then a stage came when a computer was considered a good piece of decoration in the room. But using a computer? Ask your steno to do it!

Notification No. 27/2006-Service Tax dated the 21st September 2006

Click here for the procedure and the list of banks.

Agricultural tractors – no duty

Some field formations are trying to charge excise duty on agricultural tractors on the ground that besides agricultural work, these tractors are used for haulage of farm products, fertilizers, etc. thereby qualifying as “road tractors for semi-trailers”. “Road tractors for semi-trailers” attract Central Excise duty at the rate of 16%, if the engine capacity is more than 1800 cc.

Board has noticed that Tractors falling under Chapter heading 8701 were exempted from excise duty in Budget 2004-05 with the intention to give exemption to agricultural tractors, in order to encourage farm sector. Further a tractor meant primarily for agriculture purposes can also be incidentally used to take goods to nearby markets. But that is an incidental use, and such tractors are not primarily designed to haul trailers. Therefore, incidental use of hauling trailers will not put such tractors in dutiable category. Therefore primary use of tractor should be the deciding factor.

Board proposes to issue a circular on the above lines.

Draft Circular

Parts of Tractors – exemption for captive consumption

The question is whether parts falling under Chapters other than 87, when used within the factory of production for manufacture of goods of heading 8701 are eligible for the exemption under Notification No. 6/2002-CE dated 1.3.2002 (Sr. No. 296) and Notification No. 6/2006-CE dated 1.3.2006(Sr. No. 92).

Where is the doubt? The Board wants to say, but not before going through the Section Note 2(e) of Section XVII which excludes

(e) machines or apparatus of headings 8401 to 8479, or parts thereof; articles of heading 8481 or 8482 or, provided they constitute integral parts of engines or motors, articles of heading 8483;

How does it matter when parts falling under any chapter arte exempted?

Draft Circular

Any manufacture outside purview of Service Tax

Service Tax on bottling of liquor – but what is manufacture?

A process amounting to manufacture within the definition under Section 2(f) of the Central Excise Act, is outside the purview of Service Tax. Recently we carried a judgement where the High Court held that liquor bottling is liable to Service Tax because it did not amount to manufacture as per Section 2(f).  But what is manufacture?

V. Unnikrishnan from Cochin has raised an interesting issue.

As per section 2 (f) of the CEA, 1944 'any activity incidental or ancillary to the completion of a manufactured goods amounts to manufacture'. There is no condition that the process should be carried out for the completion of excisable goods. So any activity incidental or ancillary for the completion of non-excisable goods also comes under the purview of section 2 (f). Accordingly, it is only to find out whether the bottling is essential for the completion of liquor. As such the liquor cannot be marketed without bottling; the activity of bottling has to be considered as manufacture for the completion of liquor. So, it is pertinently seen that activity of liquor bottling is outside the purview of 'packaging service' under Section 65 of Finance Act, 1994. It appears that the aforesaid law point was not argued in the HC . Hope the said point will be presented in the apex court.

Until Monday with more DDT 

Have a nice week end.

Mail your comments to

Sub: intoxicating indeed

I don't think the definition of 'manufacture' can be made applicable to ‘goods’ which are beyond the scope of Central Excise Tariff Act 1985 merely because Section 2(f) (i) refers to only ‘manufactured product’ and not ‘excisable goods’ as defined in Section 2(d).
Either the definition of 'manufacture' should be amended to restrict its application or we should limit its interpretation to only goods figuring in CETA 1985. Liquor and other intoxicating products are beyond the scope of CETA 1985 as was decided by the Hon'ble High Court.
The issue is very tricky and has to be resolved very quickly by the Ministry. I remember reading an interesting article by one of our esteemed colleagues in the field of indirect taxes on this very website where he was advocating government's potential to explore service tax on liquor industry. This High Court judgment should come in handy.
Since there is ambiguity as to whether the definition of ‘manufacture’ can be extended to goods beyond the jurisdiction of CETA 1985 Ministry should resolve this by an amendment to Section 2 (f). While amending this subsection they should also consider removing 'and' after 2 (f) (i), a topic which featured in 14th July DDT and withdraw Board's circular clarifying the status of 'and'.

Posted by santosh hatwar