TIOL-DDT 1079 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1079</font><br> 26.03.2009<br> Thursday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Repair of Roads – No Service Tax - holds Commissioner (Appeals) – Revenue loses in spite of all clarifications</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> recap:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We first reported the issue in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6764" target="_blank">DDT-798-06.02.2008</a></strong>. The Madhya Pradesh Chief Minister, Shivraj Singh Chauhan sought exemption from Service Tax on maintenance or repair of roads. Our very own PC, the FM (as he then was) wrote to the CM that it was not possible.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong>F.No.B1 / 6 /2005- TRU , dated : July 27, 2005 , </strong>the TRU clarified,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">16.Maintenance or repair service</font></strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">16.2 Prior to 16/6/2005, such services covered maintenance or repair or servicing of any goods or equipment, excluding motor vehicles. However, since 16/6/2005, services relating to <strong>maintenance or management </strong> of immovable property <strong>(such as roads, airports, railways, buildings, parks, electrical installations </strong>and the like) have also been covered under the purview of service tax. Such services would be taxable when provided under a contract or an agreement by any person or by a manufacturer or any person authorized by a manufacturer.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the latest Circular - <strong>No. 110/4/2009-ST Dated: February 23, 2009</strong>, the Board had clarified that though definition of taxable services viz., ‘Commercial or Industrial Construction Service' and ‘Management, Maintenance or Repair Service' do not specifically provide for levy of service tax on <strong>construction of road </strong>, a conjoint reading of these two definitions will lead to the conclusion that <strong>maintenance or repair of roads is a taxable service under the purview of ‘Management, Maintenance or Repair Service'.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, as far as the Board is concerned, ‘repair of roads' is taxable.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is at least one Appellate Commissioner who does not think so. In a path breaking order delivered last week, the learned Commissioner (Appeals), Vizag, held that repair of roads is not taxable.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner held,</font></p> <blockquote> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">As seen from the definition the activity covers construction, completion and finishing and repair, alteration, renovation or restoration or similar services and the definition itself specifically excludes such services provided in respect of roads, airports, railways, transport terminal, bridges, tunnels and dams. From the above it is evident that not only construction services but also repair services provided in respect of roads are exempted from tax. Though the same may also fall under management, maintenance or repair service in terms of Section 65(64) of the Finance Act, 1994, in view of specific exclusion of repair services provided in respect of roads under Section 65( 25b ) of the Finance Act, 1994 the same cannot be subjected to any tax. If the intention of the government is to subject the repair services provided to roads to tax, then the definition given under ‘Commercial or Industrial Construction Service' should have been suitably amended by omitting the words “does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.” Reading the definitions of Commercial or Industrial construction service and management, maintenance or repair services together gives a meaning that repair of roads, airports, railways, transport terminals, bridges tunnels and dams are excluded from service tax liability in view of the specific exclusion provided in Section 65( 25b ) of the Finance Act, 1994. It also implies that management or maintenance of all immovable properties including roads, Airports, transport terminals, railways, bridges, tunnels and dams are liable to tax <strong>but not repairs in view of specific exclusion provided vide Section 65 ( 25b ) of the Finance Act, 1994.</strong></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the Commissioner relied on the SAME Board clarification dated 27.7.2005, quoted above and states, <font color="#FF6600">The words <em>maintenance or management </em> are only finding place and the word ‘repair' is conspicuously absent.</font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The order of the Commissioner is sure to be challenged by Revenue, but the commissioner has opened a new avenue of repair and at least for some time Roads in Vizag can be repaired without service tax.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6764" target="_blank">DDT-798</a></strong>, we had asked, <font color="#FF6600">“Is it worth taxing the road repair? 99% of the roads belong to the Government – state or central, Municipal bodies, panchayats; should the cost of maintaining the horrible roads be enhanced for these fund starved bodies?”</font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See the full text of the Appellate Commissioner's Order <strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/servicetaxroads.pdf" target="_blank">here</a>.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the same issue was before the Kerala High Court recently where the assessee approached the High Court on a Summons from the Department. The high court did not decide the issue. We will bring you that case soon.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also see</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8659" target="_blank">DDT 1060 - 25.02.2009</a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7478">Service Tax on road repairs - When in doubt, consult Higher Authority</a></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7413">Is road-laying service liable for Tax?</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exchange Rates</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has amended the Exchange Rates for Australian Dollar and Swedish Kroner w.e.f 24.03.2009.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_037.htm" target="_blank">Notification No. 37/2009 – Cus (NT) dated March 24, 2009</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI continues interest subvention for another six months</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI has decided to extend interest subvention of 2% on export credit for a further period of six months i.e. from April 1, 2009 till September 30, 2009 to the same sectors and on the same terms and conditions as given earlier for the period from December 01, 2008 up to March 31, 2009.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rupee_export.htm" target="_blank">RBI DBOD .Dir.(Exp). BC.No.116 /04.02.01/2008-09 dated March 25, 2009</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>‘Guardians of Economic Frontiers' - Telecast of Film on Customs</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Directorate of Publicity & Public Relations has made a film on Customs titled ‘Guardians of Economic Frontiers'. The duration of the English film is 25 minutes. The film is about the untold story of the organization that has been serving the nation with unflinching dedication despite many odds. It is a human interest story and highlights the different facets of the Customs Department and the challenges it faces.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">F.M. JASWAL , Commissioner, Publicity & Public Relations says a lot of effort has gone into the making of this film which has been outsourced to a professional agency. She had visited various Customs formations across the length and breadth of the country along with the production team in the course of shooting for the film. She found the experience an enriching one as each formation had its own local flavour and challenges.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can watch the film on NDTV 24x7 at 3.30 pm on 28.3.09 (Saturday) and on CNN- IBN on 29.3.09 (Sunday).</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She would appreciate feedback at <a href="mailto:fantrymein@yahoo.com">fantrymein@yahoo.com</a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SERVICE TAX - Introduction of new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said services</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bombay High Court in a judgement delivered three days ago, held that supply of vessels to ONGC cannot be taxed under <em>mining service </em> and the same can be taxed under supply of <em>tangible goods </em>. The court has also explained the concept of ‘in relation to'.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We couldn't wait till tomorrow to bring you this important order. So it is here today.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8802" target="_blank">Breaking News</a>.</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600">–Tomorrow's cases</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p> <p><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="center"><strong>Order passed twice on same set of appeals – subsequent final order recalled as fault lies with registry: Tribunal</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>TWO for the price of one. </em></strong> Visualize this. You file an appeal before the Tribunal in the year 1999 and after a five year wait the same comes to be decided on merits, in the year 2004.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Two years later i.e. in year 2006, you receive a hearing notice from the Registry informing you that the appeals filed in the year 1999 are posted for hearing. But naturally, you are flummoxed and after regaining your composure, in the most polite manner inform the Registry that the matters have been already disposed of. Needless to mention, you make it a point to enclose a copy of the final order passed in 2004. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You think that since things have been clarified, it is the end of the matter. Of course, you clarified but then the letter has to find its parent file for any action to be taken.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Unfortunately, you are mistaken</em></strong>. A year later i.e. in year 2007, you are stunned to receive an order from the Tribunal informing that the appeals have been dismissed for – you guessed it right - “<strong><em>non-appearance</em></strong>”.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commission paid or allowed as a deduction from gross rate to insurance companies does not fall within category of remuneration or reward for soliciting or procuring insurance business – No TDS: ITAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> insurance companies have not provided any service of soliciting or procuring of insurance business for the assessee company. On the other hand, the assessee company has provided reinsurance to the insurance companies. The insurance companies do not get business from the insured for the assessee. The said insurance companies have got business for themselves and not for the assessee company. The insurance companies get business either directly or through agents. If any commission is paid to the agents by them, that attracts provisions of section 194D as the same is paid for services rendered for soliciting or procuring insurance business.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs</strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Unaccounted diamonds not available for confiscation – Wrong averment made in ROM application by Revenue that said diamonds were released on execution of bond – Tribunal shreds ROM application</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INTERESTINGLY</strong>, <em>there is something more to the entire episode </em> – the earlier Tribunal order dated 25.04.2008 had been accepted by the (then?) Commissioner on 11.07.2008 and was not taken up for further appeal. And if that be so, it is not understood as to how and why the ROM came to be filed by the Commissioner in October 2008.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, wherefrom did we get this information……………..</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns tomorrow for the judgements</strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Day.</font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments t</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">o <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p> </body> </html>