Authors of Manuals – not updated
FOR the last couple of weeks, we have been reporting about the manuals for scrutiny of ER1s and ST3s reportedly issued by CBEC and which we got from ADB and not from any sources in India. These manuals are aimed at guiding the field officers and must have been prepared by some great minds far more superior and updated about the Act and the Rules than the poor field staff. But a close reading of Service Tax manual revealed that the authors are no better when it comes to updating themselves about the Rules.
Annexure 2.1 of the Service Tax manual contains format for preliminary scrutiny of the ST 3 returns. It has a list of questions for which if the answer is no, necessary action has to be initiated as listed in the Table.
Question No 14 a) reads:
Is the tax payer maintaining separate accounts for receipts and utilization of inputs for manufacture of both dutiable and exempted goods?
If the answer is no, then ascertain whether the tax payer is reversing CENVAT credit amount equivalent to 8% of the value of the exempted goods/ services in terms of provision of Rule 6(3) of CENVAT Credit Rules, 2004. In case no reversal of CENVAT Credit amount has been made, show-cause notice may be issued to recover the amount with interest.
The manuals have reportedly been published in 2009 and way back in 2008, a new rule 3A has been inserted in CENVAT Credit Rules which the authors are apparently ignorant about. They tell the field to issue Show Cause Notices for recovery of 8% amount if no separate accounts are maintained. But Rule 3A provides for a kind of proportionate reversal based on the formulae mentioned therein. But the manual does not mention the same and directs for issue of SCNs.
Further, the question reads “Is the tax payer maintaining separate accounts for receipts and utilization of inputs for manufacture of both dutiable and exempted goods?"
May be they had forgotten that they were drafting the manual for service tax and service providers do not manufacture goods.
The question should have been “Is the tax payer maintaining separate accounts for receipts and utilization of inputs for providing both taxable and exempted services?”
So much for high profile reports submitted to mighty organisations like ADB.