TIOL-DDT 1389 · the untouched capture
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<h4><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 1389 </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">28.06.2010<br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Monday </font></h4>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No Service Tax on Residential Complex for personal use - CBEC reiterates </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NATIONAL</strong> Building Construction Corporation Limited (NBCC) requested the CBEC for a clarification on the applicability of service tax on construction of residential houses. The Board Clarifies:- </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The activity of building new residential complexes falls within the definition of taxable service, namely, ‘Construction of Complexes'. Normally, the type of complex proposed to be built by NBCC falls within the definition of residential complexes. However, as per definition, the residential complex (for service tax purposes) does not include a complex which is constructed by a person directly engaging any other person for designing/planning/construction and is intended for personal use as residence by such person. The definition also explains that personal use includes promoting use of such property as residence by another person on rent or even without consideration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Ministry of Urban Development (GOl) has directly engaged the NBCC for constructing residential complex for central government officers. Further, the residential complexes so built are intended for the personal use of the GOI which includes promoting the use of complex as residence by other persons (i.e. the Government officers or the Ministers). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As such the GOl is the service receiver and NBCC is providing services directly to the GOl for its personal use. Therefore, as for the instant arrangement between Ministry of Urban Development and NBCC is concerned, the <strong>service tax is not leviable</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It may, however, be pointed out that if the NBCC, being a party to a direct contract with GOl, engages a sub-contractor for carrying out the whole or part of the construction, then the sub-contractor would be liable to pay service tax as in that case, NBCC would be the service receiver and the construction would not be for their personal use. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This seems to be the original and consistent view of the Board that individual houses for personal use are not taxable. In <em>M/s MACRO MARVEL PROJECTS LT Vs COMMISSIONER OF SERVICE TAX, CHENNAI</em> - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2008/2008-TIOL-1927-CESTAT-MAD.htm" target="_blank">2008-TIOL-1927-CESTAT-MAD</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
the Tribunal noted, “<font color="#FF6600"><em><strong>it appears, the law makers did not want construction of individual residential units to be subject to levy of service tax</strong></em></font>”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the above clarification, substitute builder for the NBCC and individual buyer for Government. Now this individual buyer buying the property for his personal use, is not covered under Service Tax!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In most of the cases, the residential complexes are built by directly entering into contract with the builder/developer by the individuals for their personal use. Such arrangements are squarely covered under the above clarification given. The intention is obviously to tax such persons (cosntructing residential complexes) as middle men between the develper/builder and ultimate purchaser of residential units. It is high time the CBEC comes out with a clear clarification; otherwise the middle class sections of society end up paying service tax (as small builders collect it from purchasers to avoid the wrath of the department) while the rich get away (because they puchase palatial residential units in a complex containing normally less than 12 units )</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then what is the controversy about the cost of land being included, the explanation inserted in the Finance Act, 2010 and <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/stnot10_029.htm" target="_blank">Notification No. 29/2010 -Service Tax Dated 22nd June 2010</a></em></strong>? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again the Board has hidden such an important clarification. It is not placed in the public domain. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today we bring you yet another incisive article on the subject, where the Author feels that there is no question of including the land cost. Please see our "Guest Column” </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/NBCC_construction.htm" target="_blank">CBEC Letter F.No.332/16/2010-TRU</a> Dated: 24th May, 2010. </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Pickling and oiling - Not Manufacture? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> question before the Board is whether Pickling and oiling amounts to manufacture . </font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Pickling is removing surface oxides from metals by chemical or electro chemical reaction and pickle means “ the chemical removal of surface oxides (scale) and other contaminants such as dirt from metal by immersion in an aqueous acid solution". </font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Therefore”, the Board says, “the process of pickling is only a chemical cleaning process to remove scales and dirt from the metal by immersion in chemical solution and does not result in emergence of any new commercially different commodity. For a process to amount to manufacture under Section 2f of the Central Excise Act, 1944, the process undertaken should result in emergence of commodity having different name, character and use. Since in the present case no new product emerges as a result of the process of pickling it <strong>will not amount to manufacture</strong>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why this clarification now? Is it to deny <em>CENVAT Credit</em>? </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular927.htm" target="_blank">CBEC Circular No. 927/ 17 /2010-CX Dated: 27 June 2010</a> </font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Board Explains Drawback Rules Amendments </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> commenting on the amendments to the Drawback Rules, <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11019" target="_blank">DDT 1384 - 21.06.2010</a></strong>, had observed, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Now after the amendment, the manufacturer has to apply to the Commissioner within three months and the delay will be condoned by the Assistant Commissioner . How this is possible? In short, before this amendment, the rule and the proviso were in harmony as both contained Commissioner. Now it is disturbed. Rule says Commissioner and proviso AC. </font></strong></font></p>
<p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">May be the assessee should apply to the Commissioner with a copy to the AC for condonation of delay and the poor Commissioner should ask his AC, “Sir, have you condoned the delay so that I can go ahead with the file?”. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Now the Board clarifies this:</strong> <font color="#FF6633"><strong>The applications for fixation of Brand Rate of drawback have to be filed in the office of the Commissioner of Central Excise (or Customs & Central Excise) as provided in rules 6 and 7 of the Customs, Central Excise & Service Tax Drawback Rules, 1995 and as already advised vide the above mentioned circular. If there is a delay in making the application, the Assistant/Deputy Commissioner of Central Excise (Technical) or such other Assistant/Deputy Commissioner in the office of the Commissioner of Central Excise who has been assigned the work relating to fixation of Brand Rate of drawback, may grant the first extension of upto 3 months. If the delay is of more than 3 months, extension may be granted only by the Commissioner. </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, Rule 16A (4) of the Customs, Central Excise & Service Tax Drawback Rules, 1995 has been amended to provide that in cases where the sale proceeds are realized by the exporter after the amount of drawback has been recovered from him under Rule 16A (1) of the Drawback Rules, 1995 due to non realization of export proceeds, he shall be allowed to produce evidence of such realization within a period of 3 months from the date of realization of export proceeds instead of the previous provision of one year from the date of recovery of amount of drawback provided the foreign exchange has been realized within the period permitted by RBI. The period may be extended by the Commissioner of Customs by 9 months subject to the condition that the amount has been realized on a date covered by the extensions of time limit given by the RBI for realizing export proceeds. Application fee equivalent to 1% of the FOB value of exports or Rs. 1000/-, whichever is less, shall be payable for applying for grant of extension by the Commissioner. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2010/cuscir10_013.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 13/2010-Cus., Dated: June 24, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Condonation of delay - generally as a normal rule, delay should be condoned – SC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> search in our library revealed that we have covered 455 cases relating to 'condonation of delay' in filing appeals and this is just a small tip of the proverbial iceberg. Quite often, due to unavoidable reasons, an appeal cannot be filed within the stipulated time and for that reason, is it fair to deny justice? The Supreme Court recently held that unless mala fides are writ large on the conduct of the party, generally as a normal rule, delay should be condoned. The Supreme Court further observed: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ After all, justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it of on such technicalities and that too at the threshold.
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In the legal arena, an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities.
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Appellant would not have gained in any manner whatsoever, by not filing the appeal within the period of limitation. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, who is going to benefit from this order? The Government of course! It is usually the Government which comes up with applications for COD. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2010/2010-TIOL-46-SC-LMT.htm" target="_blank">2010-TIOL-46-SC-LMT</a></strong> for the Supreme Court Order </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"> – Tuesday's cases</font></strong></font></strong></font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"><strong><font color="#663399">Central Excise</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Deterrent Action- Mere fact of payment of duty with interest does not absolve or cleanse petitioner of the violations - These measures are aimed at preventing duty evasion - CBEC Member's order upheld: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It must be noted that such restrictions are necessary to bring the erring assessee on the correct rails, so that there is a compulsion on statutory compliance at least in the future. Such restrictions are imposed keeping in mind the need to protect the interest of the Revenue as well as to have a check on the breach of law consciously committed by an assessee, leading to evasion of duty, that restrictions imposed as to the payment of duty and availing of CENVAT credit would bring an erring assessee to comply with the provisions in accordance with law. On the substantiated fact, that the petitioner had knowingly committed this violation, imposing the restrictions on the payment of duty and availing of CENVAT credit and that too for a limited period by the respondents cannot be viewed as an arbitrary exercise. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">AOP - Association set up for treatment of industrial effluent - Taxability of surplus generated from members - since surplus fund falls within purview of doctrine of mutuality, it is exempt from taxation: Bombay HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE assessee in the present case is an association of persons. It collects funds from its members for the purpose of treating industrial effluents. And the issue before the High Court is the taxability of surplus generated by the assessee from its members after meeting regular expenses - Whether the ITAT was justified in holding that surplus generated by the association of persons where there is complete identity of contributors and participators, is exempt from taxation on the principle of mutuality. The second issue is - Whether interest earned on surplus funds placed with bank by a mutual concern is exempt from taxation. And the answers to both the questions are YES. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Definition of C&F Agent includes Consignment agent: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the authorities have proceeded on the premises that the assessee is a consignment agent and relying upon Sub-section 25 of Section 65 of the Finance Act 1994, the original authority has passed the order holding that the assessee is liable to pay the service tax. When the assessee is a consignment agent, as the definition of C & F agent includes consignment agents as held in the case of Mahavir Generics , the High Court answered all the questions in favour of the revenue and against the assessee. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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