TIOL-DDT 1393 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1393 </font><br>
02.07.2010 <br>
Friday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Scope of New Taxable Services and Extension of Existing Taxable Services in Finance Act, 2010 – TRU Clarifies </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PURSUANT</strong> to the notification of effective date of new taxable services and expansion of the scope of existing taxable services, issue of various notifications providing for exemption, abatement etc, TRU has come out with a DO letter explaining the intricacies of these new changes. The highlights: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A. Advance Payments: </strong>With regard to services provided or payments made prior to effective date of July 1, 2010 for the eight new taxable services added through Finance Act, 2010, TRU clarifies part or full payment of the consideration received by the service provider/person liable to pay service tax (and not by an agent, who in turn transfers such amount to such person after this date) for such services provided after the appointed date has already been received prior to that date, are specifically exempted from service tax even if the taxable service is provided on or after July 1, 2010. However, any amount received after July 1, 2010 by the service provider/person liable to pay tax would be subjected to tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>B. Air Transport Service: </strong>As regards transport of passengers by air service, it is clarified that service tax on transport of passengers by air was extended to cover all domestic and international air passengers embarking in India with concessional tax rates subject to non-availment of CENVAT credit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in case a ticket covers more than one domestic journey/flight/sector, it is clarified that since the taxable activity relates to ‘embarkation in India for domestic journey….', each time such embarkation in India takes place the tax is chargeable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard the clarifications issued vide circular No. 96/7/2007-ST dated 23.07.2007 has no application as the said circular did not cover situations of multiple embarkations in India. Similarly, in round trip tickets involving multiple journeys/flights/sectors with one of the sector involving embarkation or disembarkation at North-Eastern States /Bagdogra, the journey/flight/sector that involves embarkation or disembarkation at North-Eastern States /Bagdogra would alone be covered under aforesaid exemption. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, Rule 4A of the Service Tax Rules, 1944 is amended to provide that the ticket (in any form, including electronic form whatever may be the name) showing the name of the passenger, description of the journey (details like place of embarking and disembarking, class of travel, flight number, etc.,) and the amount of service tax collected would be deemed to be the invoice/ bill /challan for the purposes of the rule. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>C. Port and Airport Services: </strong>The definition of port, other port and airport services were amended to comprehensively cover under their ambit, all services provided within an airport or a port or other port irrespective of whether or not such activities are authorised by the authorities or whether or not they are otherwise classifiable as distinct taxable services. In effect all services that are wholly rendered within the prescribed area of the port or other port or an airport, are to be classified within the ambit of ‘port services' or ‘airport services'. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, certain exemptions and abatements presently available under individually defined taxable services are extended when such activities are undertaken within airport or port by issuing relevant notifications in this regard. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>D. Sponsorship Service: </strong>The definition of existing taxable service, namely ‘the Sponsorship Service' was amended to remove the exclusion available for sponsorship pertaining to sports. The measure was taken to prevent exclusion benefiting certain sponsored sports events, which are organized by private organizations or business entities as commercial ventures. However exemption is provided for sponsorship services with reference to certain sports championships or tournaments, such as national tournament. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>E. Construction Services: </strong>Changes have been made in the construction services, both commercial construction and construction of residential complex, using ‘completion certificate' issued by ‘competent authority'. Before the issuance of completion certificate if agreement is entered into or any payment is made for sale of complex or apartment in residential complex, service tax will be leviable on such transaction since the builder provides the construction service. Completion certificate issued by a Government authority was prescribed as demarcation by introducing an Explanation in the Finance Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further after interaction with stakeholders, the scope of the phrase ‘authority competent' to issue completion certificate has been widened by issuing an order for removal of difficulty. Completion certificate issued by an architect or chartered engineer or licensed surveyor can be now taken to determine the service tax liability. Also, the abatement of seventy five percent will be applicable only if the gross value of commercial or residential complex or unit includes cost of land. Otherwise the existing rate of abatement of 67% would continue to apply. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, exemption has been provided for construction of residential complex service, when the same is rendered as part of Jawaharlal Nehru national Urban Renewal Mission (JNNURM) and Rajiv Awaas Yojana. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>F. Transport of Goods by Rail: </strong>Service tax on transport of goods by railways will now take effect from January 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>G. Transmission of Electricity: </strong>Earlier vide Budget notification 11/2010-ST, dated February 27, 2010, transmission of electricity was exempted from service tax. After post budget interactions, taxable service provided by a distribution licencee or a distribution franchisee authorised to distribute power under the Electricity Act, 2003 for distribution of electricity is also exempt from levy of service. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/TRU_DO_Letter.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>D.O.F.No.334/03/2010-TRU. , Dated: July 1, 2010 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Board Comes out of Blunderland – rectifies mistakes by corrigendum </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the previous two editions of <strong>DDT, </strong> we reported that Board amended a non-existent entry (S. No. 6) in Notification No. 1/2006-ST by amending Notification No. 40/2010-ST dated June 28, 2010 (S. No. iii) without verifying the current status of the principal Notification 1/06-ST. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After realizing the <em>faux pas </em>, Notification No. 13/2008-ST dated March 1, 2008 was hastily amended leading to more confusion (refer <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11064" target="_blank">TIOL-DDT 1392 01.07.2010</a> </strong>). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finally, Board has issued a corrigendum to Notification No. 40/2010-ST deleting S. No. iii therein which proposed amendment to the non-existent S. No. 6 of Notification No. 1/2006-ST. The better course would have been to bring back the entry in S. No. 6 of the Notification No.1/2006, but anyway that is the Board's choice. DDT congratulates the bright officers in the Board for reacting at super speed and correcting the lapse. It requires tremendous courage to admit a mistake and correct it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another corrigendum has also been issued to Notification 39/2010 ST to correct some errors. We understand that it is a herculean task to keep track of all these notifications and make amendments at the appropriate places. But then they should strive for making the laws less confusing and simple. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the law makers are confused, what about the poor victims who are to comply with all these constantly changing laws? </font></p>
<p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/corrigendum_40.htm" target="_blank"><font size="2"><strong>CORRIGENDUM to Notification No. 40/2010 Dated: June 30, 2010 </strong></font></a><font size="2"> + <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2010/corrigendum_39.htm" target="_blank"><strong>CORRIGENDUM to Notification No. 39/2010 Dated: June 30, 2010 </strong></a></font></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is common to a Port and Jammu Kashmir? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SERVICES </strong>are not tangible. It is very difficult to define the “Borders” for services. How do you tax a service under Section 66A of the Finance Act, 1994? How can one say the service is received in India? Though difficult, at least there is a method in madness and we have the Taxation of Services (Provided from outside India and Received in India) Rules 2006. The services were divided into three categories to decide the tax liability. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then, we have Jammu and Kashmir. The levy of service tax is as complicated as the J&K problem. As per the Finance Act, 1994, the provisions are not applicable to J&K. How do we treat a goods transport agency transporting goods from Punjab to J&K? Is it liable for service tax? What if the Truck starts in J&K and reaches Delhi? What if the services are provided from outside J&K and received in J&K? Are they liable to tax? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, we have the latest to the list. The PORT. When the demands of service tax on services rendered inside the port were set aside by the appellate forums on the ground that these service providers were not “authorised by the Port”, the helpless babus thought of an innovative solution. In this year's Budget, they removed the word “authorised by the port” from the definition of the service. This innovative solution has led to more problems. Now every service within a port became taxable under Port service. Rent-a-cab, erection commissioning, for that matter any other taxable service if provided within the Port will be taxed under the Avatar of Port service, of course with no abatement / exemption available to these services under Port services while outside the port, they are exempted/ entitled for abatements. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The babu has found one more solution. Amend all such notifications by adding port service to them. And finally after a couple of corrigendums, they did it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the issue is how do you decide whether a service is rendered “wholly within” the port? The same J&K or Outside / Inside India problem. If a telephone is installed in a port, is it taxable under port service? If there is a branch of a Bank within the port, will it come under Port Service or Banking Service? What about an ATM installed in a Port? The service providers will have tough time in deciding the service head and for the babu, paying service tax under a wrong head means non-payment of service tax! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How about a notifying a new set of rules, called “Taxation of Services Provided wholly within the Port Rules, 2010” so that these issues can be thrashed out? </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of Certain Goods covered by IPRs Prohibited </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENTERAL </strong>Government has notified prohibition of import of certain goods falling under the purview of various Intellectual Property Rights laws subject to the conditions and procedures as specified in the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. This notification is issued in supersession of an earlier Notification No. 49/2007-Cus (NT) dated May 8, 2007. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_051.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 51/2010-CUS (N.T.)., Dated: June 30, 2010 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tariff Value of Brass Scrap increased </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has increased the Tariff Value of Brass Scrap from USD 3619 per MT to USD 3645 while the Tariff Values for other notified goods remains unchanged. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_052.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION NO. 52/2010-CUS (N.T.)., Dated: June 30, 2010 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Contrary arguments by DRs at different Benches of Tribunal? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CAN</strong> Departmental representatives make contrary arguments at different Benches of the Tribunal? This was an issue before the ITAT Special Bench recently. The assessee's counsel pointed out that the Department's Representative in another Bench argued the point the assessee was making before this Bench and got a favourable order. So the Department was barred from taking a contrary view before another Bench. The Tribunal was not however impressed and observed, “if some Departmental Representative has rightly or wrongly argued an issue before any bench of the Tribunal, other Departmental Representatives across the country cannot be inhibited from arguing what they feel correct notwithstanding the earlier submission made by the learned Departmental Representative in some different case at some different bench.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Special Bench order was delivered on 30.06.2010 and we bring you this order today – true to the TIOL tradition. The Special Bench had also decided some weighty issue on depreciation. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See Breaking News for this important order brought to you within a day. </font></strong></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"> – Monday's cases</font></strong></font></strong></font></p>
<p align="justify"><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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Effective Date of Adjudication Order is the Date of Dispatch of the order: High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> common question in these writ petitions is whether the “case” of the petitioners had been “adjudicated” prior to the filing of their settlement applications under Section 32E of the said Act. Normally, such a question would appear to require a straightforward determination of the factual position. However, in these writ petitions, it so happens that the order-in-original passed by the adjudicating authority was dated 24.12.2009 though it was received by the petitioners after 08.01.2010, which was the date on which the petitioners had filed their settlement applications under Section 32E of the said Act. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax - Sec 80HHC - insurance claim received on destruction of stock-in-trade is eligible to included in 'business profit' for purpose of exports benefits: Bombay HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION 80HHC</strong> has been one of the most disputed incentivising Sections of the I-T Act. It has undergone amendments so many times that each amendment claimed its own pound of litigation-flesh. In the latest case the issue before the High Court was <strong>- </strong>Whether insurance claim received by the assessee on destruction of stock in trade was eligible to be included in “business profit” for the purpose of deduction u/s 80HHC, despite the jurisdictional HC decision in the case of Dresser Rand India Ltd </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>( <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=39&filename=legal/hc/2010/2010-TIOL-281-HC-MUM-IT.htm" target="_blank">2010-TIOL-281-HC-MUM-IT </a></em>)</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> and
the Apex Court ruling in the case of K.Ravindarnathan Nair</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong> ( <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2007/2007-TIOL-202-SC-IT.htm">2007-TIOL-202-SC-IT </a>)</strong></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">.
And the answer is YES. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Notifications are not assessee specific - Each and every service of commercial or industrial construction provided by the assessee has to be examined for the purpose of extending the facility in terms of Notification No.15/2004-ST, 01/2006-ST – Stay granted: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant seeks waiver of pre-deposit and stay of recovery in respect of service tax amounting to over Rs.26.8 crores demanded for the period October 2005 to March 2008 and also in respect of various amounts of penalties imposed under various provisions of the Finance Act, 1994.The appellant had undertaken different commercial and industrial construction projects at various parts of the country. In respect of certain projects, they paid service tax on the gross amount of taxable value without claiming any abatement but availing CENVAT credit on inputs through out the period or on input service up to 1.3.2006. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend. </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">vijaywrite@taxindiaonline.com </a></font></p>
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