TIOL-DDT 1394 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1394</font><br>
05.07.2010<br>
Monday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether tax paid on services received by sales offices of manufacturers eligible as input credit? </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received the following query from a netizen: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) Whether manufacturer may take credit of service tax paid on payment of rent/security agency in relation to sales office under the definition of input service and</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) Whether services like rent on immovable property/security agency consumed in sales office [situated at different locations] are CENVATable to the manufacturer as input service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) In such situation whether sales office requires registration and work as input service distributor.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard, we are of the view that the sales offices of a manufacturer which receives invoices for taxable services (like rent or security agency as in the instant case) are regarded as an 'input service distributor' in terms of Rules 2(m) of the CENVAT Credit Rules, 2004 (hereinafter referred to as 'CCR') read with Rule 4A(2) of Service Tax Rules, 1994 (hereinafter referred to as 'STR') for procuring/purchasing input services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the sales offices will have to obtain registration from the jurisdictional authorities in terms of Service Tax (Registration of Special Category of Persons) Rules, 2005 (hereinafter referred to as 'SRPR'). Further, in terms of Rule 9(10) of CCR read with Rule 4 of SRPR, as ‘input service distributors' they have to file half yearly returns with their jurisdictional authorities. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Further, the input service distributor shall be able to distribute the input credits received by them in the manner provided in Rules 7 and 9(1) of the CCR read with Rule 4A(2) of STR and the invoice issued by an input service distributor is a valid document for the purpose of availing CENVAT credit by the manufacturer if the said document is issued in terms of Rule 9(1)(g) of CCR. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> As regards eligibility of CENVAT credit on taxable services procured by the sales offices of the manufacturer viz., renting of immovable property and security agency service, we are of the view that these taxable services would get covered in the inclusive definition of 'input service as defined in Rule 2(l) of CCR under the phrase 'activities relating to business'. As these sales offices perform a crucial role in selling the products manufactured by the manufacturer, they are regarded as an important and integral part of the business of a manufacturer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> In view of the above, the taxable services procured by sales offices of manufacturers, in the instant case, taxable services like renting of immovable property and security agency service are 'input services' and hence, service tax paid thereon is eligible as CENVAT credit for the manufacturer. However, to avail the benefit of CENVAT credit by the manufacturer, the sales offices have to get registered with the jurisdictional authorities and follow the requisite procedures as stated above. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">But there are several complications like whether renting is taxable at all and whether it can be an input service. </font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT Credit Rules 2004 amended again </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FROM</strong> 22nd June to 1st July 2010, the <em>CENVAT Credit</em> Rules have been amended thrice. Notifications 25, 26 and 27 CE(NT) have been issued to amend the rules on three different issues. Apparently, different sections in the Board deal with different issues and there is no coordination among them. While all the amendments could have been made with a single notification, separate notifications have been issued for the three amendments. Vide the latest Notification; Rule 6(6) of the CENVAT Credit Rules has been amended to insert a new clause after clause (iv) as under: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(iva) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of notification No. 6/2006- Central Excise dated the 1st March, 2006, number G.S.R.96(E), dated the 1st March, 2006; or” </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the provisions of Rule 6(1) to 6(4) are not applicable to the above supplies which are exempted. We do not know how many more amendments are in store. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/exnt10_27.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification 27/2010 CE(NT): Dated July 01 2010</strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Amends Appendix 4C of HBP Vol.I </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> amended Appendix 4C of the Handbook of Procedures (Vol.I) pertaining to List of Agencies Authorised to Issue Certificates of Origin - Non Preferential, for notifying the new address of the Federation of Gujarat Industries, consequent to their change of address. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn077.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">PUBLIC NOTICE NO 77/2009-2014, Dated: July 01, 2010 </font></strong></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT
amends HB for import of meat products</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> amended Handbook of Procedures Vol.I to insert a new paragraph 4.4.5 which reads as follows:</font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“4.4.5. Where import of meat and meat products of any kind including fresh, chilled and frozen meat, tissue or organs of poultry, pig, shee p, goat; egg & egg powder; milk & milk products; bovine, ovine and caprine embryos, ova or semen; and pet food products of animal origin has been sought as an input under Advance Authorisation, the RA, while issuing advance authorisation, shall endorse a condition that before effecting imports of any of these inputs, Sanitary Import Permit shall be obtained from the Department of Animal Husbandry, Dairying and Fisheries (DAHDF). RA shall also endorse a copy of authorisation to DAHDF, Krishi Bhawan , New Delhi .” </font></em></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn078.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">PUBLIC NOTICE NO. 78/2009-2014, Dated: July 1, 2010</font></strong></a></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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"><font color="#663399">Income Tax</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income tax - Sec 80IB - Whether creation of marketing arm be treated as device to shift expenses of assessee firm to former so as to show higher profits of assessee and claim same u/s 80IB - NO, says ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is a partnership firm formed in 2004, and is engaged in the manufacture of pens and writing materials. In the return filed for the year under appeal, the assessee claimed deduction u/s 80-IB. While scrutinizing the return, the AO noticed that there was another partnership firm by name M/s Cello Sales and Marketing (“CSM” or marketing arm) and was established on 01.04.2001 to market the products manufactured by the Cello Group of concerns which were in existence at that time. The assessee marketed its products through CSM. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT on GTA outward freight – Matter to be resolved after Karnataka High Court decision: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed that the issue was decided by the Larger Bench of Tribunal in the case of ABB Ltd Vs CCE, Bangalore and that the departmental appeal against this Larger Bench order is pending before the Hon'ble Karnataka High Court. In view of the above, the Tribunal, in its Miscellaneous Order had directed the Registry to list the matter once the decision of the Karnataka High Court is available. Final Order would be passed on the matter on the basis of the decision of the Karnataka High Court. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Deemed violation of rule 8(3A) of CER, 2002 – Voluntary payment of short paid Education Cess with interest - No mens rea - CCE ordering for appropriation of duty paid through CENVAT as being made through PLA – Sound case for invoking section 11A(2B) of CEA, 1944 – Penalty and interest set aside: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is before the CESTAT with a submission that it was clerical mistake on their part in taking a wrong credit in the PLA; that nobody would like to intentionally make a short payment of Rs.34,498/- attracting consequences as held by the Commissioner; that show cause notice did not attribute mens rea on the part of the appellant. More over, since the appellant themselves detected the error and made the payment of short paid amount along with interest, show cause notice itself should not have been issued to them in terms of Section 11A(2B) of the Central Excise Act. </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 align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></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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