TIOL-DDT 14 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#0000CC" size="3">TIOL-DDT
14</font><br>
21 12 2004<br>
Tuesday</b></font></p>
<p align="left"><font color="#FF00FF" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>1.
Service Tax</b></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#006633"><b>TRU
INSTRUCTIONS ON GOODS TRANSPORT, BUT NO CLARIFY ON HOW TO TAKE CREDIT </b></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> THE TRU has come out with elaborate clarification on Service Tax on Goods Transport
Agency to be effective from 1st January. 2005. The first four paragraphs of
the circular reproduces the statutory provisions like:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <b>Exemption for tax on 75% of the value</b> provided that no credit is taken
and no exemption under <a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2003/sernot03_12.htm" target="_blank"><strong>12/2003-SERVICE TAX</strong></a> dated 20-6-2003 is availed.(This
notification is a rather flawed one - please see "correct
Notification No. 12/2003" in this edition of DDT.)<br>
<br>
2. <b>Consignment Note Required Even If No Service Tax Paid:</b> The TRU letter
clarifies that Goods Transport Agencies are required to issue consignment Notes
even when they are not liable to pay Service Tax. i.e. when the Service Tax
is paid by the consigner or by Consignee<br>
<br>
3. <b>Not Required To Register, When Not Liable To Pay Service Tax.</b> Goods
transport Agencies who are not liable to pay Service Tax are not required to
register with the department.<br>
<br>
4. <b>Centralised Registration not to be denied.</b> As per Rule 4(3)(a) of
Service Tax Rules, Commissioners may permit Centralised Registration in case
of goods transport agencies Centralised Registration should not be denied, unless
there is reason to believe the evasion of tax. Verification and Audit checks
will be carried out only at Centralised office. No independent enquiries or
audit checks will be conducted on the branch offices, except with the authorisation
from an officer of the rank of Commissioner or above.<br>
<br>
5. <b>No vehicle will be stopped </b>on the way unless there is specific intelligence
about deliberate evasion and even then only with the permission of the Commissioner
or above. In such cases also the vehicle and goods will be released after taking
Photostat copy of the transport documents. This is exactly what the Bharadwaj
Committee had recommended and an obliging Board gladly accepted. But neither
the Bharadwaj Committee nor the Board had taken the trouble of checking up whether
any officer had the power to stop and search a vehicle under Service Tax Law.
- (See can a vehicle be stopped under Service Tax? in this edition of
DDT) <br>
<br>
6. <b>NO PREVIOUS RECORDS :</b> Records pertaining to the period prior to the
imposition of Service Tax will not be called for verification and except in
the cases of offences under Customs & Central Excise.<br>
<br>
7. <b>ALL MINOR OMISSIONS EXCUSED TILL 31-12-2005:</b> No penalty for omission
in payment of tax or procedural lapses for one whole year till 31-12-2005 except
in the cases of deliberate fraud, collusion etc. <br>
<br>
8. <b>NO DOUBLE TAX:</b> If the tax has already been paid, it will not be charged
again from any other person to avoid double taxation.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="http://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjYyOQ==" target="_blank">See
TRU letter in F.No.341/18/2004-TRU (Pt.) dated 17th December, 2004 </a><br>
<br>
<font color="#FF00FF"><b>2. But how to take credit?</b></font><br>
<br>
The recent notifications and the very latest TRU letter has left a very important
omission. There is now no document prescribed for taking credit of the Service
Tax paid by a consignor or consignee in case of goods transport by Road. Rule
9 of the Cenvat Credit Rules, prescribes the documents under which cenvat credit
can be taken. Rule 9(1)(e) deals with the challan evidencing payment of tax
by a person who is liable to pay the Service Tax but who is not the Service
Provider covered under Rule 2(1)(d)(iii) &((iv) 0f the Service Tax Rules.
These clauses make the insurance company in case of service provided by insurance
agent and the Indian recipient in the case of service provided non residents,
as liable to pay tax. A clause(v) has been added to this Rule 2(1)(d) of the
Service Tax Rules to make the consignor or the consignee liable to pay the Service
Tax in certain cases. But this clause(v) has not been added to Rule 9(1)(e)
of the Cenvat Credit Rules, 2004. So the net result is - now <font color="#0000CC"><b>there
is no document prescribed to take credit of tax paid by the consignor or consignee
in the case of goods transport.</b></font> So much for the elaborate work done
by the Board! Thankfully, we still have time. The tax is to be effective from
1.1.2005 (This also by TRU's dictum, not any law) and the credit can be
taken only after that. So the government can still amend the Rule 9 of the Cenvat
Credit Rules. DDT hopes it will be done before the New Year. <br>
<br>
<font color="#FF00FF"><b>3. correct
Notification No. 12/2003</b></font><br>
<br>
This notification actually is meant to exempt the tax on the value of the goods
and materials supplied along with the service for calculation of Service Tax.
This is the notification which applies to all services but unfortunately is
one of the most defectively drafted notifications. To elaborate, the notification <font color="#0000CC">"Exempts so much of the value of all taxable services
as is equal to the value of the goods and materials sold by the service provider
from the service tax leviable thereon."</font> Let us understand this
with an example:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Gross receipts Rs. 100<br>
2. value of goods and materials supplied Rs. 80<br>
3. value of service Rs. 20<br>
4. Service Tax on gross receipts- 10.2% of 100 Rs. 10.20<br>
5. Service Tax on goods supplied - 10.2% of 80 Rs. 8.16<br>
6. Service Tax on service 10.2% of 20 Rs. 2.04</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Now what the Government actually wanted to collect was only Rs. 2.04, by exempting
Rs. 8.16 but what it actually exempted is the value of goods and materials,
Sl.No 2 above. So as per this notification, the tax payable would be 10.20 minus
80!. <b>An impossible situation ?</b> And this notification is in the statute
for the last 18 months, blissfully ignorant that it cannot be implemented. Compare
this with the recent Notification No.32/2004 granting 75% exemption, where the
wording is "Exempts from so much of Service Tax……. as is in
excess of the Service Tax calculated on a value which is equivalent to the 25%
of the gross amount. <br>
<br>
Notification No.12/2003 is prima-facie defective, for the reason that what it
exempts is the value and not the tax. As per Sec.93 of Finance 1994, the Govt
has power to exempt the tax but not the value. <b>Will the Board rectify this?
</b><br>
<br>
<font color="#FF00FF"><b>4. can a vehicle be stopped under Service Tax?</b></font><br>
<br>
Rule 23 of Central Excise Rules gives the power to Central Excise officers to
stop and search a vehicle. There is no similar provision for Service Tax. However,
as per Sec. 83 of Finance Act, 1994, Sec.12 of the Central Excise Act is applicable
to Service Tax. As per Sec.12 of the Central Excise Act, certain provision of
the Customs Act, notified by the Government are applicable to Central Excise.
As per Notification No.68/63-Central Excise dated 4-5-63 issued under Sec.12,
certain provisions of Customs Act, are made applicable to Central Excise. Sec.106
of Customs Act gives power to the proper officer to stop and search vehicles.
But this Sec.106 is not included in Notfication. No.68/63 and therefore, the
obvious conclusion is there is no provision under the law relating to Service
Tax to stop and search a vehicle. The TRU circular on Goods Transport referred
in the beginning of this edition of DDT, bars stopping vehicles except with
the permission of the Commissioner, but Board seems to be unaware of the fact
that Commissioner has no such power- to stop a vehicle or to authorise for its
stopping. For that matter, even the Board does not have the power. <b>The Government
is very kind in not exercising the power it does not have.<br>
</b><br>
<font color="#FF00FF"><b>5. Foreign Trade Policy</b></font><br>
<br>
<b>Government amends Appendix 3 to Schedule 2 (Export Policy) of the ITC(HS)
Classification of Export and Import Items, 2004-2009 to add some more items
to the list. </b><br>
<br>
Appendix 3 lists special chemicals, organisms, materials, equipment and technology(SCOMET)
allowed to be exported against export licences. Now the following items are
added to the list.<br>
<br>
3 D 004: Equipment related to P3, P4 facilities such as protective suits and
class III safety cabinets.<br>
<br>
3 D 005: Complete containment facilities at P3, P4, containment level as specified
in the WHO biosafety manual.<br>
<br>
<font color="#0000CC"> And at present "Micro-light Aircraft and powered
hang-gliders" figure in the list. This has been amended to include the
parts of these aircraft and gliders.</font><br>
<br>
<b>See <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2004/dgft04not011.htm">DGFT
NOTIFICATION NO 11 (RE-2004)/2004-2009, Dated: 16, 2004</a></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DGFT
amends Handbook of Procedures to amend Appendix 27 and para 4.7</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appendix
27 lists the export promotion councils. In the list sl.no. 26 in respect of
Shellac Export Promotion Council is kept in abeyance.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
Para 4.7 deals with issue of advance licence where SIONs are nor fixed, based
on self declaration. Now the following words are added to this para. <font color="#0000CC">For
export of perfumes, perfumery compounds and various feed ingredients containing
vitamins, no licence shall be issued under Para 4.7 by the licensing authority
and the applicants may apply under Para 4.4.2 of handbook of Procedures, Vol-I.
Where export and/or import of biotechnology items are involved, licence under
Para 4.7 shall be issued by the licensing authority only on submission of a
'No Objection Certificate' from the Department of Biotechnology."</font><br>
<br>
<b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2004/dgft04pub033.htm">See
DGFT PN No. 33/2004-09, Dated: December 17, 2004 </a></b><br>
<br>
<font color="#006633"><b>If everything seems to be going well, you have obviously
overlooked something.</b></font> -- Murphy's Eighth Law<br>
<br>
<font color="#FF0000"><b>Until tomorrow with more of DDT<br>
<br>
Have a Nice Day </b></font></font></p>
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