TIOL-DDT 1555 · 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 1555</font><br>
23.02.2011<br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax - Renting of Immovable Property – Service
recipient is required to pay Service Tax to service provider even if contract
did not specifically mention it: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> happens when you enter into an agreement to provide service (with no mention of Service Tax as there was no tax on the services at the time of providing the service) and Service Tax is imposed on the service and the client refuses to bear the tax as there was no contractual obligation? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the clients can be multi national corporate giants or government departments. I know a frustrated retired Colonel of the Indian Army who is not able to get the Service Tax he paid on security services reimbursed from Defence Establishments, because the contract did not mention about the Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the recent controversial Service Tax on renting, several MNCs who have hired buildings are refusing to reimburse Service Tax to the building owners because the agreement entered into at the time of leasing did not mention about Service Tax, which actually did not exist at the time of entering into the contract. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When you rented your property prior to 1.6.2007, you did not visualize that there would be a Service Tax on renting (which any way the Delhi High Court struck down) and so you did not include it in the agreement. Now the Department wants the tax from you but your client will not pay you as your contract did not provide for it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a problem faced by several service providers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Delhi High Court has come to their rescue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a recent case, the plaintiff, owner of the premises rented out, filed a civil suit against the tenant for payment of Service Tax that the plaintiff Service provider was required to pay. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even though the agreement did not provide for payment of Service Tax (non-existent at the time of entering into the contract), the Delhi High Court relying on Section 64-A of the Sale of Goods Act, 1930 , which clearly states that unless a different intention appears from the terms of the contract, in case of the imposition or increase in the tax after the making of a contract, the party shall be entitled to be paid such tax or such increase, held that “Although there is no explicit provision to that effect, enabling lessors such as the plaintiff, to the service tax component, this Court is of the view that there is sufficient internal indication in the Act, through Section 83 read with Section 12-A and Section 12-B suggesting that the levy is an indirect tax, which can be collected from the user (in this case, the lessee). ” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court has given a decree that the defendant tenant is liable to pay the Service Tax to the plaintiff service provider. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This landmark judgement of the High Court should be a big relief to the service providers and now they can demand the Service Tax from their clients. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This judgement almost went un-noticed as Union of India was not one of the parties and this was a civil suit between two private parties. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this very important judgement today. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12120" target="_blank">Breaking News</a></strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Cricket - World Cup 2011 - Customs Exemption to BCCI, but Board Remembers Circular Now</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12068" target="_blank">DDT 1548 - 11.02.2011</a></strong>, we had pointed out that the Customs officers may not allow the exemption from Customs Duty on imports in connection with the Cricket World Cup, as Board in <em>Circular No. 5/2011 – Cus Dated January 17, 2011</em> had informed that, “henceforth BCCI would not be eligible to avail itself of duty exemption under Notification No.21 /2002- Cus. dated 1.3.2002 <em><strong>or any other Customs notification.</strong></em> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ten days after we pointed out about the futility of the exemption notification, Board now clarifies that the ineligibility in the Circular, of BCCI or any one certified by BCCI, applies wherever BCCI claims a notification benefit by virtue of being National Sports Federation / Apex Body controlling the game of Cricket. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board further clarifies that: </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the Central Government has issued a separate notification No. 7 / 2011 – Customs dated 9.2.2011 for the benefit of the ICC World Cup, 2011 being organized by the BCCI, and imports made for the event may be assessed in terms of this notification subject to conditions specified therein. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As suggested by <strong>DDT in DDT 1555</strong>, it is wise not to avail this exemption – if litigation is not your other favourite sport. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_009.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 9/2011 - Cus., Dated: February 21, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Eligibility
of tufted cotton bathmats/cotton tufted bathrugs for grant of duty credit
scrip under VKGUY: DGFT Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>POLICY</strong> Circular 21/2009-14 dated 12.1.2010 clarified that exports of cotton bathmats/rugs covered under ITC (HS) Codes 5703 or 5705 would be treated as hand-made category for grant of benefit of duty credit scrip by obtaining a suitable self-declaration from the exporters. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, it was represented that in respect of some export shipments prior to 12.01.2010, this benefit was being denied because the export product has been described on the shipping bill as “cotton powerloom-tufted bathmats/cotton powerloom-tufted bathrugs”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After examining the matter, DGFT clarifies: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The export shipments covered under ITC (HS) Code 5703 or 5705 are to be treated as hand-made category even if the description of the export product entered in the relevant shipping bills may have been “cotton powerloom tufted bathmats/cotton powerloom tufted bath rugs”. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2010/dgft10cir023.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 23 (RE-2010)/2009-14., Dated: February 21, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export of Cotton Yarn - Expeditious issue of export licences </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SERIAL</strong> No. 3(ii) of Policy Circular No. 20(RE-2010)/2009-14 dated 14.02.2011 had stipulated certain documents to be submitted to <strong>concerned</strong> RAs for issuance of export licence. To facilitate expeditious issue of export licences, Sl. No. 3(ii) of Policy Circular No. 20(RE-2010)/2009-14 dated 14.02.2011 is amended. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Circular No. 20 dated 14.02.2011, the documents prescribed were: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) Proof of export of such yarn during the previous two years i.e. FY, 2008-09 and FY, 2009-10</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) certificate from the concerned Export Promotion Council certifying that the yarn is Value Added Special Yarn/Technical Yarn. Export against the licences so issued must be completed by 31.03.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now they are amended as:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Proof of export of such yarn during the previous two years i.e. FY, 2008-09 and FY, 2009-10 <font color="#663399"><strong>duly accompanied by copies of shipping bills showing export of such yarn </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) The custom authorities will draw necessary sample(s) at the time of shipment to be tested and thereafter shall send the test report to concerned RA to facilitate initiation of appropriate penal action under the provisions of FT( D&R ) Act in case any deviation/ misdeclaration is detected/reported. Export against the licences so issued must be completed by 31.03.2011. </font></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2010/dgft10cir024.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 24 (RE-2010)/2009-14., Dated: February 22, 2011</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Prohibition on export of onion - DGFT Clarification </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EXPORT</strong> of Onions (all varieties including Bangalore Rose onions and Krishnapuram onions) excluding cut, sliced or broken in powder form was prohibited by Notification No.13 (RE-2010)/2009-14 of 22.12.2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This prohibition on exports was relaxed vide Notification No.19 (RE-2010)/2009-14 of 10.2.2011, as per which export of Bangalore Rose onions andKrishnapuram onions were placed in the “Restricted” category,to be exported under licence subject to Minimum Export Price ( MEP ) of USD 1400 per Metric Ton. Modalities for issuance of export licences for such export by RAs was stipulated in Policy Circular No. 21 dated 15.02.2011.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Vide Notification No.24 (RE-2010)/2009-14 of 18.2.2011, export of all types of onion including Bangalore Rose onion and Krishnapuram onion has been allowed through the State Trading Enterprises( STEs ) subject to applicable Minimum Export Price (MEP).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT </strong>clarifies that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) MEP would refer to FOB price per Metric Ton. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Export licences that may have been already issued by RAs for export of Bangalore Rose onions and Krishnapuramonions, between 15.02.2011 to 18.02.2011 will continue to be valid for such export. </font></p>
</blockquote>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2010/dgft10cir025.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 25 (RE-2010)/2009-14;., Dated: February 22, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on Weaving Machines - Resurrection Again</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> are really tired of reporting the repeated with routine regularity resurrection that the Board resorts to in anti dumping matters. Either there is total apathy or deep irresponsible slumber, both of which are not really powers that should be wasted on the babus.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The provisional anti dumping duty on Circular Weaving Machines having six or more shuttles for weaving PP / HDPE Fabrics of a width exceeding 30 cms., originating in or exported from China PR, was imposed by Notification No. 49/2010-Customs, dated 12th April, 2010. This notification clearly stipulated that the anti dumping duty imposed by the notification will be effective up to and inclusive of the 11th day of October 2010. So the notification had no effect from 11.10.2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the government notifies that the anti dumping duty will be effective for a period of five years from the date of imposition of the provisional anti-dumping duty, that is, the 12th April, 2010.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is the position for the period from 11.10.2010 to 15.02.2011, when there was no valid notification? When government was sleeping, you are required to pay the duty! </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2011/ctariff11_010.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 10/2011- Cus., Dated: February 16, 2011 </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"> - Thursday's cases</font></strong></font></strong></font></p>
<p align="justify"><strong><font color="#663399" 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">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Ban on Export of Cotton Yarn - challenge to Notifications - Dismissed: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is not possible to hold that the impugned Notification dated 22nd December 2010 is bad in law only because it imposes the ban on export of cotton yarn retrospectively. Even if it is held that the impugned Notification dated 22nd December 2010 is prospective, if in fact the cap of 720 million kgs . is reached on an earlier date, the ban would anyway become operative from that date notwithstanding that an EARC may have been issued thereafter. </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">Whether provisions of Sec 194C can apply even where there is no contract of service, nor any payment for any work done - NO, says ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether entries in the books of assessee are only indicative and not conclusive; Whether contract between the assessee and its franchisees is to be given due weightage to understand the true character of the transaction; Whether provisions of section 194C can be invoked even where there is no contract of service nor any payment for any work done and Whether payment of bonus is allowable if the same is given irrespective of shareholding pattern particularly in a case where shareholding is high and bonus is minimal. And the verdict goes in favour of the assessee. </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">Enabling applicant to retrieve their own processed data: prima facie not taxable under “Online information and data base access and retrieval” service: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>STAY</strong>/Dispensation of pre-deposit – Online information and data base access and retrieval service received from outside India - Prima facie case for waiver of pre-deposit as the service provider is not providing access to any data of their own except receiving the data from the applicant and getting them processed as per the software in place and enabling them to retrieve their own processed data – Contention that no service tax is payable prior to 18.4.2006 is also relevant. </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 Time.</font></p>
<p align="justify"><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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