TIOL-DDT 1650 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"
"http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
<title>Untitled Document</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1650</font><br>
13.07.2011<br>
Wednesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Leviability of Service Tax on Flying Training School and Aircraft Maintenance Engineering Institutes - CBEC Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> received representations seeking clarifications regarding leviability of service tax on Flying Training Institutes providing training for obtaining Commercial Pilot License (‘CPL') and on Aircraft Engineering Institutes for obtaining Basic Aircarft Maintenance Engineer License (‘BAMEL'). CPL and BAMEL are granted by Directorate General of Civil Aviation (‘DGCA') after conducting required examinations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These institutes have sought to cover their activity under the exemption clause provided in the definition of ‘commercial training or coaching centre' as laid down in section 65(27) of the Finance Act, 1994, as it stood prior to the amendment in Budget 2011. Board examined the issue and clarifies as follows: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. The flying institutes / academies are approved by the DGCA and in fact figure in the website of the DGCA as well. But that does not automatically translate into the courses being conducted by them getting the status of 'recognized by law', since for that to happen, there has to be a statutory backing which is not the case here. The fact that the training imparted by the academies is taken into consideration by the DGCA does not make the course certificate statutory in nature. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. The procedure for granting of a CPL (Commercial Pilot License) entails clearing of an exam that is conducted by the CEO (Central Examination Organisation) of the DGCA, The test has a proper syllabus that is laid down in the DGCA website. The license is granted as per Aircraft Act 1934 read with Aircraft Rules (Rule 38 of the Rules ibid lay down the Licensing Authority for granting of the licenses shall be the Central Govt.). Thus, there is no statutory recognition of the course being provided by the flying academies. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">If granting of CPL entails clearing of an exam conducted by the Central Examination Authority of the DGCA and the test has a proper syllabus prescribed by the DGCA and the license is granted as per Aircraft Act 1934, then how can you conclude that the course which leads to granting of such a license, as not having any statutory recognition? – this is outrageous</font>) </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. In fact the closest that the relationship between the academies and the DGCA comes is something that has been outlined in Notification No. 10/2003 dated 20th June 2003. It exempts the taxable services being provided by a commercial coaching / training centre in relation to commercial coaching that forms an essential part of a course or a curriculum being offered by any other institute or establishment leading to issue of a degree or qualification recognized by law for the time being in force. However, the said exemption is subject to the condition that the exemption shall not be applicable if the charges towards the course are being paid directly to the coaching centre in question. Thus, in the current case, it can be argued that the flying academies are providing coaching that ultimately culminates in issuing of the CPL by the DGCA (even though that is not a guarantee in as much as it is subject to clearing the exam). This, CPL is definitely recognized by law. Thus, it may appear that the exemption is operative; however, the flying academies are hit by the exclusion clause of the above notification since the charges are paid by the trainees the coaching academies directly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">The validity of the proviso to the Notification No. 10/2003-ST itself appears to be doubtful in as much as it treads beyond the statute as it stood prior to the amendment through Budget 2011 – how does it matter who pays to whom so long as the certificate is issued in accordance with law?</font></strong>) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. Also relevant is the Circular No. 107/01/2009 - ST dated 28th Jan 2009 issued by the Commissioner (Service Tax) which clearly says: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"As all these institutions or establishment are either created or recognized in terms of the power conferred by statutes, they would fall in the category of institutes/ establishments which issues diploma or certificate recognized by the law for the time being in force..." </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the current case, the institutes in question do not fulfil this criterion, as neither are they created nor recognised by the statute. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. Thus, the course certificates given by these academies cannot be held as "recognized in law" for the purposes of service tax exemption unless and until the course per se is specifically recognized by law which is not so in the current case. It may be added that there are several judicial pronouncements that lay down that the specific wording of law have to be interpreted strictly. Thus, the term "recognized by law" has to construe a direct nexus only between the degree/ certificate being awarded by the Coaching centre and the statute. Accordingly, the said institutes/academies would clearly come in the category of coaching centres as laid out in the pre-amended Section 65(27) of the Finance Act ibid (prior to Budget 2011) and therefore would be taxable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">It is the course, which requires the statutory recognition and not the institutes providing such course.</font>) </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">f. In the Finance Act, 2011, w.e.f., 01.05.2011, the definition of Commercial Training or Coaching service as provided under Section 65(27) has been amended to mean - "any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes". The exclusion clause available earlier on is now gone. However, vide Notification No. 33/2011 - ST dated 25.04.2011 exemption has been provided to two categories which are - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) any pre-school coaching or training; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii) any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law for the time being in force; </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">By virtue of this exemption notification, courses offered by these institutes are exempt because they lead to certificates recognized by law</font>) </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">g. It is to also clarify that that the coaching being provided by Flying Training Schools and Aircraft Maintenance Engineering Institutes would also not come under the scope of the exemption provided under the second category of the exemption notification mentioned above for the same reasons as mentioned. It is also pertinent to mention that the intent of the changes in the definition of Commercial Training or Coaching service as made in Budget of 2011 is evident on perusal of the explanatory letter of JS (TRU-II) D.O.F.No. 334/3/2011 - TRU dated 28.2.2011 wherein at Para 3.3 it has been mentioned that - "The scope of the service is proposed to be expanded to include all the coaching and training that is not recognised by law, irrespective of whether the institute is providing any other course(s) recognised by law." Thus, the scope of the service has in fact been expanded. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">The nature of this expansion is explained further in the same TRU Circular at Annexure B Para 3 and further by Notification No. 33/2011-ST which followed thereafter – which certainly does not give the impression which is being created by the above clarification</font>) </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">h. In addition, it may also be observed that the institutes do not fall under the exemption Notification No. 24/2004 (as amended), as the institutes' courses do not directly enable the trainee getting the requisite employment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">Board is probably not aware of the ground realities in the Aviation sector where there is a shortfall of qualified commercial pilots and with proper course and valid certification, employment is guaranteed</font>)</strong> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i. Therefore, the said institutes/academies would clearly come in the category of coaching centres as laid out in the Section 65(27) of the Finance Act ibid (either prior to or after Budget 2011) and therefore would be taxable. It is clarified that the contents of this instruction shall not override any statutory provisions. It is accordingly requested that immediate action may please be taken to safeguard revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(<font color="#663399">One more Circular from the Board which will only help fill the coffers of advocates and tax consultants – they will only welcome more of such circulars from the Board</font>) </strong></font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2011/cbec_letter_fts_137.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter F. No. 137/132/2010 - Service Tax., Dated: May 11,2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC's Draft Guidelines for Transfer of Superintendents and Inspectors - Sensitive Posts defined</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has issued transfer guidelines for Superintendent and Inspector posts in the Central Excise and Service Tax formations. The introduction loftily states; </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Group ‘B' Executive Gazetted and non-Gazetted (i.e. Superintendent and Inspector ranking officers) constitute 48% of the total sanctioned work of the department. Further, they are the cutting edge level officers and often are the first to interact with Assesses/Clients of the department. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The transfer and placement of these officers in a fair and transparent manner is very important step to ensure efficiency, recognition of merit and honesty. Further, by rotating these officers to various charges, department builds supervisory capacities at the level of Group ‘B' Gazetted. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rotation between Sensitive and Non-sensitive postings:</strong> The guidelines prescribe:</font></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ There should be strict rotation and adherence to tenure of postings in case of all the posts – sensitive as well as non-sensitive- to ensure all round exposure and efficiency. However, in case where sufficient number of officers are not available due to administrative / vigilance reasons for posting to sensitive charges, officers can be rotated from one sensitive charge to another sensitive charge. </font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As far as possible, an officer in the subsequent cycle of postings should not be posted in the same sensitive charge.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Normally, there should be a gap of minimum two year between one sensitive posting to another.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ On reversion from a sensitive Directorate, as far as possible, officers would be posted to a non-sensitive charge for a minimum period of two years.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Posting to a sensitive charge should normally not exceed two years for each posting.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ First posting on appointment / promotions / reversion from Customs Commissionerate of the officers in the grade of Inspector /Superintendent in a Central Excise / Service Tax Commissionerate, should be, as far as administratively possible, to a non-sensitive charge. </font></p>
</blockquote>
</div>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is a sensitive posting?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>A sensitive position is any post whose occupant could cause adverse effect to the integrity and functioning of the institution by virtue of the nature of his/her responsibility. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A post can be characterised as being sensitive: </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) by the<u> nature of the activity</u> itself. This could be the case for all activities where a high degree of personal judgement is involved when taking decisions, e.g. experts taking decisions in the area of procurement or contracts, with regard to policy-making and negotiation or in areas where there is a relatively high degree of freedom to act and/or where supervision levels might be low; or sometimes the private assumptions on the personal capacity of the experts in the system. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) by the context in which the activity is carried out. This could apply to functions dealing with policy-making where officials might be subject to pressure to disclose sensitive information and where disclosure might harm the interests of the institution. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But now in Indian Government, plainly speaking, a sensitive post means one in which you can make money. This fact is openly and officially acknowledged and transfers are accordingly made or transacted. Transfers are an annual commercial activity in the Revenue Department. At the higher level, even this job is sensitive. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to the CBEC, the following are the sensitive posts: </font></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Anti Evasion / Preventive Wing
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Refund / Rebate Cell
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Vigilance Section
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Current Audit <strong>(<em>what is this ?</em>)
</strong></font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ All Ranges / Forward Sectors </font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Postings in Chief Commissioner's office and office of Commissioner (Appeals) are to be treated as non-sensitive. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/pitara/cbec_draft_gpB_2011.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC's Transfer Guidelines. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Government Websites Updated and Outdated</font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SOME</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> ten
years ago, I suggested to the Director, Systems, CBEC to have the photograph
of the Chairman, CBEC on the website of the CBEC. The Director told me, “if
the Chairman gets arrested by the CBI (that was around the time that the
then CBEC Chairman was arrested by CBI), I wouldn't know how to remove the
photo from the website and it would take me at least four days to get it
removed!”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday evening at 5 pm, some new ministers joined the Indian Cabinet and some took charge of different portfolios. How did the websites of these <strong>concerned</strong> ministries react to the event? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Ministry of Corporate Affairs website reacted immediately and they had a picture of their new minister, Veerappa Moily uploaded immediately. They simply took off his information from the Lawmin website and uploaded it here. But the Law Ministry is yet to recognise Salman Khursheed, as their website still shows Veerappa Moily as their minister. Law is known for its delay. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Trains now run on time though they frequently derail and the Ministry of Railways was equally quick to update and showed Dinesh Trivedi as its new minister. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribal Welfare Ministry is yet to accept Kishore Chandra Deo as its new minister. Environment Ministry is yet to get rid of Jairam Ramesh and they don't seem to be aware of Jayanti Natarajan. Other ministries like Rural Development and Science & Technology are also yet to acknowledge their new ministers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this e-age, perhaps the easiest thing to do is to start a website and the most difficult thing is to update it – especially if it is a government one! </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also see <strong>DDT's</strong> Dream Cabinet in <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9054"><strong>DDT 1114 - 20.05.2009 </strong></a></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"> – Thursday's cases</font></strong></font></strong></font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#663399"><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">Central Excise </font></font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Retail packs of 'Cadbury Dairy Milk Gold' and 'Cadbury 5 Star' sent to job-worker for re-packing into assorted packs called 'Celebrations' - duty payable u/s 4A and not section 4 of the CEA, 1944: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DURING</strong> the period of dispute, two of their products “44 gms Cadbury Dairy Milk Gold” and 20 gms. “Cadbury 5 Star” packed in retail packs with MRP printed on them were cleared to their job-worker M/s Dr. Writer Foods Products Ltd., Satara in cardboard cartons called “outers” which contained certain number of bars of chocolates. The dispute in this case is about the duty payable on the clearances of “Dairy Milk Gold” and “5 Star” chocolates in card board boxes by the appellant to their job-worker. </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 when assessee fails to rebut quantum addition made by AO in respect to undisclosed income found during search, penalty is warranted in such circumstances - YES, rules ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> firm is a builder and developer belonging to “Earth Group” - a search was conducted u/s 132 on the group - two diaries marked as A-11 and A-12 were found and seized – the partner of firm stated that diary A-11 contained all payments received by cheque whereas all cash sale receipts were recorded in the diary A-12 and admitted that cash receipts were in the nature of on money receipts and payments which were not reflected in the regular books. However, the transactions in diary A – 12 were fully recorded in the books. </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">Assessee giving his own interpretation without informing Department - Extended period applicable: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Respondent has raised the argument that the demand is time barred. It is seen that these impugned Commissions were not reported in ST3 returns filed. An assessee on his own giving an interpretation of law and not bringing the relevant matters to the notice of the department will be a fit case for invoking extended period of time. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p><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"><strong> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
</body>
</html>