TIOL-DDT 1901 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font></strong></font><font color="#663399" size="3">TIOL-DDT 1901</font><br>
</strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">16.07.2012<br>
</font></strong><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MONDAY</font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Confusion surrounding Rule 6(8) of CENVAT Credit Rules 2004 haunts tax payers</font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong>colloquial English, we often hear double negatives like "You don't get nothing", or "I did not kill nobody". It seems Rule 6(8) of the CENVAT Credit Rules, 2004 is suffering from such "double negative effect". </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ever since we carried the possible error in Rule 6(8) in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15413" target="_blank">DDT 1897</a></strong>, we are getting mails from heads of indirect taxes of cross section of industry with different views on the subject matter, proving at least one thing. There is utter confusion prevailing on the issue. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before going into the details, it will be useful to read the sub-rule 8 of Rule 6 of the CENVAT Credit Rules, 2004 in its present form. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(8) For the purpose of this rule, a service provided or agreed to be provided shall not be an exempted service when:- </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules, 1994 and the payment for the service is to be received in convertible foreign currency; and </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) such payment has not been received for a period of six months or such extended period as maybe allowed from time-to-time by the Reserve Bank of India, from the date of provision. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is quite common practice to keep exports out of the scope of mischief of Rule 6. For goods, it is clearly mentioned that the provisions of Rule 6 are not applicable ( Ref: Rule 6(v)). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For services, as per Rule 2(e) of the <em>CENVAT Credit</em> Rules, "exempted service shall not include a service which is exported in terms of Rule 6A of the Service Tax Rules, 1994". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is worth noting that Rule 6A of Service Tax Rules, 1994 does not stipulate that the payment for the service shall be received within six months from the date of provision of the service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, even if the payment is not received within six months, export of services would be outside the purview of Rule 6 of the CENVAT Credit Rules, 2004, by virtue of the definition of exempted service and there would be no necessity to insert any sub-rule like 6(8) in the CENVAT Credit Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, apparently the Government wanted to exclude the exports from the purview of Rule 6 with some conditions linked to receipt of payment for the export. If the payment is not received within six months or such extended period, may be the credit on the input services used for export of services needs to be reversed. This view is also fortified by the<strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/service_tax_ministry_finance_changes.pdf" target="_blank"> Power Point Presentation</a></strong> made by the JS(TRU). Relevant slide reads as under: </font></p>
<blockquote>
<p><strong><font color="#006699" size="2" face="Verdana, Arial, Helvetica, sans-serif">If payment not received in 6 months… </font></strong></p>
<blockquote>
<p align="justify"><font color="#006699" size="2" face="Verdana, Arial, Helvetica, sans-serif"> - Service will remain non-taxable, being provided in a non-taxable territory - … but input tax credits will need to be reversed </font></p>
<p align="justify"><font color="#006699" size="2" face="Verdana, Arial, Helvetica, sans-serif">- But if payment received before the period allowed it will comprise exports </font></p>
</blockquote>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, if the exports are to be kept outside the purview of Rule 6 only if the payment is received within six months or such extended period from the date of provision of service, the sub-rule 6(8) should be worded in the following manner: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(8) For the purpose of this rule,<font color="#FF0000"> in case of export of services</font>, a service provided or agreed to be provided shall <font color="#FF0000">not</font> be an <font color="#FF0000">exempted</font> service <font color="#FF0000">only</font> when:- </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules, 1994 and the payment for the service is to be received in convertible foreign currency; and </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) such payment has been received for a period of six months or such extended period as maybe allowed from time-to-time by the Reserve Bank of India, from the date of provision. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unless some immediate clarification / amendment is made, the double negative is going to create a lot confusion among the stakeholders. At least one Head of Indirect Tax of a big company interprets Rule 6(8) in its present form to mean, "The assessee has to make payment as per Rule 6 if the exports proceeds are not received within the stipulated time or extended time and once the foreign exchange payment is received, the amount paid under Rule 6 can be taken as refund". </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will TRU clarify? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax on Beggars? </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>TRU PowerPoint Presentation says, </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ A beggar playing music on road not taxable even if soliciting money </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ But taxable if <strong>same beggar</strong> performs at a function for consideration </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the same beggar performs at a function for consideration, is he still a beggar? And why is it not Taxable when he sings on the road while it becomes taxable if he sings in a hall? (Assuming that many beggars in India earn more than Rs. Ten Lakhs a year) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember the old-time song <a href="http://www.songs.reloadlife.com/dus-lakh/garibon-ki-suno-woh-tumhari-sunega.html" target="_blank"><strong>Tum Ek paisa doge Woh Dus Lakh dega</strong></a>. (You give me a paisa; HE will give you Ten Lakhs). Is there a service in this case and the promise of a huge consideration? </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The TRU Power Point says, </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consideration may actually be payable at a later point of time but linkage should be immediate. </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Fees Paid to Company Directors Taxable? </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> TRU Power Point says, </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not excluded and thus taxable: </font></p>
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Applicable to all kinds of directors except of government regulatory bodies </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Any monetary or no-monetary consideration </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Director's fee </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Commission/bonus </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Company car/ travel reimbursements </font></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What will be the status of payments made to a partner? And what is the position of whole-time directors? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the CAG back in Service Tax Net? </font></strong></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PLEASE see </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15145" target="_blank">DDT 1871 04.06.2012</a> </strong>- <font color="#006600"><strong>CAG Evades Service Tax? Show Cause Notice to be issued? </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15211" target="_blank">DDT
1878 13.06.2012</a> </strong>-<strong><font color="#006600"> Evasion
of Service Tax by CAG No Notice - Yet … </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15262" target="_blank">DDT 1883 20.06.2012</a></strong> -<strong><font color="#006600"> No Service Tax on CAG Clarifies CBEC </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you remember, the Chief Commissioner, Nagpur had written to all Chief Commissioners, to collect Service Tax from the CAG for the paid services offered by him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a rather, quick action the Board clarified in Circular No. 159/2012-ST dated 19.06.2012 clarified that the <em>services of CAG are not services as are rendered by a chartered accountant even though both may be engaged in the sphere of the auditing . Board also clarified thatservices of CAG are also not covered by the heading Business Support Services</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please note, Board did not say that services by CAG are not taxable; it only said that they are not covered under certain specific heads. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, with effect from 1st July 2012, there are no such classifications and so perhaps CAG can be brought under the tax net. Though services by Government fall in the negative list, it is doubtful whether CAG is Government and further whether these services will get covered under the exclusion clause <em>(iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities</em>; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe Nagpur Chief Commissioner can revive her campaign to rope in the CAG! </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs Tariff Values amended </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TARIFF</strong> Value of Brass Scrap is reduced to 4090 USD per MT and for Gold it is decreased to 506 USD per 10 grams and for Silver it is decreased to 866 USD per Kilogram. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2012/cnt12_058.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No 58/2012-Cus.,(N.T.), Dated: July 13, 2012 </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><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">Service Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellant collecting consideration for plant operation and maintenance and discharging tax liability - clients supplying electricity free of cost for said service the fact that cost of electricity used in manufacture of oxygen has to be considered in determining excise duty payable on oxygen does not mean that cost of electricity has also to be considered in determining value of taxable services - CESTAT directed to hear appeal on merits without insisting on any pre depos it: HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant entered into an agreement with their customers M/s Sunflag Iron & Steel Co. Ltd., Bhandara and M/s Lloyds Steel Industries Ltd., Wardha for plant operation and maintenance and for the services rendered they had received consideration from the clients on which service tax liability was discharged. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="left"><font size="2"><strong><font color="#FF6633" face="Verdana, Arial, Helvetica, sans-serif">Income
tax - </font></strong></font><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether
when taxable income is enhanced either under Ss 147 or 263, assessee
is liable to pay interest u/s 234B - YES: HC</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br />
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>issues before the Bench are
- Whether when assessment is made for the first time u/s 147 it is to be
construed as a regular assessment and Whether when taxable income is enhanced
either under Ss 147 or 263, assessee is liable to pay interest u/s 234B.
And the verdict goes against the assessee.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Petitioners could not point out any legal provision requiring authorities to first adjudicate notice issued regarding confiscation and then only they could have issued show cause notice regarding recovery of dues and penalty contention raised is wholly misconceived Writ Petition dismissed: HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>A</strong> textbook case booked against an assessee who manufactures and clandestinely removes goods usually goes thus. The clandestinely removed goods are seized and the investigation agency gathers evidence to prove that the assessee has been doing this surreptitiously for long. So, after recording of statements and gathering other corroborative evidences, a demand notice is issued demanding duty that escaped assessment for the past five years. But before this demand is issued, priority is given to the demand notice that has to be issued in respect of the goods that have been seized, all thanks to the provisions of section 110 of the Customs Act, 1962. </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><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"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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