TIOL-DDT 1921 · 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 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><font color="#663399" size="3">TIOL-DDT 1921 </font><br>
14.08.2012 <br>
Tuesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax on Fee to Directors - Problems With Companies Act</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Section 309 of the Companies Act, the remuneration paid to Directors cannot exceed t he limit of 1% profit ofthe company when the company has a Managing /Whole Time Directors/ Managers or 3% of the profit of the company if the company does not have a Managing/ Whole Time Directors/ Managers, as the case may be. The Company can pay remuneration at a rate exceeding one percent or, as the case may be, three per cent of its net profits, with the approval of the Central Government. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, if the company is already paying 1 percent or 3 percent to the Directors and if they additionally pay the Service Tax, will it amount to paying more than 1 percent and 3 percent? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Ministry of Corporate Affairs has clarified: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First of all, the Ministry admits that <em>the Non-Whole Time Directors of the Company are presently not covered under the exempted list and as such, the sitting fee/ commission payable to them by the company<strong> is liable</strong> to Service Tax</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Ministry further clarifies that if the Service Tax is paid by the Company, it will be deemed to be a part of the remuneration and would increase the amount of remuneration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, Government has decided that any increase in remuneration of Non-Whole Time Director(s) of a company solely on account of payment of service tax on commission payable to them by the company shall not require approval of Central Government under section 309 and 310 of the Companies Act even if it exceeds the limit 1% or 3% of the profit of the company, as the case may be, in the financial year 2012-13. </font></p>
<p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">What happens after that?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nothing really. The Revenue Department had already solved this problem. By Notification No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2012/stnot12_046.htm" target="_blank">46/2012 ST</a></strong> dated 07.08.2012, Government had amended the Service Tax Rules to stipulate that in respect of services provided by a Director to the Company, the Company is liable to pay the tax <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15613" target="_blank">(DDT 1919 09.08.2012</a><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15613">)</a></strong>. So, it is now mandatory for the Company to pay the tax and it has no option. A mandatory payment made by the company cannot be added to the remuneration of the director to determine the 1 percent or 3 percent limit. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_24_2012.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MCA General Circular No. 24/2012: Dated August 09 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund of ST in respect of goods exported - Faulty Circular breeds contempt </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/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_041.htm" target="_blank">41/2007-ST</a></strong> dated 06.10.2007 [as it then existed], paragraph 1, proviso clause (e) read - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(e) the said goods have been exported <font color="#FF0000"><strong>without availing drawback</strong></font> of service tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995;" </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further in the said notification, paragraph 2(e) read - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(e) the claim for refund shall be filed on a quarterly basis, <font color="#FF0000"><strong>within sixty days from the end of the relevant quarter</strong></font> during which the said goods have been exported:" </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank">32/2008-ST</a></strong> dated 18.11.2008 amended clause 2(e) in the following manner - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In the said notification,-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) in paragraph 2, in sub-paragraph (e), for the words "<font color="#FF0000"><strong>sixty days</strong></font>", the words "<font color="#FF0000"><strong>six months" shall be substituted</strong></font>;" </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So also Notification <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_033.htm" target="_blank">33/2008-ST</a></strong> dated 07.12.2008 further amended the notification <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_041.htm" target="_blank">41/2007-ST</a></strong> in the following manner-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In the said notification, - </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) in paragraph 1, in the proviso, sub-paragraph <font color="#FF0000"><strong>(e) shall be omitted</strong></font>;" </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Because of the aforesaid Notifications <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank">32/2008-ST</a></strong> and <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_033.htm" target="_blank">33/2008-ST</a></strong>, more particularly<strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank">32/2008-ST</a></strong> a refund claim could be filed within six months of the close of the quarter and, therefore, the claim for the Quarter April, 2008 to June, 2008 which ought to have been filed by 31st August, 2008 could now be filed within six months from the end of the quarter i.e by December, 2008 by giving a retrospective effect to the notifications <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank">32</a></strong> & <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_033.htm" target="_blank">33/2008-ST</a></strong> as is suggested by the Board Circular <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/sercir112.htm" target="_blank">112/06/2009-ST</a></strong> dated 12.03.2009. Incidentally the preceding Circular <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2008/sercir106.htm" target="_blank">106/9/2008-ST</a></strong> dated 11.12.2008 on the subject matter ought to have clarified this issue but unfortunately it did not. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us also take a look at the clarification doled out by the Circular <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/sercir112.htm" target="_blank">112/06/2009-ST </a></strong>on this convoluted subject of Refund of Service Tax in respect of goods exported. The subject title reads “Filing of claim for refund of service tax paid under notification No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_041.htm" target="_blank">41/2007-ST</a> </strong>dated 6/10/2007 - reg" and the tabulation extract is as below - </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TABLE</strong></font></p>
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<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S. No. </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue Raised </font></strong></p></td>
<td valign="top"><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Clarification </font></strong></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_041.htm" target="_blank"><strong>41/07-ST</strong></a> has been amended by notification Nos. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank">32/2008-ST</a></strong>, dated 18.11.2008 and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_033.htm" target="_blank"><strong>33/2008-ST</strong></a>, dated 7.12.2008 to (i) extend the limitation period from 60 days from the end of quarter to six month; (ii) to omit the condition of non-availment of drawback. Whether, in view of amended conditions, refund for the <font color="#FF0000"><strong>quarter Mar-Jun 08</strong></font> would be allowed to be filed till Dec 08? </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is clarified that consequent upon revision of limitation period, any refund claim that is filed within such revised limitation period would be admissible if it is otherwise in order. Therefore, refund claims of service tax on specified taxable services used for exports of goods made in the <font color="#FF0000"><strong>quarter</strong></font> <font color="#FF0000"><strong>Mar-Jun 08</strong></font> could be filed till 31st Dec 08. </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Did you find anything amiss in the portion marked in <font color="#FF0000"><strong>RED</strong></font>. It reads “<font color="#FF0000"><strong>quarter Mar-Jun 08</strong></font>".</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Quarter is 1/4 th and 1/4 th of a year is 3 (three) months. But March to June is four months! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, this clarification is factually wrong inasmuch as since Quarter cannot be March to June, 2008, filing the refund for the aforesaid period till 31st December, 2008 would not be proper. One may, however, say that the refund for the singular month of March, 2008 ONLY is in jeopardy and this is true. Since the notification increasing the time limit of filing refund claim for a quarter was extended from ‘sixty days' to ‘six months' by the amending notification <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_032.htm" target="_blank"><strong>32/2008-ST</strong></a>, the only quarter that comes into reckoning is "April to June, 2008". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No doubt, this clarification has been issued only on 12th March, 2009 and the assessees but naturally would have already filed the refund claims by this time and it was only a matter of factual ascertainment that was necessary namely whether the claim was filed by 31st December, 2008 for the quarter April to June, 2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But can an assessee justify his claim of refund for the month of March, 2008 on the strength of this Board Circular no. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/sercir112.htm" target="_blank">112/06/2009-ST</a></strong> <font color="#FF0000"><strong>Or</strong></font> <strong>would this be considered an error apparent on the face? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Find out in this CESTAT decision <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2012/2012-TIOL-1021-CESTAT-MUM.htm" target="_blank"><font size="1">2012-TIOL-1021-CESTAT-Mum</font></a></strong>. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The 15th of August 1947 </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>15th August has certainly turned out to be the most remarkable and inspiring day of my life. We started at 8.30 with the Swearing-In ceremony in the Durbar Hall in front of an official audience of some 500, including a number of ruling Princes. The official guests, including Ambassadors, Princes and the Cabinet, then drove in procession from Government House (ex-Viceroy's House) to the Council Chamber. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Never have such crowds been seen within the memory of anyone I have spoken to. Not only did they line every rooftop and vantage point, but they pressed round so thick as to become finally quite unmanageable. At the Council Chamber, it had fortunately been arranged that there should be two Guards of Honour of 100 men each. These 200 men joined with the police were just able to keep the crowd back sufficiently to let us get out of the State coach without being physically lifted out of it by the crowd. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It took us half an hour to go the short distance back, for we had to go slowly through the crowds. Once we were held up for some five minutes by the pressure of the crowds. Apart from the usual cries of "Jai Hind" and "Mahatma Gandhi ki Jai" and "Pandit Nehru ki Jai", a surprising number shouted out "Mountbatten ki jai". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At 6 p.m. the great event of the day was to take place - the salutation of the new Dominion flag. This programme had originally included a ceremonial lowering of the Union Jack: but when I discussed this with Nehru he entirely agreed that this was a day they wanted everybody to be happy, and if the lowering of the Union Jack in any way offended British susceptibilities, he would certainly see that it did not take place, the more so as the Union Jack would still be flown on a dozen days a year in the Dominion. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the flag broke a brilliant rainbow appeared in the sky, which was taken by the whole crowd as a good omen. (I had never noticed how closely a rainbow could resemble the new Dominion flag of saffron, white and green). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">[<em>Excerpts from Lord Mountbatten's Personal Report No. 17 dated 16th August 1947 - his last report as Viceroy of India.</em>]</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 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">Refund of Service Tax - SEZ Unit - Jurisdictional CCE is also a member of Approval Committee and once Committee has given nexus and justification for use of such service in relation to authorized operations it was totally unwarranted on part of lower authorities to question same: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT </strong>is the avowed policy objective of the Government of India that exports should not bear the burden of taxes. If this policy objective has to be sub-served and the objective realized broader view of the provisions relating to refund has to be taken. Therefore, even if the appellant was not eligible for refund under Notification No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_009.htm" target="_blank">09/2009-ST</a></strong> dated 3.3.2009, the appellants were certainly eligible for refund under Section 11B of the Central Excise Act, 1944. </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, to claim an expenditure on ground of commercial expediency, it is not enough to say that it was a prudent or viable commercial decision - YES: HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is a company. During assessment, AO disallowed expense incurred on the medical and foreign travelling of the Managing director and his wife. AO argued that, as the MD was not actively engaged in the business affairs of the company, it was not justified to allow deduction for such a huge expenditure. On appeal, CIT(A) allowed the assessee's claim on the ground that the claim of expenditure was on account of commercial expediency and was bona fide. Revenue's appeal to the Tribunal failed. </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">Naphtha manufactured and captively consumed in generation of electricity used in manufacture of exempted goods and also used for allied purposes viz. lighting of refinery road, canteen and administrative building etc. - benefit of notfn. 67/95-CE not available for allied purposes: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>show cause notice was issued to the applicants denying the benefit of Notification No. 67/95-C.E. in respect of the quantity of naphtha which has been used in generation of electricity which is further used in the manufacture of exempted goods and used for certain allied facilities such as refinery road lighting, canteen and administrative building etc.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Thursday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Thursdaywith more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice <strong>Independence Day</strong> </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>
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