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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 2037</font><br>
04.02.2013<br>
Monday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax - 10% or 12%? - Delhi HC quashes Two CBEC Circulars</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH </strong>effect from 01.04.2012, the rate of service tax was enhanced to 12% from 10%. As per Rule 7 (c) of the Point of Taxation Rules, 2011, in case of 8 specified services provided by the individuals or proprietary firms or partnership firms, the Point of Taxation shall be the date on which payment is received or made, as the case may be. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Rule has been amended vide Notification No 4/2012 ST dated 17.03.2012, effective from 01.04.2012. The effect of the amendment is that under the new Rule 7 of the POT Rules, the point of taxation is date of receipt of payment only for the service tax payable under reverse charge, i.e., under Section 68(2) of the Finance Act, 1994. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then, what happened to the 8 specified services provided by the individuals, firms etc? Actually, the "<strong>facility of treating the date of receipt of payment</strong>" as point of taxation has been extended from 8 services to <strong>all the services</strong> provided by individuals, partnership firms, or proprietary firms having turnover of l<strong>ess than 50 lakhs</strong> in a Financial Year, by simultaneously inserting a proviso in Rule 6(1) of the Service Tax Rule, 1994w.e.f. 01.04.2012 as under: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received.” </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this backdrop, Board had issued a clarification vide Circular No 154/2012 dated 28.03.2012 that: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For invoices issued on or before 31st March 2012, the point of taxation shall continue to be governed by the Rule 7 as it stands till the said date. Thus in respect of invoices issued on or before 31st March 2012 the point of taxation shall be the date of payment. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to the above clarification, in respect of Chartered Accountant Service, which is one of the 8 specified services, though the service was rendered on or before 31 st March 2012 and invoice was also issued on or before 31.03.2012, if the payment is received on or after 01.04.2012, the rate of service tax applicable will be 12%, but not 10%. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Reiterating the above clarification, the CBEC vide another Circular No 158/2012 dated 08.05.2012 further advised the service providers to issue supplementary invoices to collect the differential 2% service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, because of increase in tax rate, what is supposed to be a boon for specified services has turned out to be a bane, because, while all other service providers who issued invoices at 10% can pay service tax only at the rate of 10% (because of Rule 4 of the POT Rules, 2011), the specified service providers have to pay service tax at 12%, as the POT is "date of receipt of payment" for them. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Had it been a reduction in tax rate, the service providers would have happily accepted the above position, but because of increase in tax rate from 10% to 12%, they are now affected adversely and therefore the Delhi Chartered Accountants Society challenged the above two Circulars before the Delhi High Court. In a judgement delivered on 1st February 2013, the High Court held that both the Circulars are contrary to the statutory provisions of the Finance Act, 1994 and the Point of Taxation Rules, 2011 and quashed them. While quashing the Circulars as contrary to the provisions , the High Court was comparing the old and new Rule 7 of the Point of Taxation Rules, 2011 ( i.e., upto 31.03.2012 and after) and held that the new Rule 7 does not provide for the contingency that has arisen in the present case. And apparently, it was not brought to the notice of the Court that there is a proviso to Rule 6(1) of the Service Tax Rules, 1994, which was inserted simultaneously, consequent to the re-drafting of Rule 7 with effect from 01.04.2012. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you today this High Court judgement delivered on Friday. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16904" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see Breaking News. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Exchange Rate for Japanese Yen amended </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended exchange rate for Japanese Yen for export goods and imported goods as Rs 58.00 and 59.60 respectively. There is no change in exchange rate for remaining currencies. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_017.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 17/2013-Customs (N. T.) Dated 31.01.2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Filing
of Cost Audit Report and Compliance Report in XBRL mode</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> continuation of MCA's General Circular Nos. 8/2012 dated May 10, 2012 [as amended on June 29, 2012], 18/2012 dated July 26, 2012 and 43/2012 dated December 26, 2012, it has been decided that all cost auditors and the companies concerned are allowed to file their Cost Audit Reports and Compliance Reports for the year 2011-12 [including the overdue reports relating to any previous year(s)] with the Central Government in the XBRL mode, without any penalty, within 180 days from the close of the company's financial year to which the report relates or by February 28, 2013, whichever is later. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_02_2013.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MoC General Circular No. 2/2013 Dated 31.01.2013. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Does
CBEC consider Prosecutor more important than the case? Bombay HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a Criminal Application filed with condonation of delay of 110 days by Union of India, the delay was sought to be explained by pointing out that the previous prosecutor had in spite of letters, not taken steps. The High Court vide its order dated 03.08.2012 directed that unless the department takes action against counsel on the panel, who would be responsible for the delay or report the matter to Bar Council, question of entertaining the application for condonation would not arise. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the matter was listed again, the Court found that that nothing has been done by the department so far. The High Court again cautioned, “If the department considers the prosecutor to be more important than the cause, it is the choice of the department. In that case delay would not be condoned”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was a case of importing more than 48 Kgs. of gold worth more than Rs.1.12crores in the international market and Rs.1.61crores in the local market, which ended in acquittal. The acquittal is challenged in appeal with a delay of about 110 days. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Was the delayed appeal a planned strategy? </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=27&filename=legal/hc/2013/2013-TIOL-80-HC-MUM-CUS.htm" target="_blank">2013-TIOL-80-HC-MUM-CUS</a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP
- Declaration of Intent for claiming Chapter 3 benefits of FTP</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DECLARATION</strong> of Intent for claiming benefit under Chapter 3 of Foreign Trade Policy (FTP) was made mandatory for all categories of shipping bills through Public Notice No. 82 dated 16.8.2010. This stipulation was to take effect from 01.01.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been decided to grant Chapter 3 benefits in respect of such cases, even though declaration of intent had not been mentioned. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Such requests for grant of Chapter 3 benefits should be filed with respective RAs before 30th April, 2013 and will not be subject to any late cut /late fee. Pending applications filed earlier, as well as fresh applications filed upto 30.04.2013 shall be taken up for consideration by respective RAs. No application after 30th April, 2013 will be accepted by RAs even with late cut / fee. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2012/dgft12cir013.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Policy Circular No.13 (RE-2012)/2009-14; Dated: January 31 2013</strong></font></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">WCO Award for 14 Customs Officers - But where is Function? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>14</strong> Customs officers have been awarded the “World Customs Organization (WCO) Certificate of Merit” on the occasion of the International Customs Day 2013. They have been asked by the CBEC to be present on the Customs Day celebration in New Delhi on 5th February 2013 to receive the Certificates. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5th
February; New Delhi - that is all that they have been told. At what time
on 5th February and where in New Delhi - the poor awardees are not informed.
Many awardees called us up to find out the venue and time. And our inquiry
reveals the following:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chief
Guest: Hon'ble Finance Minister P Chidambaram; Guests of Honour: Hon'ble
MoS(R) S S Palanimanickam & Rahul Bajaj; Venue: Zorawar Auditorium, Manekshaw
Centre, Swarna Jayanti Marg, Delhi Cantonment, New Delhi; Time: 8.45 AM</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">German Customs nabspax with Cheque of 70 Million Dollars </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>LAST</strong> week, the German Customs at Duesseldorf airport found a passenger with a cheque for 70 million dollars. Enquiries revealed that the passenger was a former Chief of the Central Bank of Iran. Customs suspect a money laundering aspect to the mysterious cheque. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mass resignation by Superintendents of Central Excise & Service Tax on 30.04.13 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECRETARY</strong> General of All India Association of Central Excise Gazetted Executive Officers, Ravi Malik says, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the Superintendents of Central Excise & Service Tax will tender their resignations on 30.04.13 being fed up of “no promotions, lower salary & lack of working conditions”. They have been presenting their case to the <strong>concerned</strong> authorities regularly for last more than 2 decades but without response. They have already observed the Satyagraha programmes for many years like fasting, Anshan, dharnas, Shantigoshthis, Gandhigiri, lunch hour protests, wearing black badges, boycott of Excise day etc. But the <strong>concerned</strong> authorities always had a deaf year to their demands. Nobody is listening to them despite the major government revenue being earned by them in the form of Central Excise duty, Customs duty & Service Tax. Their cadre restructuring meant for removal of stagnation is pending with government for last 7 years while next cadre restructuring has already become due being prescribed to be done at every 5 years. In the history, only one cadre structuring has happened for them instead of it happening at 5 yearly intervals. Even after only one cadre restructuring in 2002, IIIrd cadre restructuring should have been started till now. The ongoing one is also not being implemented despite the approval by the Expenditure as well as Finance Minister 2 years ago whereas a large number of these officers being retired every month without promotion. Their demoralisation, dissatisfaction and non-motivation have already resulted into the shortage of the government revenue target for Ist half of the current financial year.</font></em></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">Public facility means facilities owned by State or local government such as public building, structure or system, including those used for education, recreational or cultural purposes - Sports Stadium constructed for conducting Commonwealth Games is non-commercial construction - merely because some amount is charged for using facility, it cannot become commercial construction - <em>prima facie</em>, appellant not liable to pay Service tax - Pre-deposit waived and stay granted from recovery of adjudged dues of more than 20 Crores: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant constructed a Sports Stadium Complex for Government of Maharashtra at Mahalunge, Balewadi, Pune and this Stadium is known as Shree Shiv Chhatrapati Sports Complex. This stadium was constructed on tender invited by the Government of Maharashtra. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question involved is whether this construction undertaken by the appellant amounts to ‘Commercial or Industrial Construction' as defined under Section 65(25b) of the Finance Act, 1994. The said section defines the terms ‘Commercial or Industrial Construction Service' as construction of a new building or a civil structure or a part thereof which is used or occupied or engaged, primarily, for commerce and industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CCE, Pune-II observed that the facility constructed by the appellant for the State Government of Maharashtra is to be used by the public and others for a consideration for use of the facility and, therefore, the entire building structure is commercial construction and accordingly he confirmed the Service Tax demand of Rs.10,21,11,459/- u/s 73 and also imposed an equivalent amount of penalty u/s 78 of the FA, 1994. </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="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether when transferor company sanctions dividend after date of amalgamation but before same was sanctioned by competent court, such payment can still retain character of dividend - NO: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether when the refund application is not in proper format, it changes the character of the application seeking refund; Whether when the transferor company sanctions dividend after the date of amalgamation but before the same was sanctioned by a competent court, such payment can still retain the character of dividend and Whether tax paid on such dividend is liable to be refunded. 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">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 4(1) of CCR, 2004 - There is no time limit prescribed in CENVAT Credit Rules for taking credit - If manufacturer does not take credit as soon as inputs are received in factory, word “immediately” in rule 4(1) of CCR, 2004 does not mean nor is it intended to mean that benefit would be denied - If manufacturer has not taken credit immediately, it is affecting manufacturer, not Revenue - Order set aside & appeal disposed of: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue associated with the adverb “immediately” is as old as the credit rules when they first appeared on the horizon but this time there is a twist in the end. <font color="#FF0000">A twist which the assessee may find it difficult to unwind and the Revenue would be glad to twist further!</font> Inasmuch as the appellant had taken credit of Rs.4.46 Crores during the period October 2006 to November, 2006 on the inputs which were received in the factory during the period April, 2004 to September, 2006. Similarly, they had taken credit of Rs.33 lakhs in the month of April, 2009 in respect of the inputs that were received during the years 2005-06, 2006-07 and 2007-08. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue representative after relying upon the findings of the lower authority submitted that in view of the delay in taking the credit it is not possible to verify whether the duty paid inputs are received in the factory and are used in the manufacture of goods cleared on payment of duty hence the demand is rightly made. </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 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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