TIOL-DDT 2448 · the untouched capture
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<!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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#663399" size="3"><s><strong><font size="2"><strong><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=20079"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2014_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="250" height="123" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></font><font color="#663399" size="3">TIOL-DDT 2448</font><br> 30.09.2014<br> Tuesday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax on Electricity, Water and Diesel Charges </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>Commissioner recently had a doubt and sought clarification from the Chief Commissioner regarding liability of Service Tax on amounts collected by the assessee towards electricity and water from the tenants, apart from rent, for payment to the Electricity Board/ Water Board. The Service Tax was demanded on subject services under the category of "Management, Maintenance or Repair" service (MMR). On a similar issue, in Pune Commissionerate, the demand of Service Tax under <em>"Renting of Immovable Property"</em> (RIP) was dropped on the ground that they do not form part of RIP services.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner, on re-examination, felt that the electricity charges and water charges collected on actual basis by the assessee and paid to Electricity Board/ Water Board could qualify to be excluded on 'Pure agent' basis as the assessee played the role of pure agent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The good Chief Commissioner called a meeting of all the Commissioners in his jurisdiction and the meeting decided that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. If the assessee is collecting actual amounts of electricity and water charges from the tenants by issuing an invoice or otherwise and paying to the Electricity Board/Water Board (third party) and fulfilling the conditions given under Rule 5(2) of Service Tax (Determination of Value) Rules, 2006, the expenditure or cost incurred are not includable in the taxable value. In this connection, the meaning of pure agent given under explanation 1 of Rule 5(2) ibid may be seen. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. With reference to the charges collected towards the DG set maintenance by the service provider, the service provider is providing the service of maintenance of DG set and supply of electricity to the tenants, during power shut down from Electricity Board, and the amounts collected would form part of value for charging Service Tax. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Of course Show Cause Notices are flying all over the country and the litigation is pending at different stages. This is a problem faced by many property owners. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally in the Pune Commissionerate, the notice was dropped for one assessee and confirmed for some other assessees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some Commissioners feel that after the advent of 'negative list', this collection of charges for supply of electricity is taxable. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15469"><strong>DDT 1903-18.07.2012</strong></a><strong>, </strong>we asked, </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">But, is it not a settled law that Electricity is goods and many State Government VAT Acts have exempted the sale of electricity from VAT? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CESTAT in <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTA4MzM=" target="_blank"><font size="1">2013-TIOL-1751-CESTAT-MUM</font></a></strong>, held, "<em>We find that electricity is specifically covered under Tariff Heading 27 of the Central Excise Tariff Act. We find that as per the provisions of Maharashtra Value Added Tax Act, 2002, electricity is also covered under Schedule A sr.no.20 and charged to Nil rate of tax. In view of this, we find the </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"><em>electricity is goods </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>chargeable to duty under Central Excise Tariff as well as under the Maharashtra Value Added Tax Act, 2002. Therefore, the supply of electricity to tenant amounts to sale of goods and not supply of service. Further the Notification No.12/03 ST dated 20/6/2003 exempt from service tax, any value of goods supplied by service provider to service recipient.</em>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">BSNL in a letter dated 27-08-2012, clarified to its Telecom Circles that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Service Tax on payment of charges towards diesel and electricity consumption (based on actuals) is applicable in accordance with Section 67 of Finance Act, 1994 read with Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Service Tax paid on consumption/reimbursement of Diesel and Electricity Charges is available for Cenvat credit since BSNL is paying Service Tax on infrastructure services received from Infrastructure service providers. Such Service Tax payment on Infrastructure services would be input service for BSNL. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is this not an issue that can be easily settled by the Board with a clarification? But as in any case, the field officers don't obey the Board, litigation is the only way. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please also see - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9434">Service Tax on Electricity</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Hosur notified as ICD </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC </strong>has notified Hosur in Krishnagiri district of Tamil Nadu as an Inland Container Depot for Unloading of imported goods and loading of export goods. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2014/cnt14_088.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 88/2014-Cus., (N.T.), Dated: September 26, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP - Revision in Import Policy for some primary agricultural commodities appearing in Chapter 10 of ITC(HS), 2012, Schedule 1 (Import Policy)</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has made amendments in the Import Policy of Chapter 10 of ITC (HS) 2012, Schedule 1 (Import Policy). The Import Policy for certain agricultural items have been revised from <em>"State Trading Enterprises" </em>to <em>"Free".</em> </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2013/dgft13not093.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 93 (RE - 2013)/2009-2014., Dated: September 29, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP - Import of Currency Paper and Security Printing Paper; conditions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has made amendments in Policy Condition No.1 and 3 of Chapter 48 of ITC(HS), 2012, Schedule 1 (Import Policy): </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Requirement of a specific approval letter from M/o Finance for import of Currency Note Paper/Security Printing Paper has been dispensed with, subject to submission of a certificate of import from the head of the Units of SPMCIL and BRBNMPL to Customs, for clearance of such imports and subject to Actual User condition. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2013/dgft13not094.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 94 (RE - 2013)/2009-2014. , Dated: September 29, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Swachh Bharat - Clean the Offices - D.O Letter from CBEC Chief </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Chairperson of CBEC Shanti Sundharam has in a D.O Letter to the Chief Commissioners and DGs said, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The drive towards achieving clean offices is of utmost importance and I request you to take up cleaning of the offices and residential premises under your control in a mission mode. A number of steps are being undertaken In North Block which is enclosed for your reference. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>I would also request you to go through the enclosures attached to this letter and chalk out a time bound action plan for ensuring cleanliness of the office and residential premises In your zone. The copy of the Action Plan may also be hosted on your website.</em> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She adds:- "<em>There is a need to motivate all officers and staff to adopt cleanliness as a mantra in their daily life; In this context, the "Swachchta Shapath" will be administered on 2nd October, 2014 at 11AM in all attached and sub-ordinate offices of CBEC."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Significantly, her letter starts with, Dear Sir/Madam - this is a rare feature in Government; no boss will address his subordinate or one who is not a Government officer as "Sir". An Inspector in Central Excise once mailed me, "even though you are not in the department, I call you SIR, because of the respect I have for you" - some respect indeed! </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=pitara/misc_files/chperson-swachhbhrat.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC Chairperson's Letter D.O.No.CH(EC)/Misc/SB/2014., Dated: September 26, 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Leave a Note for your Successor - PM tells Babus </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HANDING</strong> over and taking over charge when officers get transferred or retired was a responsible tradition in Government, but as we advanced, nobody wants to be responsible and so the 'handing over charge', withered away and nowadays it is not even an empty formality. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DoPT in a letter to all Ministries and Departments of the Government states; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Knowledge is a key driver of organizational efficiency and effectiveness, an intangible and one of the most valuable assets of an organization. Often, it is seen as the 'hard' information available in files, notesheets, correspondence, documents, SOPs, MOPs, and electronic databases. It is much more than that. All employees have invaluable knowledge of their areas of responsibility, which may be much more nuanced and integrated than those mentioned earlier.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Such innate knowledge is at a risk of getting lost </em></strong><em> when the incumbent leaves the seat/ gets transferred or demits office. New employee will take time to understand issues of current importance, appreciate urgency of actionable points, recognize strengths and weakness of different subordinates for suitable work allocation, and comprehend critical issues by trial and error. This time spent in negotiating the way in new environment, spent in trial and error, may turn out to be the critical difference between success and failure of the unit, the department or even the organization. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Thus, knowledge continuity in wake of employee transition needs to be recognized as a key challenge: more so in the government where rule based Personnel policies mandate a fixed tenure. Problem of knowledge continuity can be significantly tackled if incumbent employee, with overall goal of success of the organization in mind, considers the successor as a part of same team and transfers the knowledge that he/she considers critical. Such knowledge transfer can be by personal interaction and briefing. However, written notes for the successor serve the purpose more effectively and also help build institutional memory. In government, though this practice used to be in vogue, of late it is becoming rare. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>A need for re-institutionalizing the practice of leaving 'note for the successor' was highlighted by Hon'ble Prime Minister during the presentation of the M/o Personnel, PG & Pensions on 12 June 2014.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the DoPT wants the babus to cultivate the habit of leaving behind <em>"note for the successor"</em> when they move out. The DoPT also wants training establishments to include inputs on <em>"note for the successor"</em> in their training programs so that officers are sensitized towards this important organizational responsibility. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=pitara/business_rules/dopt_13024012014.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DoPT Office Memorandum No. 13024/01/2014-Trg.( Trg. Ref.)., Dated: September 26, 2014 </strong></font></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"> – Wednesday's cases</font></strong></font></strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"></font>Central Excise</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT Credit of Service Tax paid on outward transport - Delivery of goods at buyer's premises - Credit is not admissible of freight charges as they are not integral part of price of goods: HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Assessee manufactures cement and clinker and it supplied the goods to different entities on FOR basis during the relevant period. According to the Assessee, it continued to be owner of the goods till delivery and the sale of the goods took place at the destination. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The amount paid for the GTA-service was not included in the price of the goods; and it was not integral part of the price of the goods. It was separately paid but the Assessee claimed Cenvat credit on the service tax paid. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The demand of CENVAT Credit was upheld by the Tribunal. Hence the assessee is in appeal before the High Court. The period of dispute is January 2005 to October, 2007. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether penalty is warranted even in case where tax is paid to buy peace with Revenue - NO: HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is an individual who had established a small private school. A search was conducted and it was noticed that sums of Rs.46,530/- and 48,380/- for the two years were not accounted for. Thus, the amounts were added to his income and separate orders of assessment were passed. On appeal, the CIT(A) granted him relief. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On appeal, the Tribunal upheld the order of assessment. Accordingly, the assessee paid the dues of tax, on the amounts added to his income. Subsequently, the ITO initiated proceedings under Section 271(1)(c). The assessee submitted that he had admitted to the figures as they were only the result of calculations and also he had already been subjected to tax on such amount. However, rejecting such submission, the ITO passed an order levying penalty of Rs.20,000/- each for the two assessment years. On appeal, the CIT(A) deleted the penalty levied. The Department filed an appeal before the Tribunal, which upheld the order of the ITO and directed the Assessing Officer to levy minimum penalty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether penalty is warranted even in a case where tax is paid to buy peace with the Revenue and Whether when the assessee runs a small school and maintains no books, detection of some additional income during the Survey must necessarily lead to imposition of penalty after the Tribunal confirms the additions. And the verdict goes against the Revenue. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services provided by M/s Bechtel Overseas Corporation Ltd. San Francisco, CA of overall management and administration for Sahara's Aamby Valley project is correctly classifiable under category of Consulting Engineer Service & not under Real Estate Agent Service - Services by provider located outside India to recipient in India is leviable to ST only from 18.4.2006 - Revenue appeal dismissed: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a Revenue appeal against an order passed by the CCE(A) setting aside demand of Rs.28,12,221/- against the respondent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The respondent M/s. Bechtel Overseas Corporation Ltd. San Francisco CA, provided overall management and administration for M/s. Sahara India Commercial Corporation Ltd. (Sahara)'s entire project at Aamby Valley under an Agreement for Program Management Services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department alleged that the service provided by M/s. Bechtel falls under the category of Real Estate Agent Service and, therefore, a ST demand of Rs.28,12,221/- was raised for the period 25.01.2001 to 08.02.2002. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Tomorrow for the judgements </strong></font></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"><strong>Have a nice day. </strong></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@tiol.in"><strong>vijaywrite@tiol.in </strong></a></font></p> </body> </html>