TIOL-DDT 2450 · 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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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 color="#663399" size="3">TIOL-DDT 2450 </font><br> 07.10.2014 <br> Tuesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry of Finance is abetting Huge Service Tax evasion? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> the Delhi High Court wanted to know from the Government why Google is paying Service Tax while Facebook is not. It all started with a writ petition filed by former BJP leader Govindacharya. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his latest affidavit before the High Court, Govindacharya submitted: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. That the submissions made through affidavit of Commissioner of service tax, are incorrect and misleading and for such false affidavit, appropriate action may be initiated by this Court; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. That for the various services provided by the Private Respondent, as per agreements signed in India, government is liable to collect service tax even if service provider claims to have permanent establishment outside the territory of India. Secondly, services rendered by the Private Respondents are composite services which were not exempted but Government is trying to help the Private Respondents in huge tax evasion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. That it is incorrect to say that only a company/entity having fixed establishment inside India are liable to pay service tax as per the provisions of the Finance Act because the scheme of Service Tax is different from that of Income Tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. That as per the Service Tax Laws & Rules, Ministry of Finance is liable to collect service tax on all the services which are rendered to be provided in the territory of India. If the service provider's permanent establishment, any office or agent is based in India then there is clear-cut liability to pay such service tax by them. If after an enquiry/investigation, the government fails to establish service provider's establishment in India then service tax is to be recovered from recipients of the said services (as admitted in para 71 of the counter Affidavit. Dt. 21 st May, 2013, filed by Respondent No. 9 i.e. Facebook Inc.) for which necessary details of quantum of services have yet not been obtained by the Service Tax Department as required under Sec. 77 of the Finance Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. That as per counter affidavits filed by various parties in the present proceedings, it looks that service tax is not paid by Facebook India Pvt. Ltd. (R-2), Facebook Inc. (R-9), Facebook Ireland Ltd., Google Inc. (R-10) and Google Ireland Ltd. Instead of obtaining such details and recovery of service tax for current and previous year, the Ministry of Finance is abetting the huge service tax evasion by the Private Respondents and not filing full disclosures before this Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. That the Respondent No. 3 Google India Pvt. Ltd. has admitted payment of service tax till 30th June, 2012 which is also confirmed by the counter affidavit of R-1 but Union of India has failed to give details of payment of service tax by Facebook which is also providing similar services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. That Petitioner specifically asked from UOI for details of receipt or classification of payment of service tax by the Private Respondents vide letter dated 28th April, 2014 and reminder dated 9th May, 2014. Five months passed but till now, such crucial documents have neither been submitted nor classification details of previous tax payments has been disclosed in affidavit filed before this Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. That as per the Additional Affidavit dated 20th May, 2013 filed by Respondent No. 2 i.e. Facebook India Pvt. Ltd., they are incorporated to carry on business of Online Support Services, Software Development, Technical Support and Services which attracts service tax liability since they are not in the negative list. Similar services are performed by Google India Pvt. Ltd. as well. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. That from 1st July, 2012 there cannot be any tax exemption to Facebook and Google for their composite service (advertising agency, data service, selling of web space etc.,) and their service needs to be classified either as Advertising Services or Business Exhibition Services, which are not in negative list of service tax. In view of above, counter affidavit filed by the Commissioner of Service Tax supporting the unlawful exemption and tax evasion by the Private Respondent is wrong, and service tax ought to be also demanded for the period of 2012-2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. That the Union of India has failed to provide details of notice issued under Sections 76 and 77 of the Finance Act to Facebook and Google to provide details of records, books of accounts showing recipients of services in India so as to ascertain their tax liability and also their claims of tax exemption for the period of 2012-2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. That in view of above it is submitted that directions be given to Respondent No. 4 to file a report on tax liability & recovery (either from service provider or recipients of services) on various services provided by the Private Respondents in India through Agreements & Indian operations since year 1996. </font></p> </blockquote> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">I-T - Due Date for Deposit of TDS extended </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CONSIDERING </strong>the consecutive holidays owing to the festive season and weekends during the first week in the month of October 2014, the Central Board of Direct Taxes, has extended the due date of deposit of tax deducted at source/tax collected at source during the month of September, 2014 <em>from</em> 7th October, 2014 to 10th October, 2014.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the due date for filing of TDS/ TCS statements for the Quarter ending 30th September 2014 remains unchanged. </font></p> <p><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC has not made any such extension for payment of Service Tax/Excise Duty by 5/6 October 2014. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/files/notification/cbdt/2014/cbdtorder01102014.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Order Section 119 in F.No.385/10/2014-IT(B), Dated: October 01, 2014 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - New Exchange Rates from October 2 </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has notified new exchange rates for Imported Goods and for Export Goods with effect from 02 October 2014. The US Dollar is 62.30 rupees for imports and 61.30 rupees for exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Exchange rates were last notified on 18th September 2014, effective 19th September. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2014/cnt14_096.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 96/2014-Cus., (N.T.), Dated: October 01, 2014 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">At last, some light at end of the...canal</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> infrastructure industry in the State of AP/Telangana was having a tough time for quite some time on service tax front. During the Chief Ministership of Y. S. Rajasekhara Reddy, several massive irrigation projects were undertaken by the State Government, involving digging of canals, lift irrigation, strengthening the embankment of canals, laying of pipelines and other electro mechanical work, etc., running into crores and crores of rupees. Rightly or wrongly, these contracts were described as Turnkey /EPC projects, which is enough for the Service Tax department to demand service tax under Works contract service. With the sudden demise of Y.S. Rajasekhara Reddy and subsequent political developments, it was a nightmare for these infrastructure majors in claiming their contract amounts, cost escalation; leave alone the service tax demand. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While such demands were stayed by the CESTAT in several cases on a prima facie view, the calamity struck in the form of the decision of the Tribunal in the case of <em>Ramky Infrastructure Limited</em> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2012/2012-TIOL-613-CESTAT-BANG.htm" target="_blank"><strong><font size="1">2012-TIOL-613-CESTAT-BANG</font></strong></a>, which has upheld the demand. What followed was a spate of orders directing various amounts of pre deposits; inability of the appellants to pay the same, dismissal of appeals for non-compliance, battered assesses approaching High Court and Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though there was a hope that a section 11C exemption would be issued in this regard <strong>(<a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTkzMjQ=">DDT 2255 - 19.12.2013</a>)</strong>, nothing happened. In fact the documents obtained under RTI by some of the contractors reveal that the Government was positively considering the issue of 11C exemption. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When all non-commercial construction activities were kept out of the levy of service tax upto 01.06.2007, and when canals were specifically exempted vide notification 41/2009 ST Dt. 23.10.2009 and all irrigation related works were exempted from 01.07.2012 under Notification 25/2012 ST dated 20.06.2012, it defies logic as to why they should be taxed only for the intervening period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Few of the Joint Venture Companies, who have been asked to deposit 50 percent of the service tax dues by the Tribunal, have knocked at the doors of the AP High Court, albeit unsuccessfully. They then made a beeline to the Supreme Court, which passed a landmark order on the subject. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While directing the petitioners to deposit about 10 percent of the tax dues, the Supreme Court has directed that a full bench, headed by the President of the Tribunal should hear all such cases together and pass orders, before 15.03.2015. Full bench, in the language of the Supreme Court means a bench of three Judges and obviously, the issue has to be decided by the Larger bench of the Tribunal, which is not bound by the decision of the Division bench in <em>Ramky</em> case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the CBEC magnanimously concede before the Tribunal about its intention to exempt such activities, instead of defending the demands tooth and nail? </font></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTY2MDU=" target="_blank"><font size="1">2014-TIOL-83-SC-ST</font> </a></font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please also see </strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9717" target="_blank"><strong>DDT 1204 25.09.2009, </strong></a><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9777" target="_blank">DDT 1212 09.10.2009</a>, <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9854" target="_blank">DDT 1224 - 27.10.2009</a>, and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16489" target="_blank">DDT 2001 - 12.12.2012 </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Clean India</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_%202450_modi.jpg" alt="Legal Corner Icon" width="337" height="487" hspace="5" border="0" align="center"></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"> - Wednesday's cases</font></strong></font></strong></font></p> <p><font 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 color="#663399"><strong>Central Excise</strong></font></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit on Outward Transport - Goods sold on FOR basis - Destination is place of removal - credit entitled - drafting of adjudication orders requires training; incompetent departmental adjudication ill serves interests of State. - Strictures and Costs against Commissioner: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> impugned order disallowed Cenvat credit of Rs.3,19,79,457/- availed by the assessee on outward transportation charges besides confirming levy and collection of interest and penalty as specified in the order. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is a manufacturer of cement. In response to the show cause notices, assessee specifically pleaded [recorded at paragraphs G & H of the impugned order], </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. that the assessee sells its final products on FOR basis to all customers; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. that freight charges are included in the assessable value of the final product; that excise duty was discharged on the assessable value, inclusive of freight charges; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. that the transit risk, in transportation of the final products is borne by the assessee; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. that property in the goods passes to the customers on delivery at the customers premises; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. that on the basis of these transactional facts, the place of removal under Section 4 (3) (c) of the Central Excise Act, 1944 was the customers premises; and therefore availment of Cenvat credit was legitimate and un-assailable. </font></p> </blockquote> <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 a membership card-holder of stock exchange gets shares on demutualisation of Exchange in new entity, such conversion of shares amounts to transfer and any capital gains liability arises - NO: HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>assessee company was engaged in business of shares and stock trading and broking. It was a member of Bombay Stock Exchange. The membership of BSE was purchased in the FY 1998-99 for total consideration of Rs.97,51,000/-. The return of income was filed on 30th November, 2006 declaring total income of Rs.1,59,42,000/-. The assessment was completed on 30th December, 2008 u/s 143(3) on a total income of Rs.1,80,24.063/-. The Assessee claimed depreciation on the value of card in AYs 2004-05 and 2005-06 aggregating to Rs.42,66,063/- which was disallowed by the AO. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether when a membership card-holder of a stock exchange gets shares on demutualisation of the exchange in the new entity, any capital gains liability arises and whether such conversion of shares amounts to transfer. And the answers go against the Revenue. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Since assessment of duty liability has to be done by Customs, notwithstanding fact that appellant did not claim benefit of exemption, same should have been extended to respondent importer: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THESE</strong> are appeals filed by Revenue against two orders passed by Commissioner of Customs, Kandla. Vide the two orders Customs duty demands of Rs.309.45 crore & Rs.3.07 crores have been dropped by the adjudicating authority. The respondent, <em>M/s. PSL Ltd</em>., is a manufacturer of coated pipes and the manufacturing is undertaken in a Customs bonded/warehouse. The respondent acted as a sub-contractor to contractors, such as, L&T, <em>Punj Lloyd Ltd</em>. and <em>National Petroleum Construction Co. Ltd</em>., who were awarded contracts by ONGC for lying of pipelines, etc. in connection with the oil exploration /exploitation activities undertaken in the Bombay High. The bare pipes imported by ONGC were supplied to the respondent for coating and the coated pipes were supplied back to ONGC through the contractor and essentiality certificate for use of these pipes was also furnished and the respondent claimed the benefit of Serial No. 215, Notification No.21/2002-Cus dated 01/03/2002. </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"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice time. </font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to </font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com" target="_blank">vijaywrite@tiol.in</a></font></strong></p> </body> </html>