TIOL-DDT 2456 · the untouched capture
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<p align="justify"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><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>TIOL-DDT 2456</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
15.10.2014 <br>
Wednesday</font></strong></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Reforms in Reporting Service - CBEC scraps 15 reports for its offices - why not extend it to the assessees too? </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is said that until recently, a report used to be sent by a Commissionerate to the Board/Ministry on the amount of duty foregone on the tobacco sent to England for making Cigars for the Prime Minister Winston Churchill! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board has decided to do away with fifteen reports it regularly receives from the field formations. A great contribution to the lofty aim of saving paper and reducing useless work! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are several returns the assessees have to furnish which are totally useless and which nobody ever sees. Why can't the Board scrap some of them? </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2014/instruction14_006.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Instructions in F.No.354/156/2014-TRU, Dated: October 10, 2014</font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Service Tax on Foreign Remittance - CBEC U-turn?</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TWO</strong> years ago there was a lot of commotion in India and abroad on the Government's alleged proposal to charge Service Tax on foreign remittance. Even Shashi Tharoor wrote to the Prime Minister urging him not to levy the tax and the Kerala Chief Minister was assured by the then Prime Minister Manmohan Singh that there was no such proposal. Amidst all that international confusion, CBEC issued Circular <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2012/sercir163.htm" target="_blank"><strong>No. 163/14/2012-ST</strong></a>, clarifying that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>1. There is no service tax per se on the amount of foreign currency remitted to India from overseas. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. In the negative list regime, ‘service' has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. As the amount of remittance comprises money, the activity does not comprise a ‘service' and thus not subjected to service tax. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India. In terms of the Place of Provision of Services Rules, 2012, such services are deemed to be provided outside India and thus not liable to service tax. </font></em></p>
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<blockquote>
<p><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India, in terms of Rule 3 of the Place of Provision of Services Rules, 2012.</font></em></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, CBEC has superseded this Circular and clarifies that: </font></p>
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<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. No service tax is payable per se on the amount of foreign currency remitted to India from overseas. As the remittance comprises money, it does not in itself constitute any service in terms of the definition of‘service' as contained in clause (44) of section 65B of the Finance Act 1994. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Indian bank or other entity acting as an agent to MTSO (money transfer service operator) in relation to money transfer, facilitates in the delivery of the remittance to the beneficiary in India. The agent falls in the category of intermediary as defined in rule 2(f) of the Place of Provision of Service Rules, 2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Service provided by an intermediary is covered by rule 9 (c) of the Place of Provision of Service Rules, 2012. As per this rule, the place of provision of service is the location of service provider. Hence, service provided by an agent, located in India (in taxable territory), to MTSO is liable to service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Service Tax would apply on the amount charged separately, if any, by the Indian bank/entity/agent/sub-agent from the person who receives remittance in the taxable territory, for the service provided by such Indian bank/entity/agent/sub-agent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Sub-agents also fall in the category of intermediary. Therefore, service tax is payable on commission received by sub-agents from Indian bank/entity. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This issue was decided by the Tribunal by a majority decision in the <em>Paul Merchants Ltd </em>case - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2012/2012-TIOL-1877-CESTAT-DEL.htm" target="_blank"><font size="1">2012-TIOL-1877-CESTAT-DEL</font></a></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Paul Merchants Ltd (PML) was an agent for Western Union to transfer money from abroad to India.And the Tribunal by majority held that this activity amounted to export and so there was no liability to pay Service Tax. Of course, this case pertained to the period prior to 1.7.2012, but the Tribunal had observed, "<em>the recently framed Place of Provision of Services Rules, 2012, replacing to Export of Service Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, though differently worded and introducing further refinements in laying down the criteria for determining the place of provision of service (which in terms of Rule 3 is the place of recipient i.e. the place of consumption) follow the same principles as those behind the Export of Service Rules, 2005 and Service Import Rules</em>."</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the same logic is applicable even after 1.7.2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But suddenly, out of the blue, the Board has come up with the clarification that these are taxable activities. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is sure to lead to a lot of agitation and litigation, especially in States like Kerala and Punjab where there are thousands of poor people getting foreign remittance from their relatives who do menial jobs in many foreign countries and even those poor people are not left out of the Service Tax net. This will certainly have political repercussions, with hardly any economic benefits. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcxOTc=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 180/06/2014-ST, Dated: October 14, 2014 </font></strong></a></p>
<p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">Negative Growth in CE Revenue - 13% growth in ST </font></strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC's</strong> Revenue collection for the first six months of the year stood at Rs. 2,41,811 crore, which is less than 40% of the Budget Estimate. Service Tax accounted for 77,000 Crores while Excise brought in 75,000 crores and surprisingly Customs was ahead with 89,000 crores. </font></p>
<p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">Company Law - Clarification on Trust/Trustee as a partner in LLP </font></strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CLARIFICATIONS</strong> have been sought on whether a trust or a trustee representing a trust in the case of "Real Estate Investment Trust" (REIT) or "Infrastructure Investment Trust" (lnvITs) or such other Trusts set up under the regulations prescribed under the Securities & Exchange Board of India Act, 1992, can become a partner in an LLP. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Ministry of Corporate Affairs clarifies that: that for the purposes of these trusts it is not barred for a trustee, being a body corporate, to hold partnership in an LLP in its name without the addition of the statement that it is a trustee.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_37_2014.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MoCA General Circular No. 37/2014, Dated: October 14, 2014 </font></strong></a></p>
<p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600"> Reorganisation of CBEC Field offices - Confusion starts TODAY </font></strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC </strong>seems to have decided to go ahead with its massive overhaul of field offices with effect from today. Spend the next few days searching for your Central Excise/Service Tax offices, their addresses and the officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department hardly has any Inspector now - all the inspectors have become superintendents and all the superintendents remain there. You can't move around in Central Excise offices without dashing into a few superintendents. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nearly 200 Commissioner level offices have been created without a single officer for them. Yesterday the Board issued a jurisdiction order for 247 Commissioners most of whom will hold additional charge of about 200 offices. And strange things happen - the Bhopal Appellate Commissioner will work from Raipur and hold additional charge of Bhubaneswar. ADG NACEN, Kanpur will have additional charge of Kolkata and Shillong. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At least 200 Additional Commissioners should get promotion to fill these posts, but Board is not able to promote a few Superintendents. But they have created all these offices to confuse the assessees. Why this hurry? Why can't this be done in a more organised way? </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sernews/order/cbecorder189_2014.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Office Order no. 189/2014, Dated: October 14, 2014 </font></strong></a></p>
<p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">India Loses in WTO - US Chicks on their way? </font></strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Chicks.jpg" alt="India Loses in WTO - US Chicks on their way? " width="318" height="150" hspace="5" border="0" align="left"><strong>THE</strong> WTO yesterday held that India's ban on products such as poultry meat, eggs and live pigs violated several global trade laws because they were imposed without sufficient scientific evidence that the products risked spreading avian flu. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By a Notification dated 19.07.2011, India had prohibited imports <a></a>from the countries reporting Notifiable Avian Influenza (both Highly Pathogenic Notifiable Avian Influenza and Low Pathogenic Notifiable Avian Influenza), certain livestock products like domestic and wild birds (including poultry and captive birds);day old chicks, ducks, turkeys, and other newly hatched avian species etc., </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The American Press went overboard with the news with the US Trade Representative proclaiming that the WTO panel agreed with the U.S. case that India lacks any scientific basis to restrict U.S. agricultural products, including U.S. poultry products. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">His website proudly claimed with the above picture, <em>This victory affirms the Administration's commitment to ensuring WTO Members play by the rules, and that America's farmers, workers and businesses get the fair shot they deserve to sell Made-in-America goods under WTO rules</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India can appeal against this decision.</font></p>
<p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><font size="3"><strong><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="4">tiol</font><font color="#006600"> - Thursday's cases</font></strong></strong></font></em></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">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT - Segregating defective Inputs and valuing them at lower rate for purpose of stock valuation is not equivalent to writing off value of inputs in books of account - no cause for reversal of credit: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is a manufacturer of automobile components and availed CENVAT credit. On receipt of inputs, the defective ones are segregated and returned to the suppliers but some inputs which have been issued for processing are rejected in machining process. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant was asked to show cause as to why under the provisions of Rule 3(5B) of CCR, 2004 they should not reverse the CENVAT credit availed on such process rejection. </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 if it is found that assessee has made purchases at abnormally high prices from a party that is not traceable, Revenue will have all legitimacy to reject books and tax gross profit on estimate basis - YES: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is a registered firm engaged in the business as a wholesale dealer in Iron and Steel. During the course of assessment proceedings the AO observed that as against gross turnover of Rs. 44.89 crores the assessee had declared gross profit of Rs. 1.31 crores only which worked out to 2.93%. Since the gross profit disclosed by the assessee was very low, the AO made enquiries to ascertain the genuineness of claim of purchases. From the addresses of all the suppliers given by the assessee, the AO called for information u/s 133(6) from 34 suppliers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE issue before the Bench is - Whether if it is found that the assessee has made purchases at abnormally high prices from a party that is not traceable, the Revenue will have all the legitimacy to reject the books and tax the gross profit on estimate basis. And the verdict goes against the assessee. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">ST - If laying of cables cannot be taxable service, adopting the same logic, laying of pipeline also cannot be construed as taxable service - Demand of Rs.7.62 crores set aside by CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant undertook manufacture and supply of pipes to Maharashtra Jeevan Pradhikaran and as per the contract apart from the supply of pipes they were also required to undertake the activity of laying, connecting, jointing pipeline for water supply projects till the stage of testing and commissioning of raw and pure water by pumping machinery. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is the view of the department that the said activity is classifiable under “erection, installation and commissioning service"and accordingly a SCN was issued demanding Service Tax of Rs.7,62,26,657/- on the total contract value of Rs.75,36,01,409/- received by the appellants during the period from 2003-2004 to 2006-2007. </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"><strong><a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a></strong></font></p>
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