TIOL-DDT 2470 · 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"><strong><font size="2" 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><font color="#663399" size="3">TIOL-DDT 2470</font><br> 07.11.2014 <br> Friday</font></strong></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">Kerala High Court Strikes Down Service Tax on Restaurants and Hotels - AGAIN </font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Kerala High Court has held sub Clauses (zzzzv) and (zzzzw) to Clause 105 of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2011 as beyond the legislative competence of the Parliament. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>zzzzv </strong>- service by restaurant in serving food or beverage. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>zzzzw </strong>- service by a hotel, inn, guest house, club or camp-site for providing of accommodation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As Netizensare aware, a Single Judge of the Kerala High Court in the case of<em> Kerala Classified Hotels and Resorts Association</em> reported in <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODkwMzg=" target="_blank"><strong><font size="1">2013-TIOL-533-HC-KERALA-ST</font></strong> </a>had declared that sub Clauses (zzzzv) and (zzzzw) to Clause 105 of Section 65 of the Finance Act 1994 as amended by the Finance Act 2011 is beyond the legislative competence of the Parliament as the sub Clauses are covered by Entry 54 and Entry 62 respectively of List II of the Seventh Schedule.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While reporting this in<strong> <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTgxNzA=" target="_blank">DDT 2146 - 11.07.2013</a> </strong>we had commented, "<em>This is certainly not going be the end of the story. The Government is sure to take the matter further up in appeals. Retrospective amendment does not seem to be an option in this case"</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And Revenue promptly filed a writ appeal before a Division Bench of the High Court. In the meanwhile in the <em>Indian Hotels and Restaurants Association</em> case reported in <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMwNjQ=" target="_blank"><strong><font size="1">2014-TIOL-498-HC-MUM-ST</font></strong></a>, the Bombay High Court did not agree with the judgement of the Single Judge of the Kerala High Court and upheld the levy. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the Division Bench of the Kerala High Court has confirmed the judgement of the Single Judge and has not agreed with the Bombay High Court judgement. The Division Bench observed,<em> it is beyond dispute that by virtue of the provision in Article 366 (29A) of the Constitution, even the service part involved in the supply of food and other articles of human consumption, is deemed as a sale to enable the States to impose tax on the same. The point, therefore, is as to whether, having characterised constitutionally the subject matter of supply of food in a restaurant, including the service part of it, as a sale, can the Parliament characterise the same transaction as a service for imposition and levy of service tax. We are of the view that since the whole of the consideration received by a restaurant owner for supply of food and other articles of the human consumption, including the service part of the transaction, is exigible to tax by the State by virtue of the constitutional definition, it is not open to the Union to characterise the same transaction as a service for imposition and levy of service tax. We are, therefore, unable to agree with the view taken by the Bombay High Court</em>." </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now we have two contradicting High Court judgements each having considered the other opinion, rejecting it. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the situation is service in restaurants in Maharashtra is taxable, while it is not taxable in Kerala. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What about other States? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In meantime another High Court - the Allahabad High Court in another context in the case of <em>Indian Coffee Workers Co-operative Society</em> reported in <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMwNjU=" target="_blank"><strong><font size="1">2014-TIOL-499-HC-ALL-ST</font></strong> </a>has observed, "<em>The charge of tax in the cases of VAT is distinct from the charge of tax for service tax. Entry 54 of the State List to the Seventh Schedule to the Constitution empowers the state legislatures to impose a tax on the sale of goods. Article 366 (29A) was introduced by the Forty Sixth Constitutional Amendment so as to provide a deeming definition of the expression ‘sale' to comprehend situations within the purview of its several sub-clauses including the sale of goods involved in the execution of a works contract. The charge of service tax is not on the sale of goods but on a taxable service provided. Unlike a tax which is imposed on the sale of goods, the charge of service tax is on the provision of a taxable service provided by the assessee. Hence, the fact that the assessee may be paying VAT on the sale of goods on the supply of food and beverages to those who consume them at the canteen, would not exclude the liability of the assessee for the payment of service tax in respect of a taxable service provided by the assessee as an outdoor caterer</em>." </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the <em>Indian Hotels and Restaurants Association</em> has filed an SLP in the Supreme Court and the Supreme Court is most likely to hear the petition on 21st November 2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finally the Supreme Court has to decide the issue and fortunately in this case, retrospective amendment is not a solution. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today we bring you the Kerala High Court judgement - Please see<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=21906" target="_blank">Breaking News</a> </strong></font></p> <p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">Income Tax Department - Hierarchy Notified </font></strong></font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Section 2(15A) of the Income Tax Act, "<em>Chief Commissioner" means a person appointed to be a Chief Commissioner of Income-tax or a Principal Chief Commissioner of Income-tax. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 2 (16) <em>"Commissioner" means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, as per the above provisions, a Chief Commissioner is equal to a Principal Chief Commissioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And a Commissioner is equal to a Principal Commissioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 118, the <em>Board may, by notification in the Official Gazette, direct that any income-tax authority or authorities specified in the notification shall be subordinate to such other income-tax authority or authorities as may be specified in such notification. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Board can decide who is subordinate to whom. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And now the Board has decided that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Principal Chief Commissioners and Chief Commissioners are subordinate to the Central Board of Direct Taxes. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Principal Commissioners and Commissioners are subordinate to the Principal Chief Commissioners and Chief Commissioners. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the situation created by the cadre restructuring which has perhaps upset the neat hierarchical pyramid. The Revenue Secretary, Chairman of the Board, Members of the Board and Principal Chief Commissioners are all of the same pay scale of Rs. 80,000 and there are four ranks among them. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If this is replicated in CBEC, the entire reorganisation will go for a toss. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcyMzE=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Notification No. 56/2014 in F. No. 187/30/2014(ITAJ), Dated: November 3, 2014 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600">Customs - New Exchange Rates from November 6 </font></strong></em></font></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 6th November 2014. The US Dollar is 61.90 rupees for imports and 60.90 rupees for exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Exchange rates were last notified on 16th October, 2014. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcyMjk=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No.101/2014-Cus (N.T.), Dated: November 05, 2014 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Export of Red Sanders wood - More time given to DRI & AP Government </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Central Government has allowed more time to the Government of Andhra Pradesh & Directorate of Revenue Intelligence (DRI) to finalize the modalities and export of respective allocated quantity of Red Sanders wood. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcyMjc=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 96/(RE- 2013)/2009-2014, Dated: November 05, 2014 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><strong><font color="#006600">Jurispruden</font></strong></strong></em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em><font color="#FF6633" size="4">tiol</font></em></strong></font></strong></font><em><strong><strong><font color="#006600">-Monday's cases</font></strong></strong></em></font></p> <p align="justify"><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"><strong><font color="#663399">Service Tax </font></strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Notfn. 4/2006-ST - Applicant is engaged in activity of giving loan for earning interest through leasing vehicles - as interest on loan is exempted from service tax in terms of s.67 of FA, 1994 & rule 6(2)(iv) of ST Valuation Rules, 2006, applicant has a <em>prima facie</em> case: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant is Non-banking Finance Company and engaged in the activity of providing services of hire purchase and financial leasing of commercial vehicles. The service provided by the applicant is having three components namely, Principal, Interest amount & Processing/Management fees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applicant is paying service tax on processing/management fees of the service provided by them. They are not paying service tax on principal and interest. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue is of the view that as the applicant is engaged in financial leasing service, therefore, as per notification No. 4/2006-ST dt. 1.3.2006, the applicant is entitled for 90% exemption of the interest charged by them and remaining 10% collected by them is includible in the taxable service.</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 where money is paid by flat buyer & same remains as outstanding with assessee, excess payment over and above sum paid by original buyer due due to incapability to purchase flat is to be treated as interest as per Sec 2(28A) - YES: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>THE </strong>assessee entered into a contract with M/s Kone Elevators for erection and commissioning of lift. The returns filed by assessee were taken for survey u/s 133A where it was found that an amount of Rs.62.87 lacs had been paid to Kone Elevators without deducting tax at source. Accordingly, the AO observed that the tax deductibles u/s 194C at 2% which worked out at Rs.1,25,740/-, was not made by the assessee. The assessee contended that since the payment were not made under works contract and it was only a contract of sale, the provisions of section 194C would not be applicable. The AO observed that the contract was purely for carrying out work of supply, erection and commissioning of lift and the payment had been made as per the invoice at Rs.18,00,000/-. There was no bifurcation of each items and the price schedule signed by both the parties and the invoice showed that the process of erection of lift would fall under the clause (iii) of the explanation to section 194C. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether where money has been paid by the flat buyer and the same remains as outstanding with the assessee, the payment of excess amount over and above the amount paid by the original buyer necessitated due to incapability of the original buyer to purchase the flat is to be treated as interest as per Sec 2(28A) and the same is liable to TDS u/s 194A. And the verdict favours the Revenue.</font></p> <p align="justify"> <font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CUSTOMS </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Cus - Notf. 16/2000-Cus - Exemption notification is to be construed strictly - Catalyst is required for initiating a chemical reaction&is not required for manufacture of machinery, instruments, equipment or appliances - Benefit not available: CESTAT </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> are two appeals, one filed by the Revenue against an O-in-A & another by the importer against another O-in-A. Both involve common issues. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee imported 16,400 Ltrs of Catalyst HTZ-5 from M/s. HaldorTopsoe A/S Denmark claiming the benefit of exemption under notification No. 16/2000-Cus (Serial No. 182). The adjudicating authority denied the exemption on the ground that the catalyst imported by the assessee is a chemical used in the process of manufacture of fertilizers and cannot be considered as machinery, instrument, apparatus and appliances or parts or raw materials for the manufacture of the aforesaid items. The assessee importer filed an appeal before the lower authority, who held that since the said catalyst is for the first/initial charge and is required for renovation or modernization of a fertilizer plant and machinery and the same was certified by the officer not below the rank of a Deputy Secretary to the Government of India in the Department of Fertilizers., the appellant is eligible for the benefit of aforesaid exemption. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Monday for the judgements</font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend.</font></p> <div 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"> <strong><a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a></strong></font> </div> </body> </html>