Regional Advisory Committee (RAC) Decisions
SOME more decisions from the RAC meeting of Pune Central Excise Zone
Service Tax -Canteen Service - Company pays the whole amount and Service Tax to the canteen operator and later recovers 20% from employees - What is Service Tax liability?:
A factory provides the canteen facility to its employees. The factory pays to the canteen contractor the whole price including Service Tax. The factory later recovers 20% of the cost from its employees. Is Service Tax payable on this 20%?
To illustrate:
1. Amount paid to the contractor = 114 (100+14 Service Tax)
2. Amount recovered from employees = 22.80 (20% of 114)
In a recent meeting of the Regional Advisory Committee of Pune Zone, an assessee raised this ISSUE:
Where the canteen services are availed by a factory registered under Factory Act, the service tax is charged by the service provider under his invoice, which is paid by the Company. The expenses towards this service are shared by company and employee 80% by company and rest 20% by employee. However, on receipt of service provider's bill on which service tax is paid, the company pays 100% amount to the service provider and later on recover 20% from employee. In other words, it a sharing of expenses on which ST is paid . If this 20% amount is levied to service tax again, it will amount to payment of service tax at two stages. This not the intension of the Legislature.
Reply: The Department replied, "The business entity places order with the service provider to fulfill their own obligations of providing facilities to the employees, whether under any legal provisions or as courtesy or under some specific understanding with employees or their associations/ unions. Therefore, the business entities are required to bear the tax burden as charged by the service providers in the instant scenario. Further, if the business entity is recovering some amount from the employees towards provision of such services, then the business entity is actually providing such services to the employees. Therefore, service tax, if otherwise applicable, needs to be discharged by the business entity in terms of the provisions of Section 65B(44) of Finance Act, 1994.”
Service Tax - Can't a new cheque be issued in place of a lapsed cheque?:
Question: Company is an SEZ unit engaged in the business of providing Information Technology Software Services (ITSS). The Company claimed refund of unutilised CENVAT Credit on input services, for the period April 2012 to December 2012, under Notification no. 12/2013-ST.
The Service Tax Authorities sanctioned the refund. However, the refund cheques could not be deposited in the bank account of the Company due to change in the directors. In the meantime, the cheques expired.
Now, for more than a year, we are in constant follow up with the Service Tax Authorities for re-issue of time barred cheques. However, the said request is still pending.
Reply: In such cases, normal business practices can be followed. The authority who had issued the cheque in the first place can be approached for re-validation / re-issue of the cheque. Specific instances may be brought to the notice of jurisdictional Commissioner.
Scope of RAC Meetings:
An assessee raised issues pointed out by Audit. The Department observed;
All the issues queried above are those which have been raised by the Audit officers during the course of audit of the records of the assessee. RAC is not the appropriate forum to discuss and deliberate on the observations raised by Audit. This is a forum for taking up procedural matters which are causing inconvenience to public at large and not any individual organization or entity.
The observations raised by Audit are discussed in the MCM, which itself is another forum, before finalizing the Audit objections. The objections, if vetted by MCM will culminate into a Show Cause Notice, which will further undergo quasi-judicial proceedings. The appropriate procedure, in the event of issue of SCN would be to discuss the merits and demerits of the case before adjudicating authority.
Then, why can't they allow the assessees to be present in the MCM?