TIOL-DDT 2912 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26988"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2016.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="252" height="220" hspace="5" border="0" align="right" ></a></font><font color="#663399" size="3">TIOL-DDT 2912</font><br>
18 08 2016</strong></font><br>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Thursday</strong></font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">ST - Transfer of Goods Without the Right to use - CBEC Clarifies</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Section 66E(f) of the Finance Act 1994, the <em>transfer of goods by way of hiring, leasing, licensing or in any such manner <strong>without</strong> transfer of right to use such goods,</em> is a declared service. This came into force on 01 07 2012.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is transfer of goods without transfer of the right to use? Who will hire/lease goods if the right to use is not transferred? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Just before the implementation of the new provisions in 2012, CBEC had organized a meeting in Hyderabad to 'sell' the new concepts. Ms Sheila Sangwan, then Member of CBEC and her team tried to explain the complexities of the new era in Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the meeting, a question was asked, <em>"can you tell us a few examples of transfer of goods without transfer of right to use such goods"</em>. The CBEC Member and her team had no clue, though they had included it in the Statute.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Four years later, the CBEC has now attempted to clarify this issue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a Circular released yesterday, the Board states,</font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of sub-clause (d) of clause (29 A) of Article 366 of the Constitution of India, the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. It follows that such transactions will be liable for Sales Tax/Value Added Tax. In terms of section 66E(f) of the Finance Act, 1994, transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods is a "declared service" and hence liable to service tax. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board says it is essential in any given case involving hiring, leasing or licensing of goods, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the goods. Further, the Supreme Court in the case of <em>Bharat Sanchar Nigam Limited vs Union of India, reported in</em> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2006/2006-TIOL-15-SC-CT-LB.htm" target="_blank"><strong>2006-TIOL-15-SC-CT-LB</strong>,</a> had laid down the following criteria to determine whether a transaction involves transfer of the right to use goods, namely,- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. There must be goods available for delivery; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. There must be a consensus ad idem as to the identity of the goods </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The transferee should have a legal right to use the goods - consequently all legal consequences of such use, including any permissions or licenses required therefor should be available to the transferee; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. For the period during which the transferee has such legal right, it has to be to the exclusion to the transferor; this is the necessary concomitant of the plain language of the statute - viz. a <em>"transfer of the right"</em> to use and not merely a licence to use the goods; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same right to others. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board states that this criteria (Board is not very fussy about English; what they meant was 'these criteria') must invariably be followed and applied to cases involving hiring, leasing or licensing of goods. The terms of the contract must be studied carefully <em>vis-a-vis</em> the criteria laid down by the Supreme Court in order to determine whether service tax liability will arise in a given case. It is not possible to either give an exhaustive list of illustrations or judgements on this issue. Cases decided under the Sales Tax/VAT legislations have to be considered against the background of those particular legislative provisions and terms of contract in that case. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has referred to six cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has referred to two situations involving either a financial lease or an operating lease and <em>"dry leases" </em>and <em>"wet leases"</em> in the aircraft industry <em>only to explain and emphasize the diverse nature of such transactions. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board directs that no a priori generalisations or assumptions about service tax liability should be made and the terms of the contract should be examined carefully, against the backdrop of the criteria laid down by the Supreme Court in the Bharat Sanchar Nigam Limited case as well as other judicial pronouncements. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what is an example of <em>transfer of goods without transfer of right to use such goods? </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has still not answered the question. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board in D.O.F.No 334/1/2012-TRU, dated 16.03.2012 had given certain examples where the transaction does not involve transfer of right to use: </font></p>
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<td><p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S.No. </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nature of transaction </font></strong></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A car is given in hire by a person to a company along with a driver on payment of charges on per month/mileage basis. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Supply of equipment like excavators, wheel loaders, dump trucks, cranes, etc for use in a particular project where the person to whom such equipment is supplied is subject to such terms and conditions in the contract relating to the manner of use of such equipment, return of such equipment after a specified time, maintenance and upkeep of such equipment. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hiring of bank lockers. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4 </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hiring out of vehicles where it is the responsibility of the owner to abide by all the laws relating to motor vehicles. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5 </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hiring of audio visual equipment where risk is of the owner. </font></p></td>
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<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjAzNTU=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 198/08/2016-SERVICE TAX, Dated: August 17, 2016</font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f1"></a>Anti Dumping Duty on Cold Rolled steel Products </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INDIA</strong> has imposed provisional anti dumping duty on Cold-Rolled flat products of alloy or non-alloy steel originating in, or exported from People's Republic of China, Japan, Korea RP and Ukraine as the goods have been exported to India from these countries below normal value; as the domestic industry has suffered material injury on account of these imports; and as the injury has been caused by the dumped imports of the goods from these countries. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The anti dumping duty shall be effective for a period not exceeding six months from yesterday. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjAzNTY=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 45 /2016-Customs (ADD), Dated: August 17, 2016 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f2"></a>CESTAT Member Ashok Arya temporarily Transferred to Delhi </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> president of CESTAT has transferred Mr. Ashok Arya, Member (T) of CESTAT at Bangalore as Member (T) at CESTAT, Delhi for a period of six months on his request. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjAzNTc=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT Office Order in F.No. 27(39)/Trans.Policy/CESTAT/admn.08., Dated August 16 2016 </font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f3"></a>VCES - First Instalment not paid - Disqualified from VCES - SC Rejects SLP </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY</STRONG> the Supreme Court dismissed an SLP filed by <em>Manpreet Engineering And Construction Co. </em>in a VCES case. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee had been disqualified from the Voluntary Compliance Encouragement Scheme, 2013 (VCES, 2013) and the immunity provided under section 108(1) of the Finance Act, 2013 was withdrawn, as he had not deposited 50% of the tax dues so declared under Section107(1) and submitted the proof of such payment to the designated authority. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a writ petition, the High Court upheld the impugned order on the grounds: (<strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTE2MjE4" target="_blank">2016-TIOL-1456-HC-JHARKHAND-ST</a></strong>) </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The <strong>VCES, 2013</strong> is already a liberal scheme floated for those declarants, who have committed breach of the taxing statute </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. the payment of the service tax liability is divided into two instalments. First instalment is of minimum 50% to be paid on or before 31st December, 2013 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The scheme is nothing but a policy decision of Union of India and this court will be extremely slow and careful in making further liberal interpretation of the <strong>VCES, 2013,</strong> because this court is not sitting in appeal against the said scheme nor this court can replace an existing scheme with a better one. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In a taxing statute interpretation ought to be made strictly. Court can neither replace all these clauses of <strong> VCES, 2013</strong> nor further instalments can be given by the court in exercise of powers under Article 226 of the Constitution of the India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. '<strong>substantial compliance</strong>' has no place in a taxing statute, otherwise every declarant or assessee will partly comply with a scheme or provision of the taxing statute and will say that there is substantial compliance, which will lead to nothing but chaos and court cannot be a party to this. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. once the clauses of the VCES, 2013 is violated, the declarant is not entitled to get benefit of the said scheme.</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court yesterday dismissed the SLP of the assessee. Please see
<strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTE3MjU2" target="_blank">2016-TIOL-124-SC-ST</a></strong></font></p>
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<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is said that in matters relating to taxes, questions rarely change, but the answers do. </em></font></strong></p>
<p><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Opening Sentence of TRU JS Letter D. O. F. No 334/1/2012-TRU Dated: March 16, 2012</font></em></p>
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<p><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 <a href="mailto:vijaywrite@tiol.in" target="_blank"><strong>vijaywrite@tiol.in</strong></a></font></p>
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