TIOL-DDT 448 · the untouched capture
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<p> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
448</font><br>
13 09 2006<br>
Wednesday</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Cenvat
Credit on Cell Phones</font></strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More than a year
ago in <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2317">TIOL-DDT
165 on 26 07 2005</a><b>, we asked</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Service
tax on mobile phones - can credit be availed?</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>“In
regard to credit of service tax on telephone connection, queries have been raised
as to whether service tax credit would be admissible on telephone sets installed
only in the business premises. The answer is in the affirmative, and credit
will be allowed only on telephone sets installed in the business premises. Mobile
phones are not covered”</i> -<u> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2003/sercircir59.htm">Circular
No. </a></u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2003/sercircir59.htm"><u>59/8/2003-S.T.,
dated 20-6-2003</u></a><u></span></u></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
clarification of the Board is being quoted to deny cenvat credit of the Service
Tax paid by a manufacturer. It is being conveniently forgotten that the above
clarification was in relation to the Service Tax Credit Rules, 2002 but certainly
not in relation to the Cenvat Credit Rules, 2004. The new rules stipulate credit
on any<b> input service received by the manufacturer of final product or by
the provider of output services on or after the 10th day of September, 2004.
</b>There is absolutely no restriction on the service instrument to be installed
in the business premises. May be in the case of telephones, the instrument can
be installed in the factory or service premises but there are several services
which can be availed only outside. If an <i>event management </i>service provider
sends his anchors to a beauty parlour just before the show, is he eligible for
taking credit on the service tax paid for the beauty treatment? Is he eligible
for the credit only if the beauty treatment is done in his office? Is a manufacturer
eligible for taking credit of Service Tax on a bank draft only if the bank is
within the factory? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why
this restriction only on telephones? And now even landline phones can be carried
around. Will credit be allowed on the Service Tax for those phones? And what
if the mobile phone is used only within the factory? Will credit be allowed?
</font></p>
<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There
seems to be no logic or law behind the Board’s clarification and credit should
be allowed if the mobile phone is an input service – nothing more nothing less.
</font></div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
<st1:place><st1:country-region>England</st1:country-region></st1:place>, VAT
credit is allowed on mobile phones but recently the Customs and Excise Department
conducted a survey of company mobile phone bills and found that among all the
companies inspected, personal use was as high as 40 per cent, according to Billy
Cairns, director of VAT services. He advised companies that provide their staff
with mobile phones to ensure that they avail credit only the VAT on the 'business'
element of their phone bills, or that they pay back any VAT on the 'private'
component of the calls. He said that what was often a "giveaway" when
Customs & Excise looked at a company's mobile phone bills was the number
of calls made after 6 pm along with “sms’ by an employee. "Text messages
are not usually associated with business and it's unlikely many business calls
are made after 6 pm," he said. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Will
our DGST or the Board clarify the matter?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Neither
the Board, nor the DGST bothered to clarify, but the Tribunal solved the problem.
In a landmark decision which we are reporting today, the Tribunal held, <b>In
the absence of any express prohibition, under the new Cenvat Credit Rules, 2004,
I am of the view that Service Tax paid on Mobile Phone is available as credit
to eligible Service providers of output service and manufacturers. </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Go
ahead and take credit on those cell phone bills.</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/cestat/2006/2006-TIOL-1152-CESTAT-MUM.htm" target="_blank">2006-TIOL-1152-CESTAT-MUM</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">LTU</font></b><font color="#006600"><b>
DRAFT NOTIFICATION</b></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With
hardly fifteen days left for the first LTU to start functioning from <st1:City><st1:place>Bangalore</st1:place></st1:City>,
the Government has announced the draft rules and Notification. They want the
comments of the citizens by 15<sup>th</sup> of September. They have given whole
of three days time to the people to send their suggestions and comments, So
hurry up and get ready with your comments.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Here
are the highlights of the Scheme:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
Large taxpayer has been defined as a person who has one or more premises registered
under Central Excise or one or more premises under Service Tax and is an assessee
under Income Tax and satisfy the conditions and observe the procedure.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>2.
Conditions: </b>Other than Tobacco and Pan Masala manufacturers should have
</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i.
paid more than 5 Crore Rupees of Excise Duty in <b>cash</b> or through account
current <b>(or)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii.
Paid more than 5 Crore Rupees of Service Tax in cash or through <b>account
current</b> <b>(or)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii.
Paid more than Rupees 10 hundred lakhs of advance tax under Income Tax </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
And is assessed to Income Tax under the Chief Commissioner of Income Tax -I
Bangalore and Chief Commissioner of Income Tax – II Bangalore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DDT’s
observation:</b></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
How do you pay Central Excise duty by cash? Go and give it to the Chief Commissioner
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
How do you pay Service Tax through account current? Is there any account
current for Service Tax</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
What is 10 hundred lakhs? In the Indian system there is a word for hundred
lakhs unlike the western system.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
Is it necessary for the assessee to be under the jurisdiction of both the
Chief Commissioners of Income Tax Bangalore- I and <st1:place><st1:City>Bangalore</st1:City></st1:place>
– II ?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.
Why specifically mention <st1:place><st1:City>Bangalore</st1:City></st1:place>
? Is it going to be the first and last LTU</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Procedure:
</b></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i.
Application in the proper form to be filed with the Chief Commissioner LTU
(Draft Application Form has not been issued).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii.
Details of all premises to be furnished.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii.
Chief Commissioner, LTU will communicate acceptance in writing.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iv.
Existing Central Excise and Service Tax registration to continue. New Registrations
to be granted by Chief Commissioner LTU.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Draft
Amendment to Central Excise Rules – New Rule 12BB</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Inter
unit Transfer without payment of duty: </b>A new rule 12 BB is being inserted
in the Central Excise Rule to allow transfer of intermediate goods from one
factory to another within the LT. This facility will not be available for those
availing certain exemptions like North East , <st1:place>Kashmir</st1:place>,
Uttaranchal, Oil Refineries and EOUs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Self
credit of excess Excise duty:- </b>if any LT has paid excess duty due to arithmetical
error, this can be adjusted against future duty liability.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Records
to be made available in Electronic media</b>. An LT will be required to make
available records of productions, credit etc in Electronic media.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Quit
but with 30 days notice: </b> if you are not happy with LTU, you can opt out
by giving 30 days notice but from the first day of the next financial year.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>All
other rules to apply:</b> all other provisions of the Central Excise rules will
apply mutatis mutandis to a large tax payer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Proposed
amendments to Cenvat Credit Rules</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Definition:
</b>Large Taxpayer to have the same meaning as in the Central Excise Rules.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Movement
of inputs: </b>Inputs on which credit has been taken can be sent to any other
registered premises of the LT.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Transfer
of Credit: </b>Cenvat credit can be transferred within units owned by the same
LT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Draft
Amendments in Service Tax Rules 1994</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar
amendments are proposed in the Service Tax Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Comments
may be sent to <a href="mailto:hema.priya@nic.in">hema.priya@nic.in</a></span></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/DraftRules.htm">Draft
LTU</a></u></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">All
customs officers in an office dismissed and arrested</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Santo Domingo Customs director has dismissed all the customs officers including
a collector working in a border town. He has ordered their arrest too. The customs
officers were charged with assisting in smuggling. Six trucks carrying smuggled
goods were intercepted with much difficulty as the persons escorting the trucks
threatened the officers with fire arms. One of the persons escorting the truck
was found to be a customs collector.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
tomorrow with more DDT </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day. </font></p>
<p 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"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></span></font></p>
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