TIOL-DDT 486 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
486</font><br>
08 11 2006<br>
Wednesday</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">E
payment of Service Tax – no penalty please </font></strong></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rs
50 lakhs limit includes payment from cenvat credit.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today
DDT would like to offer a bouquet of the most fragrant flowers to the CBEC.
We had raised several questions on the mandatory e payment and even conducted
quick survey in the major cities, to give the Board the quickest feed back possible.
We had also raised a question whether the limit of Rs. 50 Lakhs was for cash
payment only or whether it includes payment from cenvat credit too. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are extremely grateful that Board has come up with proper clarifications and
even advised the field not to initiate penal action against the assessees for
not making e payments. However the Board has made it clear that e payment is
here to stay and the assessees are cautioned to <strong>expeditiously complete</strong>
the procedural formalities for availing internet banking facility from designated
banks and comply with the requirement of mandatory e-payment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has clarified that for calculating the amount of Rs. 50 Lakhs limit,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
For a Service provider having different registrations for different premises,
the limit will be computed for each registration separately.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Similar is the situation in the case of a person paying service tax on taxable
service received by him.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
In case of LTUs, the cumulative Service Tax paid by all the registered premises
will be taken into consideration.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
For a person who pays Service Tax as a service provider and service receiver,
both the payments are to be considered.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Both cash payment and cenvat credit payment should be taken into consideration
for calculating the amount of Rs. 50 Lakhs.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/sercir88.htm">Circular
No. 88/06/2006 Dated</a></u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/sercir88.htm">,
the 6th November, 2006</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Service
tax on authorized motor vehicle dealers and service stations – Board issues
clarifications</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has clarified certain issues relating to Service Tax on <b>authorized motor
vehicle dealers and service stations .</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a)
Whether the mark-up (profit) on the spare parts sold by a service station during
the servicing of vehicles is liable to payment of service tax?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b)
Whether exemption can be claimed on the cost of consumables that get consumed
during the course of providing service? </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board’s
Clarification:</b> Notification No. 12/2003-ST. dated 20.06.2003, exempts service
tax to the extent of value of the goods and materials sold by the service provider
to the service recipient, if documentary proof of such sale exists and no credit
of excise duty paid on such spares or consumables have been taken. It may, however
be pertinent to note that for availing such exemption, the goods must be sold
and consequently, they must be available (whether independently or as a part
used for repair of a vehicle) for sale. In other words, the exemption would
not be available to such consumables which have been consumed during the process
of providing service and are not available for sale.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF6666">DDT</font></b><font color="#FF6666">:
Board had in <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2003/excircular699.htm">CIRCULAR
NO. 699/15/2003-CX, Dated : March 5, 2003</a><b>, </b>clarified:- </font></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">During
the course ofproviding service, an authorised service station also replaces
engine oil, gear oil and coolants, etc., as per the request of the customer.
The price charged by authorised service station for engine oil, gear oil and
coolants is towards sale of these consumables to the customer. Therefore, the
sale of consumable during course of providing service is akin to sale of parts
and accessories and therefore value of such consumables is not includible in
the value of taxable services provided value of such consumables is shown separately.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">However,
there are certain items such as paints used for painting body, etc., during
the course of providing service, and form intrinsic part and parcel of service
in so much as that these are not distinctly and separately identifiable from
the services rendered. Therefore, value of such items, which form intrinsic
part of service, is includible in the value of taxable service.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
activity ofproviding Teflon Coating at the time of sale cannot be construed
as a service or repair provided by an authorised service station even though
the same dealer may also be authorised to carry out after sale services. The
authorised sales dealer and authorised service station are appointed to perform
two distinct functions for the car manufacturer and therefore the activity performed
at the time of sales of vehicle by the dealer is distinct from the service provided
by the authorised service station. Normally, authorised service station comes
into picture only after vehicle comes on road. Therefore, it is envisaged appears
that any activity of sales dealer at the pre-sale stage or at the time of sale
will not come under the purview of service tax.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Is
there a change in stand? Is that circular withdrawn or is it still live?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c)
Whether ‘free services’ given by the authorized dealers (for which they are
reimbursed by the vehicle manufacturers) are subjected to service tax?</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board’s
Clarification:</b> As the law does not in any way restricts the levy of service
tax only on the service charges received from the recipient of the service,
therefore, such reimbursements are subject to service tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DDT</b>
But isn’t this already included in the Valuation Rules? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d)
Whether the commission received by the automobile dealers from Banks /Non Banking
Financial Companies (NBFC), for introducing the customers seeking finances /
loans to such banks / NBFCs is to be subjected to service tax? Further, in case
part of these incentives are passed on by the dealers to the customers, whether
tax would be leviable only on that part of incentive, which is retained by the
dealers or whether it would be on full amount?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board’s
Clarification:</b> By this activity, the automobile dealers ‘promote or market
the services provided by their customer (i.e., the financial institution), and
are therefore covered under ‘taxable service’, namely, the “Business auxiliary
service”. The tax is payable on the gross commission received by the automobile
dealer. In some cases, the dealers share part of their commission with their
customers to attract them. However, this is an independent transaction between
the automobile dealer and the purchaser of the vehicle, and does not involve
the service rendered by the automobile dealer to the finance company. Therefore,
the tax payable by the dealer would be on the gross amount received from the
financial company and not on the balance amount, i.e., after excluding the amount
that he passes on to the customer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e)
Whether service tax is chargeable on the amounts received for servicing /repair
of the commercial vehicles?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board’s
Clarification:</b> servicing, repair, reconditioning or restoration of specified
types of vehicles (whether they are used for commercial purposes or not) fall
under the category of taxable services. However, servicing of vehicles like
trucks is not within the ambit of service tax.</font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Import
of food articles including vegetable oil – Only PFA approved imports to be allowed.
</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Recently
the Gujarat </strong>High Court has asked the CBEC to take a policy decision
in consultation with the concerned Ministry as to in what circumstances the
re-processing should be allowed if the goods are not found upto the mark as
per laid down norms. Board notes that a circular had already been issued (58/2001)
which provided that all the consignments of edible/food products which fail
PHO testing shall be re-exported or destroyed. This instruction continues to
be in force. However, it appears that in certain cases where the imported goods
failed PFA testing, jurisdictional Commissioners have allowed re-processing.
Such permission should not have been allowed by the Commissioners suo motto.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
Board reiterates that <b>only the consignments of edible/food products which
conform to the provisions of Prevention of Food Adulteration Act, 1954 and rules
made there under should be allowed to be imported into India. </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board,
of course does not say what would happen to Commissioners who would flout these
instructions as they did the 2001 circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2006/cuscir06_28.htm">CIRCULAR
NO. 28/2006-Cus., Dated: November 6, 2006</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Live
ACs posted in LTU</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are happy to report that the Board has posted two live Assistant Commissioners
in the Bangalore LTU. Refer <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4362">TIOL-DDT
465 - 09 10 2006</a><b> - <strong>Ghosts haunt LTU, <st1:City><st1:place>Bangalore</st1:place></st1:City>,
</strong></b>when we reported that a dead man and a retired man were posted
there. This time around they posted two serving and more importantly alive officers.
<br>
<br>
<font color="#FF6666">Until tomorrow with more DDT </font></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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