TIOL-DDT 494 · the untouched capture
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<p><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT
494</font></b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
20 11 2006<br>
Monday</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Catering in trains
– who is liable to pay Service Tax?</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently we carried a judgement of the AP High
Court that VAT cannot be collected from both the main contractor and sub contractor.
We also carried a CESTAT order that Service Tax cannot be collected from the
sub consultant. Board had recently given a clarification on a similar issue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The <i>Indian Railway Catering and Tourism Corporation
Ltd</i> asked the Board for a clarification and they stated that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In respect of catering services provided
in Shatabdi / Rajdhani trains, IRCTC licensed private contractors (known as
sub-licensee) provide catering services on board the trains and the private
contractor pays service tax under outdoor catering service for the catering
services provided.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The entire amount billed to IRCTC towards
cost of food supplied to the passengers by the private contractor is transferred
by Railways to IRCTC which in turns transfers it to the private contractor
who is providing services.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ IRCTC does not retain any amount and service
tax is paid by the private contractor on the total amount billed by him to
IRCTC.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ IRCTC recovers 15% of the billed amount
from the private contractor and pays service tax on the said amount under
Business Auxiliary Service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies -</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ IRCTC has been formed to manage the catering
and hospitality services in trains and licensed to provide and distribute
meals and services to the passengers on board the trains.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Outdoor caterer is defined under section
65(76a) as a caterer engaged in providing services in connection with catering
at a place other than his own and caterer is defined under section 65(24)
as any person who supplies, either directly or indirectly, any food or beverages.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In view of the definition of outdoor catering
service under section 65(105) (zzt), outdoor caterer under section 65(76a)
and caterer under section 65(24) and the facts stated, the service provided
by IRCTC <b>appears</b> to be classifiable under outdoor catering service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If any further clarification on the matter
is required, the jurisdictional officers may be contacted.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As if jurisdictional officers can clarify what
even the Board could not! Now as per the Board clarification, IRCTC is required
to pay Service Tax for the catering in the trains, even though it does not actually
provide even a glass of water. Then is the contractor who actually supplies
the food also required to pay Service Tax? That too for the same taxable event?.
Please recall the AP High Court judgement in L&T. Board does not clarify
this. We will bring you more analysis on this issue soon.</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=41&filename=notification/servicetax/2006/trurail.htm">F.
No. 332/38/2006-TRU dated the 1st August, 2006.</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Agricultural tractor
on the main road – doesn’t lose status - CBEC</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Agricultural tractors were exempted from duty
in order to encourage farm sector. But what happens if a tractor strays away
from the farm and into the main road? It has to be careful to avoid a Central
Excise Superintendent! This is not that easy with so many Superintendents swarming
all over the place. The tractor accosting the first Central Excise officer on
the road is likely to be seized for straying on to the road.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board circular states that “Representations
have been received in the Board that certain field formations are proposing
to charge excise duty on agricultural tractors on the ground that besides agricultural
work, these tractors are used for haulage of farm products, fertilizers, etc.
thereby qualifying as “road tractors for semi-trailers” attracting Central Excise
duty @ 16%.”</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ “Road tractors for semi-trailers” attract
Central Excise duty at the rate of 16%, if the engine capacity is more than
1800 cc.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Tractors falling under Chapter heading
8701 were exempted from excise duty in Budget 2004-05 with the intention to
give exemption to agricultural tractors, in order to encourage farm sector.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ A tractor primarily designed and meant
for agriculture purposes can also be incidentally used to take goods to the
nearest market.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ But that is an incidental use, and such
tractors are not primarily designed to haul trailers.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Therefore, incidental use of hauling trailers
will not put such tractors in dutiable category. Therefore primary use of
tractor should be the deciding factor.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the good Board has advised the field to be
so informed.</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=31&filename=notification/excise/2006/excircular838.htm">CIRCULAR
NO. 838/15/2006-CX., Dated: November 16, 2006</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Exemption to parts
of tractors – Board clarifies </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tractors are exempted, what about parts? As
per Notification No. 6/2002-CE and 6/2006-Central Excise, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Parts, used within the factory of production
for manufacture of goods of heading 8701 parts, falling under any chapter, used
within the factory of production for manufacture of goods of heading 8701 are
exempted.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some doubts have been expressed as to whether
parts falling under Chapters other than 87, when used within the factory of
production for manufacture of goods of heading 8701 are eligible for the exemption.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board clarifies that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ goods falling under any Chapter, so long
as they are parts of goods of heading 8701, will be covered by the said notifications
subject to fulfillment of other conditions prescribed in the said notifications.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ For example, IC Engines, when used within
the factory of production for manufacture of tractors falling under heading
8701, will be classifiable under Chapter 84, and will be covered by the said
notifications subject to fulfillment of other conditions.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2006/excircular839.htm">CIRCULAR
NO. 839/16/2006-CX., Dated: November 16, 2006</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Facilities to NRIs/PIO
and Foreign Nationals - Liberalisation</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Regulation 4 of Foreign Exchange Management
(Remittance of Assets) Regulations, 2000 notified vide Notification No. FEMA.13/2000-RB
dated 3rd May 2000 and as amended from time to time, and A. P. (DIR Series)
Circular No. 67 dated January 13, 2003, Non-Resident Indians (NRIs) and Persons
of Indian Origin (PIO) are allowed to remit up to USD one million per calendar
year for any bonafide purpose out of the balances in their Non-Resident Ordinary
(NRO) accounts. The balance in the NRO accounts may also include the sale proceeds
of immoveable property acquired by the non-resident out of her/his resources
in <st1:country-region><st1:place>India</st1:place></st1:country-region>, or
sale proceeds of property received by way of inheritance or gift. The remittance
of sale proceeds of the immoveable property is at present subject to a lock-in
period of 10 years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With a view to further liberalise the procedure
and provide greater flexibility, the lock-in period of 10 years for remittance
of sale proceeds of immovable property has been dispensed with.</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=49&filename=notification/rbi/2006/rbi06cir012.htm">A.P.
(DIR Series) CIRCULAR NO. 12/RBI., Dated: November 16, 2006</a></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">As it rarely happens that a man is fit to plead
his own cause, lawyers are a class of the community, who, by study and experience,
have acquired the art and power of arranging evidence, and of applying to the
points at issue what the law has settled. A lawyer is to do for his client all
that his client might fairly do for himself, if he could. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(Samuel Johnson (1709-1784)</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></font></p>
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