TIOL-DDT 632 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html>
<head>
<title>Untitled Document</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<table border=0 cellspacing=0 cellpadding=0 width=450
background="ddt600_bg.jpg" id=table1>
<tr>
<td class="Normal"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT
632</font><br>
11.06.2007<br>
Monday</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Some
more Service Tax queries from our seminar</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
bring you a few more questions and answers from our Hyderabad seminar:-</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are purchasing raw material from M/s ABC on F.O.R destination basis. M/s
ABC pays the freight and charges in their Commercial invoice raised on
us. We make payment of the commercial bills including the freight amount.
In these case the transporter issues consignment note on us without showing
freight amount in it. In the consignment note it is mentioned - </font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Consignment
note is issued on a/c of ABC</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">To
be billed at ABC, Mumbai.</font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Person
liable for Service Tax – consignee. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
view of the above, the following query is raised. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can
we be held responsible to pay Service Tax in absence of freight amount
in the consignment note and when freight is paid to the transporters by
ABC and not by us, Should we pay Service Tax on Freight shown in Commercial
Invoice? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also
view about Cenvat credit on outward transportation? </font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer
:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Whether
the tax amount is shown in the consignment note or other is not the criterion
for liability of tax– The person liable is one of the seven categories–
reimbursement is not the criterion – if consignor is paying the
freight charges, then service tax liability is on consignor– why
should consignee pay service tax when he is not legally liable to pay
service tax? If department requires to catch the defaulter then the service
tax liability will be on the consignor. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>There
is a lot of conflict on this – The judgment of Grasim Industries
has settled this where transportation upto the point of clearance –
payment upto the place of removal the credit can be taken but thereafter,
the credit can be taken by the consignee if that transportation is input
for the consignee - freight charges are input services for the consignee
– if services are not input services then the consignee cannot </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Liability
to pay and eligibility to take credit – they are two different matters
– there is no nexus between them – on the payment part, the
liability depends on who pays the freight – whereas for taking credit,
the credit part upto the place of clearance, consignor can take credit,
thereafter the consignee can take credit if it is input service, which
happens if it carries input goods for the consignee – If it is interpreted
in any other manner, then two people will be have right to take same credit
and hence there will be two legal claimants for the same credit –
law cannot be interpreted to bring out a situation of legal absurdity.
</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
have entered into an agreement towards ‘ know how and technical
assistance and service agreement’ with XYZ , Japan by which it granted
non-exclusive right to us to use their technical information and know-how
to manufacture and sell the products and in turn we will pay to XYZ, Japan
a) An initial fee of fifty million Japanese Yen in three instalments b)
Running royalty on sale of goods c) fee for training of our staff at XYZ,
Japan’s works. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our
query in this regards is – are these services taxable?. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>a
and b above there is no dispute – both will be taxable – fee
for training the staff could be tricky – if it is essential for
transfer for the above agreement , then it will be taxable. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pure
labour oriented contracts , come under erection and commissioning having
commercial value of about 15%, can they opt for 2% under new tax rates?
. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Pure
labour contract is not a works contract and hence cannot. The question
of Composition scheme does not apply. The status of contracts will have
to be checked. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
have several works contracts. Can we opt for composition in respect of
some works and regular for some contracts? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Yes.
</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Education
cess and SHE cess is levied . This particular tax is for improving educational
service in India. My question is I cannot send my child to a school run
by Government for many reasons. Am I eligible to get relief to send my
child to another Government school where I incur boarding expenses or
to any other private school? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Are
you ready to make me the education minister? (in a lighter vein)</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are manufacturer of an exempted product under job work . We charge only
job work charges. Whether any service tax is payable on job work charges?
</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>As
far as process amounts to manufacture – whether there is exemption
or not does not matter – there will not be any service tax </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When
advertising agency’s service , market research agency’s service
are input service for a manufacturer of final products but why bar input
credit on services like CHA service and port service ( utilized for exporting
my final products ) </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The
problem is these services like CHA service and port service are provided
after the goods are cleared. Technically the service tax paid cannot be
allowed as input service as the same (CHA service and port service) is
not in or in relation to manufacture of the final products. The services
such as advertising agency’s service, market research agency’s
service are specifically given hence allowed. But the input service definition
needs a re-look and is being considered. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Question:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>W</b>hether
road repair or maintenance work is taxable under Management Maintenance
Repair services (MMRS) or under Commercial Construction service? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Answer:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Commercial
construction service specifically excludes roads and hence the same will
not be taxable under the said head. However MMRS talks about all immovable
property and roads are immovable property and therefore repairs of roads
is a taxable service and would be taxable under the head of MMRS.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CPWD
and other related authorities providing maintenance of roads better beware!</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The
Babu as FM</b> - <b>Confessions of a Swadeshi Reformer – Yashwant
Sinha ruminates</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For
some time, he was known as the FM who pledged the family gold in the London
market to salvage a sinking Indian Economy, but the bureaucrat turned
politician never depended on a personal secretary – at least that
is what he says in his memoirs.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Who
wants to be the next Finance Minister? Sinha thinks that the Sixth Pay
Commission could be a nuclear bomb on the finances of the country and
the Finance Minister’s job is an eminently avoidable one –
Sinha certainly has no chances of avoiding it or being burdened with it.
</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sinha’s
reminiscences are eminently avoidable and hardly reveal anything except
showing him as the valiant knight in shining armour. It seems there was
a proposal to trifurcate the Finance Ministry and Sinha strongly objected
to it, though he does not reveal as to who planned the division. Sinha
had asked Prime Minister Vajpayee to relieve him from the Finance Portfolio
and the PM took his time and ultimately relieved him with the words that
he was doing quite a good job in the finance ministry, but the public
perception had to be taken note of, he (PM) had decided to shift him (Sinha)
from the Ministry of Finance. Sinha says, I was happy because I had got
what I wanted. My only regret was that I was shifted because the ‘perception’
about my tenure in the finance ministry was not favourable about me. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sinha
was BJP’s FM, but he was not a part of the saffron brigade and perhaps
did not enjoy much clout in the party. Is it with a tinge of sadness that
he says, “Perhaps a lot of people were glad that I had finally left
charge as finance minister. I do not know if I could have played the game
differently. Could have propitiated the powers that be in a different
way. I am not merely referring to the powers that be in the party and
in the government but to those out there in Mumbai and other places. “</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From
our Legal Corner</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Slitting
and cutting of duty paid plastic laminated films into smaller rolls does
not amount to manufacture u/s 2(f) of Excise Act : CESTAT Larger Bench
</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Larger Bench, relying on a Supreme Court decision, decided the issue in
favour of the assessee, but it appears that the Respondent Revenue was
not represented before the Larger Bench. If Revenue does not bother to
even make an appearance before the Larger Bench, is it not a mockery of
the judicial system? </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See
our columns tomorrow for the judgment</u></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Sales
tax - Exemption to certified seeds or truthfully labeled seeds - both
conditions need not be fulfilled - Matter remanded by Apex Court </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
appears that Tribunal proceeded on the basis that the seeds were required
to be certified and truthfully labelled for the purpose of eligibility
for exemption. In reality, as clearly stated in the clarificatory memorandum
they are alternatives.<br>
<br>
The High Court also proceeded on the same basis overlooking the clarificatory
memorandum.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What
does the Supreme Court do? Obviously remand the case!</font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See
our columns tomorrow for details</u></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Employer
providing residential accommodation with furniture, cooking range and
TV to employees - If uniform standard rent is charged from all, no perquisite
to arise u/s 17(2)(ii) - TDS not applicable : ITAT</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
revenue sleuths made a case of default of non-deduction of tax on the
value of the perquisites granted to the employees during the financial
years 95-96 to 2000-01. The SBI had provided furniture to different categories
of employees. The items of furniture included computer table & chair,
vacuum cleaner, coir mattresses, cooking range, TV, washing machine, refrigerator,
dining table with chairs, air conditioner etc. For these services, the
bank charged standard rent. The assessee bank also reimbursed to the employees,
the expenditure incurred by them on daily wages for maintenance and proper
up-keep of the residential accommodation, furniture and fixtures owned
by the assessee bank and allotted to the employees. The reimbursement
was at a fixed rate on the basis of internal circulars issued by the bank
from time to time.</font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See
our columns tomorrow for details</u></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Until
Tomorrow with more DDT</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Have
a nice day.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mail
your comments to</b> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p></td>
</tr>
</table>
</body>
</html>