TIOL-DDT 639 · the untouched capture
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<p align="justify"><font size="3"><b><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 639</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b></b></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
20.06.2007<br>
Wednesday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax- How many services are there? </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you have any idea as to how many taxable services are there? May be when they started it with three services, they thought that the letters of the English alphabet are enough to take care of all the possible services to be taxed. After they finished with all the 26 letters from a to z, they brought in aa, ab… and so on. This went to ridiculous levels that today we have services categorized up to zzzzd – that makes it 108, but of these 8 services “b, c, zd, ze, zf, zg, zp and zzj” have been omitted. So that makes is a hundred services. But why can’t they give numbers to these services instead of confusing letters like zzzzd? CBEC seems to have made an earnest effort in this direction. In the draft circular issued yesterday, they have classified the services – rather clarifications on services by numbers. Now at least for clarifications, each service will be known by a three digit code from 001 to 100. Four numbers 996 to 999 are reserved for clarifications on issues like export of services, valuation etc,. This of course means that they can impose service tax on 895 more services and this will take care of the situation for the next few years. Now they should use these three digit codes for the services in the Act also. Hopefully they will do it in the next budget. </font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>About 300 Service Tax circulars about to be consigned into the dustbin of history – Board calls for comments.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC had done it! In one stroke about three hundred circulars relating to Service Tax are to be replaced by two circulars – yes just two circulars, one on technical matters and the other on procedure and the technical circular is planned in a technical way. Clarifications are given service code wise with each code followed by a dot and a two digit number indicating the clarification. Very scientific indeed!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is actually nothing new in the circulars; they are just a compilation of the existing instructions. Some of the important technical clarifications:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> ++ No Service Tax on the amount collected as surcharge for delayed payment of telephone bills.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Merely canvassing advertisements for publishing, on commission basis, is not taxable service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ ‘Express cargo service’ is covered under courier agency </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Angadias are covered within the definition of ‘courier agency’ ['Sensitive
documents' do not include Indian currency which is a legal tender and transmissions
or compensatory payment of Indian currency on behalf of client cannot be
covered under 'Courier Service' -<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2006/2006-TIOL-492-CESTAT-MUM.htm" target="_blank"> <u>2005-TIOL-492-CESTAT-MUM</u></a><u></u><b><u>. </u> Board
has conveniently ignored this CESTAT order]</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Consulting engineers include self-employed professionally qualified engineer, whether or not employing others for assistance.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Educational institutes such as IITs, IIMs, fall within the definition of ‘manpower recruitment or supply agency’ </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Halls, rooms etc. let out by hotels / restaurants for a consideration for organising social, official or business functions are covered within the scope of “mandap” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Dance, drama or music programme or competitions are social functions and allowing temporary occupation of a hall for a consideration for organizing such functions are leviable to service tax under Mandap Keeper Service </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Services provided in relation to merger, acquisition and other form of restructuring of business organization are covered within the scope of management or business <st1:PersonName w:st="on">consultant</st1:PersonName> service </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ with effect from 1.4.2003 PrasarBharati Corporation is liable to pay service tax for the broadcasting services provided like any other broadcasting agency or organization engaged in providing service in relation to broadcasting </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Moneychangers are authorized by RBI to buy and sell foreign exchange at the prevalent market rates. Buying or selling of foreign exchange by such persons without separately charging any amount as commission or brokerage does not fall within the scope of foreign exchange broking and is not leviable to service tax </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Entry load and exit load charged by a mutual fund are not for the purpose of management of assets. Thus, amount charged as “entry and exit load” are not to be treated as consideration received by Asset Management Company for asset management and hence not be leviable to service tax under banking and other financial service </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the depository services provided by CDSL including Electronic Access to Securities Information (EASI) for a fee are leviable to service tax under Banking and other Financial Services </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Repair of ships in an Indian port, whether or not during dry-docking, by the port or by the person duly authorized by the port authorities is leviable to service tax under port service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As the Management Committee of Paradeep Port is authorized by the Port Trust to provide services within the port area at the prescribed rates, such services provided by the Committee are leviable to service tax under Port Service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Free service by authorized dealers - Service tax is leviable on the amount received from the vehicle manufacturer for the purpose of servicing of vehicles. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Servicing of heavy vehicles like trucks, not being one of the specified categories of motor vehicles, is not covered within the scope of the taxable service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Any goods used in the course of providing service are to be treated as inputs for providing the service and accordingly, cost of such inputs should form integral part of the value of the taxable service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ services provided in relation to storage and warehousing of empty containers is leviable to service tax under storage and warehousing service </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, leviable to service tax under business auxiliary service </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Whether a club or association enjoying exemption under the provisions of Income Tax Act as a public charitable institution gets automatically excluded from levy of service tax? <b>NO </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Whether ticket issued outside <st1:country-region w:st="on">India</st1:country-region> for an international journey commencing from <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region></st1:place> (say Delhi–London) is leviable to service tax? <b>YES</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ if a sovereign / public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Following services provided by Department of Posts are not leviable to service tax. </font></p>
<ul type=disc>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations.<br>
</font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other similar services which are of the nature of banking and other financial services.</font></li>
</ul>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board appears to be serious in officially issuing these circulars by 1.7.2007. So please send your comments urgently to <u><a
href="mailto:tru.finmin@gmail.com">tru.finmin@gmail.com</a> </u>latest by 29<sup>th</sup> June 2007</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/circular_technical.htm" target="_blank">Board’s Draft circular in</a></u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/circular_technical.htm"><u>F.No.354/28/2007-TRU</u></a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Circular on Service Tax procedure</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has issued a circular on procedure. This is basically a reiteration of the Rules, but the Board has in detail asserted that</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The consigner and consignee has to pay tax in cash on goods transport by road service – [Tribunal had in <u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2007/2007-TIOL-645-CESTAT-MAD.htm" target="_blank">2007-TIOL-645-CESTAT-MAD</a></u> held that it can be paid from credit account. Board obviously does not agree]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <b><font color="#663399">Here is very important and useful clarification</font></b>.Whether a consignee can take the credit of the amount paid as service tax either by himself (as consignee), or by the consignor or by the Goods Transport Agency? The good Board says, “<b><font color="#663399">YES</font></b>”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Outward transport – credit only up to place of removal – CESTAT is also with the Board!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. credit of service tax paid in respect of mobile telephone service is admissible, provided the mobile phone is used for providing out put service or used in or in relation to manufacture of finished goods. [How is to be proved?]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That of course leaves several issues yet to be clarified. Some of them are:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Should the Head Office of a factory take registration as Service Tax Distributor if there is only one office and one factory?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Is every service provided by any one in a port, port service?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Is Service Tax leviable on Services provided from outside and received in <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> before 19.4.2006?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Are the amounts reimbursed for postage, printing, stationery, conveyance etc, to a service provider includible in the value?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Under the service "renting of immoveable property" whether rent payable for lease of vacant land be service taxable if after taking the land on lease, some building is constructed on the vacant land by the lessee?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well questions will always be there and answers can be found. The Board deserves all kudos for this great exercise. Now at least we know what the instructions are. And they are all in one place. Only Board should ensure that all future clarifications are incorporated into this scheme and necessary corrections are carried out immediately. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Please send in your comments on the procedures to </b><a href="mailto:geebeetru@rediffmail.com">geebeetru@rediffmail.com</a> or <a href="mailto:gdlohani@gmail.com">gdlohani@gmail.com</a> <b>by 29<sup>th</sup> June 2007. </b></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>But is the Board serious about feedback?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Board has published these draft circulars yesterday and they want the public’s
comments by 29<sup>th</sup> June. They plan to make these effective from
1.7.2007, which is incidentally a Sunday (may be they didn’t realize
this!) Now they have given ten days time to the stakeholders to send in their
comments. As for departmental officers the draft circular will not reach
half the offices in the country by 1<sup>st</sup> July. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let’s see the time frame. Assume the draft circulars have reached the Chief Commissioners yesterday and they had seen them yesterday and had called for comments from the Commissioners to reach them by 27<sup>th</sup> June. This will reach the Commissioners on 21<sup>st</sup> June. The Commissioners, assuming they are pretty fast will send it to the Divisions by 22<sup>nd</sup> asking for comments by 25<sup>th</sup>. 22<sup>nd</sup> is a Friday and the Divisional officers will send a letter to the Ranges asking for comments on 25<sup>th</sup>. This will reach the Ranges on 25<sup>th</sup> or 26<sup>th</sup> and assuming they are fast and have nothing better to do than reading 30 pages of the circulars and then commenting on them, they will prepare their comments by 28<sup>th</sup> and dispatch it to the Division by 2.7.2007. The Division will take at least two days to compile the data and they will send their report to the Commissioner by 5.7.2007. If the Commissioner also takes two days (actually he will take more) to compile, his report will go on 6<sup>th</sup> July. The Chief Commissioner will get it on 9<sup>th</sup> July and may possibly send his comments by 11<sup>th</sup> July – all this if there are no meetings, urgent reports, inspections, protocol and a host of other activities which keep the babus busy.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By this time the Board would have already issued the circulars and nobody is going to read the comments collected from the field. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If this is the situation as far as departmental officers’ comments are concerned, what would be the fate of comments from the public? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the Board is not serious about considering public comments, why ask them at all? </font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">From our Legal Corner – tomorrow’s cases</font></b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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></b></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>ITAT</u></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Can Income Tax conduct search even after death of taxpayer by issuing warrant in his name? </font>- </b>INCOME Tax search is a common and regular phenomenon. Every other day it is reported by the media. It becomes more headline-grabbing during the last leg of the fiscal when certain targets are to be realised. But can it be conducted even after the death of an assessee? Sounds strange! But this was precisely the issue which came up before the Tribunal.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>CESTAT</u></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Commissioner (A) sets aside a JC's order - Revenue appeals to Comm (A) against the same after it was set aside - JC's order merged with Appellate Commissioner's order : CESTAT - THE</font> </b>Commissioner of Central Excise has a whole year to review an order of his subordinate and most Commissioners do take all of the time given to them. After the review, the department has a further period of three months to appeal to the Commissioner (Appeals). That is a total of eighteen months. This can be further extended. The Commissioner's review order can be shown as received after three months. But the party is required to appeal within two months. This was a cosy affair till the Revenue officers got for themselves a large number of posts of Commissioner (Appeals). There were places where for thirty pending appeals; there were three Commissioners (Appeals)! So the appellate Commissioners started passing orders and by the time the Department came in appeal after a cool year and a half, the party had already appealed and won with the Commissioner (Appeals).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">What is Lecithinised high protein oil seed based meal containing Vitamins B, C and D? - Simply de-oiled soyabean cake - Tribunal sets aside denial of exemption under Advance Licence on ground of misdeclaration -</font></b>If the product is capable of being covered under two categories, applicant is entitled to choose the category which is beneficial to him. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns tomorrow for the judgements</u></b></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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