TIOL-DDT 645 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 645</font><br>
28.06.2007<br>
Thursday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Comments On Draft Circular For Technical Issues In Service Tax Law
</strong></font>
</p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has put forth a comprehensive draft circular to clarify various issues
relating to classification and valuation of taxable services and levy of
service thereon with the result that all the previous circulars issued
by CBEC/DGST on these issues will be consigned to dustbin of history.
CBEC’s effort
to codify the list of existing taxable services by assigning three digit numbers
starting from 001 to 999 is indeed commendable. As mentioned in earlier DDT
639 we hope that this process of codification will be incorporated in the statute
as well. Now coming back to the nitty-gritty of the actual clarifications or
the lack of it in the proposed draft circular on technical issues – here
are some comments prepared by our hard core team.<br>
<br>
<strong>010: Manpower recruitment and supply service:</strong><br>
<br>
If one business entity ‘A’ provides its personnel to another
business entity ‘B’ for a temporary period and the cost of such
personnel is recovered by entity ‘A’ from entity ‘B’ on
actual basis (without any mark up or premium) will this activity of sharing
of personnel be categorized under this taxable service head and chargeable
to service tax? If there is a premium attached to the sharing of personnel
then there is a consideration but in cases where there is no premium/mark
up for sharing of personnel and it is a mere transfer on deputation will
it amount to a taxable service?<br>
<br>
Earlier vide M.F (D.R.) letter F.No. B1/6/2005-TRU dated 27.07.2005 it was
clarified that such temporary transfer shall attract service tax if the supplier
agrees for use of the services of an individual employed by him to another
person for a consideration. It was further clarified that the value for the
purpose of paying service tax shall include the staff costs whether or not
such staff cost is borne by the recipient (illogical clarification as the
salary and contributions to statutory authorities linked to such salary is
not a direct consideration). What is the fate of this illogical circular?
Can we presume that this is buried?<br>
<br>
<strong>017.01: Management or Business Consultancy service:</strong><br>
<br>
In the draft circular it was clarified that services provided in relation
to merger or acquisition is covered under management or business consultant
service. However in the definition of Banking and other Financial Services
[Section 65 (12)], clause (vi) clearly covers this activity of advice on
mergers and acquisitions. The clarification is contrary to the statute if
the services are provided by a commercial concern.<br>
<br>
<strong>034.02: Banking and other Financial Service:</strong><br>
<br>
In the draft circular it was clarified that the amount charged as entry and
exit load from the investor is not to be treated as a consideration by the
asset management company and not leviable to service tax under the category
of Banking and other Financial service. But is there a possibility of such
consideration received by an asset management company leviable to service tax
under any other taxable service head?<br>
<br>
<strong>035.01: Port Service:</strong><br>
<br>
It was clarified that repair of ships during dry dock by persons authorized
by the Port is leviable to service tax under the taxable service head of ‘Port
Service’. Though the definition of Port Service in Section 65 (105)
(zn) covers any service provided by a Port or any person authorized by the
port, in relation to port services, repair of ships during dry dock may have
to be classified under the taxable service head of Management, maintenance
or repair service. When there is no ambiguity in the nature of service viz.,
repair of ships during dry dock, in terms of Section 65A (a) the sub-clause
which provides the more specific description has to be preferred to sub-clauses
which provide a more general description.<br>
<br>
<strong>036.03: Authorized service station’s service:</strong><br>
<br>
In the draft circular it was clarified that 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. This principle is absolutely justified. But when there
is a proposition in the same clarification that service tax is not leviable
on the sale of goods and when this aspect of sale of goods during the course
of provision of service is subject to verification of the facts of the transaction,
a mention could have been made in the subsequent part of the clarification
that it is relevant only in the case of consumables (cost inclusion aspect).
The clarification could have referred to the eligibility of exemption notification
12/03-ST dated 20.06.2003 as amended for availing abatement of value when there
is sale of goods during the course of provision of service subject to the conditions
prevailing therein.<br>
<strong><br>
076: Club or Association:</strong><br>
<br>
In the draft circular there is no reference to the recent clarification issued
by TRU vide letter dated 08.05.07 on the eligibility of cooperative housing
societies whose individual membership is less than Rs. 3000 per month for exemption
from service tax by virtue of Notification No. 8/07-ST dated 01.03.2007. Is
it a slip or can we assume that the cooperative housing societies are not eligible
to claim the benefit of this exemption notification?.<br>
<strong><br>
062: Commercial or Industrial construction service and 079: Construction of
Complex service:</strong><br>
<br>
What is the status of clarifications issued by TRU vide circular no. 80 dated
17.09.2004 and TRU letter dated 27.07.2005? Further with regard to construction
of complex service it was clarified in TRU letter dated 27.07.2005 that the
gross amount charged shall not include the cost of land and stamp duty paid
for registration of land. It was also mentioned that Notification No. 18/2005-ST
(now Notification No. 1/06-ST) provides the option of abatement and service
tax can be paid on 33% of the gross amount charged subject to the fulfillment
of the conditions specified in the notification. With the introduction of new
Section 67 and the valuation rules (18.04.2006 for the new section 67 and 19.04.2006
for valuation rules), all the previous clarifications wherever related to valuation
of taxable services were withdrawn by TRU letter dated 19.04.2006 (para 4.1-13).
Now what is the fate of the cost of land and stamp duty paid thereon? Is there
a choice for the assessee to exclude the cost of land and the stamp duty paid
thereon from the gross amount charged or they have to religiously follow Notification
No. 1/06-ST.<br>
<br>
The list may go on endlessly and the only request is that Board should not
come out with this circular in haste. They have to sieve through all the circulars
issued clarifying various technical issues in all the taxable services and
then come out with a comprehensive circular. After all when some efforts are
put in bringing out such comprehensive circular it is advisable that they put
in more efforts so that they leave no stone unturned before coming out with
a comprehensive circular.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Exchange rates announced for imported goods and export goods</strong></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=24&filename=notification/custom/2007/cnt07_063.htm" target="_blank">Notification Nos. 63/2007</a> and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_064.htm" target="_blank">64/2007-Cus., (N.T.), Dated June 26, 2007</a> fix
the exchange rates for imports and exports respectively with effect from 1st
May, 2007. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_052.htm" target="_blank">Notifications 52 </a>and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_053.htm" target="_blank">53/2007-NT-Customs, dated the 28th May, 2007</a>are superseded.</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=24&filename=notification/custom/2007/cnt07_063.htm" target="_blank">Notification Nos. 63/2007 </a>and <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_064.htm" target="_blank">64/2007-Cus., (N.T.), Dated June 26, 2007</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central Information Commission (Management) Regulations, 2007 - Notified</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CIC has notified the <b>Central
Information Commission (Management) Regulations, 2007,</b> which have come into force from 21.6.2007.<br>
<br>
Regulation 2(q) and 4(xviii) are missing! Maybe somebody can ask for information
as to where they went missing.<br>
<br>
<strong>Some salient features of the Regulations:-</strong><br>
<br>
++ Working hours from 9.30 AM to 5.30 PM with a lunch break of an hour from
1.00 PM to 2.00 PM.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>++ Info
takes a vacation :</b> Summer vacation for 2 to 4 weeks during June-July
and a winter vacation of two weeks during December-January. Can Tribunals
also take a vacation?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>++ Civilised
appeal :</b> Language used in the appeal should be formal and civilised
and should not be in any way indecent or abusive.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>++<font color="#000000"> Registrar
can reject appeal</font> :</strong> And his decision is final.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> ++ <strong>Counsel
permitted :</strong> And the counsel need not be a lawyer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>++
Enquiry :</strong> Commission may entrust an enquiry to the Registrar or
any other officer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>++
Costs :</strong> Commission can award costs.<br>
<br>
<a href="http://www.hrindiaonline.com/laws4u/rti1.php?filename=rti/2007/regulations.htm" target="_blank">No.CIC/Legal/2007/006 Dated: 21st June, 2007</a></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<font color="#006600"><strong>From our Legal Corner – tomorrow’s cases</strong></font></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"> <strong><font color="#FF0000">Income Tax</font></strong><br>
<br>
<font color="#663399">Constitution of Special Bench on wrong facts - same issue pending in HC - order
to set up SB withdrawn - Such Order is administrative and President has power
to withdraw it : ITAT President<br>
<br>
<font color="#000000">In an interesting case, the assessee sought and got a Special Bench and at
the same time approached the High Court. What would have happened if the Special
Bench and the High Court had given different verdicts? Obviously the High Court
view would prevail. Then what is the point in the Special Bench deciding the
issue at all? But then can the President of the Tribunal dismantle a Special
Bench he had constituted?</font></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <br>
<font color="#FF0000"><strong>Central Excise</strong></font><br>
<br>
<font color="#663399">Once duty has been paid on excisable goods and same are later returned by consignee
as per rule 16(1), it cannot be said that goods were non-marketable in the
first place and the same are 'waste and scrap' : Tribunal<br>
<br>
<font color="#000000">What happens when duty paid goods returned under Rule 16 of the Central Excise
Rules are spoiled during re-processing and if the re processing does not amount
to manufacture?</font><br>
</font><br>
<font color="#FF0000"><strong>Customs</strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#663399">Whether burden of proof to establish veracity of export value lies on exporter
or Revenue?</font></font></p>
<p align="justify"><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a very serious issue and is referred to a Larger Bench.</font></p>
<p align="justify"> <font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>See our columns tomorrow for the judgements</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
<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="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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