TIOL-DDT 871 · 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
871</font><br>
23.05.2008<br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">
FICCI and CII want exemption from Service Tax </font></strong></p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7312" target="_blank">DDT 867</a> and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7317" target="_blank">868</a></strong> had
carried news that CBEC had clarified that Trade Associations are liable to
pay Service Tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
FICCI and CII have approached the Government for exemption. FICCI Secretary
General is reported to have spoken to the Finance Minister on the subject.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
seems the CII is also in touch with the FM. It is heard that CII is already
stuck with a SCN for over Rs. 30 Crores and details are sought from FICCI. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">FICCI
and CII feel that they are non-profit organisations and are not liable to tax.
FICCI claims that it had worked for national independence and there was no money
made in that enterprise. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
the Board clarification is emphatic when it states,</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
services provided by these associations are not of charitable, religious or
political in nature. They collect membership fees and other charges form their
members and they work for the interest of trade and industries. Therefore, they
do not have objectives which could be categorized as public service. Accordingly,
they do not fall within the scope of the excluded categories.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Further
some of the trade associations have also argued that they are providing service
to their own members and thus the service is self service. However such argument
does not have any legal basis. In this regard attention is invited to the Explanation
to section 65 of the Finance Act, 1994, which clearly clarifies that taxable
services includes any service provided by any unincorporated association or
body of person to a member thereof, for cash deferred payment or any other valuable
consideration.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bilateral
Investment Promotion and Protection Agreement with Brunei</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India
has signed a Bilateral Investment Promotion and Protection Agreement-<strong><font color="#FF6633">
BIPA</font></strong> with Brunei Darussalam, yesterday. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Signing
the agreement, the Finance Minister Chidambaram said that Brunei is the 70th
country with whom India has so far signed BIPA. Observing that Brunei is the
third largest producer of oil in South East Asia and the fourth largest producer
of LNG, PC hoped that the agreement would serve as a catalyst in boosting investment
flows between the countries.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
BIPA seeks to protect and promote investments from either country in the territory
of the other country with ultimate objective of increasing bilateral investment
flow.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Kamal
Nath objects to new WTO texts</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">New
draft texts on industrial goods aimed at clinching an elusive deal in global
trade talks will have to be "completely revised," as per India's commerce
minister Kamal Nath.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
World Trade Organisation's Doha round of talks to reduce trade barriers was
launched in 2001 with the target of reaching an agreement by 2004. But negotiations
have long foundered over rows between developed and developing countries on
agricultural subsidies and industrial tariffs.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
text (on industrial goods) would have to be completely revised and significant
convergence achieved before taking the matter for deliberation at the ministerial
level," said the Commerce Minister Kamal Nath.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Technical
discussions on both texts would start from next week and hard negotiations lie
ahead," according to him</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
new farm text is also reported to have made headway on "sensitive"
products that countries could shield from a sharp fall in customs duties.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Developed
countries would be able to designate up to four or six percent of their imported
agricultural goods as "sensitive" while committing themselves to an
overall quota for imported products. In the industrial sector, about 30 emerging
market countries would agree to reduce their customs duties to a maximum level
of 19 to 26 percent. The more the tariffs are lowered, the greater would be
the right of governments to protect certain "sensitive" items. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Power
of a “semi-colon” & an “or” in Section 73 of the
Finance Act, 1994</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our
friendly Netizen has sent this “interesting” interpretation making
the rounds in the Central Excise & Service tax formations, thanks to an
erudite Commissioner in a coastal city.</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Here
is an extract from the recovery sections concerning Excise & Service tax.</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">11A.
Recovery of duties not levied or not paid or short-levied or short-paid or erroneously
refunded.-</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided
that where any duty of excise has not been levied or paid or has been short-levied
or short-paid or erroneously refunded by reason of fraud, collusion or any willful
mis-statement or suppression of facts, or contravention of any of the provisions
of this Act or of the rules made thereunder with intent to evade payment of
duty, by such person or his agent, the provisions of this sub-section shall
have effect, as if, for the words one year, the words "five years"
were substituted. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">SECTION
73. Recovery of service tax not levied or paid or short-levied or short-paid
or erroneously refunded.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided
that where any service tax has not been levied or paid or has been short-levied
or short-paid or erroneously refunded by reason of —</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a)
fraud; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b)
collusion; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c)
wilful mis-statement; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d)
suppression of facts; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e)
contravention of any of the provisions of this Chapter or of the rules made
thereunder with intent to evade payment of service tax,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">by
the person chargeable with the service tax or his agent, the provisions of this
sub-section shall have effect, as if, for the words “one year”,
the words “five years” had been substituted.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Take</font></strong> a look at both the recovery Sections. Whereas Section 11A employs the punctuation
mark “comma” after the word fraud & an “or” after
the words collusion, any willful misstatement, suppression of facts, contravention
of any of the provisions of this Act or of the rules made thereunder with intent
to evade payment of duty, the provisions of Section 73 employ a semi-colon “;”
& also an “or” after each of these words – fraud, collusion,
willful misstatement, suppression of facts. Incidentally, in section 11A, there
is one more ‘comma’ after the word ‘suppression of facts’.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">What
could be the reason for this?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does
it mean that a “semi-colon” [;] & an “or” are more
powerful than a “comma” & a simple ‘or’ <strong><font color="#FF6633">OR</font></strong>
does it mean “nothing”?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Somewhere
along the coast, an adjudicating authority, after poring over innumerable decisions
concerning ‘statutory interpretation’ has taken a view that “intent
to evade payment of Service Tax” would not apply to sub-heading (a) to
(d) of the said proviso in Section 73. Meaning to say, <font color="#FF6633"><strong>that
there is no need to prove “an intention to evade payment of Service tax”
for issuing the extended period demand notices in Service tax matters.</strong></font></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Great
interpretation though!</font></strong></p>
<p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">
tiol</font> <font color="#006600">– </font></strong></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Monday’s
cases</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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></font></strong></font></strong></font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></font><font color="#663399">Central
Excise </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Welding
Electrodes – Cenvat Credit available, trumpets Tribunal</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">WHY</font></strong>
there is so much of dispute on some insignificant welding rods, when you are
ready to give credit to almost any input? And the dispute continues unabated
for more than twenty years! Instead of having a perpetual dispute, why can’t
the government clarify the position in the Rules?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Welding
electrodes used for repair; eligible:</font></strong> Welding Electrodes used
in repair and maintenance of machineries in the cement factory, - the cement
factory consisting of complex machineries cannot run smoothly if the various
defects are not rectified immediately. There are large number of pipes and tubes
through which the various ingredients pass through. If some parts of the pipes
or even machinery are broken, welding is very necessary. How can anybody reason
that such welding is not in relation to the manufacture of final products?”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Judicial
Discipline:</font></strong> It was clearly held that Supreme Court’s decision
is binding on the Tribunal and is to be preferred to the contrary decision of
Tribunal’s Larger Bench decision.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income
Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurisdiction
- If an order is set aside by CIT(A) for fresh examination, AO is not
at liberty to find a new source of additions - cannot go beyond grounds
it originally made additions on and same were set aside: Gujarat HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WHAT
is the jurisdiction of an Assessing Officer (AO) if an order is totally set
aside by the CIT(A) and remanded for fresh assessment? The normal assumption
and widespread understanding in the Department and also among most professionals
is that the AO is at liberty to examine the facts furnished in the return by
the assessee and if it comes across something new which might have escaped the
eagle's eyes of the AO, he is free to make additions. This is what was understood
not only by the CIT(A) and also the ITAT in this case but the Gujarat High Court
took a different view that the AO cannot exceed its jurisdiction except for
the grounds on which it made the additions and the same were challenged and
finally set aside by the CIT(A) for fresh examination by the AO. Had the CIT(A)
originally not set aside the order, the AO would not have expanded the scope
of his jurisdiction. And thus, the High Court allowed the appeal of the assessee.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ST
Credit – Prima facie, credit allowable on Xerox Machine maintenance services,
Air Travel Agent Service, Tourist taxi service & Photography services: Tribunal</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Minuscule</font> </strong>amounts of credit were taken pertaining to service tax paid on the
following services - Xerox machine maintenance, Air Travel Agents, Tourist taxi
& Photography. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue
was of the opinion that there was no question of extending any credit on these
services as there was no connection of these services with the manufacturing
activities. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
cenvat credit of Rs.22,078/- was accordingly denied & a penalty of Rs.5000/-
was imposed by the lower authority, which order was upheld by the Commissioner
(Appeals). </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See
our columns Monday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Monday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice Weekend.</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" target="_blank">vijaywrite@taxindiaonline.com</a></font></p>
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