TIOL-DDT 891 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">TIOL-DDT 891 </font></strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> 20.06.2008 <br> Friday </font></strong></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Negative list of Input services- SEMINAR QUESTIONS & ANSWERS </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here are some of the questions raised in our Vizag seminar and their answers! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether repairing of public roads done under contract awarded by local municipal administration attract service tax under ‘Maintenance or Management service” or it is exempted from payment of service tax under “commercial construction service” since road repair involves relaying of the road? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. A clarification can be given on this issue, only after obtaining the practice being followed in other Commissionerates in such cases . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax paid on employee insurance policies by the manufacturer or service provider is eligible for taking Cenvat credit? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Service tax paid on Personal Accident policy, Mediclaim, and other insurance policies of employees is eligible for service tax credit. The only condition is that the company has to pay for the insurance policies and should cover only the employees. If insurance is for the whole family it is not available as credit. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">As suggested by one of the participants of the seminar, the Government will consider preparing negative list of services, which are not available as credit. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Are services received from abroad before 16/06/2005 liable for payment of service tax?. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Since the issue is before CESTAT (LB), no clarification can be issued in this matter. However, it is mostly likely that the issue may be decided partially in favour of the department by ruling that foreign services attract service tax from 16/06/2005. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax paid on “commercial construction service utilized for construction of Administrative block is available as credit? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Service tax paid on commercial construction of office building is available as credit as per the definition of “input service”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. How the value of service is to be arrived in cases of contracts involving supply & apply of paints, since application of paint attract service tax? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. It has to be arrived basing on the terms of the agreement. Value of the supply part can be arrived basing on the transaction value; it should not be difficult to arrive at the value of application part once value of supply part is known. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether construction of complex service provided for the construction of residential quarters of defense establishment exempt from payment of service tax? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. No such exemption is available. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax paid on services not listed in the Notification No. 41/07 dt. 6/10/2007 can be claimed as refund? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Service tax paid on services not listed in the Notification No. 41/07 is not available as refund. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether Service tax paid on maintenance of employees' residential colony is <br> available as credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Service tax paid on the maintenance of factory is available. However, theservice tax paid on the maintenance of employees' colony or Guest House is not available as credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax paid to the caterer running the employee canteen is eligible for taking credit? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. The answer is negative. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax paid on the transport service (Rent-a-cab service) for transport of employees is available as credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. Yes, credit is available. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether service tax is liable to be paid on container retention charges? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. No answer can be given without examining the contract/agreement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Q. Whether stevedoring service attract service tax under Cargo Handling Service or Port Service? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A. As the issue is before Tribunal, no comments can be given. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">TIOL – the Seminar way </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We got a mail from a former very senior CBEC officer; “It is very heartening to know about the unprecedented response to the seminar chaired by Mr. P.C. Jha, dynamic & practical minded chairman of CBEC, for which you & your team deserves all kudos. May I suggest you to initiate similar meets in metro towns to create more awareness about ambiguities & anomalies in the application of service tax laws which is going to contribute huge chunk to central kitty. Also take up issues on special economic zones & above all IPR which is going to be another daunting task so far as its enforcement is concerned on India 's frontiers though may not be a significant revenue earner. I may also like to associate with you on some of these issues in the next seminars”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are extremely grateful for such gracious comments. We get such mails from several organisations and individuals from various corners of the country asking us to organise such seminars in their respective cities. While we are honoured with such requests, we regret our inability to organise seminars in major metros and other cities. In our endeavour to bridge the gap between the tax administration and the tax payers, we can organise a couple of seminars, but beyond that, well! We are helpless. But wherever such seminars are held, in future, we promise to bring you the minutest details. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Walk out by Income Tax employees </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Strange it may sound, but the Income Tax employees have been staging a Walk Out after lunch hour over the past few days expressing their displeasure over appointment of private security personnel to guard their office premises at Piramal Chambers , Mumbai. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Walk Outs are a favourite past time of our politicians and the government employees seem to have picked up these traits! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We do not know which side is right, whether the Association or the administration which has attempted to explain to the Association that the present deployment of private security is on account of the terrorist threat perception being faced by government offices. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By the way, the same building also houses the offices of the Director General of Service Tax, the Chief Commissioner of Central Excise, and the Commissioner of Central Excise – but they seem to be least perturbed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We hope that the matter is resolved at the earliest and the taxpayers are not inconvenienced. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633" size="5"> tiol</font></strong></font><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> – Monday's cases </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></font></strong></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Good reason for revenue to smile – Lager Bench resolves an important Central Excise valuation issue in Department's favour </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question is while arriving at the cost of the goods manufactured by the job worker, whether the first 10% notional profit added by the principal manufacturer has to be added to the cost of the intermediate goods or only the actual cost the material has to be taken without adding the 10% notional profit. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Getting Airborne - Jet Airways is not a Cargo Handler so as to pay Service Tax for period 18.8.02 to 31.8.2004: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellant is admittedly an Airline engaged in the business of transportation of passenger and Cargo. The appellant takes booking of the cargo which is to be transported either by himself at its booking office or through IATA agents appointed at various locations all over the country. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue alleges that the service provided by the Appellant is a Cargo Handling Service and raised a demand of Rs.96.86 lakhs - appellant neither collects the cargo from the consignor premises nor delivers the same to the consignee of the cargo - From the definition of Cargo Handling Services, it becomes clear that services to be taxed under the said heading are to be provided by cargo handling agency and the same must be in relation to cargo handling services - The appellants are admittedly not providing any cargo handling services to the public at large and as such, are not perceived to the trade or public as a cargo handling agent. </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>Reimbursement of expenses to be incurred by contractee is not taxable under section 44BB - interest on delayed issue of refunds could be taxed only under Article 12.2 of DTAA - Assessee is not in a business of obtaining income-tax refunds and earning interest thereon: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No doubt that section 44BB is a code in itself and it starts with non obstantive clause which excludes application of sections 28 to 41 and sections 43 and 43A of the Act but at the same time, to assess any sum under that section, the activity must fall within the activity described in sub-section (2) of section 44BB of the Act. Supply of Dry Fruits and recovery of communication expenses specifically do not find mentioned in sub-section (2) of section 44BB as these activities have nothing to do with the activity of prospecting for or extraction or production of, mineral oils in India or outside India. So as it relates to reimbursement of cost of equipment, the same also does not fall within the ambit of sub-section (2) of section 44BB as the same apply on supply of plant and machinery on hire and the equipment, 75 per cent cost of which is reimbursed, was not machinery on hire being used in such activity. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></font></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"> vijaywrite@taxindiaonline.com </a> </font></p> </body> </html>