TIOL-DDT 936 · 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> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="3">TIOL-DDT 936 </font></strong><font size="3"><strong></strong></font></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><br> 25.08.2008 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services provided in DTA by the SEZ Units - who has to pay service tax? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> would you do when there is an audit objection by the C&AG? You make best efforts to prove that the matter does not belong to you and pass the buck. Vide para 6.7.8 of the C&AG report on Indirect taxes for the year 2008, it was pointed out that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u>6.7.8 Non-levy of service tax on services rendered in the DTA </u></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of the paragraph 7.8 of the Exim Policy (2002-07), an SEZ unit can render services in DTA on payment of the applicable duty. As per the Finance Act, 1994, amended from time to time, service tax is levied on the value of taxable services rendered. Audit scrutiny of the records of six units in Madras and Cochin SEZs revealed that service tax of Rs. 72.47 lakh was not paid on services valuing Rs. 7.22 crore rendered (during 2003-04 to 2005-06) in the DTA. The concerned services related to manpower services, technical testing and analysis services etc., which were taxable. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Director General of Export Promotion vide his letter dated 14.7.2008 to the Director General, Service Tax has communicated that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Department of Commerce, while commenting on the observations of CAG on the Audit Para, vide OM F No. D-9/7/2007-SEZ dated 19 th June 2008 (copy enclosed), has observed that ‘monitoring and collection of Service Tax does not come under the jurisdiction of Development Commissioner. Service Tax is levied and collected by the <strong><font color="#FF3333">concerned</font> </strong> Central Excise Unit”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accepting that the monitoring and collection of Service Tax does not come under the Department of Commerce, will payment of customs duty on supply of steel products come under Department of Commerce? Then why did the DoC earlier issue clarifications on payment of export duty on steel, not once, but twice (Please see <font size="1"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7557" target="_blank">DDT 905</a></strong></font> ). It appears that the above clarification has been circulated to the field with a direction to issue SCNs demanding service tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And if the supply of steel products to SEZ are exports and attract export duty, then by the same analogy the supply of services in DTA would amount to import of services from outside India and the liability to pay service tax in such cases is on the recipient of the Service, but not on the SEZ Unit. Para 7.8 of the Exim Policy says that SEZ Unit can render services in DTA on payment of applicable duty. It does not stipulate that the duty has to be paid by the SEZ Unit only. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, while it may be doubtful whether the SEZs would create wealth and provide an impetus to the economy, there is at least certainty with regard to the growth of revenues for the consultancy sector. </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=260&filename=sez/sez_instructions/2006/DGEP.htm" target="_blank">Letter F.No DGEP/C&AG/SEZ/217/2007/1155 Dated 14.07.2008 by DGEP</a> </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Bombay HC sets aside ITAT order in SET Satellite case - rules CBDT Circular is binding on revenue </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Keeping our tradition of bringing you the judgements in the least possible time with detailed analysis, we are reporting this Bombay High Court order today which was delivered only on Friday. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IN a twist of fate, the Revenue has lost what it had won at the tribunal level last year. The High Court noted that the only contention advanced and which found favour with the Tribunal was that the advertisement revenue received by the assessee was also income liable to tax in India . The C.I.T. (A) relied upon <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/1969/it69cir23.htm"><strong><font size="1">Circular No.23 of 1969 </font></strong></a>. That Circular read with Article 7(1) would result in holding that advertisement revenue received by the appellant are not taxable in India as long as the treaty and the Circular stand. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And thus, the HC allowed the appeal and set aside the Tribunal's order. It further noted that merely because tax on income was paid for some assessment years, it would not estop the assessee from contending that its income is not liable to tax. </font></p> <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=7767">Please see Breaking news for full details. </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ICB procedure may be either at the stage of IPP or EPC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per existing provisions in Chapter 8 of the Foreign Trade Policy, deemed export benefits are available for supply of goods to Mega Power Projects. Department of Power has raised an issue whether the deemed export benefits to Mega Power Projects are available where either power procurement has been tied up though ICB procedure or if ICB procedure has been followed at Engineering and procurement contract (EPC) stage. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter was discussed in the meeting chaired by Commerce Secretary and attended by DGFT, Addl. Secretary & Joint Secretary, Department of Power & representative from Department of Economic Affairs and it is clarified that deemed export benefits are available on supply of goods to Mega Power Projects: - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) If power procurement from such projects has been tied up though ICB procedure OR </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) If ICB procedure has been followed by such projects at Engineering and procurement contract (EPC) stage. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, the ICB procedure may be either at the stage of IPP or EPC. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ICB = International Competitive Bidding </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IPP = Independent Power Producer. </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=46&filename=notification/dgft/2008/dgft08cir029.htm" target="_blank">POLICY CIRCULAR NO 29 (RE-08)/2004-2009 Dated: August 20, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export obligation period under EPCG extended for export ban / restriction period </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Vide Public Notice No 26 (RE-2008)/2004-2009, Dated: June 3, 2008, the following para has been inserted after para 5.11.3 of Hand Book of Procedures Vol I: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.11.4: “Whenever a <strong><font color="#0000CC">ban</font> </strong>/ <strong><font color="#FF3333">restriction</font> </strong> is imposed on export of any product, export obligation period in respect of EPCG authorizations already issued prior to imposition of <strong><font color="#0000CC">ban</font> </strong> of such export products, would stand automatically extended for a period equivalent to the duration of <strong><font color="#0000CC">ban</font> </strong>, without any composition fee and exporter would not be required to fulfill average E.O. as well for the <strong><font color="#0000CC">ban</font> </strong> period”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this para has been amended as under: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.11.4: “Whenever a ban/restriction is imposed on export of any product, export obligation period in respect of EPCG authorizations already issued prior to imposition of <font color="#0000CC"><strong>ban</strong></font>/ <strong><font color="#FF3333">restriction</font> </strong> of such export products, would stand automatically extended for a period equivalent to the duration of ban/restriction, without any composition fee and exporter would not be required to fulfill average E.O. as well, for the <font color="#0000CC"><strong>ban</strong></font>/ <strong><font color="#FF3333">restriction</font> </strong> period”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, what is the difference? Though the para was started with ban/restriction, it continued with only ban and restriction was forgotten. Somewhere some shrewd Customs officer might have disallowed the benefit for restriction period, the DGFT has now done the needful. </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=47&filename=notification/dgft/2008/dgft08pn067.htm" target="_blank">PUBLIC NOTICE NO 67(RE-2008)/2004-09, Dated: August 20, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Guidelines for foreign investment in commodity exchanges </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry of Commerce & Industry, Government of India, had notified guidelines vide Press Note 2 (2008) dated March 12, 2008 wherein a composite ceiling of 49% was allowed in Commodity Exchanges with prior Government approval. The maximum ceiling of 49% is subject to the condition that investment under the Portfolio Investment Scheme will be limited to 23% and that under the FDI Scheme will be limited to 26%. Further no foreign investor/entity including persons acting in concert will hold more than 5% of the equity in these companies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, it has come to the notice of the Ministry that some of the existing exchanges have foreign investment more than the permissible level. To facilitate these entities to comply with the current foreign investment ceiling, they would be required to divest the foreign equity in excess of the maximum ceiling of 49% before June 30, 2009. All Commodity Exchanges are further directed to furnish compliance report informing the foreign investment in those entities as on June 30, 2009 along with details of equity structure to the DIPP, Department of Consumer Affairs, FIPB, Forward Markets Commission and SEBI. Non compliance of Press Note 2 (2008) after June 30, 2009 would be considered as a violation of FEMA, 1999. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/pnote/2008/pnote08_008.htm" target="_blank">PRESS NOTE NO. 8 (2008) [DIPP F. No. 12(58)/2005-FC Dated: August 19, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Name change of Diamond Trading Company Pvt. Ltd. UK - RBI informs Authorised Dealer Category - I Banks </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AD Category - I banks have been permitted to make advance remittance without any limit and without bank guarantee or standby letter of credit, by an importer (other than a Public Sector Company or a Department / Undertaking of the Government of India / State Government/s), for import of rough diamonds into India from noted mining companies, subject to certain conditions. With effect from 1st August 2008, name of Diamond Trading Company Pvt. Ltd. UK , one of these mining companies has been changed to De Beers UK Limited and the same is brought to the notice of AD Category - I banks. </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=280&filename=notification/rbi/2008/rbi08cir008.htm" target="_blank">CIRCULAR NO 8/RBI., Dated: August 21, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services in relation to sports are professional services for the purpose of Section 194J of the Income Tax Act, 1961 </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBDT has notified that the services rendered by Sports Persons, Umpires and Referees, Coaches and Trainers, Team Physicians and Physiotherapists, Event Managers, Commentators, Anchors, and Sports Columnists are professional services for the purpose of Section 194J of the Income Tax Act. </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=35&filename=notification/cbdt/2008/it08not088.htm" target="_blank">Notification No. 88/2008, Dated: August 21, 2008 </a></font></p> <p align="center"><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">– Tuesday's cases </font></strong><img width=100 height=84 src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" align=left hspace=5 alt="Legal Corner Icon" border=0 v:shapes="_x0000_s1026"></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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax - Liability to pay interest on short or delayed payment of duty is mandatory – Interest under Section 75 is not penal - It is a civil liability which is inescapable: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE appellants, a public sector undertaking have short paid their service tax liability for which the department demanded interest. They paid the differential tax liability but did not discharge the interest liable to be paid by them on the ground that the short payment of service tax was only due to arithmetical error in calculation of service tax and not on account of any fraud or suppression with an intention to evade service tax. They also stated that they have paid some amount of service tax in excess and requested that the same may be adjusted against the interest liability to be paid by them. The Tribunal rejected the idea of appellant's request to square off their interest liability against the service tax payments made by them and dismissed their appeal. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise – suppression - Letter given to an officer not having jurisdiction cannot be treated as a letter to jurisdictional officer: High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the High Court is: Whether wilfully non-furnishing of information and non-obtaining of Central Excise Licence will not constitute suppression of facts on the part of the party (respondent company) and consequently the demand w.e.f . 22.01.1991 should not be time barred? The Court took the view that the information given on 22.01.1991, to the Inspector of the Range with regard to which he had no jurisdiction in the matter, cannot be said to be information to the office of Assistant Collector, Central Excise. Therefore, the observation of CESTAT that no concealment was made by the assessee is erroneous in law. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Procurement of aircraft engines - when contract mentions that engines cannot be reproduced it tantamounts to contract for sale and not service – Payment made to non-resident is not fee for technical services under Indo-Russian DTAA - not liable for any TDS in India: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the foreign company delivered any technical knowhow along with the three prototype engines of AL-551, it cannot be construed as rendering of technical services to the appellant and the payment made in this regard cannot be treated as ‘fee for technical services'. In conclusion it was held that the appellant is not required to deduct TDS for the payment made to the non resident entity. </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></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></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> </body> </html>