Service Tax Updates. (April 2012)

Transcription

1 Contents: (A) Draft Circulars for public comments (B) Circulars (C) Case Laws Service Tax Updates (April 2012) (A) Draft Circulars for public comments Dated 4/4/2012- Harmonisation of Service Tax and Central Excise Registration Common Application format has been prescribed for filing an application for registration under Central Excise or Service Tax. It is also proposed to revisit the process of registration under both Central Excise and Service Tax to amend procedures prescribed in respect of registration. Dated 13/4/2012: Revised format for Excise and Service Tax Return At present Central Excise assessee is required to file returns in the Format ER-1 to ER-3. Similarly, Service Tax Assessee needs to file the Return in ST-3. It is proposed to harmonize the ER-1, ER-3 and ST-3 returns to prescribe a single common return instead of these three returns. It is proposed to align the payment cycle and the return cycle under Service Tax by making following amendments to Service Tax Rules, (B) Circulars S. No. Particulars Time period 1. Assesses who had paid Service Tax of Rs 25 lakhs or less including payments made by utilizing the CENVAT credit, during preceding financial year. Quarterly payment and quarterly return 2. All other assesses who had paid Service Tax of more than Rs 25 lakhs including payments made by utilizing the CENVAT credit, during previous financial year. Monthly payment and Monthly return 3. For all new assessee. Quarterly payment and quarterly return No.155/6/2012 ST: Clarification on Point of Taxation Rules for Airlines For tickets issued and payment received before 1 st April, 2012, rate of service tax shall be 10.30% (not 12.36%) subject to applicable exemption. Above proposition shall be equally applicable for sale of tickets through agents. Airline companies and agents shall not recover differential service tax i.e. 2% service tax on account of increase in service tax rate from 10% to 12%. Any differential amount already collected by the Airlines or agent shall be payable to Central Government to the extent not refunded to the customers. No. 156/7 /2012-ST: Electronic refund through the Indian Customs EDI System A Committee has been constituted with Director General of Service Tax to review the Notification No. 52/2011-ST relating to refund of Service tax paid on taxable services used for export of goods at the post-manufacture stage. Committee shall review the followings: (i) evolve a scientific approach for the fixation of rates in the schedule of rates for service tax refund; (ii) propose a revised schedule of rates for service tax refund taking into account the revision of rate of service tax from 10% to 12% and also movement towards Negative List approach to taxation of services. No. 157/8/2012-ST: Services provided by the Agricultural Produce Marketing Committee (APMC) /Board APMCs are statutory bodies created with a view to regulate agricultural produce markets. Market fees popularly known as mandi shulk, collected by the APMC is used in providing facilities like roads, drinking water, weighing machines, storage places, street lights, etc. in the market area. These facilities are not provided to a particular licensee but for the development of agriculture market as whole. These cannot be called as outsourced activities to APMC by licensee so as to be covered by the Business Support Services. Market fee collected from the licensees are used to provide a host of services to the licensees in relation to the procurement of agricultural produce, which are inputs in terms of the definition given in section 65(19) of the

2 Finance Act, Therefore, services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-ST. However, any other service provided by the APMCs for a separate charge(other than market fee ) e.g. renting of shops in the market area, etc. would be liable to tax under the respective taxable heads. (C) Case Laws CCE, Bangalore-1 Vs ECOF Industries Pvt. Ltd (26) S.T.R 100 (Kar.) Distribution of Cenvat credit by head office as Input Service Distributor to its units permissible notwithstanding the fact that services had not been availed at that particular unit. No provision under Rule 7 of Cenvat Credit Rules, 2004 which provides that the credit can be distributed only to the unit engaged in manufacture of final product. Credit can be distributed to any of the units if the conditions of rule 7 are fulfilled. CCE, Bangalore-II Vs Tafe Ltd. (Tractor Division) 2012 (26) S.T.R 160 (Kar.) Once input credit is legally taken and utilized on the dutiable final product, it need not be reversed on the final product being exempted subsequently. Reversal of Cenvat credit cannot be claimed neither (i) in respect of final product which has come into existence on the date of exemption notification nor (ii) on the inputs stored in the godown or the work in progress/finished product. Relied upon the judgment of Apex Court in case of Collector of Central Excise Pune v. Dai Ichi Karkaria Ltd reported in 1999(112) E.L.T.353(S.C). Sharp Menthol India Ltd. Vs Union of India 2012 (26) S.T.R 162 (Bom.) Department liable to pay 6% on delayed refund. 13% is payable by a party to the Revenue not by revenue to assessee. Relied upon the decision of Apex Court in the case of Khazan Chand, etc. v. State of J&K and Ors. Reported in AIR 1984 Supreme Court, 762. CCE, Bangalore-III Vs Presscom Products 2012 (26) S.T.R. 79 (Kar.) Delay in payment of duty is liable to interest even if duty paid before issue of SCN. Liability to pay interest becomes effective automatically, and there are no circumstances or provisions excluding it. Revised/higher value paid by the customer due to increase in cost of raw material. Assessee liable to pay interest on differential duty paid by him suo moto before issue of SCN. CCE, Chandigarh Vs S.T. Cottex Exports Pvt. Ltd (26) S.T.R. 65 (P & H) Final product manufactured by assessee exempted from payment of excise duty under Notification No.30/2004- CE subject to the condition that no input duty credit has been taken. Simultaneously, another notification no. 29/2004-CE existed at the same time providing payment of 4%. Assessee purchased duty paid capital goods during the period when benefit of Notification No. 30/2004 was availed. Rule 6(4) of CCR denies credit when capital goods used exclusively in manufacture of exempted goods. In the instant case, during relevant time goods were not unconditionally exempted as both notifications were in force. Hence, credit of duty paid on capital goods admissible. Inox India Ltd. Vs CCE, Vadodara 2012 (26) S.T.R. 120 (Tri. - Ahmd) Refund can be granted of service tax paid on transportation of empty container and detention charges levied on container by transporter under GTA Services. Use of the word in relation to in notification no. 41/2007-ST would cover empty containers also. Transportation of empty containers is necessary for stuffing of export goods. Refund is admissible for transportation of containers to the place of removal as it is in relation to to transportation of goods to ICD/Port for export. Refund also admissible on detention charges incurred for the period during which the container is in the process of utilization for transportation. Comment: GTA services have been exempted under Notification 18/2009 when provided to exporter for movement of goods from place of removal to ICD/CFS/Port/Airport as the case may be. Hence, no need to file refund claim. If conditions of Notification No 18/2009- ST not fulfilled, refund claim can be filed under Notification No. 52/2011. Muscat Polymers Pvt. Ltd. Vs CCE, Rajkot 2012 (26) S.T.R. 122 (Tri. - Ahmd) Cenvat Credit admissible on mobile phones taken by the company in the name of employees when used by them in relation to business of the company. Mention of name of employee on the bill does not render the credit inadmissible. Name of employee is mentioned only for internal purpose.

3 Comment: Issue pertains to period prior to where definition of input services covered activities related to business. Since , these words have been specifically omitted. Now it may be difficult to establish the admissibility of credit though needs to be examined on case to case basis. CCE, Chandigarh Vs Dynamic Motors 2012 (26) S.T.R. 145 (Tri. - Del) Authorized service station providing services to vehicle manufactured by other manufacturer cannot be held to be taxable services as clarified by Board s Circular No. 699/15/2003, dated Comment: The scope of services has been widened by Finance Bill whereby services provided by any person i.e. whether authorized service station or otherwise has been included in the definition of service. UTI Technology Services Ltd. Vs Commissioner of Service Tax, Mumbai 2012 (26) S.T.R. 147 (Tri. - Mumbai) Issue of PAN cards on behalf of Income tax department is in relation to sovereign function of Income Tax department of levy and collection of tax. As it is not in relation to any business, cannot be taxed under Business Auxiliary Services. Services regarding acquisition, installation, commissioning and system integration of the IT system, hosting facilities for the central site, preparation and issue of NSSN cards are covered under the category of Information Technology Software not management consultancy services. CCE, Kolhapur Vs Shah Precicast P. Ltd (26) S.T.R. 187 (Tri-Mumbai) Cenvat credit can be availed on the Xerox copy of bills of entry in terms of provision of Rule 9(1)(c) of the Cenvat Credit Rule, 2004 Assessee had made best efforts to obtain the original copy from Commissioner of Customs. Assessee also lodged police complaint and filed undertaking for submitting original copy as soon as available with them. Comment: It was held in the case of Ahmednagar Alloys P Ltd Vs CCE&C, Aurangabad, 2010 (251) E.L.T. 319 (Tri. - Mumbai) that credit not admissible based on Xerox copy of BOE without attestation from Custom Officer. In our opinion, availment of credit based on Xerox BOE can be questioned by the department. CCE, Jaipur Vs Ajmer Automobiles (P) Ltd (26) S.T.R. 19 (Tri.-Del.) Dealer of motor vehicle engaged in marketing of the vehicle loan of finance company. Finance company has given commission to manufacturer of vehicles who passes on a part of it to the dealer. Dealer not liable to pay service tax on the commission received as tax has already been paid by the manufacturer on gross commission received from financing company. Receipt of commission to dealer is part of that commission only. Mere mention of wrong section in SCN does not invalidate the SCN so long as acts constituting the offences are explained and they constituted offence within meaning of correct section in force at the time of issue of notice. Idea Mobile Communication Ltd. Vs CCE, New Delhi/ Rohtak 2012 (26) S.T.R. 27 (Tri.-Del.) The value of SIM cards forms part of the activation charges as no activation is possible without valid functioning of SIM card. The value of taxable service is to be calculated on the gross total amount received by the operator from the subscribers. Relied upon the decision of [2011 (23) S.T.R. 433 (SC)] CCE, Bangalore Vs Kochi Logistics Services Pvt Ltd (26) S.T.R. 30 (Tri-Bang) Held that processing of Drawback claim in respect of any export consignment is an integral part of Customs House Agent (CHA) services. Work of CHA relating to processing of Drawback claim in respect of any export consignment starts even before shipping bill for Drawback claim is filed. Contention that drawback claim is post export activity cannot be accepted. Therefore any payment received on account of Drawback claim processing activity performed with custom department on behalf of client, falls within scope of CHA service on which CHA liable to pay service tax. Quadrant Communications Ltd. Vs CCE, Pune-III 2012 (26) S.T.R. 33 (Tri.-Mumbai) Advertising agent/consultant liable to pay service tax on the gross amount charged from the customer i.e. payment made towards bills of TV channels, cinema houses, hoarding suppliers on behalf of their client plus commission charged for their own services. Agency not working as pure agent of its clients. However agency shall be eligible to take credit of the duty paid on bills of TV channel, cinema house, hoarding suppliers etc. Kamal Auto Finance Ltd. Vs Commissioner Of Service Tax, Jaipur 2012 (26) S.T.R. 46 (Tri.-Del.) Assessee termed as Consignment Agent in the agreement with his principal. But actual working of assessee was clearly distinct from consignment agent. Assessee did not provide any clearing and forwarding service to his principal. They were selling products of principal to their own clients and under their own sales invoice without any interference of Principal. Consignment agent covered under C&F agent services definition. But mere nomenclature of consignment agent

4 in the agreement with principal does not make assessee liable under Clearing and Forwarding Services because activities performed are distinct from that of consignment agent. Held that assessee not liable to pay tax as he was not covered under clearing & forwarding agent service. Career Launcher India Ltd. Vs Commissioner Of Service Tax, Delhi 2012 (26) S.T.R. 55 (Tri.-Del.) Books/study material not containing any sale price on it, supplied to students by a commercial training and coaching service provider. Composite invoice issued for entire amount and no separate invoice issued for books/material. It held that assessee never intended sale of goods to students, in fact amount received towards study material was only a reimbursement of expenditure for composite service. Therefore assessee liable to pay service tax for whole amount charged from students including value of study material. Stay application rejected. S.K. Jalendra & Associates Vs CCE, Jaipur 2012 (26) S.T.R. 135 (Tri. - Del) Assessee providing services of arranging documents for bank to evaluate credibility, eligibility and financial status of prospective borrowers. Role of assessee was catalyst to connect funding agency with borrower. Assessee is providing services to bank not to borrower. Remuneration received from bank was for promoting funding business of bank and covered under Business Auxiliary Services. Assessee had only served the bank but not acted on behalf of the bank. In the absence of any letter of appointment or agreement, assessee not entitled to benefit under Notification No. 14/2004. In the absence of documentary evidence, it cannot be established that the processing charges collected from the borrower included commission amount paid to assessee. Contention of the assessee that tax already paid by bank on commission as a part of processing charges is untenable. No double taxation. Rajratan Global Wires Ltd Vs CCE, Indore 2012-TIOL-469-CESTAT-DEL Wind power generator plant located away from the factory for operational purpose has to be treated as captive power plant. Services of erection, installation, commissioning, repair and maintenance and insurance used in respect of the wind mills are eligible for Cenvat credit as the service received has nexus with the manufacture of the final product / with the business of manufacture. M/s Century Rayon Vs CCE, Thane-I 2012-TIOL-448-CESTAT-MUM Cenvat credit of service tax paid in respect of transport of goods from place of removal to the port of export is available even though the same is exempted under notification no. 18/2009-ST Mere splitting of transportation charges i.e. charges of transportation of empty container to factory and after stuffing sent to port of export, does not disentitle the assessee for availing cenvat credit. M/s Tara LPG Bottling Pvt Ltd Vs CCE, Pondicherry 2012-TIOL-436-CESTAT-MAD Service provider recovered the tax amount from the customer but did not pay the same to government will be liable for penalty. Intention to evade tax exist as they did not either pay the tax amount to the Government nor they sought any clarification regarding the category under which they were required to pay the tax. CCE, Vadodara Vs M/s Emico Elecom (India) Ltd 2012-TIOL-377-CESTAT-AHM Input service includes not only the inward transportation of inputs or capital goods but also outward transportation of final product upto the place of removal. Therefore CENVAT credit of service tax paid on outward freight is available as it falls within the definition of input service. CCE, Bangalore Vs M/s Outsource Partners International Pvt Ltd 2012-TIOL-414-CESTAT-BANG CCE, Bangalore Vs M/S Utopia India Pvt Ltd 2012 TIOL-439-CESTAT-BANG Commissioner Of Service Tax, Bangalore Vs M/s Kbace Technologies Pvt Ltd 2012-TIOL-452-CESTAT-BANG Original authority rejected the refund claim on the ground that nexus not established between input and output services. Commissioner (Appeal) gave detailed finding on nexus between input and output services and remanded matter back to original authority to re-quantify eligible refund based on CA Certificate. Tribunal held that Commissioner s (A) order gave findings on substantive issue i.e. nexus between input and output services and remanded only for limited purpose of re-quantification. This does not amount to remand as the substantive issue was settled by appellate authority itself. Note: Similar matter covered by all three cases. CCE & Customs Visakhapatnam-I Commissionerate Visakhapatnam Vs M/s DR Reddy Laboratories Ltd 2012-TIOL- 419-CESTAT-BANG CCE Tirupati Vs M/s Nutrine Confectionery Co. Ltd 2012-TIOL-450-CESTAT-BANG

5 Credit of service tax paid on outdoor catering service and group insurance service eligible as input service credit. Comments: Above decision may not be relevant from where definition of input services has been changed. Catering services and group insurance taken for the benefit of employees shall not be eligible for credit as per revised definition of input service. Note: Similar matter covered by both the cases. CCE, Kanpur Vs M/s Heera Panaa Guest House and Vice-Versa 2012-TIOL-457-CESTAT-DEL The activity of the appellant i.e. allowing temporary occupation to customers for organising marriage functions and providing furniture s, fixtures, lighting, catering etc, has to be treated as allowing temporary occupation of Mandap for some consideration and taxable under Mandap Keeper services not Pandal or Shamiana service. Explanation added w.e.f clarifying that social function includes marriage, clarificatory in nature and has retrospective effect. M/S Man Industries (India) Ltd Vs CCE, Indore 2012-TIOL-478-CESTAT-DEL Assessee engaged in business of doing job work on goods supplied by client and liable to pay service tax under Business Auxiliary Services. They availed input credit on goods supplied by client and included the value of goods in the gross amount for charging service tax. Refund claim filed on the ground that value of goods supplied by client should not have been included in the gross value for charging service tax. Held that refund of service tax paid on goods supplied by client not admissible as the assessee has already claimed Cenvat credit on the goods at the time of receiving from customer. Double benefit i.e. taking of credit and refund cannot be enjoyed on the same goods. Shree Gayatri Tourist Bus Service Vs CCE, Vadodara 2012-TIOL-475-CESTAT-AHM Agreement entered with ONGC for transportation of their employees and delegates to various places under their instructions and directions. Maintenance of vehicles expenses are to be borne by the Assessee (not by ONGC). Such kind of agreement entered between the parties is a case of Hiring of vehicles and hence, will not be covered under the category of Rent a cab service. M/s Venus Investments Vs CCE, Vadodara 2012-TIOL-474-CESTAT-AHM Cenvat credit of service tax paid on Commercial or Industrial Construction service not available to service provider engaged in providing Renting of Immovable Property service M/s Science Centre Vs CCE, Jaipur-I 2012-TIOL-463-CESTAT-DEL Service tax will be liable on the amount of fees collected by coaching institute from the students even if it is not received from the students. Adjudicating authority should have given option to pay tax along with interest and penalty of 25% within 30 days from the date of adjudication order. Assessee being a small coaching centres and located in remote place, deserves some relief and Tribunal ordered for paying penalty of 25% within 30 days from the date of their order. If not paid within 30 days, penalty payable equivalent to the amount of duty involved. Adani Gas Ltd Vs Commissioner of Service Tax, Ahmadabad 2012-TIOL-407-CESTAT-AHM Charges received for Supply of gas measuring equipment s and pipes to customers by gas agency will be taxable under the category of Supply of tangible Assets. There is no transfer of right in possession and effective control. Pre deposit ordered. Isha Homes (I) Private Ltd Vs Commissioner Of Service Tax, Chennai 2012-TIOL-424-CESTAT-MAD Construction of multiple residential complexes/ independent houses horizontally i.e. villas for residential purpose in a common area having common facility will be covered under the category of "Construction of Complex service. The common area and the common facilities make 97 villas as a part and parcel of residential complexes. Pre deposit ordered. CCE, Tirunelveli Vs Bharat Sanchar Nigam Ltd 2012-TIOL-423-CESTAT-MAD Assessee made a blatantly wrong claim under DRS (Dispute Resolution Scheme) that they have reversed the wrongly taken credit but was unable to produce the supporting documents against Appellate tribunal. Demand of wrongly availed credit and imposition of equal penalty, justified. M/s Amaravathi Sri Venkatesa Paper Mills Ltd Vs CCE, Madurai 2012-TIOL-422-CESTAT-MAD Consignment agents made liable for payment of freight to transport agencies for transportation of goods. Service tax also payable by consignment agent under reverse charge and subsequently deducted from the sale value

6 recovered from the customer. Consignment agents paying service tax in their individual capacity not as an agent of manufacturer. If service tax is not paid by consignment agent than the manufacturer cannot be held liable for the payment of service tax. M/s City Union Bank Vs CCE, Trichy 2012-TIOL-406-CESTAT-MAD Penalty waived under section 80 when there was no evidence/finding recorded showing that assessee had intention of tax evasion or suppression of facts. Head Office: Jaipur Branch: Shree Shakambhari Corporate Park, A, 1 st Floor Chakravarty Ashok Society, Ganpati Plaza, M.I. Road J B Nagar, Andheri (E). Jaipur , Rajasthan Mumbai - 99, Maharashtra. Contact: Ashish Chaudhary Contact: Arun Poddar Contact No.: Contact No.: Branches: Mumbai Kolkata Jaipur New Delhi Ahmedabad Raipur Bengaluru Chandigarh website: This material and the information contained herein prepared by SK Patodia & Associates is intended to provide general information on service tax and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business. SK Patodia & Associates shall not be responsible for any loss whatsoever sustained by any person who relies on this material.