Staying Updated Indirect Tax Newsletter April 2012 - Volume 15 Issue 01 In the Issue Case Law Valuation Physicians samples cleared to principals are assessed on transaction value /MODVAT credit cannot be claimed on items used for repairs and maintenance, as distinct from manufacture Others One to one correlation is not required between inputs and goods exported for the purpose of claiming refund of credit Notifications /Circulars Point of Taxation in relation to service tax on airfare shall be the earliest of date of receipt of payment or date of issuance of invoice Case Law No penalty to be levied when payment of tax before issuance of show cause notice VAT Online filing of return has been made compulsory for specified dealers in Madhya Pradesh Entry Tax Entry Tax @ 1% has been levied on specified goods in West Bengal Sales Tax Case Law No WCT-TDS is to be deducted on value of contract representing service component and turnover relating to sales outside the State, inter-state sales and sale in the course of import. Entry Tax @ 1% has been levied on specified goods in West Bengal
Notifications / Circulars It is clarified that those structural components which are to be used essentially as a part of Boiler System would be classifiable as parts of Boiler only under Heading 8402 of the Tariff and that since these structural components are nothing but the parts and accessories of the Boiler, they would be covered by the definition of inputs under the Credit rules, 2004 (i.e. all goods for generation of electricity & steam). Further these structural components shall not be hit by the exclusion clause to the definition of inputs, as these are not used for laying of foundation or making of structures for support of capital goods, but are essentially parts of the Boilers. (CBE&C Circular No.964/07/2012-CX dated 2nd April, 2012) Case Law Manufacture In TRF Ltd. v. CCE (2012 (277) ELT 349), the Tribunal has held that the appellant cannot be treated to be manufacturer of brought out items, which are cleared along with own manufactured goods with a common logo. In Alumayer India Pvt. Ltd. v. CCE (2012 (278) ELT 123, the Tribunal has held that structural items being different from angles, plates, sections, etc. of aluminium and acquired new name and use in erection of structural glazing systems, the process would amount to manufacture. Valuation The Tribunal in the case of Fitwell Engineering Co. v. CCE (2012 (277) ELT 269) has held that transportation expenses incurred for plant and machinery from factory to place of erection would not be includible in the assessable value of such goods. In Parnax Lab Pvt. Ltd. v. CCE (2012 (278) ELT 95) the Tribunal has held that transaction value under Section 4 would be applicable on clearance of physicians sample cleared to principals. /MODVAT In Sree Rayalseema Hi-Strength Hypo Ltd. v. CCE (2012 (278) ELT 167, the Andhra Pradesh High Court has held that repair and maintenance, being distinct from manufacture, credit cannot be claimed on the duty paid on welding electrodes used for repairs. 2 April 2012 Volume 15 Issue 01
In Trichy Distilleries & Chemicals Ltd. v. CCE (2012-TIOL-443-CESTAT- MAD), the Tribunal has held that the credit in respect of goods actually used in the manufacture of storage tanks is eligible to be availed. Others In CCE v. A G Flats Ltd. (2012 (277) ELT 96), the Tribunal while differentiating between waste and by product has held that waste is a byproduct, which is of no value or negligible value, which the manufacturer would want to get rid of. Any other by-product is the result of the process of manufacture and subject to excise duty. The Tribunal in the case of CCE v. Synotex Industries (2012 (278) ELT 90) has held that declaration of just manufacturer details (house mark) as required under the Standard of Weight and Measures Act, 1976 would not amount to affixing of brand name for denial of benefit under the small scale exemption. In CCE v. Motherson Sumi Electric Wires (2012 (278) ELT 177), the Karnataka High Court has held that one-to-one correlation between the inputs and exported goods is not required for the purpose of refund of accumulated credit under Rule 5 of the Credit Rules, 2004. In CCE v. Bansal Metallic Oxides (2012-TIOL-477-CESTAT-MAD), the Tribunal has held that deemed exports cannot be equated with exports for each and every purpose and value of such deemed export is includible in the aggregate value of clearances for small scale exemption. 3 April 2012 Volume 15 Issue 01
Notifications / Circulars The Central Board of Excise & Customs (CBEC) has clarified that the point of taxation in relation to service tax on airfare shall be the earliest of date of receipt of payment or date of issuance of invoice in case where the ticket is issued before 01-04-2012 but journey is happening on or after 01-04-2012. (Circular no. 155/6/2012-ST dated 09-04-2012) The CBEC has issued a draft circular containing a single common return called as EST return for harmonizing the present ER-1, ER-3 and ST-3 returns as a measure of simplification of the business processes in respect of filing the return by assessee. (F. No. 201/05/2011-CX.6, dated 13-04-2012) The CBEC has issued a draft circular containing a single application format for obtaining registration under central excise as well as service tax against the present A-1 and ST-1 forms. (F. No. 137/22/2012-ST, dated 04-04- 2012) The Central Board of Excise & Customs (CBEC) has clarified that toll in the nature of user charge or access fee paid by roads users is not liable to service tax. (Circular no. 153/3/2012-ST dated 22-02-2012) Case Laws The High Court of Karnataka, in CCE&ST v. Adecco Flexione Workforce Solutions Ltd. [2012 (26) S.T.R. 3] and CST v. Prasad Bidappa [2012 (26) S.T.R. 4], has held that penalty under Section 76 of the Finance Act, 1994 should not be levied where service tax along with interest has been paid before issue of a show cause notice. The High Court of Karnataka, in CST v. Pimac Engg. & Services Pvt. Ltd. [2012 (26) S.T.R. 5] and CST v. Tottori Sanyo Electric Company [2012 (26) S.T.R. 7], has held that appeal against payment of tax lies before the Apex Court as the issue pertains to determining rate of duty. Similar judgment is delivered in the case of CST v. Maini Material Movement Pvt. Ltd. [2012 (26) S.T.R. 106]. 4 April 2012 Volume 15 Issue 01
The High Court of Karnataka, in CCE v. ECOF Industries Pvt. Ltd. [2012 (26) S.T.R. 100], has held that credit of service tax paid by head office on advertisement services in relation to a product may be distributed to other unit(s) even if that unit has not manufactured the goods for which the advertisement services were procured. The Tribunal, in M/s Mayo College v. CST [2012-TIOL-387], has held that no service tax is chargeable on amount collected from delegates for the purpose of holding a conference for their mutual benefit, since it has provided the services of organizing the conference to itself. The Tribunal, in M/s Jageti & Co. v. CST [2012-TIOL-373], has held that showing gross amount in the invoice or tax paid under protest as revenue expenditure in Profit & Loss Account doesn t mean/establish that service tax paid has been collected from customers. The Tribunal, in CCE v. M/s Outsource Partners International Pvt. Ltd. [2012- TIOL-414], has held that sending back the case to adjudicating authority for re-quantification of refund by Commissioner (Appeal) after deciding the substantive issue viz. establishment of nexus between input and output services does not amount to remand. Similar decision is given in the case of CCE v. Utopia India Pvt. Ltd. [2012-TIOL-439] and CST, Bangalore v. M/s Kbace Technologies Pvt Ltd [2012-TIOL-452-CESTAT- BANG]. The Tribunal, in Oberoi Flight Services v. CST [2012 (26) S.T.R. 41], has held that lounge facilities provided to airlines passengers by third parties, is providing customer service on behalf of the client and hence will fall under business auxiliary services and not under airport services. The Tribunal, in Rajratan Global Wires Ltd. v. CCE [2012 (26) S.T.R. 117], has held that credit will be allowed of input services availed in relation to the windmill located far away from the factory. The Tribunal held that windmills to be considered as captive plant. The Tribunal, in Sanjogita Construction v. CCE [2012 (26) S.T.R. 112], has held that adjudicating authority is right in levying penalty where service tax along with interest is paid before issue of show cause notice but no intimation is given to the department either in writing or through service tax return. 5 April 2012 Volume 15 Issue 01
The Tribunal, in Quadrant Communications Ltd [2012 (26) S.T.R. 33], has held that reimbursement amount recovered by advertisement agent/consultant for expenses incurred on behalf of their clients is liable for service tax under advertisement agency services. Further the Tribunal mentioned that per Rule 5 of the (Determination of Value) Rules, 2006, makes it abundantly clear that any expenditure or costs incurred in the course of providing taxable service shall be included in the value for the purpose of charging service tax. The Tribunal, in DSCL Sugar v. CCE [2012 (25) S.T.R. 599], has held that service tax paid on commission agent in respect of sales made through such agent is admissible as Credit. 6 April 2012 Volume 15 Issue 01
VAT Notifications/ Circulars Dadra & Nagar Haveli Online application for obtaining C forms has been made mandatory for all dealers w.e.f. April 01, 2012. (Notification No. ADM/VAT/CT- MMP/Comp/2012/2702 dated March 31, 2012) Delhi Due date for furnishing reconciliation return in Form DVAT-51 along with the statutory forms for Q1, Q2 and Q3 of 2011-12 has been extended to June 30, 2012. (Notification No. F.3(33)/PII/VAT/ Misc/2006/1490-1500 dated March 29, 2012) Due date for payment of tax for dealers whose tax period is a month has been revised from 25 days to 21 days from the end of month and for that of dealers whose tax period is a quarter, six months or an year from 25 days to 21 days from the end of quarter. (Notification No. F.3(25)/Fin.(Rev.- 1)/2011-12/DSIII/288 dated March 28, 2012 and F.3(11)/P-II/VAT/ Misc/2005 dated April 12, 2012) Time limit for revision of a return by a dealer has been revised to end of the financial year subsequent to the year in which return is filed. Earlier this time limit was four years from the date of filing of return. (Notification No. F.3(25)/Fin.(Rev.- 1)/2011-12/DSIII/288 dated March 28, 2012) Kerala VAT rate has been increased from 4% to 5% and 12.50% to 13.50% w.e.f. April 01, 2012. (Kerala Finance Bill, 2012) Madhya Pradesh Online filing of return has been made mandatory w.e.f. April 01, 2012 for dealers having turnover exceeding Rs. 2.0 Crores. (Notification No F-A3-14/2010/ 1/ V(20) dated April 16, 2012) West Bengal Among other products, VAT Rate on Motor Cars costing more than Rs 10 lacs, mobile phones costing more than Rs 20 thousand has been increased from 13.5% to 14.5%. (Notification No 456-FT dated March 31, 2012) 7 April 2012 Volume 15 Issue 01
Entry Tax Notifications/ Circulars Madhya Pradesh Online filing of return has been made mandatory w.e.f. April 01, 2012 for dealers having turnover exceeding Rs. 2.0 Crores. (Notification No F-A3-14/2010/1/ V(22) dated April 16, 2012) West Bengal Entry Tax @ 1% has been levied on specified goods brought into the local area for consumption, use or sale therein w.e.f. April 01, 2012. (West Bengal Tax on Entry of Goods into Local Areas Act, 2012) Sales Tax Case Laws The Haryana Tax Tribunal, in S.S. Paper Industries v. State of Haryana [(2012) 41 PHT 459 (HTT)], has held that input tax credit cannot be rejected to the genuine buyers if the selling dealer fails to deposit the tax so collected unless an element of fraud or collusion between buyer and seller is established. In an advance ruling application by M/s Alstom Project India [(2012) 41 PHT 445 (Hr - CC)], the Financial Commissioner and Principal Secretary, Government of Haryana has clarified that in case of a divisible works contract, the contractee is liable to deduct tax at source at prescribed rate on the taxable turnover which is computed after deducting, from the contract value, the service component and turnover relating to sales outside the State, in the course of inter-state sales or in the course of import. 8 April 2012 Volume 15 Issue 01
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