TIOL-DDT 1483
09.11.2010
Tuesday THE Chief Commissioner, Ahmedabad had requested the Board to issue a clarification. His Commissioner, Service Tax holds a view that the amounts collected as NSE/BSE/NSDL/CSDL charges being liability of the Broker / Sub Broker need to be included in the value of service. The Security Transaction Tax and Duty being the liability of the buyer/seller of the security are not includible in the taxable value and he had issued several high value Show Cause Notices. Board has now given a clarification after considering the views from DGST and Commissioners of Service Tax and agreeing with the Ahmedabad Service Tax Commissioner. Board states,¶ Turnover charges, NSE/BSE/NSDL/CSDL transaction charges, DEMAT charges and SEBI fees that are recovered by the brokers from their clients are found to be includible in the taxable value for payment of service tax. The Security Transaction Tax (STT) and Stamp duty are not includible in the taxable value for charging service tax .” Board further clarifies,¶ Since the Stamp duty and Security Transaction Tax, are the liability of the buyer/seller of securities and the broker pays the same acting as a Pure Agent the same are not includible in the taxable amount in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. All other charges by whatever name called recovered by the broker from the buyer/seller of securities are includible in the taxable value in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 .¶ Board's conclusion is,¶in case the expense is the liability of the service provider it has to be included in the taxable value. In case it is the liability of the service receiver and the service provider pays the same acting as a pure agent then such amount is not includible in the taxable value .” As usual such important questions of law are clarified by the Board through a letter to the Chief Commissioner and a copy to DG, Service Tax with a request to communicate it to the world. CBEC Letter in F. No.187/107/2010-CX.4: Dated 17 September 2010. Ahmedabad CC's letter to Board dated 13 April 2010 Through Proper Channel - What a waste of time, money and paper! YOU will be astonished at the amount of time, money and paper at the disposal of the government and how happily they waste them with the impunity of a reckless royal ruler. Just take the case of the above clarification given by the Board. The Board has sent the letter to the Chief Commissioner, Ahmedabad, with a copy to DG, Service Tax, who was requested to bring it to the notice of the field formations. Now in the DG's office, on getting this paper, the DG marks it to the ADG, with a remark, ¶Pl put up on file”. The ADG makes a similar remark and sends it to his Additional Director who likewise sends it downwards till it reaches an inspector. A file is opened and the Inspector gives a great information that a clarification has been received from the Board which has to be communicated to all the Chief Commissioners and a draft letter is put up for approval. The file makes its upward journey through the same route as it came down. On the way somebody would find out a great flaw that the letter of the Board need not be sent to Ahmedabad Chief Commissioner as he already got one from the Board. So the draft letter has to be redrafted. Finally the DG approves the draft letter which simply says that the ¶Board's letter is communicated herewith and it may be brought to the notice of the field formations”. So the letter is now ready and photocopies are made and sent to all the Chief Commissioners, except Ahmedabad of course! Once this letter reaches the Chief Commissioner's office, the same drama as in the DG's office is repeated and Chief Commissioner sends it to his Commissioners. By now two more pages added - the covering letter by the DG and the Chief Commissioner. The Commissioner again repeats the drama and a third page is added - his covering letter. So the letter from the field reaches the field after about two months and an army of officers had been working on that simple letter and reams of paper must have been wasted apart from spending money on copying, postage etc,. Even a very rich country cannot afford this kind of luxury! Have they not heard of services like internet, website and email. Why can't the Board simply upload the clarification in its website and send an email to every officer - at almost no cost - instead of wasting so much money, time and paper? And if the DGST's job is to communicate Board instructions to the field, do we need to have a high ranking Chief Commissioner level officer for that job. A Data Entry Operator can do the job much better at a fraction of the cost. The whole job of cadre review seems to be aimed at creating more work and then finding people to do that. Maybe the next cadre review should aim at reducing the size of the Department to about a quarter of its present size. It would make great economic sense for the FM to ask 75 percent of his revenue officers to stay at home and draw their salaries without coming to office and manage the show with the 25 percent, who are anyway doing the work even now. The Government should not exist for the sole reason of promotion and career prospects of the officers, especially when they are adept at such unpardonable wasteful expenditure. Food - substantial and satisfying ? IN a country where the Legal System depends on definitions to answer every question, the definitions often lead to funny situations and in our Tax Laws implementation, where every defined word is twisted to suit perverted interpretations, God knows where the Law goes. While 'income' is not properly defined under the Income Tax Act, 'goods' not defined under central Excise and 'service' not defined under the respective Acts, we have a huge list of definitions for various words and terms. Can you imagine a law defining food ? Service Tax Notification 1/2006 defines food as¶a substantial and satisfying meal ” . The abatement under the notification is available only if the catering service provider provides a substantial and satisfying meal. Now who will decide if the meal was substantial and satisfying? The Tribunal had an occasion to consider whether ¶high Tea” was a substantial and satisfying meal. Recently, the Chennai Bench of the CESTAT dealt with the issue in a big case. Revenue had denied abatement on the ground of a substantial and satisfying meal and they had taken statements from senior officers of M/s.HCL Infosystems Ltd. M/s.Cooper Bussmann India (P) Ltd., M/s.L&T Ltd (who consumed the alleged food ) apart from the caterer in a case where the tax involved was a mighty 3.5 lakh rupees. The party had to go through the Assistant Commissioner, Commissioner(Appeals) and reached the Tribunal. The Tribunal heard the case on 30.07.2010 and passed an order on 13.09.2010 - remanding the case to the adjudicating authority to satisfy himself that what was being supplied was ‘food' - that is¶a substantial and satisfying meal'. Now how can the caterer satisfy the Assistant Commissioner that the food supplied in 2004 was food indeed and it was¶a substantial and satisfying meal? He will have to make another trip to the Tribunal - we will report that - maybe after six years! Please see 2010-TIOL-1437-CESTAT-MAD Please also see our story Service tax - Is 'high tea' a meal, satisfying and substantial? Customs Complications - Board solutions? RECENTLY Member (Cus & EP) of CBEC, SK Goel chaired a meeting of the Customs Consultative Group in Mumbai. We bring you some of the queries raised and the Member's crisp replies. Q: A self-certification and post-audit based clearance mechanism should be institutionalized: Akin to several other important economies, Indian Customs can move towards a post-audit mechanism with requisite penalty provisions. A: On the import side, the RMS and the ACP schemes are already in operation. Further, the Board is currently considering the system of Post Clearance Audit. Q: Paper copies of all documents are required at Customs: ICD Customs insist on paper documents even at locations where EDI has been implemented. Electronic documents should be accepted by Customs, through modification of Customs Act. A: Achievement of a paper-less business environment is a long - term goal of the department. Considerable progress has been made in the area of automated processing/exchange of documents. Till such time IT security/authentication features such as digital signature become standardized with widespread use, it will be difficult to completely do away with the requirement of manual documents. Q: Multiplicity of copies required at Customs should be reduced: Customs authorities insist on submission of up to 6 copies of invoice and 6 copies of packing list, although only one copy each is signed. The requirement should not be excessive. A: For its own record keeping, the department requires only one copy of the invoice and packing list Q: System Failure: Very often the EDI System becomes non-functional for 2 to 4 days when we are unable to file any bill of entry or get any assessment activity done which causes undue delay in clearance. Whenever the system do not work for 2 hours, there should be facility to complete the assessment and other activities manually automatically without seeking approval of higher authorities. A: The problem of non-working of EDI system will improve substantially once migration of customs location to ICES 1.5 is complete & all the sites shift to central Server. The automatic manual assessment cannot be allowed, though the respective Custom Commissioners are authorized to allow manual assessment on a need basis. We will bring you more clarifications in the next editions of DDT . Jurisprudentiol - Wednesday's cases  Customs
INTEREST on warehoused goods - Importer cannot be saddled with interest for delay in assessment by revenue - Date from which interest would start accruing would be date on which bill of entry for warehousing was finally assessed and enabled importer to file ex-bond bill of entry : CESTAT THE dispute relates to the question of payment of interest on warehoused goods and the date on which the goods should be treated as warehoused and whether the importer would be entitled to utilise the benefit of DEEC scheme for clearing the good on expiry of the bond period. Income Tax SEC 37 - Difference between market value of shares and value at which they are allotted to employees as ESOP - Is employer entitled to debit same in P&L Account as revenue expenditure? - No, says ITAT THE issue before the Tribunal is - Whether difference between the market value of shares and the value at which they were allotted to the employees is allowed to be debited in the P&L of the company as revenue expense. NO, says the Tribunal. Central Excise PROCEEDINGS under Income Tax Act and acceptance to pay tax on un-assessed income cannot be a ground for alleging clandestine removal and demanding Central Excise duty: CESTAT TO establish clandestine removal, it is settled law that the charge of clandestine removal has to be proved through corroborative evidence such as procurement of input, electricity consumption, labours, removal of goods, transportation etc. From the records and facts of the case, nothing is coming out in support of the allegation made by the department. Accordingly, in the facts and circumstances of the case, impugned demand is not sustainable. See our columns Tomorrow for the judgements Until Tomorrow with more DDT Have a nice DAY. Mail your comments to vijaywrite@taxindiaonline.com |
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