TIOL-DDT 1718
21.10.2011
Friday

AS we reported yesterday, the Government came out with a notification and a Board order to solve the POT problem in filing the half-yearly Service Tax return electronically.

The brilliant boys of the Board took an ingenious way to solve the problem (which in the first place was created by them).

They have amended the Service Tax Rules to add an instruction in the ST3 Form, ¶For the purposes of this Form, the words ¶received / paid¶used herein shall be construed as ¶received or receivable / paid or payable', as the case may be, in terms of the Point of Taxation Rules, 2011¶. Thus, the POT Rules have been imported into the Form.

What about last date of filing the Return? They have extended the last date to 26 December 2011, instead of October 25. But does the Board have the power to do so? The good Board took care of the issue and added a provision in the rule - ¶the Central Board of Excise and Customs may, by an order extend the period referred to in sub - rule (2) by such period as deemed necessary under circumstances of special nature to be specified in such order¶. So, now the Board has the power to extend the date and using this power, they have extended the date.

Documents for Registration: While on POT Rules, the Government repaired another POT HOLE. Service Tax Rules have been amended to the effect that, ¶the Central Board of Excise and Customs may, by an order specify the documents which are to be submitted by the assessee along with the application (for registration) within such period, as may be specified in the said order¶. So now, the Board can legally ask for all those documents they want before giving a registration certificate.

Notification No. 48/2011-ST., Dated: October 19, 2011 and CBEC Order No. 1 /2011 - Service Tax, Dated : October 20, 2011

ST 3 - One shot makes POT Rules work in ST-3 form

WE asked an expert for a quick reaction. Here is what he said,

How the ST 3 Form should look like after the introduction of POT Rules, 2011? Should there be some amendments in those tables to be filled after the POT Rules have come into force? These are some of the many doubts that are bothering the tax payers in view of the fast approaching deadline for filing the Return. Fortunately, the last date has been extended up to 26th December. Coming to the format of Return, a simple amendment to the Instructions to fill the form has done it all. The following instruction has been inserted in ‘General Instructions' vide Notification No. 48/2011 ST Dated 19.10.2011.

¶(iv) For the purposes of this Form, the words ¶received /paid¶used herein shall be construed as ¶received or receivable /paid or payable', as the case may be, in terms of the Point of Taxation Rules, 2011¶.

So, Table F I in the existing ST 3 form now takes care of ¶amount received, amount receivable (against bills issued - on accrual basis), advances received and, advances to be received”. So, all possible situations under the POT Rules have been taken care of with this amendment in the instruction.

Since the service tax is payable on accrual basis under the POT Rules, for some assessees, filling up the Table F II (Details of ¶Amount Charged”) may look redundant, but still some assessee are required to pay service tax only on receipt of payment and maybe for those services, it makes sense to provide the ¶Amount Charged” and ¶Amount realised”. For the other services, it does not really make any difference, as the ¶Amount Charged” would have already been included in Table F I.

But it is advisable to have a detailed back up worksheet for the total taxable amount shown in the ST 3 Return, as the assessees will have a tough time in convincing the departmental auditors that the amounts shown in ST 3 are correct.

Service Tax on Renting - Retailers to pay half tax by March 2012, while Home Solutions gets two weeks to calculate

THE Supreme Court last Friday gave interim orders in the famous renting cases. Though the gist of the orders was widely circulated, the orders were not available till today. A peep into the two famous cases:-

Retailers Association of India vs. Union of India: In the order dated 30th July 2008 (2008-TIOL-379-HC-MUM-ST), the Bombay High Court directed the petitioners to file undertaking in the Court stating that in the event the challenge is disallowed, they shall make payment of service tax due and payable in accordance with the aforesaid provisions as may be directed by this Court. It was further directed that in case such undertaking is given, the person who is submitting the undertaking shall not be entitled to transfer his interest in the property in relation to which the demand of service tax is made without first giving two weeks prior notice of his intention to transfer his interest and the nature of the transfer to the Respondents. In case within the period of two weeks, objection is raised on behalf of the Respondents to the proposed creation or transfer of interest, then no interest will be created or transferred without seeking leave of the Court.

In its order dated 4th August 2011 (2011-TIOL-523-HC-MUM-ST), the High Court upheld the validity of the tax as well as the retrospective amendment.

In its order dated 28 th September 2011, the Supreme Court directed that there will be no recovery of arrears due on or before 30th September, 2011. The Supreme Court clarified that there is no stay of imposition of service tax insofar as the future liability towards service tax with effect from 1st October, 2011 is concerned.

Now, in the latest Order dated 14 th October 2011, the Supreme Court directed:

1. The appellants to deposit 50 percent of the Service Tax payable in three installments by 1st March 2012.

2.The appellants to furnish surety for the balance amount.

3. The successful party will be entitled to interest.

4. Default in deposit would result in vacation of stay.

Home Solutions vs. Union of India: In the order dated 18th April 2009 (2009-TIOL-196-HC-DEL-ST), the Delhi High Court struck down the Service Tax on renting as the tax was on service in relation to renting and not on renting per se . This judgement prompted to Government to bring in the retrospective amendment.

By the order dated 18th May 2010, (2010-TIOL-341-HC-DEL-ST), the Delhi High Court stayed the recovery of tax even after the amendment by the Finance Act 2010.

By the order dated 14th December 2010 (2010-TIOL-818-HC-DEL-ST), the Delhi High Court directed the Interim Stay to continue.

By its order dated 23rd September 2011, the Larger Bench of the High Court upheld the levy as well as the retrospective amendment.

Now, in the latest Order dated 14th October 2011, the Supreme Court directed:

1. Petitioners to place on record the details of the arrears towards the service tax upto 30th September 2011, within two weeks.

2. In the meantime, no coercive steps shall be taken against the appellant for recovery of arrears of service tax due on or before 30th September, 2011.

The Supreme Court clarified that there is no stay of imposition of service tax insofar as the future liability towards service tax with effect from 1st October, 2011 is concerned.

We bring you these orders today. Please see:

1. 2011-TIOL-103-SC-ST

2. 2011-TIOL-104-SC-ST

Exports under Duty Drawback Scheme - CAG Objections - CBEC Instructions

IN its Report No. 15/2011-12, the CAG had found fault with the Revenue in administration of Drawback Scheme (DDT 1683 - 01 09 2011). Now the CBEC has issued certain instructions:

Instructions relation to ¶identification of goods” and ¶determination of use” in terms of Section 74 of the Customs Act, 1962.

It may be ensured that in all such cases where drawback under section 74 is claimed, the Assistant/Deputy Commissioner of Customs shall pass a speaking order giving detailed reasons with regard to establishing the identity or otherwise of the goods under re-export, and determination of use, if any, while sanctioning Duty Drawback or otherwise. It may further be noted that the detailed speaking orders, following the principles of natural justice, are to be issued in both cases, i.e. where drawback is proposed to be sanctioned (either in full or part) or proposed to be denied.

General Instructions with regard to expeditious processing of drawback claims under both Section 74 and Section 75 of the Customs Act, 1962.

(a) While processing Drawback claims, whether under Section 74 or Section 75, wherever any deficiency is noticed in the claim, the same shall be communicated to the exporter in a clear unambiguous manner within a period of 10 days, from the date of filing of the claim. Further, the drawback claims shall be disbursed in accordance with the timelines as specified in the Citizen's charter adopted by the department and the Sevottam standards prescribed in this regard. Commissioners of Customs shall undertake a periodic review and monitoring of the status of pending drawback claims.

(b) The field formations shall ensure that periodic sample checks and verifications are carried out with respect to the export declarations including classification, descriptions, weight etc.; It shall be also ensured that the brand rate drawback claims are disposed off in a time bound manner.

(c) The field formations shall ensure the proper data entry in BRC module of EDI system. Commissioner of Customs shall constitute a special monitoring cell in their respective formations for periodic verification and monitoring of the same. The Monitoring cell will also ensure that the necessary action is taken against the defaulter exporters.

(d) All previous circulars and instructions issued by the Board in this regard shall be strictly followed.

Board, as usual wants these instructions to be strictly complied with.

CBEC Circular No. 46/2011-Cus., Dated: October 20, 2011

Jurisprudentiol -Monday's cases

Central Excise

Pre-deposit order of Tribunal - Remand by a Division Bench - Another Division Bench does not agree with remand - Matter referred to Larger Bench: HC

WITHOUT entering any finding, even prima facie, at this stage the Division Bench remanded the matter back to the Tribunal. Ordinarily in a matter such as the present, a Division Bench of this Court would be inclined to follow the view taken by a coordinate Bench particularly at the interim stage on an application for waiver of predeposit. The Revenue implications for the Union Government are significant. Larger Bench to consider whether the remand order passed by Division Bench needs reconsideration.

Income Tax

Whether when assessee sells out old flat and buys new one after receiving full consideration, Sec 54 benefits cannot claimed if registration of sale deed of old flat was delayed more than one year - NO, benefits are available: ITAT

ASSESSEE, owner of a flat, sold out the same and purchased a new flat within one year of transfer of the old flat - claimed deduction under section 54 of the Income Tax Act in respect of capital gains arising on the transfer - During the course of assessment proceedings the AO observed the deed of transfer in respect of old flat was registered after few months of the completion of one year and hence he denied the claim of section 54 - CIT(A) affirmed the order of AO - Appeal was filed in the Tribunal.

Service Tax

'Raw water reservoir' and 'ash dyke' cannot be equated with a dam, not exempted from levy of service tax - Pre-deposit of Rs. 75 lakhs ordered: CESTAT

A taxing entry brought to the statute book at a later stage does not mean that legislature is prevented to tax an activity in terms of a former entry embracing an activity defined by law for taxation. When the work executed by the appellant could not be held as ¶dam¶constructed, the appellant lost exemption. Service tax is not commodity taxation. The authorities have taxed the service, which was taxable under law for the time being in force.

See our columns Monday for the judgements

Until Monday with more DDT

Have a Nice Weekend.

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