TIOL-DDT 1893
04.07.2012
WEDNESDAY

ONE of the most litigated services was the service of goods transport agency in relation to transport of goods. The tax was and is required to be paid in most cases by the service recipient. There is and was an abatement of 75%. But things are not that simple.

There was a condition that the abatement is subject to the condition that no CENVAT Credit was taken. There was a lot of litigation on who should not take the credit – the GTA or the service recipient who pays the tax? Finally, by Notification No. 13/2008, Government had granted an unconditional abatement for GTA.

Now under the negative regime, it is back with the condition that CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. (See Notification No. 26/2012-ST dated 20.06.2012)

Now, what are the inputs, capital goods and input services on which a transporter can take credit, especially when he pays no Service Tax at all? Trucks, Diesel, Tyres, phones?

But how does a recipient prove that the provider had not availed Service Tax? In the earlier regime, it was instructed that the recipient should take a declaration from the GTA that he has not availed CENVAT Credit. Maybe we should get back to that system again.

Whenever you pay Service Tax on goods transport, be sure to take a certificate from the truck operator that he has not availed CENVAT Credit – otherwise you will be asked to pay Service Tax on the total freight instead of on 25% of the value.

Is this intentional or a copy and paste mistake? If it is the latter, Board should not stand on false prestige and delete this unwanted condition which is bound to produce litigation in abundance. The past litigation on this issue should be an education guide to the Board.

Further to add a little confusion, as per Notification No. 30/2012- S.T dated 20.06.2012, (Sl. No.2 of the Table), Percentage of Service Tax payable by the person receiving the service, in case of services by a GTA in respect of transportation of goods by road, is 100%. Already a few Departmental officers asked DDT whether abatement was not available and 100% tax had to be paid by the recipient. This is exactly the confusion that the DGST created in 2005 by issuing a circular that 25% tax is only applicable if the GTA pays the tax and not when the consignee or consignor pays it. That issue snowballed into a major crisis with hundreds of Show Cause Notices and Audit objections flying around and consultants made tons of money! (Please see DDT 571 – 13 03 2007)

Service Tax - An Amnesty Scheme for Old Regime

THE new adult Service Tax regime is sure to produce abundant litigation. Service Tax as Pranab Da said in Parliament has entered adulthood. It has completed 18 years on 1st July 2012. And what an atrocious adult it has turned out to be. In its adulthood, it threatens to turn into a monster and is sure to produce mountains of litigation.

Can't we start on a clean slate? Why not wipe out all the existing cases, which were booked when the monster in making was an annoying child and a bullying adolescent?

The Government should seriously consider an amnesty scheme for all the cases pending at all levels from the Assistant Commissioner to the Supreme Court. All the cases should be closed by collecting 10 percent of the outstanding demand of tax, waiving the rest of the tax, penalty and interest. Anyway, Service Tax revenue is booming and the Government can get good revenue without the carcass of all these cases. Even those who do not have cases against them should be encouraged to voluntarily pay up ten percent of what they consider they owe to the Government on the promise of no case being booked against them. For the next five years, let us forget the limitation of five years. By the end of the year, let us ensure that there is no Service Tax case pending with Commissioner (Appeals) and above.

And after that whenever a case reaches the Tribunal, the Board should immediately announce its decision on the case and make a categorical announcement that it would not go for retrospective amendment in the unfortunate even of an assessee winning in the Supreme Court.

Let us start the Negative List with some positive attitude and action.

DDT Cartoon

 Jurisprudentiol – Thursday's cases

Service Tax

Service tax is not leviable on discounts/incentives received by advertising agency from media: CESTAT

THE  appellant rendered the services of advertising agency and discharged service tax on the commission received by them from their client, the advertiser. The transaction involves three parties, the advertiser, the advertising agency and the media, which puts out the advertisement. Print media has been exempted from service tax while the broadcasting media is not and they have discharged service tax under the broadcasting services on the consideration received. In certain cases, the media (broadcaster), gave a volume discount to the advertising agency based on the volume of business given by the advertising agency, at the end of the year, which was shown as income in the books of accounts of the advertising agency.

Income Tax

Whether when STT is included in brokerage income of assessee, same is to be excluded while computing total taxable income - YES: ITAT

THE issues before the Bench are - Whether STT is a tax collectible only from buyers and sellers of shares; Whether when STT is included in the brokerage income of the assessee, the same is to be excluded while computing total taxable income; Whether a broker is entitled to claim loss arising from error trade; Whether when the assessee earns dividend income, disallowance of a part of expenditure is warranted as per Rule 8D and Whether when the assessee fails to deduct TDS on VSAT and leased line expenses, such expenditure is liable to be disallowed u/s 40(A)(ia). And the assessee's appeal was partly allowed.

Central Excise

Monthly ER-1 return is NOT required to be filed by an assessee who is operating under compounded levy scheme - Penalty imposed u/r 27 for alleged contravention of rule 12 of CER, 2002 set aside and appeal allowed with consequential relief: CESTAT

THE appellant manufactures aluminium circles and operates under the Compounded Levy scheme notified under notification No. 17/07-CE  dated 01/03/2007, which prescribes a levy of Rs.12,000/- per cold rolling machine installed in the appellant's factory premises and which the appellant discharges.

The jurisdictional Central Excise authorities did not find fault with this mode of duty payment but were annoyed that the appellant did not file any monthly ER-1 return in the prescribed form within 10 days of the close of the month.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day

Mail your comments to vijaywrite@taxindiaonline.com