TIOL-DDT 2110
22.05.2013
Wednesday

Negative list Services - Are they exempted for purpose of ST-3 Return?

AS per Rule 2(e) of the CENVAT Credit Rules, 2004, ¶exempted service¶ means a-

(1) taxable service which is exempt from the whole of the service tax leviable thereon; or

(2) service, on which no service tax is leviable under section 66B of the Finance Act; or

(3) taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken;

but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994

Services on which no service tax is leviable under Section 66B are nothing but negative list services.

Now, the question a Netizen posed is whether he is required to show the turnover of negative list services also in ST 3 return. Remember if a service provider is providing taxable service and also a negative list service, the provisions of Rule 6 of CENVAT Credit Rules will come into force. When the assessee tried to show the turnover of negative list service also under exempted turnover, the ST utility is prompting for a Notification No. At present, the utility lists the following Notifications in dropdown menu ( for the period July to September 2012)

No 45/2010 ST, No 25/2012 ST, No 27/2012 ST, No 30/2012 ST, No 32/2012 ST, No 33/2012 ST, No 40/2012 ST.

There is no facility to choose ¶Negative list service¶ as one of the options. Does this mean, negative list service is exempted service for CENVAT Credit Rules, 2004, but not for filing ST3? How an assessee who wants to follow the provisions of Rule 6 of CENVAT Credit Rules can show the turnover of negative list service?

Will the Board clarify?

ACES - SOS

A worried assessee mailed us this:

Still I am unable to view the status of ST-3 return for the period from July, 2012 to Sept., 2012 uploaded on 5.4.2013.

When I click 'view status' it does not work. No status is indicated.

Can you guide me?

Will the ACES guide him?

ST - F.T.I. providing training for obtaining CPL and A.E.I. for obtaining B.A.M.E.L. - Not liable to pay ST - Board Instruction quashed: HC

IN Instruction No. 137/132/2010-ST dated 11.05.2011, CBEC clarified that Flying Training Institutes providing training for obtaining Commercial Pilot Licence (CPL) and on Aircraft Engineering Institutes for obtaining Basic Aircraft Maintenance Engineer Licence (BAMEL) would clearly come in the category of coaching centres as laid out in the Section 65(27) of the Finance Act ibid (either prior to or after Budget 2011) and therefore would be taxable.

This instruction and the consequent Show Cause Notice are challenged before the Delhi High Court by Indian Institute of Aircraft Engineering. The petitioner is an Aircraft Maintenance Engineering Training School approved by the DGCA for providing Aircraft Maintenance Engineering (AME) training and conducting examination as per the course approved by the DGCA under the Aircraft Act, 1934 (the Act) and the Aircraft Rules, 1937 (the Rules) and the Civil Aviation Requirements (CAR) issued by the DGCA under Rule 133B of the Rules.

The Delhi High Court yesterday quashed the Board Instruction and the Show Cause Notice.

While reporting the Board Instruction in DDT 1650 - 13.07.2011, we had commented,¶One more Circular from the Board which will only help fill the coffers of advocates and tax consultants- they will only welcome more of such circulars from the Board¶

We bring you this ‘yesterday's judgement' today.

Please see Breaking News

Customs - Issues related to transmission of trade data

A Committee under the chairmanship of DG NIC with representatives of Department of Commerce and Department of Revenue had been constituted to consider the issues of timely and accurate transmission of trade data and give its recommendations.

Based on the recommendations, Board has decided that All Chief Commissioners of Customs having jurisdiction over non- EDI locations should ensure that complete trade data in the form of DTR on monthly basis is sent in time to DGCIS. The Commissionerate should also certify and inform DGCIS that all trade data for the period has been sent to them. Similar exercise should be undertaken in case of EDI enabled Customs stations where manual clearances have been affected.

CBEC Instruction in F.No.528/69/2012-STO (TU),Dated: May 21, 2013

Tariff Values for Gold Reduced

THE Central Government has reduced the Tariff Value (USD) of gold from the earlier existing 466 per 10 grams to 440 per 10 grams. The tariff values of various Palm oils, Palmolein, Soyabean oil, Brass Scrap, Poppy seeds and Silver remain stationary.

With this reduction & the ongoing marriage season, buyers and traders would continue to remain happy. It is reported that the Finance Minister has appealed to the people to contain their passion for gold.

Since the common man cannot lay his hands on the black gold coal, it seems he is trying to remain content with actual gold.

The rates as on 15.05.2013 and 21.05.2013 are as under:

Table 1

Table 2

Notification No. 55/2013-Cus (NT), Dated: May 21, 2013

Can proceedings against co-noticees be deemed to be concluded if main assessee pays duty, interest and penalty - Yes

WE received this mail from a Netizen -

¶The Supreme Court in the case of Onkar S.Kanwar [Civil Appeal Nos. 6260-6265 of 2000 with C.A. Nos. 633-642 of 2002, decided on 27-9-2002] has held that when the matter had been settled under Kar Vivad Samadhan Scheme, 1998 (KVSS) by the main appellant, other persons, on whom show cause notices were issued on the same matter, too get the benefit of settlement.

Taking a leaf out of this judgment, the CESTAT has been granting similar benefits to co-noticees who did not join the main noticee when he settled his case before the Settlement Commission by accepting an additional duty liability. Inasmuch as where the applicant was granted immunity from imposition of penalty etc. the co-noticees too reaped the benefit.

A few decisions in this regard are -

+ Shri Malkosh Madhusudan Danak - 2006-TIOL-340-CESTAT-MUM

+ S. K. Colombowala - 2007-TIOL-1130-CESTAT-MUM

In the above backdrop, I would like to invite your kind attention to the following provisions of Section 11A(1A) of the CEA, 1944 as it existed before the said section 11A was substituted by the Finance Act, 2011 [w.e.f 08/04/2011] -

11A (1A) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud, collusion or any wilful mis-statement or suppression of fact, or contravention of any of the provisions of this Act or the rules made hereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 11AB and penalty equal to twenty-five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.]

(2) The [Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

[Provided that if such person has paid the duty in full together with, interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice are served under sub-section (1) shall, without prejudice to the provisions of section 9, 9A and 9AA, be deemed to be conclusive as to the matters stated therein:

Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the Central Excise Officers, shall determine the amount of duty or interest not being in excess of the amount partly due from such person.]

On account of the above, it is being concluded that even co-noticees who are made a party to the show-cause notice and against whom penal proceedings are proposed under the Central Excise Rules/CCR are entitled for claiming the immunity inasmuch as the penal proceedings are to be dropped and even if imposed cannot sustain.

I have a small doubt. The first proviso speaks of ¶other persons¶ to whom notice is served under sub-section (1) and it is against these persons that the proceedings are deemed to be conclusive.

Sub-section (1) of section 11A of the CEA, 1944 refers to issuance of show cause notice for recovery of Central Excise duty not paid/short paid by a person.

Admittedly, against Co-noticees penal proceedings have been initiated by invoking the Central Excise Rules and not Section 11A of the CEA, 1944.

So, in such a scenario will the stand taken of granting immunities from penalty to co-noticees stand legal scrutiny?

I request DDT to solicit the views of netizens on the issue.¶

Netizens may like to respond.

DDT adds - On the subject matter, we came across a CESTAT decision recently, where the applicants were imposed with penalty by the lower authorities.

The order passed by the CESTAT is extracted as below - ¶the SCN was issued on 02.04.2008 and one of the co-noticee has paid duty, interest and penalty equal to 25% of duty on 15.04.2008 i.e within 30 days of from the date of issuance of show-cause notice. Therefore, proviso 11A(1)(a) applies to the matter. Accordingly, penalty against the applicant is not imposable .

5. In this term, the appeals are allowed by setting aside the impugned order. The stay applications are also disposed of.¶

See 2013-TIOL-768-CESTAT-MUM

Jurisprudentiol – Thursday's cases

Central Excise

Valuation - Principal to principal sale - no job work - Rule 10A of Valuation Rules not applicable: CESTAT

IF any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. By applying such norm, rule 6 of the Valuation Rules should be the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared.

Income Tax

Sec 68 - Whether when assessee has filed returns of subscriber companies and also their bank statements and balance sheets in addition to confirmation letters from them, assessee can be considered to have discharged burden of proof - YES: HC

THE issues before the Bench are - Whether mere furnishing of the bank statements of the share subscribers without any explanation for the deposits in the accounts can meet the requirements of Section 68; Whether to establish the creditworthiness of the investors, is it necessary to know the business activities of the share-subscribers and also the repaying capacity, in case the amount has been borrowed for making the investment; Whether when the assessee has filed the income-tax returns of the subscriber companies as also their bank statements and balance sheets in addition to the confirmation letters from the said two companies, the assessee can be considered to have discharged the burden of proof and Whether once the assessee has established its case, the AO cannot shift the burden back onto the assessee without the AO producing any tangible material to doubt the veracity of the documents furnished by the assessee. And the verdict goes in favour of assessee.

Service Tax

Appellant employing personnel belonging to their German company - salary of 75% was paid by group company in Germany and thereafter debit notes were raised on appellant - merely because payment has been made through German entity, activity cannot prima facie be held to be taxable as ¶Manpower Supply or Recruitment Agency Service¶ - Pre-deposit waived and stay granted: CESTAT

THE appellant employed personnel belonging to their group company in Germany for a specific period. During this period, the appellant entered into agreements with the personnel for their employment. Since the personnel employed were foreign nationals, about 25% of the salary was paid in India in Indian currency and the balance 75% was paid by the group company in Germany to the credit of accounts of the personnel employed and thereafter, debit notes were raised on the appellant by the foreign entity towards reimbursement of the salary paid in Germany. For the income earned in India by the personnel, the appellant also discharged the Income Tax liability showing the personnel employed as their own employee.

The Central Excise department was of the view that the transaction involved comes within the purview of ‘Manpower Supply or Recruitment Agency services'.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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