TIOL-DDT 2197
25.09.2013
Wednesday

A significant change in service tax administration from 01.07.2012 is the partial reverse charge method introduced on certain specified services. Under this system, the service receiver has to pay the specified potion of the service tax and the service provider will pay the remaining portion. Since the liability of the service provider is only a part of the full tax liability, there is every possibility for accumulation of CENVAT Credit in service providers' accounts. This issue has already been identified by the department and the JS(TRU) letter dated 16.3.2012 says "In extreme situations the small service provider is also being allowed the refund of unutilized Cenvat credit if any, available with him. Suitable changes will be made in Cenvat Credit Rules, to this effect”.

They have kept their word and vide Notification No 28/2012- CX., (N.T.), Dated : June 20, 2012, a new Rule 5B has been inserted in the CENVAT Credit Rules, 2004 as under:

5B. Refund of CENVAT credit to service providers providing services taxed on reverse charge basis. - A provider of service providing services notified under sub-section (2) of section 68 of the Finance Act and being unable to utilise the CENVAT credit availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of such unutilised CENVAT credit subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette.

Unfortunately, the job is not over yet and a Notification prescribing the conditions or procedures has to be issued under Rule 5B. But so far, no such Notification has been issued. It is now nearly fifteen months after the launch of partial reverse charge method and many assessees may be facing the problem of accumulation of CENVAT Credit under partial reverse charge.

Has the Board forgotten about this notification? And what about the problem of limitation?

We had raised the issue in DDT 1993 - 30.11.2012 and DDT 1970 - 26.10.2012 and also in CBEC may like to speed up issuing Notification under Rule 5B of CCRs

Service Tax - VCES - Department frustrating Scheme?

THE Voluntary Compliance Encouragement Scheme (VCES) is heading for a huge failure and prospective applicants are scared to approach the Department as the declarants are being targeted by the Preventive Wing of the Department.

Day before yesterday, the Ahmedabad edition of the Gujarati newspaper Sandesh, reported that when the assesses who want to take benefit come to make inquiries for knowing the procedure for filing VCES they are being subjected to raids after 3 to 4 days due to which the service providers are in a state of shock. Taxpayers who do not apply under VCES within 4 to 5 days after making inquiries with regards to VCES filing are being subjected to raids by the preventive wing officials and post dated cheques are collected from them.

The declarations are being scrutinised with a view to ‘fix' the defaulters. The Department needs an attitudinal change at all altitudes.

Central Excise - Can Bank Account be treated as movable property for purpose of recovery of arrears?

THE CBEC has informed a Chief Commissioner that Section 11 of Central Excise Act, 1944, after amendment by Finance Act, 2013 contains the required provision.

Finance Act 2013 inserted a new sub-section as follows:

Section 11 (2) (1) (i) The Central Excise Officer may, by a notice in writing, require any other person from whom money is due to such person, or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;

(ii) every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary;

(iii) in a case where the person to whom a notice under this sub-section has been issued, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be a person from whom duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or the rules made thereunder have become due, in respect of the amount specified in the notice and all the consequences under this Act shall follow.".

Board informs that similar provision has been introduced in Section 142 of Customs Act, 1962 vide Finance Act, 2013.

CBEC Letter in F. No.296/97/2013-CX-9, Dated: August 12 2013

Former CBEC Chief Commissioner Acquitted in CBI Case

THE Patiala House Special Court for CBI (PC Act) yesterday acquitted Ram Prakash who retired as a Chief Commissioner in Customs and Central Excise, (DG, Service Tax) in a corruption case.

The case had been registered against accused Ram Prakash (A1) that while working as a public servant in the capacity of Commissioner, Customs, Central Excise and Service Tax, he indulged in corrupt practices.

It was charged that he had demanded and accepted an illegal gratification of Rs 5 lakhs from an assessee by threatening to seize the books of accounts and bank accounts, if said bribe amount of Rs 5 lakhs was not paid to him.

In an elaborate judgement running into 83 pages, the Special Judge observed,

"Of course, officers of CBI, the premier investigating agency, at the outset cannot be said to be untrustworthy but when in a serious case of alleged corruption by a senior bureaucrat is being investigated, suspicion is laid over the senior bureaucrat of alleged corruption by allegedly demanding and accepting bribe through a subordinate, what is expected by a Court from the officers of investigating agency is firstly to proceed as per the procedure established, law laid, thereupon to conduct meticulous preliminary inquiry, inquiry and investigation, collect the best possible incriminating evidence at the first instance against such suspects/accused to lend credence and avoid criticism.”

A Superintendent working under the Commissioner and two officers from the assessee company had turned approvers, but the Court did not accept their testimonies observing,

The shaken and uncorroborated testimonies of approver witnesses PW1, PW2 and PW3, which are wholly unreliable, not confirming with collateral circumstances as well as probabilities, but shrouded with grave suspicion and serious doubts, narrating even the scene of crime in contradiction with each other, lead me to conclusion that it would be extremely hazardous to place implicit reliance on such shaken testimonies of approver witnesses PW1, PW2 and PW3 as from their testimonies it is not feasible to separate truth from falsehood, because grain and chaff are inextricably mixed up, and in the process of separation an absolutely new case has to be reconstructed by divorcing essential details presented by the prosecution completely from the context and the background against which they are made, the only available course to be made is discard the tainted evidence of PW1, PW2 and PW3 in toto.

CBI case - a retirement gift? Commenting on the CBI investigation, the Court observed,

Lack of fairness apparent on part of the concerned officers of premier investigating agency in investigation of this matter merits deprecation. Instead of having allowed A1 to put his bones to rest after his superannuation from the post of Director General, Service Tax, Mumbai, he was presented with the case in hand against him six months later as like a retirement gift by the premier investigating agency as a consequence of its lackadaisical investigation in this case. Inescapable conclusion on entire aforesaid discussion is that the prosecution has failed to prove its case against A1 beyond reasonable doubt.

Accordingly accused Ram Prakash (A1) is held not guilty and acquitted for the offences charged. His bail bond is cancelled. Surety is discharged.

Jurisprudentiol – Thursday's cases

Customs

Recovery proceedings against defaulter - Properties in name of wife and sons of defaulter cannot be attached: HC

THERE is no vested right in the Department to take over any of the properties which are in the name of the dependents of the defaulter and the statute does not permit such a course of action. In the instant case, the 'defaulter' was the person who was conducting the business and the notice of default under the Rules was also served only on him. The transactions said to have been made by the defaulter in the name of the wife and children are all before such notice was served on the "defaulter".

Income Tax

Whether when running division of business is transferred to Group company as per amalgamation plan approved by High Court and no sale consideration is involved, even then such transfer gives rise to capital gains taxable u/s 50B - NO: ITAT

THE issue before the Bench is - Whether when a running division of the business is transferred to a Group company as per the amalgamation plan approved by the High Court and no sale consideration is involved, even then such a transfer gives rise to capital gains taxable u/s 50B. And the verdict goes against the Revenue.

Service Tax

Public facility means facilities owned by governments - Sports Stadium constructed for conducting Games is non-commercial construction - merely because some amount is charged for using facility, it cannot become commercial -Appellant not liable to Service Tax under ‘Commercial or Industrial Construction Service' - Appeal allowed: CESTAT

EVEN in a Children Pak, entry fee is levied for maintenance of the Park. Merely because some amount is charged for using the Park, it cannot be said that it is a commercial or industrial construction. Adopting the same logic, the Sports Stadia in the present case is also a non-commercial construction for use by the public. Therefore, we are prima facie of the view that the Sports Stadium constructed for conducting Commonwealth Games, is a non-commercial construction.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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