TIOL-DDT 2146
11.07.2013
Thursday

THE Kerala High Court has held sub Clauses (zzzzv) and (zzzzw) to Clause 105 of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2011 as beyond the legislative competence of the Parliament.

zzzzv - service by restaurant in serving food or beverage.

zzzzw - service by a hotel, inn, guest house, club or camp-site for providing of accommodation.

The High Court observed that when food is supplied or alcoholic beverages are supplied as part of any service, such transfer is deemed to be a sale. Apparently, the transfer is during the course of a service and when the deeming provision permits the State Government to impose a tax on such transfer, there cannot be a different component of service which could be imposed with any service tax in exercise of the residuary power of the Central Government under Entry 97 of List I of the Constitution of India.

The High Court relied on Article 366 (29A) (f) of the Constitution which defines "tax on the sale or purchase of goods" to include a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating).

The High Court also held that if the petitioners have made any payments, they are entitled to seek refund of the same.

The High Court order is for the period prior to 1.7.2012.

What is the position from and after 1.7.2012? Section 66 E (i) of the Finance Act,1994 as introduced vide Finance Act, 2012 declares the following activity as a service.

"service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity".

Though this was not an issue before the High Court as the Writ Petition was filed in 2011 when the concept of declared services and negative services were yet to be born, the principle should apply and the service would not be taxable even after 1.7.2012.

Not the End: This is certainly not going be the end of the story. The Government is sure to take the matter further up in appeals. Retrospective amendment does not seem to be an option in this case.

Since DDT reported about this case last Thursday (DDT 2141), we have been flooded with calls and mails requesting for a copy of the order and we had to patiently explain that the High Court judgements are not immediately available and that once we get the order, we don't delay its publication.

We bring you this important judgement today.

Please see Breaking News.

Additional CESTAT Benches - are they in making?

IN the wake of the New Year Circular 967/01/2013-CX dated 01/01/2013 and the avalanche that followed coupled with the High Court and the CESTAT decisions that gave the assessees a breather, we had in DDT 2078 reported the Karnataka High Court decision (2013-TIOL-264-HC-KAR-CX) directing the Union of India to constitute additional Benches of CESTAT for early disposal of the Stay applications. The High Court observed that for three Southern States, there is only one Bench and a large number of matters are pending consideration. If that is so, then Union Government must wake up to the clarion call and constitute any number of Benches as may be required for speedy disposal of the appeals, the High Court had observed. The High Court has also directed that a compliance report should be filed before the Registrar General before 03.06.2013, failing which the matter would be taken seriously.

We understand that the Government has asked for more time and the High Court has granted six months time.

FTP - Amendments in Reward/Incentive Schemes - Appendix 37D

DIRECTOR General of Foreign Trade has amended the Handbook of Procedures (Vol. I) (Appendices and Aayat Niryat Forms) 2009-2014.

160 products are added in Table 1 of Appendix 37D (Focus Product Scheme) after Sl. No. 888 for exports made with effect from 15.08.2013

DGFT Public Notice No. 19/(RE 2013)/2009-2014, Dated: July 10, 2013

President allows JS, TRU to retire voluntarily

THE President of India has allowed Mr. V K Garg, IRS (C&CE:83), Joint Secretary, Central Board of Excise & Customs, Department of Revenue to retire voluntarily from the Government Service with effect from the forenoon of 15.07.2013 under Rule 48A of CCS (Pension) Rules, 1972.

Garg is JS, TRU-II in charge of Service Tax and as per this order he retires on Monday. Board has to find a new JS soon. In fact they have to find two joint secretaries as the present JS, TRU-I will get a promotion soon. Two vital posts in the Board falling vacant almost at the same time!

MoFDoRF.No.A.38011/8/2013-Ad.I , Dated: July 09, 2013

Order of provisional attachment passed u/s 73C of FA, 1994 is not appealable to CESTAT

THE King of good times has everything going bad - even the spirits have gone.

Invoking the powers under section 73C of the Finance Act, 1994, the Commissioner of Service Tax-I, Mumbai had provisionally attached 10 aircraft belonging to the appellant so as to safeguard the interest of Revenue against default in payment of Service Tax by the appellant.

The appellant is before the CESTAT against this order.

The Revenue representative raised a preliminary objection that the appeal is not maintainable since as per section 86 of the Finance Act, 1994 only orders passed under section 73 or section 83A are appealable to the CESTAT. Inasmuch as the present order had been passed under section 73C the appeal against the same is not maintainable.

The appellant submitted that the order passed u/s 73C should be deemed to have been passed under section 83A and, therefore, the appeal would be maintainable before the Bench. The decision of the Bench in Standard Chartered Bank & Ors (2013-TIOL-558-CESTAT-MUM) is also adverted to.

The Bench after referring to the provisions of s. 86, s.73 and s. 73C of the Finance Act, 1994 observed -

"6.2 From the wordings of the said Section, it is clear that action under section 73C is taken pending any proceedings under section 73 or 73A. In other words, during the pendency of the proceedings where service tax liability or penalty has to be adjudged, as a measure of protection of the interests of Revenue, attachment of property has been permitted under section 73C. Section 73C per se does not empower the Commissioner of Central Excise Commissioner or any other officer to determine the service tax liability or penalties. That has to be adjudged under the provisions of Section 73 or 73A or any other provisions of the law as provided for.

7. Therefore, we are of the considered view that the order passed under section 73C of the Finance Act, 1994 is not appealable to this Tribunal and, therefore, the present appeal filed by the appellant is not maintainable…."

Accordingly, the appeal was dismissed.

See 2013-TIOL-1052-CESTAT-MUM

Taxpayer Facilitation Portal

THE Taxpayer facilitation portal exhorts individuals to purchase only from an ‘Active Taxpayer' and informs them of the multitude of benefits they derive there from.

A purchaser can also ascertain as to whether the supplier is an ‘Active Taxpayer' or a ‘Blacklisted Taxpayer' by using the following querying mechanism.

This taxpayer facilitation utility is available in our neighbouring country - Pakistan.

One may argue that our Help Centres are light years ahead of this gimmick - yes, they are. They came and were soon sucked into the blackhole!

Jurisprudentiol - Friday's cases

Service Tax

Equities come under categories of ‘products' and are considered as ‘goods' under Sale of Goods Act, 1934 - research on equity is, therefore, product research - equity research undertaken by appellant falls within scope of definition of ‘Market Research Services' and accordingly, appellant is, prima facie, liable to pay service tax on said activity - Pre-deposit ordered: CESTAT

THE appellant is a joint venture company between M/s Kotak Mahindra Bank Ltd. and M/s Goldman Sachs Ltd. They have a research department which conducts equity research and prepare research reports on the financials of the companies listed on the bourses and the stock market performance of equity shares of such companies. In the Profit and Loss account for the years 1999-2000 to 2002-03, they had shown "Fee income/Research Fees received amounting to Rs. 6,51,79,558/-.

The department was of the view that the activity pertaining to research undertaken by the appellant would merit classification under the category of "Market Research Services" and the appellant is liable to pay service tax thereon.

Income Tax

Whether a partnership firm having 20 partners, can admit an existing individual partner in representative capacity of Deloitte Haskins & Sells, Mumbai, an already participating firm, so that they became entitled for share of profit - Invocation of Sec 263 upheld: ITAT

THE issues before the Bench are - Whether a partnership firm having 20 partners, can admit an existing individual partner in the representative capacity of Deloitte Haskins & Sells, Mumbai, an already participating firm, so that they became entitled for a share of profit; Whether this can be construed as indirectly bringing on board Deloitte Haskins & Sells, Mumbai and circumventing the statutory limit of 20 partners under the Partnership Act; Whether when assessee has claimed substantial amount as remuneration to its partners u/s 40(b) which was allowed without considering the crucial aspect of the legality of its claim of status as a firm, such assessment order becomes an erroneous one and prejudicial to the interests of Revenue; Whether when an attempt is made by a concern to evade tax using subtle camouflages, bounden duty of the authorities is to find out the real intention and Whether the CIT went over board when he directed the AO to modify the assessment order by treating the assessee as an AOP and disallow the claim of remuneration to its partners. And the verdict partly goes in favour of the Revenue.

Customs

Import of Cars - Cars manufactured in America and transshipped to India via Dubai and Thailand - Cannot be treated as imported from USA - confiscation upheld - CESTAT by majority.

ONE of the Conditions for import of a new vehicle as per Import Policy (Chapter 87 in Schedule 1 of the ITC HS) is that the vehicle should have been imported from the country of manufacture. In the instant case, the cars were shipped from USA to India via Dubai and Thailand. It is the argument of revenue that that the car should have been imported from the Country of Origin. The argument of the importer is that the goods were shipped from USA to UAE to Thailand and then to India and hence the condition is complied.

See our Columns Friday for the judgements

Until Friday with more DDT

Have a nice day.

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