TIOL-DDT 2313
13.03.2014
Thursday

IT appears that Construction service has always been a complex matter to understand. While the service has seen a record number of disputes on various issues till 01.07.2012, even after the introduction of negative list, the uncertainties remain. As per Notification No 26/2012 ST dated 20.06.2012 (Sl No 12), service tax is payable on 25% or 30% of the value subject to certain conditions. Apparently, the abatement of 75% or 70% allowed is towards the value of materials used in the service as there will be transfer of property in construction service. From 01.07.2012, service tax is payable on works contracts in respect of original works on 40% of the value of the contract (Rule 2A(ii) of Service Tax - Determination of value Rules, 2006). In majority of cases, the tax payable under Notification No 26/2012 ST will be less than the tax payable under Rule 2A(ii). It appears the department is raising demand notices for the differential tax in such cases where the tax is paid under Notification No 26/2012 ST. This raises some fundamental questions which perhaps the Board should address:

1. Can a builder of residential complex not pay service tax by availing abatement under Notification No 26/2012 ST if the service is works contract?

2. If not, what is the reason? If all works contracts are to be taxed only under Rule 2A, where is the need for entry No 12 in 26/2012 ST? Can Board explain with illustration what are the cases covered under Notification No 26/2012 ST?

3. Is it not a fact that the abatement of 75% or 70% allowed under Notification No 26/2012 ST is towards transfer of property in goods while rendering construction service? If not, what does this 70% or 75% abatement represent?

Anti-dumping duty on Acetone - New Notification issued

VIDE Notification No 33/2008-Cus 11.03.2008, Government had imposed Anti-dumping duty on Acetone originating in, or exported from EU, Chinese Taipei, Singapore, South Africa and USA (that covers almost major part of the world) and imported into India. This Notification was valid upto 18.06.2012. Government had promptly initiated review on 15.06.2012, just three days before the expiry of the Notification and had requested for extension of anti-dumping duty upto one more year, in terms of sub-section (5) of Section 9A of the said Customs Tariff Act. Now, in the dead Notification No 33/2008-Cus dated 11.03.2008, the following is inserted to bring life back:

"3. Notwithstanding anything contained herein above, this notification shall remain in force up to and inclusive of the 18th day of June, 2013, unless revoked earlier"

Now, the DGAD vide its final findings, No. 15/1/2012-DGAD dated the 13th December, 2013, published in Part I, Section 1 of the Gazette of India, Extraordinary, has recommended continuation of the ADD on this item.

Accordingly, a new Notification No 10/2014 has been issued levying ADD on Acetone. This notification is valid for a period of 5 years. The quantum of ADD and other provisions are identical to Notification No 33/2008 Cus dated 11.03.2008.

What about the dumping for the period from 19th June 2013 to 10th March 2014? Was there no dumping?

Notification No. 10/2014-Cus.(ADD), Dated: March 11, 2014

Meta Phenylene Diamine (MPDA) from China - Definitive ADD imposed

PROVISIONAL ADD was imposed on Meta Phenylene Diamine (MPDA) originated in or exported from People's Republic of China vide Notification No.2/2013-Cus., (ADD), Dated: March 22, 2013. The Notification was in force for a period of six months from the date of publication., i.e., 22.03.2013.

Now, based on recommendations of the DGAD, definitive Anti-dumping duty has been imposed on MPDA originating in or imported from People's Republic of China. The Notification specifically mentioned that the ADD is effective from the date of imposition of the provisional anti-dumping duty, that is,22.03.2013 and is valid for five years.

Notification No. 11/2014-Cus.(ADD), Dated: March 11, 2014

FTP - Export of Onions - Free

GOVERNMENT has amended Chapter 7 of Schedule 2 of ITC(HS) Classification of Export & Import Items to make export policy for onions as FREE.

Earlier export of onions was permitted only through STEs and subject to a Minimum Export Price (MEP) notified by the DGFT. Recently vide Notification No. 72/(RE-2013)/2009-2014, dated 4-3-2014, Government had removed the Minimum Export Price stipulation for export of onions. (Please see DDT 2308 - 06.03.2014 ).

Now, the STE stipulation is also removed making the export policy of onions - free.

DGFT Notification No. 73/(RE-2013)/2009-2014, Dated: March 12, 2014

April 14 - Dr Ambedkar's Birthday Declared a Holiday

GOVERNMENT has decided to declare Monday, the 14th April 2014 as a closed holiday for all Central Government offices including Industrial Establishments. This holiday is also being notified under Section 25 of the Negotiable Instruments Act, 1881.

The Government has been notifying this day as a holiday every year since 1990. For the last twenty four years, the government had been separately notifying this holiday. Why can't it be included in the general list of closed holidays published before the beginning of every year?

There was a strange case before the Central Information Commission on this issue. The applicant asked the Ministry of Personnel, Public Grievances and Pensions:-

What is the criterion for declaring birthdays of departed leaders as gazetted holidays? Do leaders like Netaji Subhash Chandra Bose or Pandit Jawahar Lal Nehru not fulfil the criterion to have their birthdays also as national holidays on lines of birthdays of Mahatma Gandhi and Dr. BR Ambedkar? Is it fair that birthdays of leaders like Mahatma Gandhi or Dr. BR Ambedkar are made holidays contrary to their noble ideas of hard work?

The Ministry replied:-

1. There is a policy decision that no holiday should be declared on the birthday of any national leader other than that of Mahatma Gandhi.

2. Holiday on Dr. B. R. Ambedkar's birthday: It is not one of the regular annual holidays. However, since 1990 this occasion has been declared as a closed holiday for all Central Government administrative offices.

The persistent applicant pleaded, “I appeal that details and rules may be clearly mentioned under which Dr. B. R. Ambedkar's birthday is being observed as a closed holiday since 1990”

The Ministry gave a somewhat curious response:-

As per RTI Act Section 8 (I) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen,-(a) information, disclosure of which would prejudicially affect the sovereignty and integrity of India, therefore, under the provisions of Act, no information can be provided to the first Para of your appeal.

The Government feels that disclosure on the holiday would prejudicially affect the sovereignty and integrity of India!!!

Courts must have already listed cases for 14th April - now those cases will have to be relisted. At the time of listing the cases, they would have not known that April 14 would be declared as a holiday.

DOPT OM in F No. 12/4/2014-JCA-2, Dated: March 12, 2014

Jurisprudentiol - Friday's cases

Central Excise

Mandatory penalty u/s 11AC of the CEA, 1944 is attracted only when allegations of fraud, collusion, willfulmis-statement, suppression of facts etc. with intent to evade payment of duty against respondent are invoked in SCN - understanding of AR is not correct - Revenue appeal dismissed: CESTAT

REVENUE is in appeal against the order passed by the Commissioner(Appeals) wherein he has dropped the mandatory penalty imposed u/s 11AC r/w Rule 25 of the CER, 2002 by the adjudicating authority on the premise that provisions of section 11AC has not been attracted in the show-cause notice.

The Revenue representative submitted that in the case of Rajasthan Spinning & Weaving Mills (2009-TIOL-63-SC-CX), the Apex Court has held that although duty and interest has been paid before issuance of show-cause notice the assessee is required to pay mandatory penalty.

Income Tax

Whether co-developer of Special Economic Zone qualifies to be developer for purpose of claiming benefits u/s 115JB - YES: ITAT

THE assessee company was engaged in the business of real estate and other allied activities. Assessee claimed deduction under Section 14A. In the year 2008-09 the Assessing Officer disallowed an amount of Rs.27,24,000/- u/s 14A as expenses pertaining to earning of exempt income. The amount of disallowance in the year 2009-10 was Rs.20,17,000/-. Assessee had claimed exclusion of income earned by its SEZ business for the purpose of calculating profit u/s 115JB of the Act.

The issues before the Bench are - Whether deduction u/s 14A read with Rule 8D has to be allowed where the assessee has sufficient interest free funds and where the assessee has earned income instead of incurring expenditure in the form of interest; Whether where the disallowance under Section 14A was made on notional basis, disallowance u/s 14A could be added back for the purpose of calculation of book profit and Whether a co-developer of Special Economic Zone qualifies to be a developer for the purpose of claiming benefits u/s 115JB. And the verdict partly goes in favour of the Revenue.

Service Tax

Bus reservation charges is for conduct of tours and, therefore, it rightly forms part of tour operator services as defined in law - demand upheld, however, penalty is not leviable u/s 78 of FA, 1994 since activity was under dispute and department cannot allege suppression or willful misstatement of facts - except for above modification, Appeal dismissed: CESTAT

THE appellant undertakes tours to various places and they entered into agreements with various parties and for the services rendered they are collecting amounts under the heads ‘Bus Reservation Agreement', ‘Seat Reservation Agreement', Nasik Darshan', and ‘Tour Extension'. They are discharging service on the charges received for seat reservation, Nasik Darshan and Tour Extension. However, no service tax liability is discharged on the consideration received for ‘Bus Reservation'.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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